UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2013] UKUT 0258 (LC)
UTLC Case Number: LRX/62/2012

	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – service charges – LVT determines disputed service charges and deducts credits to arrive at sum payable – whether total credit figures adopted correct

	IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF THE LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL

BETWEEN	ISLAND HOMES HOUSING ASSOCIATION	Appellant
	and
(1) BENET ALLEN	Respondents
(2) CLAIRE LOUISE KEYTE

Re: 62 Midship Point
	The Quarterdeck
	London
	E14 8SP

	
DETERMINATION BASED UPON WRITTEN REPRESENTATIONS

No cases are referred to in this decision:

	
DECISION
Introduction
1.	This is an appeal against a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel, determining the service charges payable for the period 1 July 2007 to 10 June 2010 to the Island Homes Housing Association, the freehold owner of a residential flat known as 62 Midship Point, The Quarterdeck, London, E14 8SP (the appeal property).  The respondent lessees are Benet Allen and Claire Louise Keyte.
2.	The dispute commenced in the Plymouth county court.  In the particulars of claim dated 11 June 2010 the appellant claimed service charges totalling £3,203.21.  By order dated 31 March 2011 the case was transferred to the LVT.
3.	At a pre-trial review at the LVT on 7 June 2011 the appellant was represented by a solicitor.  The respondents did not appear and were not represented.  Following the pre-trial review the LVT directed the appellant to provide a short statement in support of the particulars of claim together with service charge demands and service charge certificates.  The appellant substantially complied with that direction.  The respondents failed to comply with the LVT’s further direction that they provide a statement containing reasons why they disputed the costs claimed and giving alternative figures where relevant.  In addition the respondents did not attend and were not represented at the substantive hearing before the LVT.
4.	In its decision dated 26 November 2011 the LVT considered the matters which had been raised by the respondents in their defence to the county court proceedings.  Contrary to the respondents’ contentions it found that the appellant, as freeholder of the appeal property, had a cause of action under the lease thereof, and that the appellant was entitled to sue for debt arising from unpaid rent and was not required to commence proceedings for forfeiture.  It rejected the respondents’ contention that an action for unpaid rent did not lie until the service charges were proved to be recoverable.  As for the disputed service charge payments, the LVT found that the various sums claimed by the appellant in respect of the following services were reasonable: management fees; buildings insurance; light, heat and electric power for lifts; cleaning and ground maintenance services; entryphone; estate cleaning and maintenance; TV aerial maintenance; lift maintenance; concierge/CCTV service; plus certain estate maintenance costs incurred in 2009/2010 only.
5.	The total of the service charges determined by the LVT was stated to be £4,674.11.  In fact the component figures totalled 1p less as follows:
								      £
		Actual 2007/08				  1,589.21
		Actual 2008/09				  1,452.30
		Actual 2009/10				  1,265.47
		Estimated 2010/11				     367.12
								£4,674.10
6.	From the total so determined the LVT deducted credits of £2,347.27 as shown on the appellant’s county court claim.  It found that the net sum payable by the respondents was £2,326.84 (£4,674.11 minus £2,347.27).
7.	The LVT also had to consider an application made by the respondent for an order under section 20C of the Landlord and Tenant Act 1985.  Its determination on this issue was contained in paras 59 to 61 of its decision, as follows:
	“59. The Tenant has been successful to the extent of approximately one-quarter of the amount claimed.  Further, significant concessions were made during the hearing by the Applicant.  Consequently the Tribunal considers it just and equitable that a partial Order under section 20C be made.
	60. The Tribunal considers that the correct Order is one protecting the Respondent from any potential liability in respect of one-quarter of the landlord’s costs of the proceedings.
	61. The Tribunal ORDERS that not more than three-quarters of the Applicant’s costs of the proceedings in the Leasehold Valuation Tribunal … should be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the Respondent to this action.”
8.	Following receipt of the decision the appellant wrote to the LVT on 6 December 2011.  It pointed out certain arithmetical errors in the LVT’s decision, some of which favoured one party and some the other.  It fairly added that, as the respondents had not moved in until 9 May 2007, they should only be responsible for 327/365 of that year’s charge.  Moreover, the resultant figure  should be reduced by a further £43.98, because the appellant had only billed £1,050.88 in the year 2007/8 and might now be estopped from charging more (“estoppel 1”).  Furthermore, although the respondents’ account had been wrongly credited with the sum of £443.75 in September 2007 as the result of an adjustment for the year 2006/7 when the respondents were not resident, the appellant again accepted that it might be estopped from removing this credit (“estoppel 2”).
