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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Oakfern Properties Ltd v Ruddy [2006] EWCA Civ 1389 (25 October 2006) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2006/1389.html Cite as: [2007] 1 All ER 337, [2007] Ch 335, [2007] 3 WLR 524, [2006] EWCA Civ 1389 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
His Honour Michael Rich QC
LRX/93/2005
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE JONATHAN PARKER
and
LORD JUSTICE MOSES
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OAKFERN PROPERTIES LIMITED |
Appellant |
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- and - |
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DESMOND RUDDY |
Respondent |
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Andrew Lane (instructed by Bar Pro Bono Unit) for the Respondent
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Crown Copyright ©
Lord Justice Jonathan Parker :
INTRODUCTION
THE RELEVANT LEGISLATION
" a building or part of a building occupied or intended to be occupied as a separate dwelling together with any yard, garden, outhouses and appurtenances belonging to or usually enjoyed with that building or part ".
" any charge for services, repairs, maintenance or insurance, being a charge which is payable as part of, or in addition to, the rent, and which varies or may vary according to any costs incurred from time to time by or on behalf of the landlord or any superior landlord".
"18 Meaning of "service charge" and "relevant costs"
(1) In the following provisions of this Act "service charge" means an amount payable by a tenant of a flat as part of or in addition to the rent
(a) which is payable, directly or indirectly, for services repairs, maintenance or insurance or the landlord's costs of management, and
(b) the whole or part of which varies or may vary according to the relevant costs.
(2) 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.
(3) ."
"19 Limitation of service charges: reasonableness
(1) 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) .
."
"27A Liability to pay service charges: jurisdiction
(1) 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.
(2) (7) ."
THE RELEVANT AUTHORITIES
Altmann
Horford
"As to the first question, the point appears to me to be this: whether the phrase "a tenancy under which a dwelling-house (which may be a house or part of a house) is let as a separate dwelling" embraces a case in which the tenancy includes when created a residential building containing more than one of what might conveniently be described as units of habitation. The question appears to be ultimately whether by force of the Interpretation Act 1889 "is let as a dwelling" is to be construed as "is let as a dwelling or dwellings". On this point it seems to me immaterial that the houses in question are physically adapted for a great number of units of accommodation: the question really is the same as would arise for solution when on the granting of the tenancy of a house it consisted of two separate self-contained flats."
"The letting in each case was of a house comprising more dwellings than one. Was it the letting of a house as a dwelling (both parties agree that the word 'separate' is of no importance in this connection)? If [counsel for the tenant] is right that the Interpretation Act 1889 requires us to construe the subsection's phrase 'a dwelling' so that it includes 'dwellings', cadit quaestio: each tenancy is protected. But I agree with the county court judge in thinking that Parliament when it enacted section 1(1) used the singular deliberately, and in this instance did not intend the singular to include the plural. The policy of the Rent Acts was and is to protect the tenant in his home, whether the threat be to extort a premium for the grant or renewal of his tenancy, to increase his rent, or to evict him. It is not a policy for the protection of an entrepreneur such as Mr Lambert whose interest is exclusively commercial, that is to say, to obtain from his tenants a greater rental income than the rent he has contracted to pay his landlord. The Rent Acts have throughout their history constituted an interference with contract and property rights for a specific purpose the redress of the balance of advantage enjoyed in a world of housing shortage by the landlord over those who have to rent their homes. To extend the protection of the Acts to tenancies such as these in this case would be to interfere with contract and property rights beyond the requirements of that purpose."
Heron
"It is not particularly unusual to find that more than one flat in a block is let to the same tenant, for example: (i) employers, especially international ones, may take a group of flats and use them for employees; (ii) investors may again take a group of flats and let them (possibly furnished) at rack rents; (iii) in some areas, individuals may own several flats and let them as holiday lets. There are numerous other permutations. If [counsel for the claimant] is right and the strict construction is that section 20 applies only where one flat is let individually to an actual resident, none of these arrangements will have the protection of section 20. One must ask rhetorically why this should need to be."
"30 . For my part I would not seriously doubt that the protection of the individual resident is the primary object of the legislation. But it does not seem to me that where there is a chain of leases that object has necessarily to be achieved by protecting only those at the end of the chain and denying protection to those higher up.
