London Borough of Southwark v Mr C Bevan, Miss C Champenois [2013] UKUT 0114 (LC)

1-8 Clifton Crescent, London SE15 2RX, is a block containing eight flats, only one of which – flat 3 – was let on a long lease at the relevant time.

The lease required the lessees to pay a “fair proportion” of the service charge, and permitted the landlord to “adopt any reasonable method of ascertaining the said proportion and may adopt different methods in relation to different items of costs and expenses”.

In the year in question, the landlord had apportioned service charges by dividing the total amount of service charge expenditure (£x) by the total number of bedrooms in the entire block (to give £y per bedroom); then, in order to calculate the service charge payable for flat 3, multiplied £y by two, being the number of bedrooms in flat 3.

It appears that, before the LVT, both sides agreed that the landlord was entitled to adopt a method of calculating the fair proportion based upon the number of bedrooms in each flat, provided that it used the correct number of bedrooms in its calculation.

The dispute turned on the number of bedrooms in flat 7. The landlord believed that there was one. The lessees believed that there were two.

The landlord had neither plans, photographs nor measurements of Flat 7, but gave the following to the LVT:

• A statement and oral evidence from one of its Resident Officers, who had been into Flat 7, and had seen that it comprised a living room, kitchen, bathroom, a single bedroom and a small storage cupboard which was too small to accommodate even a child’s single bed.

• Evidence that for the purpose of council tax flat 7 was listed as band B, whereas flat 3 was listed as band C.

The lessees argued that the external appearance of the block suggested that flat 7 contained two bedrooms, and that without clear evidence to the contrary the landlord should calculate the fair proportion on that basis.

The LVT was unable to gain access to flat 7. It concluded that it was not possible to be certain about the internal layout of the flat by looking at it from the outside, but determined that it had two bedrooms because:

• The lessees had no means of gaining access to flat 7 and therefore could not prove their case;
• Their assertion that from the outside the flat looked as if it contained two bedrooms accorded with what the Tribunal found at the inspection;
• The burden in a “situation like this” must be on the landlord who is the owner of flat 7 to demonstrate that the formula it uses to calculate its service charge apportionment is fair and reasonable;
• The Resident Officer’s evidence was not sufficient to discharge the burden. He had no property qualifications and could provide no evidence to support his statement.

The Upper Tribunal gave the landlord permission to appeal. The lessees took no part in the appeal.

The landlord’s arguments were:

• That it was inappropriate for the LVT to decide this case upon the basis of where the burden of proof lay because reference to the burden of proof is a last, not a first, resort (per Sedley LJ in Daejan Investments Ltd v Benson [2011] EWCA Civ 38);
• That, in any event, looking at the evidence as a whole as it was before the LVT, the only conclusion the LVT could properly have reached was that flat 7 was a one bedroom flat; and
• That no legally sustainable reason was given by the LVT for dismissing the evidence of the Resident Officer, supported by the council tax information, that flat 7 contained only one bedroom.

The appeal was by way of review. On the role of the Upper Tribunal in this regard, HHJ Huskinson said: “the appeal can only be allowed if the appellant can persuade the Upper Tribunal that the decision is wrong and can properly be interfered with having regard to the legal principles governing such appeals. The appeal is proceeding by way of review. As stated by the Senior President Carnwath LJ (as he then was) in Daejan Investments Ltd v Benson [2009] UKUT 233 at paragraph 61:

““However, we remind ourselves that we are reviewing their decision, not substituting our own judgment. It is common ground that we can only interfere if the LVT has gone wrong in principle, or left material factors out of account, or its balancing of the material factors led it to a result which was clearly wrong.””

The only question before HHJ Huskinson was whether the application of the method of calculating the fair proportion was an unreasonable method if flat 7 was treated as a one-bedroomed flat, but was a reasonable method if flat 7 was treated as a two-bedroomed flat.

He had little hesitation in allowing the appeal. In his view, the evidence before the LVT clearly pointed towards flat 7 having only one bedroom:

• There was evidence called before the LVT from a Resident Officer who had personally seen the inside of the flat and who said that there was one bedroom.
• There was evidence from the council tax records that flat 7 was in a lower council tax band than a two-bedroom flat.
• An exterior inspection did not enable the LVT to reach any conclusion about the footprint of flat 7, whereas evidence from the witness who had personally seen inside the flat was to the effect that the flat was a one bedroom flat.
• The Resident Officer may have “had no property qualifications”, but no property qualifications would be required for giving factual evidence as to whether there was one or two bedrooms within a flat. His evidence as to what he personally saw on inspecting the flat was capable of proving that the flat was a one bedroom flat even without the given by council tax records.

“Accordingly I conclude that the only legally sustainable conclusion open to the LVT upon the evidence before it was that, on the balance of probabilities, flat 7 was a one-bedroom flat rather than a two-bedroom flat, such that the fair proportion for the purpose of the service charge calculations could properly be made upon that basis…With respect to the LVT, I conclude that its conclusion to the contrary was clearly wrong”.

HHJ Huskinson was of the view that it was just and equitable to make a s.20C order because:

• The landlord could have avoided the difficulties which have arisen in this case if it had retained a clear record of the accommodation available in each flat in the block.
• It was no fault of the respondents that the appellant did not do so, nor was it any fault of the respondents that this matter has had to come on appeal to the Upper Tribunal.

However, since the landlord had not been given notice of the lessees’ s.20C appeal, he gave the landlord 28 days to prepare submissions to the contrary. At the time of writing that 28 days has not expired. Perhaps the decision has been published because the landlord informed the Upper Tribunal that it did not intend to oppose the making of such an order.

The standard of proof before the LVT can be a vexed question: who has to prove what case and to what level of likelihood?

In Daejan Investments in the Court of Appeal, Sedley LJ said: “It is only rarely that the tribunal will need to resort to the adversarial notion of the burden of proof in order to decide whether an argument has been made out, and tribunals ought in my view not to be astute to do so: the burden of proof is a last, not a first, resort”.

This observation supplements Yorkbrook Investments Limited v Batten (1986) 18 HLR 25, another Court of Appeal decision, which is authority for the proposition that the LVT must reach its conclusion based on the evidence before it as a whole, rather than imposing a burden of proof on one side or the other. “If the tenant gives evidence establishing a prima facie case, then it will be for the landlord to meet those allegations and ultimately the court will reach its decisions”, was Wood J’s view in Yorkbrook.

For the purposes of applications under s.27A of the 1985 Act, Sedley LJ’s comments in Daejan are, I think, broadly unaffected by the Supreme Court’s reversal of the Court of Appeal judgment.

In Daejan in the Supreme Court however, Lord Neuberger was clear that in applications for dispensation from consultation under s.20ZA, the landlord bears the legal burden of proof, and the tenant the factual burden of proving prejudice.

I conclude this post on a more light-hearted note: I was relieved to read that the Upper Tribunal disagreed with the LVT’s view that property qualifications are a prerequisite to competence in counting bedrooms.