UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2013] UKUT 257 (LC)

LT Case Number: LRX/158/2011

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

LANDLORD AND TENANT – service charge – jurisdiction of LVT – natural justice

 

 

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

LEASEHOLD VALUATION TRIBUNAL FOR THE

LONDON RENT ASSESSMENT PANEL

 

 

BETWEEN TRIPLEROSE LIMITED Appellant

and

MR Y BISHUN AND OTHERS Respondents

 

 

Re: 29, 32, 38, 42 & 44 Bridge Court

Lea Bridge Road

London

E10 7JS

 

Before: Her Honour Judge Walden-Smith

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

on 7 May 2013 

 

 

 

Ms Nichola Muir instructed by Conway & Co for the appellant

Mr Y Bishun in person acting for the respondents

 

© CROWN COPYRIGHT 2013

The following cases are referred to in this decision:

Birmingham City Council v Keddie & Hill [2012] UKUT 323(LC)

Regent Management Limited v Jones [2012] UKUT 369 (LC)

Thinc Group v Armstrong

Country Trade Limited v Marcus Noakes and Others [2011] UKUT 407(LC)

Thinc Group v Armstrong [2012] EWCA Civ 1227

Arrowdale Limited v Constain Court (North) Hove Limited LRA/72/2005

London Borough of Havering v MacDonald [2012] UKUT 154 (LC)

Luciem v Worcestershire County Council & Evans [2002] EWHC 1292

 

DECISION

Introduction

1.           This is an appeal against the decision of the London Rent Assessment Panel sitting as the Leasehold Valuation Tribunal (“LVT”) promulgated on 30 August 2011.

2.           An application for permission to appeal was made to the LVT which was refused on 17 October 2011.

3.           Permission to appeal was granted by the Upper Tribunal on 12 March 2012.  It was determined that there was a realistic prospect of success on the issues raised in the application for permission to appeal.  The appeal hearing was by way of review.

The factual background

4.           The appeal relates to the service charges payable under the leases of premises at Bridge Court, Lea Bridge Road, London E10 7JS (the property).  The property comprises 48 flats in two purpose-built blocks.  One fronts Lea Bridge Road and the other is to the rear. The ground floor of the block fronting Lea Bridge Road comprises six commercial/retail units.

5.           The appellant (Triplerose Limited) acquired the freehold title to the property on 19 March 2010 at auction.  The freehold was previously owned by a company known as Craftheath Limited.  The respondents are the long leasehold holders of flats at the block it is said on behalf of the appellants that many of the respondents are property investors that sub let.  Mr Bishun, on behalf of the respondents, said that while he did not live in the block that was not out of choice but as a result of the poor condition of the block and he denied being a property investor who had purchased for the purpose of sub-letting.  He said that other leasehold owners were in the same position as him, having to leave the premises because of their poor condition.  It does not seem to me that it matters whether or not the leaseholders are property investors or people purchasing the properties for their own occupation. I was somewhat surprised that the appellants felt it appropriate to raise such an issue given the matters that I have to determine.

6.           On 20 January 2011, Mr Bishun submitted an application to the LVT seeking a determination of the reasonableness and/or liability to pay service charges for the years 2007 through to 2010.  That application was made pursuant to the provisions of sections 27A of the Landlord and Tenant Act 1985.  There was a pre-hearing review on 2 March 2011, at which time four of Mr Bishun’s fellow leaseholders were joined as additional applicants to the LVT proceedings.  Those individuals were Mr Agabasonu, Mr Brou, Ms Webb and Ms Acheampong. The respondents are therefore those four leaseholders together with Mr Bishun.

7.           The appellants issued a claim in the Bow County Court for service charges in the sum of £3,606.58 from Mr and Mrs Bishun.  Those proceedings were transferred to the LVT by an order of District Judge Dickson and there was a pre hearing review of that transferred application on 25 March 2011.  As the matters raised in that application were substantially the same as those raised by the respondent in the first application to the LVT, it was decided that both applications were to be heard at the same time.  Those applications were listed for hearing on 16 June 2011.

