UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2015] UKUT 0496 (LC)

LT Case Number: LRX/1/2015

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

LANDLORD AND TENANT – Service Charge - jurisdiction of F-tT to hear application challenging the reasonableness of a service charge under sections 18, 19 and 27A(1) of the Landlord and Tenant Act 1985 when that had already been determined by the county court – applicability of section 27A(4)(c) of the Landlord and Tenant Act 1985

 

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

FIRST-TIER TRIBUNAL (PROPERTY CHAMBER)

 

 

BETWEEN                              MRS GERTRUDE COWLING                                             

Appellant

                                                                           and

                                WORCESTER COMMUNITY HOUSING LIMITED                          

Respondent

Re: 71 Grenville Road,

Worcester

WR2 5RN

 

 

Before His Honour Judge Nigel Gerald

Sitting at: Royal Courts of Justice, Strand, London WC2A 2LL

on

9 September 2015

 

Andrew Brown, representative for the Appellant

Justin Bates, Counsel for the Respondent

 

 

 

© CROWN COPYRIGHT 2015

 

The following cases are referred to in this decision:

 

 

 

 

                                                                    DECISION

Introduction

1.             This appeal raises the very narrow jurisdictional issue of whether or not the First-tier Tribunal Property Chamber (Residential Property) (“F-tT”) has jurisdiction to consider the reasonableness of a service charge under section 19 of the Landlord and Tenant Act 1985 in circumstances where a money judgement for the amount of the service charge claimed had been entered by order of the county court.  Because the issue is so narrow and the material facts and circumstances before me are not in dispute the easiest way forward is to briefly go through that which has previously occurred.

2.             The appellant has occupied No.71 Grenville Road, WR2 5RN as an assured tenant of the respondent since 29 March 2004.  The lease contains service charge provisions enabling the respondent landlord to recover the costs of providing a television aerial. It is common ground before me that the service charge constitutes a variable “service charge” within the meaning of section 18 of the 1985 Act, namely, that it is “an amount payable by a tenant… the whole or part of which varies or may vary according to” the costs incurred or to be incurred by or on behalf of the landlord, by reason of which the amount payable is limited to that which is reasonable by section 19 in respect of which application for determination can be made to the F-tT under section 27A, the F-tT’s jurisdiction being addition to that of the county court: see section 27(A)(7). No such application can be made in respect of fixed charges, that is, where the amount charged to the tenant does not vary according to the costs to the landlord.

3.             On 26 November 2013 the respondent issued proceedings in the Worcester County Court for an order for possession for, amongst other things, non-payment of service charge which included the cost of providing a television aerial.  One of the matters raised by the appellant in her defence was the reasonableness of the service charge under section 19.

4.             The matter came before District Judge Khan on 7 January 2014.  The District Judge entered judgment in the amount of £511.51 in respect of the television aerial.  Although the amount the appellant was ordered to pay the defendant was described as “rent arrears”, it is common ground between the parties and is plain from the transcript before me that that was a mis-description and referred to the arrears being, in this case, in respect of the provision of a television aerial pursuant to the service charge provisions of the lease.

5.             The District Judge was alive to the issue of reasonableness, but took the view that that was properly the domain of an application to the F-tT. The District Judge did not explicitly decide whether the charges were fixed or variable but, of course, the F-tT could only have jurisdiction if it was a variable – not a fixed – service charge. It is therefore implicit in his observations that he regarded the service charge to variable not fixed otherwise there could have been no suggestion of the matter being pursued in the F-tT. It is common ground before me that the learned District Judge fell into error in not appreciating that the county court had jurisdiction to determine the amount of reasonableness in parallel to the F-tT as per see section 27A(7). The material part of the District Judge’s decision is as follows:

“…The Leasehold Valuation Tribunal [now the F-tT], I think deal with these types of disputes but this is not the forum for that. On the face of it, the landlord has levied this charge. They are entitled to levy a charge on the face of it and it has to be paid.”