9.	The appellant submitted that, if the total credits of £2,347.27 deducted by the LVT were adjusted to reflect the service charges actually determined, the total sum payable would be £2,840.16 instead of £2,326.84, that is a deduction of £363.05, or 11.3% of the amount claimed in the county court.  Furthermore, that claim had been based on the estimates for 2010/11, whereas by the time of the LVT hearing the appellant was able to submit details of the actual costs.  These figures resulted in a reduction of £260.38 from the estimates, which was a credit that was added to the account.  The appellant submitted that for the purposes of section 20C this figure should be subtracted from the deduction.  The respondents had therefore only obtained a reduction of £102.67, or 3.2% of the amount claimed, not 25% as stated by the LVT.
10.	On 5 January 2012 the LVT issued a correction certificate.  It read as follows:
“1. 	After issuing its decision the Tribunal received a letter dated 6 December 2011 from Mr Sam Walker solicitor for the Applicant.
 2. 	That letter raised a number of issues and asked the Tribunal to amend its decision.  The Tribunal accepts that by an accidental slip the accounting spreadsheet which it prepared contains three errors.  The Tribunal has power to correct those errors and hereby does so, by the substitution of an amended schedule.  This is appended.
3. 	The effect of the errors was to overstate the debits on the running account as £4,674.11 instead of £4,419.42.  In consequence, paragraph 53 is amended as follows:
		Line 1: delete “£2,326.84” and substitute “£2,072.15”.
4.	The other natters raised by Mr Walker were not, with respect, raised at the hearing and the Tribunal considers that it would be wrong for new matters to be considered by it now.
5.	The Tribunal does not consider that there are grounds for amending the section 20C Order.”
11.	On 26 July 2012 Mr George Bartlett QC, the then President of the Lands Chamber, granted permission to the appellant to appeal against the LVT’s decision in the following terms:
	“There is a real prospect that the applicant will succeed in establishing that the LVT wrongly calculated the amount payable by the lessees in the light of the conclusions reached in para 45 of the decision.  [Para 45 contained the LVT’s conclusions on each of the disputed heads of expenditure].  The appeal will be by way of review and limited to the issues of (a) the total credits figure to be used in calculating the balance payable and (b) the appropriate order under section 20(c) of the Landlord and Tenant Act 1985.”
12.	The appeal was allocated to me.  On 7 March 2013, following receipt of submissions from the parties, I ordered that the matter be determined by written representations, notwithstanding an objection to that procedure by the respondents.  I have considered the following submissions:
1.	Appellant’s statement of case dated 6 September 2012 and accompanying documents.
2.	Respondents’ response to the appeal dated 4 September 2012.
3.	Statement of account dated 10 June 2010.
4.	Respondents’ further statement dated February 2013 objecting to written representations procedure.
5.	Respondents’ reply dated 29 May 2013 to Tribunal’s letter dated 20 May 2013 requesting clarification of the contention that the Appellant had waived its right to include its costs of the LVT hearing in the service charge.
Appellant’s case
13.	The appellant’s statement of case explained why it considered that the LVT had wrongly calculated the sums payable by the respondents.  Its case is that it should have been clear from the statement of account that, on each occasion when the total service charge expenditure as certified following the end of an accounting period was less than the estimated figure on which previous interim payments had been made, the tenants were credited with the difference and vice versa.  The LVT determined what was due in a given year and replaced the figures in the amounts due (or debits) column with its determined figure, but did not alter the figure in the payments received (or credits) column.  The figures in the credits column had been superseded by the LVT’s determination and should therefore have been discounted.  The only figures which should have been deducted from the LVT’s assessment were the amounts which the respondents had actually paid.  These totalled £964.30.  The total figure due, taking account of the two estoppel amounts, was therefore £2,840.16, calculated as follows:-
		2007/2008					£1,094.861
		2008/2009					£1,452.30
		2009/2010					£1,377.912
		2010/2011					£   367.12
								£4,292.19
		Less payments made		£964.30
		Estoppel 1			£  43.98
		Estoppel 2			£443.75