8.           The decision of the LVT was promulgated on 30 August 2011 and permission to appeal that decision was refused by the LVT on 17 October 2011.

9.           The grounds of the appeal against the decision of the LVT are as follows:

(1)        It is alleged by the appellant that the LVT made decisions on matters which have not been raised by the respondents in the pleadings.  The appellant complains that it was therefore not in a position to produce evidence rebutting the respondents’ contentions at the hearing.  The appellant gives by way of an example, that the respondents had not made any complaints about cleaning, pest control or the clamping contract.  It is alleged by the appellant, therefore, that the appellant was not in a position to answer those queries.

(2)        The Tribunal stated in its decision that no invoices or audited accounts had been produced for the years 2007 and 2008.  The appellant says that that is simply incorrect and, even if it were correct, it was not something that the respondent had raised.

(3)        The appellant further complained that the LVT produced figures for 2007 and 2008 using “its knowledge and experience as an expert Tribunal to assess the service charge”.  It is the appellant’s contention that the LVT had plucked the figures out of the air and, further, that those figures were entirely unrealistic and not based on any of the evidence before the LVT.

(4)        The LVT failed to give any reasons for the substantial reductions in cost that it made.

The 2010-2012 challenge

10.        The appellant relies upon the decision given by a differently constituted LVT.  In the decision dealing with the 2010-2012 service charges the LVT found as follows:

“4. What was apparent from the inspection from the evidence which the Tribunal  confirms that the property on the verge of being unmanageable…

5. As a result of the gate being vandalised it had to be left open.  This allowed various vagrants and criminal elements to gain access to the back (as this was no doubt the intention of the vandalisation to the gate).  In turn this resulted in grave management problems, including people depositing human excrement around the main block. 

6. Likewise at the front, there are repeated break-ins.  These can only be avoided by installing solid metal doors, but that in turn would require significant expenditure, which the landlord does not have in the service charge account.  It is right to record that the managing agents appeared to be doing all they could in extraordinary difficult circumstances”.

11.        I note that while Ms Muir, on behalf of the appellants, says that, given the condition of the premises, it is extraordinary that anyone is willing to manage the block; Mr Bishun has informed me that the tenants have been endeavouring to obtain a right to manage the property, but that application to manage is being resisted by Triplerose Limited. There is, therefore, plainly some interest and desire to manage this block on the part of Triplerose Limited.

The respondents’ position

12.        The respondents contend that the decision of the LVT should be upheld.  It is said by Mr Bishun that the LVT used their own knowledge and experience to assess each of the charges contained within the service charge and that the Tribunal allowed sums to be claimed by the appellants with respect to cleaning, pest control, refuse collection, car park clamping, repairs and maintenance.  Such sums were calculated by the LVT on the basis of their own knowledge and experience and the evidence provided by the respondents by way of oral evidence together with documents and photographs.

13.        The respondents contend that they had requested access to inspect the invoices to support the various charges claimed under the service charge, but the appellants had said that they did not inherit any documentation when they purchased the freehold.  In addition, the respondents complained the appellants failed to produce any cleaning maintenance schedules and insurance documentation regarding the claims history and as a consequence the respondents were unable to obtain suitable comparative quotations.  The respondents say that it is not right that the appellants were unaware of the need to provide that information and the appellants cannot therefore complain that the appellant’s case was prejudiced by reason of not having prior notice of the issues between the respondents and the appellants.

14.        The respondents main reason for challenging the service charges was because the respondents felt that they were being charged for services that were not being provided.

15.        With respect to cleaning, the respondents say that the appellants had been made fully aware that the issue of cleaning was in dispute as it was a matter that had been raised on a number of occasions with Y & Y Management Property Managers.  The respondents further contend that they had requested copies of the cleaning schedule, but such schedule was not provided.

16.        With respect to repairs and maintenance the respondents contend that the appellants had had the opportunity to submit certified copies of accounts with respect to repairs and maintenance but they had chosen not to do so.

17.        With respect to car parking clamping it is the respondent’s case that the LVT had set out in its decision that there should be a reimbursement of the parking/clamping fees incurred by the leaseholders.  The respondents contend that the appellants have misconstrued the decision of the LVT with respect to car parking/clamping.