6.             The appellant appealed that judgment to the circuit judge having, on 20 January 2014 and largely at the behest of the District Judge, issued the application for determination of the reasonableness of the service charge in the LVT (now the F-tT) which has resulted in this appeal. What is usually done, and it is common ground the District Judge could have done, is for the county court to stay the service charge aspect of the matter before the county court and refer it for determination to the F-tT under section 176A of the Commonhold and Leasehold Reform Act 2002 instead of entering judgment for the full amount. It is the entry of the money judgment which gives rise to the issue in this appeal.

7.             The appeal came before His Honour Judge Pearce-Higgins QC on 7 August 2014. He dismissed the appeal for two reasons.  First, he stated that it was not a variable service charge but a fixed charge case so that the matter was not susceptible to a determination of reasonableness under section 19 by the F-tT or, by parity of reasoning, by the county court.  Secondly, he held that the appellant was liable for the £511.51 under the lease and therefore dismissed the appeal.  He made various alterations to the order for possession but maintained and did not dislodge the money order in the amount of £511.51. The material part of his decision are this:

“…it is not a variable [service] charge varying with the costs incurred by the landlord every year (it is a fixed charge) and, secondly, in any event, because I have made the judgment about the entitlement, the Tribunal has no jurisdiction – my judgment on this matter resolves it…

“Therefore, what I propose to do is to dismiss the appeal in the sense that the judgment for the sum claimed and the payment of the arrears remains.”

8.             Had what is now agreed before me been the common position of the parties before the appellate county court it is possible, but not inevitable, that the decision of His Honour Judge Pearce-Higgins QC might have been different. He might, had he been informed of what is common ground before me, have allowed the appeal of this aspect of the matter and either remitted it to the District Judge or, consistent with practice, referred the issue of reasonableness to the F-tT under section 176A of the 2002 Act – or not. He plainly had some sympathy for the appellant, who had been a long-standing tenant of the respondent, as he varied the possession order so as to afford her a more generous opportunity to pay and so avoid losing her home.

9.             Be that as it may, permission to appeal that decision has been sought from the Court of Appeal. That was dismissed on paper by Lord Justice Lewison on 12 May 2015 on the primary ground that the appellant’s notice was over four months out of time without any adequate reason for the delay having been given. His Lordship went on to say:

“Whatever the outcome of the appeal to the Upper Tribunal the judge’s money judgment will stand.  Whether he was right or wrong to give judgment in that sum does not raise an important point of principle or practice, nor is there a compelling reason for the Court of Appeal to hear the appeal.  Moreover there is no real prospect of success in appealing against the Judge’s decision that the detailed Terms of Tenancy applied to Mrs Cowling’s tenancy.” 

10.         I am told that the appellant is to renew her application for permission to appeal orally before the Court of Appeal on 3 December 2015.

11.         Meanwhile, on 28 October 2014, the LVT as it then was determined that it had no jurisdiction to entertain the application to challenge the reasonableness of the service charge up until the 7 January 2014 (the date of decision of the District Judge) because that had been determined by the county court albeit that it would determine the reasonableness of the service charge thereafter on the footing, which has not been appealed and as I have said is common ground before me, that it is a variable “service” charge within section 18 so vesting the LVT (F-tT) with jurisdiction under section 27A.

12.         The material parts of that decision are as follows:

 “65.       This Tribunal cannot interfere in any way with decisions of the County Court.  Either this Tribunal or a County Court can determine whether a service charge is payable.  By giving judgment for the respondent for the sum of £511.51, which was not disturbed on appeal, a court has determined that all of the disputed service charges for the aerial point, up to 7 January 2014, are payable.  The Tribunal has to agree with the Respondent that this is the end of the matter for charges up to 7 January 2014.  The determination of the District Judge on 7 January 2014 resolved the payability of the arrears of service charge and subsection (4) of section 27A therefore applies and precludes this Tribunal from having jurisdiction in relation to those arrears.