								£1,452.03
								£2,840.16
14.	As for the section 20C order, the appellant  submitted that, for the reasons it gave in its letter to the LVT dated 6 December 2011, the order under section 20(C) should have been limited to 96.8% of its costs of the LVT proceedings, not 75%.
1. Reflects arithmetical error in original LVT decision and payment from 9 May 2007 only.
2. Reflects arithmetical error and transposed figure in LVT decision.
Respondents’ case
15.	In their response to the appeal the respondents raise the following points.  They did not receive an invitation to respond to the appellant’s application for permission to appeal.  The appellant failed to issue balancing certificates as required by para 50 of the LVT decision.  No receipts or vouchers were pleaded, notwithstanding the provisions of para 7 of the 5th Schedule to the lease.  In the absence of disclosure of invoices the appellant had failed fully to particularise its claim for money and was therefore denied the right of appeal on those issues.  The appellant had never fully particularised or substantiated the figures for credits or the balance payable in the statement of account.  The LVT has no power to alter the landlord’s accounts.  In the absence of any evidence of actual expenditure the LVT’s decision on the reasonableness of the charges must have related to the reasonableness of the estimated charges.  Estimated charges have no cause of action in a county court.  In order to avoid the risk of forfeiture the respondents sent the appellant a cheque for £2,326.84, but the appellant refused to present it for payment.  The LVT had no power to adjust the amount of credits claimed by the appellant in the county court.  As to the application for an order under section 20C the appellant had waived its right to claim its costs under the lease by failing to issue an interim estimated service charge at April 2011 and 2012.
16.	As an alternative the respondents submitted that, since the appellant had not reissued certificates of total expenditure for the relevant years, it must accept that the amount payable by the respondents, subject to reconciliation, is £1,308.74, calculated as follows:

	2007/2008					£555.31
	2008/2009					£539.70
	2009/2010					£404.52
	2010/2011 estimated				£184.22
						          £1,683.75
	Minus Tribunal Credits			   375.01
						           £1,308.74
Conclusions
17.	I start by reminding myself that the extent of the permitted appeal was limited to the issues of the total credits figure to be adopted when calculating the balance payable and the appropriate order to be made under section 20(C).  It follows that my jurisdiction does not extend to the following issues raised by the respondents: whether the respondents were invited to respond to the application for permission to appeal and, if not, the consequences thereof; whether the appellant is entitled to appeal, having regard to its failure (if any) to give sufficient particulars of its claim; whether the appellant has a cause of action for the service charges in question.  Furthermore, since no permission has been granted to cross-appeal, the respondents’ suggestion that the sums due for the various items of expenditure should be significantly below those determined by the LVT cannot form the subject of my determination.
18.	I turn to the principal issue raised by the appeal, namely whether the LVT had power to alter the credit items contained in the statement of account dated 10 June 2010.  The LVT took the view that it had no such power.  In refusing permission to appeal on 30 January 2012 it stated:
	“8. Staunton v Kaye and Taylor makes clear that, in cases which are transferred from the County Court, the jurisdiction of the Tribunal is limited to the terms of the parties’ pleadings.  The Tribunal has no power to permit a party to amend its pleaded case.
9. The Applicant is seeking to enlarge a transferred claim from the County Court, following a hearing before the Tribunal at which the Respondents did not appear and were not represented.  The Tribunal does not consider that such a proposition is even arguable.  On the facts of this case, the Applicant is now seeking a further £1,382.97.
10. Moreover, the Tribunal does not consider that there is any relationship between its functions and the accounting practices adopted by the Applicant.  In particular it has no power to correct accounting errors, if that is what they are, in a pleaded case.
11. It was open for the Applicant to seek to amend its pleadings in the County Court before the case was transferred to the Tribunal.  It did not do so.  The consequences of such failure cannot found a ground of appeal in this action.”
19.	I would respectfully differ from that conclusion, for the following reasons.  It is clear from its decision dated 26 November 2011 that the LVT was aware that that the Lessee was liable to pay an interim charge on account and that, once the Lessor’s total expenditure for an accounting period was known, an adjustment was to be made to reflect any difference between the actual service charge and the interim charge (paras 28 to 30).  Contrary to the respondents’ submission, the statement of account dated 10 June 2010 formed part of the particulars of claim (and thus of the pleadings) in the county court.  It was apparent from the pleadings that the payments received/credits column in the statement of account included adjustments to reflect the excess or deficiency of the service charge over the interim charge.  That this was so is exemplified by the following entries for 1 and 28 September 2007:
Date		Description		Rent and Service	Payments	Balance
					Charge Due		Received