18.            So far as pest control is concerned it is the respondent’s case that there was an issue with vermin in the property, but there had been no action taken by the previous management of the property so that there should be no claim levied for the provision of pest control.

19.        With respect to refuse collection, it is the respondent’s case that those were services not provided by the previous managing agent but by the London Borough of Waltham Forest.  As a consequence therefore the appellants are not entitled to claim for that within the service charge.

20.        The respondent’s position is that the decision of the LVT should be upheld, that the charges claimed by the appellants should not be payable, and the LVT properly based its decision on the evidence before it.

The service charge provisions of the Lease

21.        By virtue of clause 2(2)(a) of the Lease the respondents covenant to pay and contribute one twenty-eighth of the cost (amongst other things) of:

(i) insuring the building,

(ii) maintaining, repairing and decorating and renewing;

(a) the structure of the building,

(b) the gas and water pipes, electric cables and wires in under or upon the building,

(c) the entrance drive pathways, entrance hall, staircases and landings of the building.

(iv) employing and maintaining the service of maintenance staff;

(v) keeping any communal gardens;

(vi) cleaning the exterior of the building;

(vii) all other services which the lessor may at its absolute discretion provide;

(viii) the lessor’s managing agents.

[This numeration is not the same as is in the lease.]

22. By virtue of clause 2(2)(b) of the Lease, the amount of the contribution is to be ascertained and certified by the lessor’s managing agent once a year in respect of the preceding year to 24 June.  Payments of the service charge are to be made by two equal payments on demand on 25 December and 24 June for the proceeding year.

The evidence of Mr Bishun before the LVT.

24. The LVT set out in their decision that they had heard evidence from Mr Bishun in which he stated that he had purchased the leasehold interest in flat 32 in September 2007.  He set out to the LVT that the arrears of £1,621.33 claimed by the appellants related to service charges inherited by the appellants from the previous freeholder Craftheath Limited, and that the respondents had frozen payment of the service charge to the previous managing agents because those managing agents had not provided the basic services in accordance with the provisions of the lease.

25. It was set out by Mr Bishun to the LVT that since he had bought his flat in September 2007, the block had been poorly managed.  The main entrance gate had not worked since 2007, thereby allowing fly-tipping, and he claimed that there were problems with leaks in the roof, bins were not being cleared regularly so that there was an infestation of vermin, and there was graffiti on the stairwells.  He further said that as the security entry-phone was not working at all times, there was a problem with non-residents using the staircase of the block as an area for drug and alcohol misuse.

26. It was Mr Bishun’s evidence before the LVT that although the problems persisted, the freeholder had taken no action to remedy the defects.  Mr Bishun said that in addition to the claims for service charges for works that he alleges were never carried out, there was a sum of £140.54 which related to a period before his purchase in September 2007, and while he was told that he would not be responsible for that charge no credit had ever been applied to his account.

27. He also complained to the LVT that the leaseholders had been asked to contribute towards the cost of building a car park in the grounds of the block on the basis that that would result in a free and safe area for parking.  He said that the leaseholders were now being charged £500 per annum for parking and that there was no provision in the lease for such a charge to be made.

28. Mr Bishun further complains that he was charged a fee of £155 for releasing a clamp to his car when they were no parking restrictions and that while he had been assured that that charge would be set off again his service charges, that had not happened.

29. It is clear from the decision of the LVT, that they considered complaints with regard to the failure of the main gate to work properly; complaints with regard to the standard of cleaning in the property; that the amounts charged for repairs and maintenance were unreasonable; that there were further charges made with regard to paining and the supply and fitting of a gate which the respondents said did not happen; that there should not have been a charge for refuse collection as that was carried out by the London Borough; that the entry-phone should not be charged for as it had never worked; that there should be no charge for car clamping; that pest control, while charged for, was not being dealt with properly; and finally the management fee was being challenged on the basis that a very poor management service was being provided.