“66.        The District Judge suggested that the Applicant bring these proceedings, and that if this Tribunal found the service charge to be unreasonable, the Respondent would have to pay any service charges paid back to the Applicant.  That does not seem to the Tribunal to be a workable proposition.  It would bring the Court and the Tribunal into conflict, as the Respondent might reasonably ask why it has to repay something which a court has found to be payable, and this is surely the whole purpose behind section 27A(4)(c).

“67.        The Tribunal cannot accept the neat suggestion of Mr Brown to the effect that contractual liability and reasonableness are separate and distinct issues so that the Tribunal could find that only the former has been determined in the County Court, and the the Tribunal can still consider the latter.  The crucial focus of section 27A of the Act is on “whether a service charge is payable” (subsection (1)).  There is nothing in the section that suggests a divisibility of the word “payable” into constituent parts.  The County Court concluded that the service charge was payable, and whether or  not that is right or wrong decision, it was the decision in relation to the whole service charge in every aspect.  The Tribunal did not find that any of the LVT decisions to which Mr Brown referred persuaded it to take a different view.  Those decisions are not (as Mr Brown conceded) binding on the Tribunal in any event.

“68.        The Tribunal although agrees with the point accepted by Mr Bates that payability of a service charge for a TV aerial after 7 January 2014 has not been determined by the Court, and the applicant cannot be prevented from bringing such an application using this argument.

“69.        As set out above, the Application is, inter alia, for the future year of 2014, and is in relation to a global non-time limited issue.  The Tribunal’s decision on this question therefore only relates in determining that it has no jurisdiction to hear the Application in relation to the payability for any service charges incurred before 7 January 2014.”

13.         The appellant submitted, in substance, that the F-tT was not bound by the decision of the county court because there had been no determination of the reasonableness of the service charge under section 27A. Whilst there was an outstanding money judgment, that did not preclude the F-tT from determining the reasonableness of the service charge because the county court decision is confined to deciding who is liable to pay the service charge but does not determine the amount actually payable.

14.         The respondent submitted that the decision of the county court constitutes 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” under section 27A(1) from which it follows that the F-T has no jurisdiction to entertain the application because it is “in respect of a matter which … (c) has been the subject of determination by a court”: section 27A(4)(c).

15.         At the time the matter was before the F-tT and also as matters stand before this Tribunal, there is a money judgment entered by the county court that “the defendant [appellant] pay the claimant £511.51”. The District Judge appears to have proceeded on the footing that the service charge was a variable “service charge” within the meaning of section 18, hence his observations that it was the proper domain of the F-tT, whereas the appellate county court determined that it was a fixed charge so not a “service charge” within the meaning of that section.

16.         The differing reasons behind the making of the money order do not alter the fact that, subject to the outstanding application for permission to appeal, the money order or judgment remains extant. It not only resolves the question of liability but also of the amount which must be paid and by whom but also the question of jurisdiction. In my judgment, no sensible distinction can be made between liability to pay and the amount payable. As matters stand, the appellate county court has determined that it is not a “service charge” within section 18 from which it follows that the F-tT has no jurisdiction by virtue of section 27A(4)(c) and also, it must be recalled, by section 27A(1) which only vests jurisdiction where the matter concerns a variable service charge although, of course, the question of whether or not something is a variable or fixed service charge is sometimes determined by the F-tT.

17.         In conclusion, I dismiss this appeal albeit that my reasoning is slightly different from those of the F-tT because the county court proceedings have developed somewhat since their decision. I recognise that this results in the somewhat unsatisfactory position that up and until 7 January 2014 the service charge can not be challenged because the appellate county court has determined that it is a fixed charge whereas it can be challenged for all subsequent periods because it is now accepted that it is a variable service charge. Whether or not that is resolved is for determination of the Court of Appeal at the application for permission to appeal, not by this Tribunal.

 

                                                                        Dated:  14 September 2015

 

                                                                        His Honour Judge Gerald