31 [Counsel for the claimant] took me to two authorities. They were respectively Horford and Uratemp Ventures Ltd v. Collins [2000] 1 EGLR 156. Both are cases concerned with familiar Rent Act concepts. In Horford, the Court of Appeal held that the protection of the statute was intended to apply to a single dwelling and not several let together. In Uratemp the House of Lords was concerned with the familiar question of what was and what was not let as a separate dwelling. With all respect, I think both authorities are more distant cousins than twins to this case. The overall policy of the Rent Acts is to give security of tenure to the occupant and not to anybody else. In the case of service charge provisions, the policy of the Rent Acts is undoubtedly to stop the exploitation of residential tenants, but (cf. the Rent Acts, where the occupier's security need only be achieved by protecting him and nobody else) that object does not have to be achieved by ignoring the practical problems that occur where there are chains of tenancies."
"38 I think the answer is to be found in an argument not originally put by [counsel for Camden], and pre-emptively met by [counsel for the claimant] in his skeleton submissions, which is this: that, in relation to any individual flat/dwelling Central or Camden is the tenant of that dwelling. It may be the tenant of other things as well, but, of that dwelling, it is, under its lease, the tenant. I cannot for my part see why, where a lease contains a mixed estate of properties, you cannot properly call yourself the tenant of one of the properties if they can be individually identified (as here they can be). Thus, why can you not properly be identified under the same lease of Wuthering Heights and the tenant of Wildfell Hall, if they are identifiably different parcels? [Counsel for the claimant's] counter to this is that this is absurd because the Act envisages the subject-matter of the tenancy as a dwelling, not premises that include a dwelling. But this is not what the Act says; it says 'tenant of a dwelling' not 'tenant of a dwelling and of nothing else'."
THE DECISION OF THE LEASEHOLD VALUATION TRIBUNAL
"20. If the Tribunal accepts the landlord's arguments, which are not without force, the effect will be that [PPM], a not-for-profit company made up of fifteen of the tenants will not have protection of the service charge regime in the 1985 and 2002 Acts. We do not believe that Parliament intended to exclude any type of residential premises from the protection of the service charge regime which has been consistently expanded and extended since 1972.
21. Mr Ruddy's application relates to service charges between Oakfern and [PPM], which Mr Ruddy submits are service charges for which he is liable. It is our determination that section 18(1) of the Act can be interpreted as an amount payable by a tenant of a dwelling notwithstanding that the dwelling is part of a larger demise. By analogy a tenant leasing a block of flats under a single long lease has the right to acquire a new lease of just one of the flats under the Leasehold Reform and Housing and Urban Development Act 1993.
22. We accept that Judge Cooke's decision in the Heron case is not binding but it was made over four years ago and there is no other reported case which has overruled this decision where it was clearly held that the mesne landlord of a number of residential units could rely on the provisions of the Act in respect of an individual dwelling.
23. We do not accept the argument that the wording of sections 20 and 21 of the Act have the effect of preventing a mesne landlord from relying on the provisions of the Act.
24. In the alternative it is our view that the Applicant can in any event rely on section 18(2) of the Act since it is his application and the costs he has been asked to pay are those of the superior landlord albeit the demands are not made to him direct. Indeed some of the invoices which have been supplied to the Applicant to justify the service charges he has to pay are made out to Oakfern and Oakfern produce a "service charge account" to [PPM]. The freeholders now seek to oust the jurisdiction of the Act to enable them to impose service charges affecting residential accommodation without any fetter or regulation.
25. Ownership and/or management by lessees has been encouraged by legislation in recent years and seeks to enable lessees to have more control over the charges levied by landlord under service charge provisions in residential leases. It seems unlikely Parliament intended a result which could enable a freeholder to charge a mesne landlord (in this case made up of a group of tenants) without regulation while the sub-tenants could challenge the reasonableness of what are in fact the freeholder's service charges. As the mesne landlord is a not-for-profit company and has no financial resources of its own, if the service charges it collects are not sufficient to pay the head landlord then the mesne landlord will be in serious financial difficulties.
26. In conclusion it is our decision that the amounts which are the subject of the Applicant's application are service charges within the meaning of section 18 of the Act."