30. The respondent’s case before the LVT, which remains the case before this Tribunal, is that since purchasing the freehold at auction, the appellants have failed to address properly, or at all the respondent’s concerns.

The appellants’ case before the LVT

31.        Mr Gurvits, who gave evidence on behalf of  Y & Y Management, informed the LVT that they have been appointed as agents in April 2010 and that they therefore had very little information as to the management of the building in the years leading up to April 2010.  He gave evidence with respect to cleaning, health and safety, refuse collection, the entry-phone, pest control, legal and professional charges, and the management fee setting out in essence, that in his opinion all those charges were reasonable.

The decision of the LVT

32.        The LVT declined to make a determination with respect to the sum of £140.54 that Mr Bishun had claimed Craftheath Limited had agreed to credit to his account as part of the negotiations on his purchase of his leasehold.

33.        The LVT found that there had been no invoices or audited accounts produced for the years 2007-2008 and it therefore used “its knowledge and experience as an expert Tribunal” to assess the service charges.

34.        The LVT then went through each element of the service charge and determined whether or not the sums claimed should be allowed. 

35.        With respect to the building insurance the LVT determined that the cost of the building insurance was reasonable and allowed all the amounts claimed for the years 2007, 2008 and 2009.

36.        With respect of cleaning the LVT determined that some cleaning services, albeit of a poor standard has been provided.  The LVT determined that the sum of £7,968.25 was reasonable for the cleaning charges for the service charge year 2009; but with respect to 2007 and 2008, determined that a reasonable sum was £5,000 per annum.  The appellants point out that the property comprises two four-storey blocks totalling 48 flats and that the amount allowed by the LVT amounts to a mere £100 per week.  It is the appellant’s case that £100 a week is plainly insufficient.

37.        With respect to repairs and maintenance the LVT set out that the appellants have not been able to produce any invoices or audited accounts for the service charge years 2007/2008 and allowed £3,000 for each of those years.  The appellants say that they had in fact provided service charge accounts for 2007 and 2008 and that the repairs and maintenance figures for those two years were respectively £7,016.12 and £9,351.97.  The appellants complain that the LVT failed to give any reasons for the sums of £3,000 save for an acknowledgement that repairs would inevitably be required.

38.        With respect to car clamping the LVT determined that the leaseholders should not be paying for parking.  The appellants complain that this was not an issue that had been raised by the leaseholders in the application made to the LVT.

39.        With respect to other matters including: entry-phone, pest control and legal and professional, the LVT allowed certain sums, all of which were large reductions on the sums claimed, but without providing reasons as to why they had made such reductions.

40.        The respondent’s position on this appeal is that the LVT’s decision should be upheld as it is not proportionate to deal with these matters again.  The respondents’ contend through Mr Bishun that all the matters dealt with by the LVT were in fact raised at the pre-trial hearing which took place on 2 March 2011.  Mr Brown on behalf of the managing agents, had failed to diarise the pre-trial review on the 2 March 2011 but was able to attend the review hearing by telephone.  It is the respondent’s case that all the issues that were dealt with by the LVT at the substantive hearing in June 2011, were issues that were raised at that pre-trial review on 2 March. 

41.        The appellants do not accept that.  The directions from the 2 March review hearing reveal that the landlord (the appellant in this matter) shall by 25 March 2011 serve on the tenant its detailed case including all documents relied on.  These documents shall include the accounts for the relevant years and the insurance documentation including (but not limited to) the proposals made in the relevant years, the Brokers presentation and report, the relevant claims records, the policy and policy terms, the quotations received and all other documentation necessary or desirable for the tenants to be able to obtain comparables for insurance.  The directions further provide that the tenants (the respondents in this matter) shall by 22 April 2011 serve on the landlord their detailed case with all documents on which they rely attached, including any insurance brokers or insurance experts report on which they rely.

42.        It does seem from those directions, that while the respondents may have raised a general complaints about the service charges and their level, the main issue concerning the appellant was the insurance.

43.        The respondents accept that the statement of service costs for the years ending 31 December 2007 and 31 December 2008 were included in the bundle before the LVT and that the LVT looked at those accounts, but say that those accounts failed to set out a breakdown as to how the costs were reached, unlike the account for 2009 which included supporting documentation.

44.        The respondent contends that the applicants were well aware that there was an issue with respect to the cleaning charges, and that the cleaning had been an issue ever since these appellants took over the running of the property.

45.        Finally, the respondents say that all the issues were raised at the pre-trial hearing and that each item was taken through in detail at the substantive hearing where Mr Gurvits was present.  The respondents say that Mr Gurvits had the opportunity to present invoices, but he failed to do so.  The respondents complain that they would like to inspect the documents which support the service charges claimed, but they have been denied access to do so.  Mr Bishun further said that if the matter has to be remitted to a differently constituted LVT, then that LVT should inspect the property again, as it is not possible to see any improvement at all as all works are carried out on an ad hoc basis, and the property is falling apart.

The determination

46.        It is the appellants case that the respondent’s application to the LVT provided vague and unspecified complaints.  The appellants content that the respondents raised unsubstantiated allegations, duplicate billings or billings for works which were not carried out, but failed to identify which works were being referred to or provide evidence to support this allegation.  In addition the appellants contend that the respondents failed to specify the nature of the dispute with respect to the June 2010 insurance charge.  Further, while Mr Bishun’s defence to the county court proceedings disputed the cost of building insurance, the cost of emergency works to main doors, a car clamping fee, and a charge that was allegedly due from Mr Bishun’s predecessor, the defence failed to particularise the remainder of the complaints made.

47.        In light of the directions given at the hearing on 2 March 2011, the appellants provided a bundle of documents to the respondents but wrote to the LVT on 24 March 2011 setting down a marker that the appellants were having difficulties in understanding the nature and details of the respondent’s case.

“The case of the applicant (the respondents in this matter) is poorly summarised in the application and it has been hard to follow the issues the applicant has raised and we have made a best attempt at dealing with the issues raised.”

48.        The appellant’s concern had been that the issues raised by the respondents had been narrowed prior to the hearing in June 2011.  Further, if the respondents were complaining about the failures of the previous freeholders and their managing agents then those parties would need to be joined to the proceedings as, it is said by the appellants, they did not have sufficient knowledge to be able to answer those concerns.  The appellant complains that, despite those limits to the application to the LVT, the LVT in their decision set out its view with respect to practically each item in the service charge.

49.        In Birmingham City Council v Keddie & Hill [2012] UKUT 323(LC)  HHJ Gerald set out as follows:

“Applications are commenced by the landlord or tenant issuing a pro-forma application form prescribed by the Residential Tribunal Property Service which requires that details of the questions relating to service charge expenditure requiring resolution by the LVT be set out.  If they are not sufficiently set out, as is often the case, the LVT will at the pre-trial review order that the applicant’s serve a statement of case giving full particulars of precisely what it is a issue and why.  The respondent will be ordered to serve a statement of case setting out its case to which the applicant will usually be given an opportunity to respond if he so wishes by serving a statement of case in reply

Those documents … set out the nature and scope of the dispute.  They operate t o limit the issues in respect of which the parties must produce evidence in support of their respective cases.  They also operate to define the issues in respect of which they seek resolution by the LVT.  They therefore service five functions.  First, to identify the issues, secondly to enable to parties to know what issues they must address their evidence to. Thirdly, to vest the LVT with jurisdiction, and focus the LVT’s attention on what needs to be resolved.  Fourthly, setting the parameters of, and providing the tools within which, the LVT may case manage the application.  Fifthly, by confining the issues requiring resolution to what is actually (as distinct from what might theoretically be) in dispute between the parties.  They will be assured of economical and expeditious disposal of their dispute whilst also promoting efficient and economical use of judicial resources at the first instance and appellate levels.”

49         The complaint from the appellant is that the respondents  have simply complained generally about the service charge and that such a broad attack fails to give them sufficient particulars to enable them to deal with the concerns and it is not for the LVT to then raise points that have not been raised by the respondent leaseholders.

50         While it is not for the LVT to raise matters of its own motion which are not in issue between the parties, in this matter, the respondents had given sufficient information in their application to the LVT and in their statement of case that they had concerns about the amounts being charged by the appellants with respect to the service charge.  In their statement of case dated 18 April 2011, the respondents set out that they had been in correspondence with Triplerose Limited Management Agents, Y & Y Management, and that they had refused to meet with the leaseholders to discuss ongoing problems and issues.  There is also reference to a meeting with Y & Y Management and the offer made by Y & Y Management.  In the circumstances, while it is not for the LVT to expand or extend the nature and number of complaints being made by applicants to the LVT, this is not a case where, in my judgment, the LVT has taken upon itself to identify issues which were of no concern to the parties.  The LVT was reaching decisions on issues about the service charge.  The appellants were aware that the respondent leaseholders were complaining about all aspects of the service charges, and it was incumbent upon the appellants to ensure that they could properly establish the sums that had been claimed in light of the respondents complaints.

51         The appellant’s next complaint is with regard to the LVT’s finding that no audited accounts had been produced for the years 2007 and 2008.  This was not an issue that had been raised by the respondents, and copies of the accounts for 2007 and 2008 were in the bundle.  It appears that the bundle, which had been prepared by the respondents omitted the signatory pages, but there had been no suggestion by the respondents at the hearing that there were no audited accounts to support the figures claimed by the appellants.  This criticism does indeed appear to be a criticism of the LVT’s own making.

52         The accounts contained within the bundle before the LVT contain details of the actual expenditure on services.  Such information was clearly relevant to the LVT’s determination of what was a reasonable figure.  In my judgment, the LVT erred in failing to make reference to those figures or to the accounts, and in reaching conclusions based on “its knowledge and experiences as an expert Tribunal to assess the service charges” when it had concrete evidence before it as to the amounts being claimed.  While it is quite proper for an LVT to exercise its judgment relying upon its own expertise and experience, that does not justify the LVT in reaching conclusions contrary to the evidence before it without justifying those conclusions.

53         An example of this is the cleaning.  In paragraph 74 of the LVT’s decision the LVT recorded the following:

“The Tribunal noted the applicants’ [that is the respondents in this case] evidence as to the lack of cleaning services provided.  But the Tribunal was of the view that some cleaning services (albeit of a poor standard) almost certainly had been provided and on the basis of the cleaning contract recently awarded for the sum of approximately £18,000 per annum (£1,500.00 per month), the Tribunal was of the view that £5,000 per annum is a reasonable sum for the cleaning for the years 2007 and 2008.  For the service charge year 2009 the Tribunal considered the sum of £7,968.25 to be reasonable for the cleaning charges.”

54         The statement of service costs showed that the cleaning costs for 2007 were in fact £10,363.56 and in 2008 were £10,520.68.  The LVT have, therefore, reduced the cleaning costs to be charged by the appellants by more than a half.  There was no reasons given for that determination and, as I have already noted above, a cleaning charge of £5,000 a year amounts to a little under £100 per week to clean two blocks of flats comprising 48 flats in total. 

55         In Regent Management Limited v Jones [2012] UKUT 369 (LC) His Honour Judge Mole QC said as follows:

“The LVT is perfectly entitled, as any expert Tribunal, to raise matters of its own volition.  Indeed it is an honourable part of its function, given that part of the purpose of the legislation is to protect tenants from unreasonable charges and the tenants, who may not be experts, may have no more than a vague and unfocussed feeling that they have been charged too much.  But it must do so fairly, so that if it is a new point which the Tribunal raise, which the respondent has not mentioned, the applicant must have a fair opportunity to deal with it.

It is a matter of natural justice to give both parties an opportunity of making submissions and, if necessary, producing evidence necessary in order that the LVT can properly deal with a decision.  The failure of the LVT to take into account the evidence before it in the form of the accounts showing the service costs for the years 2007 and 2008 and imposing its own view as to what it considered to be the appropriate charge is a breach of that fundamental right to a fair hearing.  It gives the appearance that the LVT is taking a partisan view, and is effectively punishing the appellants by making swingeing reductions without any justification given.”

