United Kingdom Upper Tribunal (Lands Chamber)

UPPER TRIBUNAL (LANDS CHAMBER)

  UT Neutral citation number: [2013] UKUT 153 (LC)

UTLC Case Number: LRA/185/2011

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – service charges – LVT determined charges reasonable – accountancy evidence disputing charges had been incurred – s.27A Landlord and Tenant Act 1985 – LVT failed to have regard to tenant’s evidence and failed to determine if charges actually incurred before determining reasonableness

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

LEASEHOLD VALUATION TRIBUNAL FOR THE

LONDON RENT ASSESSMENT PANEL

BETWEEN:

 

(1) PATRICK WILLIAM BROWN Appellants

(2) THOMAS CHARLES GAYDON

and

ISLAND HOMES HOUSING ASSOCIATION LIMITED Respondent

 

Re: 33 Midship Point & 82 Bowsprit Point

The Quarterdeck

London E14

 

Before: Her Honour Judge Alice Robinson

 

Sitting at: 43-45 Bedford Square, London WC1B 3AS

on 20 March 2013

 

 

Mr Brown appeared in person

David Wright appeared on behalf of Mr Gaydon

Mr Wakil Ahmed of One Housing Group Limited appeared on behalf of the Respondent

 

© CROWN COPYRIGHT 2013

 

The following cases are referred to in this decision:

Forcelux v Sweetman [2001] 2 EGLR 173

Yorkbrook Investments Ltd v Batten (1986) 18 HLR 25

 

The following further cases were referred to in argument:

Holding & Management (Solitaire) Ltd v Stephanie Sherwin [2010] UKUT 412 (LC)

Leonora Investment Company Ltd v Mott MacDonald Ltd [2008] EWCA Civ 857

Warrior Quay Management Company Ltd v Captain Z C Joachim LRX/42/2006

 

 

DECISION

Introduction

1.          These are appeals by Patrick William Brown and Thomas Charles Gaydon against decisions of the Leasehold Valuation Tribunal (“the LVT”) dated 26 September 2011 relating to 33 Midship Point, The Quarterdeck, London E14 8SW and 82 Bowsprit Point, The Quarterdeck, London E14 8NU.  Mr Brown is the lessee of 33 Midship Point and Mr Gaydon is the lessee of 82 Bowsprit Point.  The respondent (“the Landlord”) is the freehold owner of the Barkantine Estate on the Isle of Dogs comprising a number of blocks of flats.  These include The Quarterdeck which comprises four tower blocks each containing 82 flats, one of which is Midship Point and another of which is Bowsprit Point.  Some of the flats in the blocks are held on long leases and others are let by the Landlord as a Housing Association and Registered Social Landlord to assured tenants.

2.          In its decisions the LVT considered claims by the Landlord to recover arrears of service charges which had been transferred from the county court.  Both claims related to the period from 5 December 2005 to 1 July 2010.  The LVT considered a number of issues and concluded that all of the charges demanded in respect of 33 Midship Point were reasonably incurred with the exception of the charge for electricity in 2007/2008 which was reduced from £243.70 to £68.74 and the management charge in 2008/2009 which was reduced by £2.58.  In respect of 82 Bowsprit Point the LVT determined that Mr Gaydon was liable to pay the sums claimed with the exception of the charges for management which were limited to £150 each year and the charge for electricity which was limited to £117 each year.  In respect of both properties the LVT held that no balancing charges are payable in any of the relevant years until service charge certificates which comply with the requirements of the lease have been given to the tenant.

3.          On 1 March 2012 the Upper Tribunal (Lands Chamber) granted permission to appeal limited to a single ground namely that the LVT failed to have regard to the evidence of Mr Kong Lee who gave evidence on behalf of Mr Brown and whose evidence the LVT was asked to take into account when dealing with the case of Mr Gaydon.  The appeal was ordered to be dealt with by way of review.

4.          The LVT hearing was due to start on 11 July 2011 and on 23 June 2011 the parties exchanged witness statements including Mr Lee’s statement.  In it he took issue with a great many figures in documents provided by the Landlord which were before the LVT relating to a number of different service charge topics.  His primary point, although not the only one, was that there was a discrepancy between figures in the service charge account for the year 2009/2010 and what he described as the Landlord’s ledgers.  The ledgers are schedules of expenditure on different items relating to the particular block of flats which I was told are intended to be a complete record of actual expenditure on an individual block pulled together for service charge purposes.

Law

5.  Section 18(2) of the Landlord and Tenant Act 1985 (“the 1985 Act”) provides:

“The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.”

6.  Section 19(1) of the 1985 Act provides:

“Relevant costs shall be taken into account in determining the amount of a service charge payable for a period—

(a) only to the extent that they are reasonably incurred, and

(b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard;

and the amount payable shall be limited accordingly.”

5. In Forcelux v Sweetman [2001] 2 EGLR 173 the Tribunal (Mr P R Francis FRICS) held that in determining whether costs are reasonably incurred for the purpose of s.19(1)(a) two questions must be asked.  First, whether the action taken in incurring the costs was reasonable. Second, whether the amount of those costs was reasonable.