1/09/2007	Service Charge Due	116.54					668.41 Debit
28/09/2007	Y/E LH S/C Adj				443.75		224.66 Debit
20.	One effect of the LVT’s decision was to substitute the figures determined by the LVT for the service charge figures in the third column of the service charge statement.  But the credit figures in the fourth column, such as the figure of £443.75 which was stated to represent a service charge adjustment, were derived from the original service charge figures in the third column.  I therefore accept the appellant’s submission that the LVT had power to alter the credit figures in the accounts in addition to the quantum of the service charges and that the only credit figures which should be deducted from the determined service charges are those which reflect payments actually made by the respondents.  Since there has been no challenge to the arithmetical calculations put forward by the appellant on this basis it follows, subject to one possible qualification, that the amount payable by the respondents is £2,840.16, not £2,072.15 as determined by the LVT in its correction certificate.  
21.	The qualification relates to the following matter raised by the LVT in paragraph 50 of its main decision:
	“The Tribunal considers that the balancing certificates can be served retrospectively, applying Warrior Quay [Warrior Quay Management Company Ltd & Anor v Joachim, LRX/42/2006, unreported].  The Applicants [the appellant in the current appeal] also undertook to serve the balancing certificates and this decision is prepared on the basis that this has now happened.”
22.	The respondents submitted that the appellant, having failed to reissue balancing certificates, was therefore denied the right to appeal.  In my judgment the absence of any appeal or application for judicial review following the grant of permission to appeal on limited grounds is fatal to that submission.  
23.	I turn to the issue of the section 20C certificate.  The LVT found that the respondents had been successful to the extent of approximately one quarter of the amount claimed.  It ordered that not more than three quarters of the costs of the proceedings in the LVT should be regarded as relevant costs to be taken into account in determining the amount of any service charges payable by the respondents.
24.	In this appeal the respondents have not challenged the appellant’s assertion that its claimed figure of £2,840.16 – which I have accepted – is only 3.2% less than the amount for which it contended at the LVT hearing.  They submit that the appellant has waived its right to claim its costs of the LVT hearing under the lease because it failed to issue an interim estimated charge for costs at April 2011 and April 2012.  That is a point that the respondents would be entitled to raise, should they choose to do so, when the appellant submits a service charge account which includes its LVT costs.  It is not a matter which falls to be determined in this appeal.
25.	The appeal is allowed.  I determine that the balance of the service charge payable by the respondents in respect of the period from 1 July 2007 to 10 June 2010 is £2,840.16.  I order that 3.2% of the costs incurred by the appellant in connection with the proceedings before the LVT are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the respondents.  I make no order as to costs.
Postscript
26.	The respondents’ response included the following observations:
	“5… It is a fact that the Tribunal’s decision on reasonableness (if not paid) can be enforced by the County Court on pain of forfeiture.  For the record, the Respondent, tired of waiting for the reissued Certificates of Total Expenditure, sent the landlord a cheque for the Tribunal’s ‘amount payable’ £2,326.84.  The landlord has refused to present the cheque for payment.  In the meantime the Tribunal have further reduced the amount payable with an extra £254.69 credit to the Respondent received on the 5th January 2012. …
	8. It is a known fact that the Landlord will take the decision of the Upper Tribunal and, without copy or notice to the defendant, encourage a District Judge to give Judgment, without notice, with costs and interest at 8% in closed chambers.  The Landlord will say nothing of the uncashed cheque.  The Landlord will then proceed with a claim for forfeiture on the Judgment.  The Defendant will be put to an obstacle course of appeal in the County Court.  Yet none of the charges have ever been substantiated with reconciliation.
	9. The claim is a small claims track in the County Court and the Respondent claims no costs.

	Conclusion
This type of aggressive debt collecting of unsubstantiated charges must be outlawed by HM Courts and Tribunals Service in the interest of equal treatment between landlord and tenant.  The Respondent respectfully begs the Upper Tribunal to dismiss the appeal.”
27.	Given the appellant’s unsolicited action in volunteering concessions on estoppels 1 and 2, the submission that it is aggressively pursuing unsubstantiated charges is surprising, as is the suggestion that the county court would give judgment in camera and without prior notice to the respondents.  In any event, by quoting the respondents’ observations in this regard, this decision will ensure that the county court will be fully aware of the position when it comes to consider the matter again in due course .

								Dated ** May 2013

									N J Rose FRICS
									Member