56         As the Court of Appeal have confirmed in Thinc Group v Armstrong [2012] EWCA Civ 1227, for a court or tribunal to determine a dispute on the basis of the case not put forward by a party or not raised by the court or tribunal is unfair and not permissible.  In this case the LVT has come to a conclusion on cleaning costs, ignoring the evidence that was before them, and imposing its own views without justifying those views.  The details of this case appear to show that the LVT have wholly underestimated what would be reasonable costs for cleaning a property of this size and nature.

57         In Country Trade Limited v Marcus Noakes and Others [2011] UKUT 407(LC) His Honour Judge Gerald said the following:

“13. It is an every day occurrence for the LVT to be faced with an application relating to the reasonableness of various elements within a service charge of a detailed and factual nature frequently involving quite small sums of money relating to goods or services which are part of most people’s broad knowledge and experience of every day life.  Frequently all or most of the adduced evidence will be from the landlord.  The tenant, often in the absence of any comparative evidence, will be asserting that the costs are too high usually for a variety of interacting reasons – the rate is too high, too many hours are claimed, work was not done to a reasonable standard to justify the sum charged.

14. It is not in my judgment the effect of the above cited authorities that the LVT must accept the evidence of the landlord without deduction if there is no countervailing evidence from the tenant.  The evidence required in these types of service charge disputes is quite different from the sort of complex largely non-factual evidence and issues addressed in cases such as Arrowdale. 

15. The LVT does not have to suspend judgment or belief and simply accept the landlord’s evidence.  It is entitled to robustly scrutinise the evidence adduced by the landlord (and, of course, the tenant) which, after examination, it is entitled to accept or reject on grounds of creditability.  The cause of scrutiny is not just looking through the invoices or other documents, but identifying issues of concern and asking the landlords (or tenants) witnesses for explanations and observations.  It is not necessary for each and every invoice to be minutely examined but sufficient for them to be dealt with on a sample basis.  It is only once this process has been gone through that the LVT will be able to reach any decision on the creditability of witnesses which will be based on the answers given and any other available evidence.

16. The difficulty comes where the LVT accepts that “some” work has been done but does not accept that the “rates” or “charges” claimed as reasonable are creditable or justified and that there is no other comparative or market evidence (in the form of estimates, or quotes or such like) of what those rates or charges might be.  The LVT will not be able to reject the sum claimed because it has accepted that some work has been done to justify a charge, but will have concluded that the amount claimed is too high.

17. In those circumstances the LVT is entitled to employ a robust commonsense approach and make appropriate deductions based on the available evidence (such as it is) from the amounts claimed always bearing in mind that it must explain its reasons for doing so.  The circumstances in which it may do so will depend on the nature of the issues raised and the service charge items in dispute, and will always be a question of fact and degree.  In some instances, such as insurance premiums, it will be very difficult for the LVT to disallow the landlord’s claim in the absence of any comparative or market evidence to the contrary.  In other cases, such as gardening, cleaning or such like the position might be different where the nature and complexity of the work is fairly straightforward.  It is only where the issue is finely balanced that resort need be had to the burden of proof.”

58         The difficulty in this case is that it appears that the LVT has had no, or very little, regard to the available evidence.  The LVT failed to take into account the cost of providing the services as put forward by the appellants, the LVT failed to have regard to the size and nature of the building; and the LVT failed to take into account the peculiar difficulties of these blocks and the continued vandalism.  Having failed to give reasons for the determinations made, it appears that the LVT have simply imposed their own views in an arbitrary manner which has thereby denied the appellants proper opportunity to understand the basis of their findings.