6. Section 27A(1) of the 1985 Act provides:

“An application may be made to a leasehold valuation tribunal for a determination whether a service charge is payable and, if it is, as to—

(a) the person by whom it is payable,

(b) the person to whom it is payable,

(c) the amount which is payable,

(d) the date at or by which it is payable, and

(e) the manner in which it is payable.”

7. On an application under s.27A it is for the tenant to establish a prima facie case that the service charge expenditure has not been reasonably incurred after which it will be for the landlord to meet those allegations, see Yorkbrook Investments Ltd v Batten (1986) 18 HLR 25 at p.35.

8. The LVT correctly identified the issue it had to determine in paragraph 6 of both decisions:

“The tenant does not dispute that he failed to pay the service charges claimed but asked the Tribunal to determine whether he was liable to pay them.  The Tribunal’s jurisdiction to determine liability to pay service charges is derived from section 27A of the Landlord and Tenant Act 1985.”

Decision

9.               The appellants main complaint was the inadequacy of the material produced by the Landlord to substantiate the money claimed in the service charge bills. They drew attention to an Audit Commission report at the end of 2008 that was severely critical of the Landlord’s management of annual service charges and refers to poor accounting and failure to calculate actual expenditure. They said that until the 2009/2010 service charge year no supporting material had been provided. Mr Lee is another lessee and an accountant and he had looked at the documents that had been made available for inspection for that year and had found numerous omissions and discrepancies. They argued there was no evidence to support the service charges claimed and it was not possible to reconcile the material provided by the Landlord with the service charge accounts.

10.            It was submitted on behalf of the Landlord that the LVT had considered all the appellants points including those raised by Mr Lee and found that the service charges were reasonable. The appellants were using emotive language, they did not want to pay service charges and were looking for any excuse to challenge every aspect of the LVT decision. They would not be happy with any decision of the LVT or Lands Chamber.

11.            At the hearing I drew attention to the fact that the appeal was to be dealt with by way of review and was limited to consideration of whether the LVT had regard to Mr Lee’s evidence. Therefore it is only possible for this tribunal to consider the appellants’ general complaints in that context. I also noted that by virtue of paragraph 7 of the Fifth Schedule to the lease the lessee has a right to inspect the receipts and vouchers relating to service charge expenditure, a right which could be enforced if necessary. The appellant’s motives are irrelevant. They have a right of inspection in accordance with the lease and, in accordance with the 1985 Act, they are entitled to ask the LVT to consider whether a charge has actually been incurred and, if it has, whether it is a reasonable charge.

12.            As already indicated, Mr Lee’s evidence dealt with the service charge year 2009/2010. His evidence covered the following topics:

(1)       Management Costs

(2)       Method of Apportionment

(3)       Buildings Insurance

(4)       Light/Heat

(5)       Cleaning and Grounds Maintenance

(6)       Entry Phone

(7)       Lift Maintenance

(8)       Concierge

(9)       Rubbish Collection

(10)    Day to Day Maintenance

(11)    Estate Cleaning and Grounds Maintenance

(12)    Estate Day to Day Maintenance

It is helpful to consider the LVT’s decision by reference to these topics in turn.

13.       I n relation to the costs of management the LVT said this in the 33 Midship Point decision:

“26. The tenant’s written case in respect of these and other charges was simply to put the landlord to proof that the management was provided for the benefit of the building.  At the hearing he agreed that 15 per cent of costs was a reasonable charge for management provided that the costs were accurately recorded and accounted for, which he did not believe they were.  Mr Lee, who is a trained management accountant and a financial controller with the National Health Service and the leaseholder of a flat on the Estate, gave evidence to the effect that the service charge accounts might be inaccurate in some respects, and he suggested that, since the landlord’s costs of management and services appeared to be 7.5 per cent of One Housing Group’s total expenditure, 7.5 per cent was the appropriate amount for the landlord to charge for management.  It was unfortunate that Mr Lee’s evidence on this and other aspects of the case was served too late to enable the landlord to make a considered response to it and his evidence was therefore not as helpful as it might have been.

27.  Mr Saye said that he would have preferred to calculate the management fees on the basis of a cost per flat and that, if the charges were considered from that point of view, they were low by comparison with management fees charged in other cases.

28. We prefer to consider the end charges rather than the way in which they were calculated.  In a hearing before us in respect of 82 Bowsprit Point, The Quarterdeck, the landlord’s representatives agreed to limit its claim to a maximum of £150 per unit in respect of management fees, and we assume that the same concession will be applied in  the present case, so that the management cost in 2008/2009 will be limited to £150.  The end charges are in our view reasonably low by comparison with those charged by other social landlords in respect of similar mixed tenure estates, which are not easy to manage.  We have no reason to suppose that the standard of management was inadequate and we accept that the charges were reasonable in amount and reasonably incurred.”

14. It was submitted on behalf of the appellant that the LVT had failed to have regard to Mr Lee’s evidence as to the management costs which the Landlord was paying One Housing Group Limited (“OHG”), a parent company of the Landlord responsible for the management of the estate including Midship Point and Bowsprit Point.  Mr Lee pointed to the fact that OHG’s accounts for the year ended 31 March 2010 show it charging the Landlord the sum of £1,211,000 for “Housing Management and Management Services” which was only 7.5% of the Management and Services costs incurred by OHG on “social housing lettings” as shown in the annual accounts.