"The application is made under section 27A of the Act. The wording of section 27A does not include any restriction on who may apply to an LVT for a determination of service charges. Mr Ruddy's reason for making the application is that he believes he has a financial interest in the outcome of the application. Our decision is that whether or not there is a relationship of landlord and tenant between Mr Ruddy and Oakfern the Tribunal has jurisdiction to entertain this application."
THE DECISION OF THE LANDS TRIBUNAL
"Judge Cooke did not have it drawn to his attention, as Mr Tanney has drawn to mine, that the definition "dwelling" in the Act of 1985, which falls to be construed, derives from s.104(1) of the Housing Finance Act 1972. The definition as it appeared in that Section of the 1972 Act, as can be seen from the citation of s.1 of the Rent Act 1968 did have its origins in the Rent Acts but in the 1972 Act it was applied equally to Parts IV and V of that Act, which amended the Rent Acts, and to s.90, which as Judge Cooke set out in paragraph 13 of his judgement took the first step to provide a regime which protected the residential tenant against overcharging for service charges. Section 90 required no more than the provision of information but s.124 of the Housing Act 1974 inserted s.91A into the Act of 1972. It is this Section which limited recoverable service charges by reference to reasonableness and compliance with requirements for consultation. Thus the provisions now contained separately in the Housing Act 1985, were first enacted to be part of an Act (that of 1972) which used a single definition of "dwelling" for both Rent Act and Housing Act purposes. If the Court of Appeal holds that the context of that definition excludes the singular from including the plural, then unless the contexts of the different parts of the 1972 Act lead to a difference of meaning in the one Act, I must conclude that Judge Cooke should have regarded himself as bound to reject that submission. As, on his reasoning it led nowhere, my reconsideration of the point is academic. Nevertheless, I set out my conclusions, because Mr Tanney addressed these arguments to me on the supposition, which only closer analysis shows to be mistaken, that Judge Cooke had based his on this construction of "dwelling". "
"Judge Cooke's reasoning in relation to the present case would be that the lease to [PPM] is of Flat 16 as well as 23 other flats and common parts, therefore it is of a dwelling (in the singular) as well as other dwellings and other premises."
"13 ... On that basis the suggestion that the paying undertenant should not be able to make an application against the superior landlord hardly bears examination. The mesne landlord, who merely passes on the liability to the superior landlord to be paid by the Tenant has no interest, as well as having knowledge only by procuring it from the superior landlord, to dispute the unreasonableness of the costs incurred. Clearly the superior landlord is, in such circumstances, the appropriate respondent to any application, although it might have been prudent to have joined [PPM] also, in order to make the LVT's determination binding on them. This may, even now, be possible.
14 One therefore turns to s.27A to see whether there is anything in its wording which precludes an application by the person ultimately liable to pay the costs from seeking a determination as to their reasonableness and consequent recoverability, against the person who incurred them. As the LVT pointed out "the wording of section 27A does not include any restriction on who may apply to a LVT for a determination of service charges." It provides that "An application may be made to a leasehold valuation tribunal". Mr Tanney has therefore to submit that a restriction on the LVT's jurisdiction arises by implication in order to exclude its determining an issue specifically within its jurisdiction between the persons most concerned. I see no basis for such implication. The interests of others who may be affected by the determination are protected by the rules to which I drew attention in paragraph 3 above. The risk of strangers to the issue seeking to invoke the LVT's jurisdiction can be sufficiently protected against, by the LVT's power to dismiss frivolous applications under Regulation 11 of the 2003 Procedure Regulations. I therefore hold that the LVT also answered the second question addressed to it correctly."
THE ARGUMENTS ON THIS APPEAL
The jurisdiction issue
"[s]ince by reason of the definition in section 18(2) [of the 1985 Act] relevant costs may be incurred 'by a superior landlord', the effect of Mr Tanney's submissions would be that if the costs incurred by the freeholder are unreasonably incurred, [PPM] is still obliged to pay them but cannot, to the extent that they are unreasonably incurred, recover them from its subtenants."
The jurisdiction issue
CONCLUSIONS
The service charge issue
The jurisdiction issue
RESULT
Lord Justice Moses:
Lord Justice Pill: