Wales & West Housing Association Limited v Sharon Paine [2012] UKUT 372 (LC)

The dispute between the landlord and Ms Paine was whether the landlord was entitled to include management charges in its service charge demands. The landlord said it was: Ms Paine disagreed.

The LVT however considered that there was also an issue as to the amount of the management charge that the landlord was entitled to demand. The LVT’s view at the hearing was that the charge was high at £292: the landlord agreed that it was, but “made no concession as to whether it was reasonably incurred or not”.

The LVT determined that the management charge was excessive, and that in this case a “reasonably incurred management charge would be no more than £200 per annum”.

The landlord sought permission to appeal. It appended to its request for permission a comparison between its charges and those of other providers, and a summary of the management costs that it had actually incurred relative to income generated in 2011.

Refusing permission, the LVT considered that it was entitled to determine whether the management charge was reasonably incurred “whether or not evidence is placed before it by the leaseholder”. It further observed that if the landlord wanted to adduce evidence on the point, it should have sought an adjournment.

The Lands Chamber granted permission to appeal.

The President allowed the appeal, finding that there had been procedural unfairness and an unlawful decision.

Procedural unfairness

The parties’ positions in their statements of case raised only the question of the tenant’s liability for management charges, not the amount.

The Lands Chamber determined that it was not unlawful for the LVT to query the amount of the management charge, although an LVT “should be slow to [question an item that has not been identified as being in dispute between the parties]” because:

a)      Proceedings under s.27A are essentially inter partes, and the LVT does not have “a roving commission to mete out justice as it sees it, regardless of the contentions advanced by either party”;

b)      There are likely to be problems of evidence because the “parties will not have prepared their cases or sought to produce material to deal with the new question”.

The President offered his view as to how the LVT should have dealt with the evidential problem: since the level of management charge was not an issue between the parties, once the landlord had responded to the LVT’s observation that the management charge was high, the LVT should either have accepted that response, or, if not satisfied with it, should have invited the landlord put produce evidence.

In the President’s judgment, it was manifestly unfair to deny the landlord the opportunity to put in evidence if the answers given to an issue raised for the first time at the hearing are not satisfactory.

Unlawfulness

The President held that the procedural unfairness was followed by a dose of unlawfulness because the LVT applied its own knowledge and experience as an expert tribunal, without giving the landlord an opportunity to respond to it.

The key decision on how the LVT should go about using its knowledge and experience is Arrowdell Ltd v Coniston Court (North) Hove Ltd LRA/72/2005. Although the substantive decision deals with enfranchisement, it sets out the “three inescapable requirements” that the LVT must satisfy if it wishes to use its own knowledge and experience in the resolution of a dispute:

Firstly, 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 to the parties for comment.

Thirdly, it must give reasons for its decision.

In this case, the President determined that the LVT’s decision failed to answer any of the three Arrowdell requirements. There was no evidence before it on the reasonableness of the amount of the management charge; the knowledge that it applied in reaching its decision had not been put to the parties, and no reasons were given explaining why the £292 demanded by the landlord should be reduced to £200.

The Lands Chamber’s paper copies of authorities on procedure and jurisdiction must be rather dog-eared from intensity of use recently. This decision is however useful because it builds on the clear (some might go so far as to say mordant) observations of HHJ Gerald in Keddie and Sachdev, ie that the LVT is not a party to the dispute which it is asked to resolve, and that, tempting as it may be for it to take a point which it considers that the parties have missed, it should do so with caution, mindful of the consequences – for example, adjournments, increased stress and cost – of doing so.

This is all the more relevant in a case where the landlord is entitled to recover the costs of the LVT proceedings through the service charge: the greater the number of issues in dispute, the higher the costs are likely to be. Should the landlord be prevented from recovering from its tenants the costs involved in responding to a point raised by the LVT? Conversely, it seems unfair to require tenants to pay the landlord’s costs of dealing with an issue about which they were not complaining – and in respect of which they may themselves have incurred extra costs.