15. It was submitted on behalf of the Landlord that the annual accounts of OHG were not relevant to the evidence relating to service charges because the company accounts were compiled on a completely different basis from those relating to the service charges and it was not possible to draw any conclusions by comparing one with the other.  The LVT evaluated Mr Lee’s written and oral evidence which is referred to in paragraph 26 of the 33 Midship Point decision.  The LVT was entitled to prefer the evidence given on behalf of the Landlord by Mr Saye that a reasonable management fee should be calculated on the basis of a cost per flat.

16. In my judgment the LVT has fallen into error.  Paragraph 26 of the 33 Midship Point decision correctly identifies the tenants case that a 15% management fee was reasonable “provided that the costs were accurately recorded and accounted for, which he did not believe they were” (my emphasis).  However, instead of considering Mr Lee’s evidence that the service charges claimed exceeded the amount actually paid by the Landlord to its parent company for management services, the LVT simply went on to decide whether or not the sum claimed was reasonable.  Before any question of reasonableness can arise for the purposes of s.19(1) of the 1985 Act, the LVT must first decide whether or not the service charges are “relevant costs” i.e. are costs “incurred … by or on behalf of the Landlord … in connection with the matters for which the service charge is payable” for the purposes of s.18(2) of the 1985 Act.  The LVT failed to grapple with Mr Lee’s evidence which asserted that the Landlord was claiming for more than it had actually paid and instead went straight to considering whether or not the amount claimed was reasonable.  Although at the hearing before me the appellant did not dispute that the £150 fixed by the LVT was reasonable, he maintained reliance on Mr Lee’s evidence that this sum had not in fact been paid. 

17.       Having said this, I would not remit the matter to the LVT for re-hearing to reconsider Mr Lee’s evidence about management costs.  Even if it were proper to have regard to the £1,211,000 charged by OHG to the Landlord in the company’s accounts for 2010 as representing a management fee, the sums of £10,620,000 and £5,453,000 relate to expenditure on social housing lettings which have nothing to do with the service charges payable in respect of flats let on long leases which the LVT was considering.  Thus either the tenant would have failed to establish a prima facie case which the Landlord had to meet, see Yorkbrook Investments v Batten, or no reasonable LVT could have concluded that the sums claimed as management charges have not in fact been paid on the basis of Mr Lee’s evidence.  As to the need to establish a prima facie case, although the Court of Appeal in Yorkbrook was dealing with an argument as to reasonableness, the court referred to issues relating to the burden of proof when considering applications under what was then the Housing Act.  In my judgment there is no basis for adopting a different approach where a tenant argues that a cost has not been incurred as opposed to arguing that the cost incurred is unreasonable.

18.       Mr Lee’s evidence makes a general point that the Landlord’s accounting procedure fails to accord with UK GAAP principles. However, I accept the Landlord’s submission that service charge accounts are not bound to be compiled in accordance with these standards. The 1985 Act as summarised above provides a clear statutory framework for the assessment of service charges.

19.       For the same reasons Mr Lee’s evidence does not found a challenge to the LVT decision relating to 82 Bowsprit Point.

20.            Turning to the method of apportionment, the tenant’s covenant is to pay a “reasonable proportion” rather than a fixed percentage of the total service charge expenditure, see paragraph 1(2) of the Fifth Schedule of the relevant lease.  Paragraph 4 of the LVT decisions records that the proportions demanded are based on rateable value and that this method of apportionment is not disputed.  However, Mr Lee’s evidence about rateable values is relevant later to the cost of specific items. He drew attention to the fact that the service charge statement for 2009/2010 sets out the rateable value of the Midship Point block of flats as 23212, the rateable value of the 30 flats within Midship Point which are let on long leases as opposed to for social housing as 8386 and the rateable value of the estate as 222724.  Although the service charge accounts do not give the rateable value of 33 Midship Point, there is no dispute that this is 232.  Mr Lee’s evidence points out that, in the service charge statement for 2009/2010, the total cost for the 30 flats let on long leases in Midship Point is given and then a figure for 33 Midship Point is given which is directly based on that flat’s rateable value as a proportion of the rateable value of the 30 flats let on long leases. 

21.            Mr Lee’s evidence goes on to consider buildings insurance but at the LVT hearing these costs were not disputed and I need not consider the issue further.

22.            Mr Lee’s evidence dealt next with the issue of heating and lighting of the common parts as to which the LVT said this in the 33 Midship Point decision:

“30. The charges demanded to the tenant under this head were £20.53 in 2005/2006, £41.05 in 2006/2007, £243.70 in 2007/2008, £92.66 in 2008/2009 and £72.52 in 2009/2010.  The electricity bills for 2009/2010 were produced.  Mr Saye said that the charges were for electricity consumed in the common parts of the block and for the lifts in the block and that none of the charges were for heating, there being no heating provided in common parts.  He said that none of the charges was in respect of electricity for the Estate and that those charges had been borne by the landlord.  He said that after the stock transfer from Tower Hamlets the local authority continued, by mistake, to pay the electricity bills for the Estate for a time.  He said that the electricity meters had not been read until the current year and all the charges for the earlier years were based on an assessment of the electricity which had been consumed.  He agreed that the charge for 2007/2008 was out of line with the charges made in other years and submitted that the best the Tribunal could do was make a reasonable estimate of the proper charges for that year.

31. Mr Lee said that no explanation had been provided of the two electricity meters in the block, and that there was an unexplained discrepancy between the charges for electricity to Bowsprit Point and Midship Point which were identical or very similar blocks, but since the costs for Bowsprit Point were very much higher than the equivalent charges for Midship Point, this appeared to be an argument for another day.  The tenant accepted that the charges for all the years with the exception of 2007/2008 appeared to be reasonable.

32. Given that this is a tower block with lifts which are, presumably, in constant use, we regard the costs of electricity for all the years save 2007/2008 as reasonable.  Doing the best we can we have averaged the costs charged to the tenant for 2006/2007, 2008/2009 and 2009/2010 and have arrived at an average of £68.74 which we determine as a reasonable figure for electricity in 2007/2008.  We have omitted 2005/2006 from the calculation as that, too, appears to be out of line with charges for other years.”

23.       Mr Lee’s evidence was as summarised by the LVT in paragraph 31 of its decision. Mr Brown’s case is that the LVT failed to have regard to it. It was submitted on behalf of the Landlord that the LVT considered Mr Lee’s evidence in paragraph 31 of the decision but held that the cost of electricity was reasonable with the exception of 2007/2008 which it reduced.

24.       In my judgment it is evident that the LVT accepted Mr Saye’s evidence that the two electricity meters in Midship Point recorded only electricity consumed in that block.  There appeared to have been no complaints about the amounts charged with the exception of 2007/2008 which the LVT reduced.  As to 82 Bowsprit Point where the electricity charges were significantly higher the Landlord agreed to limit the charge to £117 in each year.  I was informed that Mr Gaydon appeared personally at the LVT hearing and agreed that £2 per week was a reasonable amount to charge.  In these circumstances I consider there is no evidence that the LVT decisions in respect of this issue were flawed.

25.       The next topic dealt with in Mr Lee’s evidence is cleaning and grounds maintenance as to which the LVT said this in the 33 Midship Point decision:

“33. The charges demanded of the tenant were: nothing in 2005/2006, £92.07 in 2006/2007, £189.39 in 2007/2008, £194.20 in 2008/2009 and £183.52 in 2009/2010.

34. Mr Megan said that he had known the Estate for ten years and he believed that standards of cleanliness in the block and grounds were generally high, and among the best in the borough.  He said that the service was good and very responsive, and that there was a local office where tenants’ concerns could be raised.  He described the administrative arrangements made for supervising and performing the services, and said that agency staff were required to cover for sick employees from time to time.

35. The tenant said that in the past two years he had seen less and less of the caretakers and he considered that the standard of cleaning had dropped, and he questioned the extensive use of agency staff to cover for the regular employees.  Mr Lee said that he questioned the landlord’s apportionment of its caretakers’ costs to the block and suspected that the costs were in fact in respect of all four tower blocks.  He said that he had found a discrepancy of £405.10 between the ledger entries and the landlord’s statement.

36. We see no good reason to doubt the general accuracy of the landlord’s accounting, which was carried out by independent and reputable chartered accountants who, we were told, normally spent a week in the landlord’s office checking and assembling the material they required and followed their visit by a series of questions before they prepared the accounts.  The landlord had been given insufficient notice of the accounting error which Mr Lee said that he had found to enable it to deal with it in evidence.  We are not satisfied on the evidence that the standard of the caretaking was inadequate or the costs excessive.”

26.       The “accounting error” to which the LVT refer in paragraph 6 is a reference to paragraph 18 of Mr Lee’s statement.  This refers to a ledger cost of £17,956.68 as compared with the (service charge) statement cost of £18,361.78, a discrepancy of £405.10.  The ledger cost is the total of the sums listed on page 15 of the appeal bundle (page 453 of the LVT bundle) together with a further page from the LVT bundle which was omitted from the appeal bundle.  The figure of £18,361.78 does not appear in the service charge statement (page 74 of the appeal bundle) but, in accordance with the apportionment based on rateable value referred to by Mr Lee, see paragraph 16 above, is based on the service charge claimed for 33 Midship Point of £183.52 grossed up to reflect the block rateable value of 23212.  Thus the calculation starts with £183.52, divides that by 232 (the rateable value of 33 Midship Point) and then multiples the result by 23212 (the rateable value of the block) to arrive at a figure which should reflect the total cost for the block as a whole.

27.       It was submitted on behalf of the Landlord that the LVT had evaluated the evidence from both parties including Mr Lee and after fully considering Mr Lee’s evidence had found that the auditor’s reports were more credible than Mr Lee’s narrative.

28.       Although in paragraph 6 the LVT states that the Landlord had been giving insufficient notice of the accounting error to be able to deal with this in evidence, in my judgment it is clear from the first half of paragraph 36 that the LVT considered the accuracy of the Landlord’s service charge accounts and accepted the Landlord’s evidence about it.  The LVT therefore have regard to the argument that the service charge accounts claimed a cost which had not in fact been incurred and rejected it.  Further, the LVT clearly had regard to the argument that the figures for Midship Point could include the costs of caretakers working on other blocks in the estate and similarly rejected it.