59         I have already set out the example of the cleaning costs and the amount allowed by the LVT and the obvious failings with respect to that part of the determination.  Another example is the repairs and maintenance determination.  First, the LVT state that the respondent [the appellants in this matter] had not been able to produce any invoices or audited accounts for the service charge years 2007 and 2008.  That is plainly wrong as the statement of service costs included in the bundle before the LVT provide that the appellants had expended £7,016.12 in 2007 and £14,640.32 in 2008.  The LVT set out in the decision that it acknowledged that repairs would inevitably be required and that some repairs must have been undertaken each year in order to maintain the property.  The LVT then went on to say that the amount allowed for the service charge year 2007 was £3,000 and for the service charge year 2008 was again £3,000.  The service charge for 2009 was £3,342.95.  No justification is given by the LVT as to why they have reduced the service charge for repairs and maintenance by such an extreme amount, down to £3,000 for years 2007 and 2008 and down to £3,342.95 in 2009.  Without giving any justification or reasons for those stringing reductions, it again appears that the LVT is acting in an arbitrary manner and possibly punishing the appellants for no justifiable reason.

60         As George Bartlett QC the then President of the Tribunal stated in Arrowdale Limited v Constain Court (North) Hove Limited LRA/72/2005, there are three unmistakeable requirements of any decision:

“Firstly, as a Tribunal decided issues between the parties it must reach its decision on the basis of evidence that is before it.  Secondly, it must not reach a conclusion on the basis of evidence that has not been exposed for the parties comments.  Thirdly, it must give reasons for its decision.”

61.In London Borough of Havering v MacDonald [2012] UKUT 154 (LC), this Tribunal found that:

 “The jurisprudence behind why written reasons must be given by a Tribunal, including a Leasehold Valuation Tribunal was sent out succinctly by Lawrence Collins J (as he then was) in Luciem v Worcestershire County Council & Evans [2002] EWHC 1292 admin paragraphs 10-11.  In that case, Lawrence Collins J was dealing with a decision of the Special Educational Needs Tribunal”.  However he expressly found that the principles are not unique to that Tribunal and set out the following principles:

(1)   Proper and adequate reasons must be given so that there are intelligible and deal with the substantial points that have been raised and the reasons should deal, in short form, with the substantial issues raised in order that the parties can understand why the decision has been reached;

(2)   As a result of that first principle, the absence of reasons to explain why a case was rejected may make the decision appear irrational;

(3)   Where reasons are inadequate, it is not normally appropriate that the reasons should be amplified on the appeal to the High Court;

(4)   A decision must be sufficiently specific and clear as to leave no room for doubt as to what has been decided;

(5)   The lay members of the Tribunals specifically appointed for their [educational] expertise may use their expertise in deciding issues before the Tribunal.  But they may not use it to raise and decide other issues which the parties may not have had an opportunity to consider as the Tribunal may obey the Rules of natural justice and members should not give evidence to themselves which the parties have had no opportunity to challenge.”

62    The respondents to this appeal quite understandably ask that matters are dealt with proportionately.  They say that the subsequent decision of a differently constituted LVT dealing with later service charge years is a decision that they do not agree with but one which they accept.  The respondents say that the appellants should take the same position with regard to this LVT decision.  In essence, what Mr Bishun is saying is that you loose some, you win some.  While I understand his feelings in expressing that, it is clear that in this case the LVT failed to properly take into account those matters it ought to have taken into account, failed to properly set out the basis of their decisions, and appear to have been acting in an arbitrary manner, failing to fulfil those three inescapable requirements referred to by the former President in Arrowdale Limited.

Conclusion

63         In the circumstances, therefore, I have  come to the conclusion that the LVT failed to have any, or any proper, regard to the actual cost of the services in 2007 and 2008 despite having that evidence before them and that the LVT replaced the actual costs with substantially reduced costs without providing any justification for those reductions.

64         In all the circumstances, this decision cannot be allowed to stand, and despite the unfortunate consequences of the costs, time, and effort being increased, this matter must be remitted to a differently constituted LVT for the purpose of it being heard again.

65         Before the matter is re-listed for hearing before the LVT, it will be necessary for the LVT to have a directions hearings, in order to set out clear directions as to what information the leaseholders [the respondents in this hearing] need to set out in order that all the issues that are to be covered are clearly before the LVT; and for a direction to the respondent (the appellants in this matter) to provide the documentation necessary in order for both the leaseholders and the LVT to understand the basis upon which the figures are claimed.

Dated:  22 May 2013

Her Honour Judge Walden-Smith