Om Property Management Ltd v Thomas Burr
| Jurisdiction | England & Wales |
| Judge | Master of the Rolls,Lord Justice Elias,Lord Justice Patten |
| Judgment Date | 03 May 2013 |
| Neutral Citation | [2013] EWCA Civ 479 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 May 2013 |
| Docket Number | Case No: C3/2012/1991 |
[2013] EWCA Civ 479
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
(LANDS CHAMBER)
LRX642011
Royal Courts of Justice
Strand, London, WC2A 2LL
Master of the Rolls
Lord Justice Elias
and
Lord Justice Patten
Case No: C3/2012/1991
Mr Thomas Burr, the appellant, appeared in person.
Mr Andrew Arden QC and Mr Justin Bates (instructed by Charmaine McQueen-Princefor OM Management Legal Department) for the Respondent.
Hearing date: 10 April 2013
Approved Judgment
Mr Burr has been registered as the leasehold owner of a flat known as 9 Cambridge Square, Royal Earlswood Park, Redhill, Surrey since 5 October 2006. The flat forms part of a development which was constructed in about 2000. The development includes a communal leisure centre with a swimming pool which has its own gas supply.
The respondent ("OMP") is a management company which is party to Mr Burr's lease. It started managing the development in April 2001. At that time it was told by the developer that the gas supply to the swimming pool was supplied by EDF Energy ("EDF"). For several years, the respondent read the meter and sent the readings to EDF who generated invoices which the respondent paid. The charges were paid from the payments made by the tenants.
In November 2007, OMP received notification from Total Gas and Power Limited ("Total") that it, rather than EDF, had been supplying the gas to the swimming pool. Total demanded £135,337.28 for the period December 2000 to November 2007.
Following negotiations between OMP and Total, Total agreed to reduce its charges and EDF reimbursed the monies that had been wrongly paid to it. In the result, the total amount charged to the leaseholders for gas in the service charge accounts for the year ended 30 April 2008 was £100,289.28. OMP demanded Mr Burr's proportion from him in October 2008. Although he challenged OMP's right to make this demand, he paid £194.49 (under protest), which was the amount which he calculated to be his share of the additional sum claimed for the gas. He issued proceedings in the county court alleging negligence against OMP. His case was that, but for OMP's negligence, most of the additional charge for gas would have been paid by the previous leaseholder of his flat. OMP denied negligence and the proceedings were transferred to the Leasehold Valuation Tribunal ("LVT").
Before I come to the LVT decision I need to refer to the material provisions of the Landlord and Tenant Act 1985 ("the 1985 Act").
The material provisions of the 1985 Act
" 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 dwelling as part of or in addition to the rent—(a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements 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) For this purpose—
(a) "costs" includes overheads, and
(b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period.
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) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard;
and the amount payable shall be limited accordingly.
(2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise.
…
(5) If a person takes any proceedings in the High Court in pursuance of any of the provisions of this Act relating to service charges and he could have taken those proceedings in the county court, he shall not be entitled to recover any costs.
20B.—Limitation of service charges: time limit on making demands.
(1) If any of the relevant costs taken into account in determining the amount of any service charge were incurred more than 18 months before a demand for payment of the service charge is served on the tenant, then (subject to subsection (2)), the tenant shall not be liable to pay so much of the service charge as reflects the costs so incurred.
(2) Subsection (1) shall not apply if, within the period of 18 months beginning with the date when the relevant costs in question were incurred, the tenant was notified in writing that those costs had been incurred and that he would subsequently be required under the terms of his lease to contribute to them by the payment of a service charge."
The LVT decision
The LVT held that:
(i) it had no power to determine the allegations of negligence;
(ii) the amounts of the gas charges were reasonable;
(iii) the real issue was whether the respondent was prevented from recovering the charges by virtue of section 20B of the 1985 Act;
(iv) Total had been supplying gas to the swimming pool between December 2000 and April 2008;
(v) Total did not raise any invoice for the gas supplied until November 2007; and
(vi) the costs had been "incurred" for the purposes of section 20B of the 1985 Act when the gas was supplied.
Decision of the Upper Tribunal (Lands Chamber)
OMP appealed to the Upper Tribunal (Lands Chamber), contending that costs were not "incurred" for the purposes of section 20B until OMP actually paid the costs or at least until it was obliged to pay the costs on receipt of an invoice. Accordingly, the LVT was wrong to hold that OMP had incurred the costs when the gas was supplied.
The Upper Tribunal (HH Judge Mole QC) allowed the appeal. Its reasoning and conclusions are to be found in the final section of its Decision:
"20. In the current case I do not think that it is necessary or desirable to try and determine whether costs are incurred when an invoice or certificate is served or when payment is made. (I am not necessarily equating an invoice and a certificate; different considerations may well apply to them.) I do not get much help from dictionary definitions of 'incurred'. It is of greater assistance to recall that the statute declares that it is 'costs' that are 'incurred' which are relevant. In the present case it is sufficient to say that the costs were not incurred when the gas was used. I appreciate that the liability to pay somebody something may have been incurred at that point, but the use of the word 'costs' is significant. As the President pointed out, it is the cost that must be incurred. A liability does not become a cost until it is made concrete, either by being met or paid or possibly by being set down in an invoice or certificate under a building contract.
21. I do not see that there is any tension between the decisions of the President in Hyams v Wilfred and Jean-Paul v LBSouthwark. Each was decided on its own facts. In neither case was it necessary to distinguish between the issue of a certificate or invoice under a works contract and payment of it, nor was it suggested there was any gap between demand and payment that was of significance. The crucial and helpful point was the drawing by the President of the distinction between incurring a liability and incurring a cost. I am...
To continue reading
Request your trial
-
LVT/0009/04/13: Hayes Point, Sully
...20B was not required in relation to the supplementary demand of 29 September 2010. The case of OM Property Management Ltd v Burr [2013] EWCA Civ 479 held that costs are incurred when the liability to pay has either by payment or the presentation of an undisputed invoice, as opposed to being......
-
LVT/0009/04/13 Amended Point 124: Hayes Point, Sully
...20B was not required in relation to the supplementary demand of 29 September 2010. The case of OM Property Management Ltd v Burr [2013] EWCA Civ 479 held that costs are incurred when the liability to pay has either by payment or the presentation of an undisputed invoice, as opposed to being......
-
Decision Nº LRX 24 2012. Upper Tribunal (Lands Chamber), 04-09-2013
...Borough of Southwark [2011] UKUT 178 (LC) OM Property Management Ltd v Burr [2012] UKUT 2 (LC) OM Property Management Ltd v Burr [2013] EWCA Civ 479 DECISION Introduction This appeal once again raises the important question of when relevant costs are to be taken to have been “incurred” for ......
-
LVT/0071/01/14: 73 Cardiff Road, Llandaff
...did not and could not say that the relevant costs ‘had been incurred’. As the Court of Appeal held in Burr v OM Property Management [2013] EWCA Civ 479, costs are not incurred on the mere provision of services or supplies (with no distinction being drawn between services or supplies). Rathe......