29.       In this connection I note that the independent report of the auditors on the service charge statement for Bowsprit Point in the year 2009/2010 which was before the LVT states as follows:

“Basis of our opinion

Our work included examination, on a test basis, of evidence relevant to the amounts included in the statement and their disclosure.  It also included an assessment of the significant estimates and judgments made by the Landlord in the preparation of the service charge statement.

We planned and performed our examination so as to obtain all the information and explanations which we consider necessary in order to provide us with sufficient evidence to give reasonable assurance that the service charge statement is a fair summary of the costs relating to BOWSPRIT POINT and is sufficiently supported by accounts, receipts and other documents which should have been made available to us.”

Although the statement goes on to say that the accountants do not evaluate the overall adequacy of the information to the standard necessary if they were conducting a formal audit, it is clear that they considered not only the extent to which costs were supported by evidence of actual expenditure but also the extent to which the costs related to Bowsprit Point as opposed to any other block.  There is no reason to believe that their assessment of the service charges relating to Midship Point was carried out on a different basis.

30.       Mr Lee’s evidence was specific to the Midship Point figures and does not found an argument that the LVT failed to take his evidence into account in its 82 Bowsprit Point decision.

31.       As to the entry phone the LVT said this:

“37. The charges made to the tenant were £4.41 in 2005/2006, £22.76 in 2006/2007, £2.37 in 2007/2008, £8.75 in 2008/2009 and £11.59 in 2009/2010.

38. The landlord’s representatives said that there was no maintenance contract in place for the entryphone system and the charges were based on the actual cost or repairs and maintenance.  The tenant said that the system frequently did not work and that the entry system giving access to the lift area did not work for over a year.  Mr Saye said that there was a widely publicised telephone number for use in emergencies, as well as a contact centre which was open from 8am to 6pm, together with a local office and an out-of-hours service, and he would expect a problem such as that described by the tenant to have been noticed and dealt with by an inspector.  Mr Lee said that he had found discrepancies between the amounts recorded in the ledgers and the amounts in the landlord’s statement of case but, again, he had given the landlord insufficient notice to enable it to deal with the allegations.

39. We accept Mr Saye’s evidence and see no good reason to doubt that these charges were reasonably incurred.”

32.       Mr Lee’s evidence made four points about the entry phone by reference to the ledger (page 16 of the appeal bundle).  These were that four transactions were not supported by invoices, one invoice had no description, one invoice was for the supply of electronic fobs which are charged to individuals and should not be a charge on the block and finally that there was a discrepancy between the total in the ledger and the equivalent amount in the service charge statement grossed up to reflect the rateable value of the block as a whole in the sum of £732.67.  Mr Brown’s case is that this evidence was not taken into account.

33.       It was submitted on behalf of the Landlord that the LVT had considered and evaluated Mr Lee’s evidence. The Landlord is a large company and the fact that it cannot produce an invoice for every item of expenditure does not mean that it was not incurred and the LVT was entitled to conclude that the money was owing.

34.       In my judgment it is clear from paragraph 39 of the decision that the LVT accepted Mr Saye’s evidence that the charges were based upon actual costs, a conclusion to which the LVT was entitled to come. Further, insofar as Mr Lee referred to a discrepancy between the ledger and service charge accounts, the ledger showed a larger figure than the service charge accounts which is an error in Mr Brown’s favour. It is therefore not open to him to complain about the LVT’s acceptance of the service charge statement figure.

35.       The next topic dealt with in My Lee’s evidence is lift maintenance as to which the LVT said this:

“43. The charges demanded of the tenant for this service were £8.39 in 2005/2006, £48.15 in 2006/2007, £45.67 in 2007/2008, £160.53 in 2008/2009 and £94.82 in 2009/2010.  The landlord’s representatives said that these costs were paid under a maintenance contract which will be terminated on 31 December 2011 because the lifts were the subject of a major refurbishment which was completed in April 2011.

44. The tenant said that the lifts had constantly broken down, and Mr Lee said that he had found a discrepancy between the total expenditure recorded in the landlord’s ledger and that the landlord had failed to supply supporting invoices for some entries in the ledger.  Mr Lee’s points were made too late for the landlord to deal with them.

45. We accept that these are reasonable charges for responsive repairs.”

36.       Mr Lee’s evidence is accurately summarised in paragraph 44 of the decision. Mr Brown’s case is that this evidence was not taken into account. Again it was submitted on behalf of the Landlord that the LVT had considered and evaluated Mr Lee’s evidence.

37.       In my judgment the LVT failed to take Mr Lee’s evidence into account. I recognise that in paragraph 36 of the decision when dealing with the issue of cleaning and grounds maintenance, the LVT referred to the auditing (my phrase) of the Landlord’s service charge accounts in support of its conclusion that the service charges were not excessive. Further, the LVT repeated its reliance on the auditing in paragraph 5 of its’ decision refusing permission to appeal dated 25 November 2011 in support of its conclusion that the service charge accounts were “essentially accurate.”

38.       However, paragraph 36 of LVT decision refers to there being no good reason to doubt “the general accuracy” of the accounting. That evidence is not referred to in paragraphs 44 or 45 of the decision on the issue of lift maintenance or indeed in any other paragraphs of the decision. It is of course correct that the LVT is not bound to refer to all the evidence when giving reasons for its decision and the mere fact that a piece of evidence is not mentioned does not automatically mean the LVT has failed to take it into account. However, the discrepancy to which Mr Lee referred was not insubstantial; the ledger expenditure (page 18 of the appeal bundle) on lift maintenance was £8,146.93 compared with an equivalent figure for the block from the service charge statement of £9,486.92, a discrepancy of £1,339.99.  Further, Mr Lee’s evidence showed repeated and substantial discrepancies on many topics between the service charge statement and the Landlord’s ledgers which are supposed to be a summary of the relevant service charge expenditure. Even if, on a benevolent reading of the LVT decision, it is possible to read into its conclusion on lift maintenance a reference back to the auditing of the service charge accounts, in my judgment the LVT has failed to take into account the whole picture in terms of discrepancies between the ledgers and service charge accounts when reaching that conclusion.

39.       It was submitted on behalf of the Landlord that the points Mr Lee was making as to a discrepancy between the total expenditure recorded in transactions on the ledgers and the equivalent figure for the block of flats based on the service charge accounts only make sense by reference to tables of calculations which Mr Lee produced for the benefit of this appeal but which were not before the LVT.  As this appeal was ordered to be dealt with by way of review only I agree that new material should not be taken into account.  It was submitted that, absent that material, the points being made by Mr Lee did not make sense and unless he explained his evidence for the benefit of the LVT it was not possible for the LVT to deal with the points made. There is some support for this submission in paragraph 36 of the 82 Bowsprit Point decision dealing with cleaning and grounds maintenance when the LVT said:

“The problem, as throughout this case (and, too, in respect of 33 Midship Point) was that the tenant’s case had been so imprecisely stated that the landlord had not had the opportunity to refute it.”

40.       The difficulty with this submission is that it is not what the LVT said in the 33 Midship Point decision. The LVT did not say that the evidence was so unclear it could not be understood. The LVT’s point is that there was evidence of a discrepancy but it raised an issue which, because of a lack of response from the Landlord, the LVT had been unable to resolve. In my judgment it is not appropriate for the LVT to refer to the fact that the landlord had insufficient notice to enable it to deal with the allegations and for that reason to reject them.  At a hearing the LVT has ample case management powers that would enable it to refuse to consider evidence which was submitted late on the grounds of prejudice to the other party, alternatively to consider adjourning the hearing in order to give the other party sufficient opportunity to consider the evidence.  However, what it cannot do is to admit the evidence and then reject it on the grounds that the other side has had insufficient opportunity to deal with it.  In my judgment that amounts to failing to have regard to the evidence itself.  It was submitted on behalf of the Landlord that the LVT had had regard to Mr Lee’s evidence because it is specifically referred to in paragraph 44 of the decision.  However I consider that on fair reading of the decision as a whole, the LVT has identified evidence that costs may not have been incurred but, because the Landlord had insufficient time to deal with the evidence, the LVT has declined to address it.

41.       The next topic dealt with in Mr Lee’s evidence is the concierge as to which the LVT said this:

“49. The costs demanded of the tenant were £257.67 in 2005/2006, £240.31 in 2006/2007, £385.68 in 2007/2008, £414.62 in 2008/2009 and £410.21 in 2009/2010.  These costs are said by the landlord to include all the costs of having a concierge service in the block between 13.00 and 23.00 from Mondays to Saturdays.  The concierges not only monitor the CCTV screen but also do spot cleaning and sweep the foyer of the block.

50. Mr Wright said that there were five concierges on the Barkantine Estate and only two on the other side of the Isle of Dogs and he believed that the costs should be averaged between the Barkantine Estate and the rest of the landlord’s property/  He also submitted that there was excessive use of expensive agency staff and he said that the tenants did not know what the concierges earned.  He believed that they were paid £25,000 a year but said that their wages were shown in the documents as £40,000.  Mr Lee said that he had found discrepancies between the ledgers and the landlord’s statement but, once again, these were identified too late to enable the landlord to have a proper opportunity to respond.  Mr Lee also observed that the hourly rates for one of the concierges had varied from £6.61 to £10.50 to £10.05 per hour.

51.  Mr Saye said that the concierges were presently paid between £25,000 and £26,000 a year but there were additional costs such as national insurance and the cost of uniform, the costs of which were included in the costs in the service charge accounts.  He said that the different rates may have been as a result of promotion, or anti-social hours.

52. It is agreed that some form of security is required and the landlord is, reasonably, exploring whether another system would prove better value for money than the present one which was inherited from Tower Hamlets.  In the meantime we accept that these costs were reasonably incurred and properly accounted for.

42. Again it was submitted on behalf of the Landlord that the LVT had considered and evaluated Mr Lee’s evidence.

43. The main arguments on behalf of Mr Brown reflected in paragraph 50 of the decision relate to the amount which the concierge’s were paid.  The LVT refer to evidence from Mr Lee of a discrepancy between the ledgers and the service charge statement.  There is no reference in Mr Lee’s witness statement to such a discrepancy, reference may have been made to such a discrepancy orally but I have no evidence about that which would enable me to identify what the evidence was and whether the LVT should have dealt with it.

44. Mr Lee’s witness statement says that some charges related to the previous financial year, one invoice is marked duplicate, there are no supporting invoices for some items of expenditure listed in the ledger and in respect of a number of invoices only a proportion of the costs has been charged to Midship Point, but no timesheet is enclosed i.e. it is not possible to check whether the apportionment of the concierge’s time to Midship Point as compared with other blocks of flats is correct.  None of those arguments are referred to in the LVT decision nor are they dealt with.  That said, I consider that one issue raised could not properly be regarded by the LVT as raising a prima facie case for the Landlord to answer.  The two invoices which include charges relating to the previous financial year were received by OHG on 7 April 2009 (page 20 of the appeal bundle) and 11 November 2009 (page 29 of the appeal bundle).  The natural inference is that these invoices would have been paid in the service charge year 2009/2010.  There is no reason why the Landlord cannot charge for such expenses in the service charge year in which the expense is paid and there is no evidence that these amounts were also charged in the previous service charge year.  Indeed that is unlikely given the timing of the invoices.  As to the other points raised by Mr Lee, in my judgment these should have been considered by the LVT. It is difficult to see why the service charges should include a double payment as shown by the copy invoice for the same services. There may have been grounds upon which the LVT could conclude that the apportionment of concierge charges was reasonable and in the light of auditing of service charge accounts that if it was satisfied expenditure had been incurred notwithstanding the absence of invoices.  However, none of these issues was considered by the LVT which therefore failed to have regard to the evidence. It is not possible to say that those are the only conclusions to which a reasonable LVT could come and it would be wrong for the Lands Chamber to substitute its own view on these issues which the LVT never considered.

45. The next topic dealt with in Mr Lee’s statement is rubbish collection as to which the LVT said this:

“53. The charges demanded from the tenant for this service were £3.10 in 2005/2006, £19.39 in 2006/2007, £9 in 2007/2008, £16.05 in 2008/2009 and £5.95 in 2009/2010.

54. The landlord’s case was that these charges were for the removal by a company called Veolia of bulk rubbish left by residents or fly tippers.  Mr Wright submitted that there should be no charge for this service which the council would have performed without charge, which Mr Saye disputed.

55. We accept that this service is necessary and must be paid for and that these costs are reasonably incurred.

46. These paragraphs do not mention Mr Lee’s evidence which was to the effect that there was again a discrepancy between total expenditure shown in the ledger and expenditure apportioned for the whole block based on the service charge statement of £125.78.  He also drew attention to the fact that one invoice included a hire charge for the next financial year.  As for this, the relevant invoice (page 32 of the appeal bundle) was received on 17 March 2010 within the 2009/2010 service charge year and there is no reason why this sum cannot be included in that service charge year notwithstanding that it relates to a hire charge in advance.  I do not consider that this could properly be said to raise a prima facie case for the Landlord to answer. However, here the LVT not only failed to deal with the evidence that the service charge claimed exceeded the expenditure, this evidence is not mentioned at all.  As I have already said, the LVT is not bound to refer to all the evidence when giving reasons for its decision and the mere fact that a piece of evidence is not mentioned does not automatically mean the LVT has failed to take it into account. However, in its decision the LVT has quite properly dealt with each topic separately and purported to address the arguments raised before it. There is no reference at all to Mr Lee’s evidence let alone any attempt to deal with it so far as the topic of rubbish collection is concerned.  In my judgment the only proper conclusion to draw is that the LVT failed to have regard to it.

47.       The next topic in Mr Lee’s evidence is day to day maintenance which is dealt with by the LVT in paragraph 56 of the decision:

“56. The charges demanded of the tenant for this service were nothing in 2005/2006, £39.77 in 2006/2007, £84.25 in 2007/2008, £16.35 in 2008/2009 and £23.91 in 2009/2010.  The tenant said that the fluctuations were excessive but Mr Saye said, and we accept, that fluctuations in the costs of responsive repairs were likely, and we see no good reason to doubt that these costs were reasonably incurred.”

48. Mr Lee’s evidence points to a significant discrepancy between total expenditure shown on the ledger and the amount claimed in the service charge account apportioned to the block.  In fact the service charge claim is more than double the expenditure shown on the ledger.  There is no reference to or consideration of Mr Lee’s evidence that the charges made relate to costs that simply have not been incurred and again the LVT have failed to have regard to his evidence.

49. In paragraph 45 of his statement Mr Lee makes a similar point in relation to day to day maintenance of the estate where the service charge claim appears to be about four times the amount spent as shown on the ledger.  This topic is not dealt with anywhere within the LVT decision, let alone by reference to Mr Lee’s evidence.  Again the LVT have failed to have regard to his evidence.

50. The final topic dealt with in Mr Lee’s evidence is estate cleaning and grounds maintenance as to which the LVT said this:

“40. The charges demanded of the tenant were £60.76 in 2005/2006, £9.72 in 2006/2007, £32.21 in 2007/2008, £32.67 in 2008/2009 and £72.61 in 2009/2010.  Time sheets and vouchers to support the charges for 2009/2010 are from page 634 of the hearing bundle.  Mr Saye described the administrative arrangements for providing the service.  Mr Brown said that he considered the standard of the service to have fallen, but provided no specific evidence to support his allegation.

41. Once again, we see no good reason to doubt that these costs were reasonably incurred.”

51. Mr Lee’s statement lists the ledgers to which this claim relates and points out that the total is £5.768.90 less than the figure in the service charge account apportioned to the estate.  He also queries the apportionment of staff costs between blocks, the lack of supporting invoices, lack of information or the inconsistency as to staff charges and in respect of communal cleaning 13 items of expenditure relate to the previous financial year.  A number of these points could be said to have been dealt with by the LVT: for example staff costs (paragraphs 50-52 of the decision) and lack of invoices/timesheets (paragraph 40 of the decision specifically refers to these).  However the evidence that the service charge claim exceeds actual expenditure is neither mentioned nor dealt with again indicating that the LVT failed to have regard to Mr Lee’s evidence.

52. So far as the topics of the entryphone, lift maintenance, concierge, rubbish collection, day to day maintenance of the block and estate and estate cleaning/grounds maintenance are concerned, because Mr Lee’s evidence related to the Midship Point figures it does not found a case to challenge the 82 Bowsprit Point decision. Further, Mr Gaydon did not dispute the costs relating to day to day estate maintenance.

Conclusion

53. For the reasons given above I consider the LVT wrongly failed to have regard to Mr Lee’s evidence on the following topics in its decision on 33 Midship Point: lift maintenance, the concierge, rubbish collection, day to day maintenance, day to day maintenance of the estate and estate cleaning and ground maintenance. The decision on  33 Midship Point will be remitted to the LVT for rehearing on those topics for the service charge year 2009/2010, the only year to which Mr Lee’s evidence relates.

54. It was submitted on behalf of the Landlord that if the case was remitted to the LVT the appellants would only appeal again to the Lands Chamber and that it would be wrong to require the Landlord, a publicly funded body, to incur further costs. It is not for me to second guess what further decision the LVT may make. However, the appellants are entitled to an LVT decision which has regard to and deals with their evidence. Of necessity in a service charge case this may be a detailed and time consuming process. The Landlord has a remedy in its own hands to avoid or shorten such a process namely to provide accurate and complete information to support its service charge accounts.

55.       A letter concerning costs accompanies this decision, which will become final when the question of costs is determined. Costs could only be awarded in this case in accordance with rule 10(7) of The Tribunals Procedure (Upper Tribunal)(Lands Chamber) Rules 2010 (SI 2010 No.2600).

Dated 8 April 2013

 

Her Honour Judge Alice Robinson

 

Costs Addendum

56. The Landlord makes an application for costs in the sum of £3,400 arguing that the appellants lost on the majority of grounds of appeal and therefore acted unreasonably in the bringing the appeal. The appellants assert the claim is excessive in terms of both hourly rate and time spent, that the Landlord’s legal representative is employed by them and therefore the cost has not been incurred and finally that no more than £500 costs may be claimed. The appellants claim the cost of the fees paid in the sum of £950.

57. On an appeal from the LVT, costs may only be awarded in accordance with rule 10(7) of the Tribunal Procedure (Upper Tribunal)(Lands Chamber) Rules 2010 (2010 SI No. 2600). The Tribunal may only award costs if they are wasted costs (not relevant), payment of fees in accordance with rule 10(6) or if “the Tribunal considers that the party ordered to pay costs has acted unreasonably in bringing, defending or conducting the proceedings.” In accordance with rule 10(8) the latter costs are limited to £500. Pursuant to rule 10(6) the Tribunal may order one party to pay another party the amount of any fee paid in the proceedings that is not otherwise included in an award of costs.

58. Overall the appeal relating to 33 Midship Point succeeded and the decision is remitted to the LVT. Of the twelve areas of Mr Lee’s evidence listed in paragraph 12 above two were agreed, the Landlord succeeded on four and Mr Brown succeeded on six. It is therefore not the case that the Landlord succeeded on the majority of grounds. Further, the grounds on which Mr Brown failed did not take up a disproportionate amount of time in the appeal. Looked at more broadly, a good deal of the appellants complaints arose out of the Landlord’s failure to address Mr Lee’s evidence at the LVT and the LVT’s consequent failure to deal with it. I do not consider that Mr Brown acted unreasonably in seeking to appeal the LVT decision and the Landlord’s application for costs is refused.

59. It is true that the appeal wholly failed in respect of 82 Bowsprit Point. This was because, with the exception of management fees and heating/lighting of common parts, Mr Lee’s evidence related almost exclusively to 33 Midship Point and failure to have regard to it therefore did not form any ground to challenge to most of the 82 Bowsprit Point decision. However, virtually no time was taken up in the appeal by argument relating to 82 Bowsprit Point and no identifiable additional costs were incurred in resisting this part of the appeal. Accordingly, even if, as to which I express no opinion, it was unreasonable of Mr Gaydon to appeal the LVT decision I do not consider it would be appropriate to make any order for costs.

60. As for the application for reimbursement of fees, as the appeal succeeded it was necessary for these fees to be incurred and in my judgment it would be fair and reasonable to require the Landlord to pay them. I therefore order the Landlord to pay Mr Brown cost in the sum of £950.

 

Dated 13 May 2013

Her Honour Judge Alice Robinson