Ruddy v Oakfern Properties Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jonathan Parker,Lord Justice Moses,Lord Justice Pill |
| Judgment Date | 25 October 2006 |
| Neutral Citation | [2006] EWCA Civ 1389 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 October 2006 |
| Docket Number | Case No: C3/2006/0488 |
[2006] EWCA Civ 1389
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
His Honour Michael Rich QC
LRX/93/2005
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Pill
Lord Justice Jonathan Parker and
Lord Justice Moses
Case No: C3/2006/0488
Anthony Tanney and Lisa Busch (instructed by Messrs Russell-Cooke) for the Appellant
Andrew Lane (instructed by Bar Pro Bono Unit) for the Respondent
INTRODUCTION
The appellant, Oakfern Properties Ltd ("Oakfern") , is the freeholder of a building in Fulham Road, London SW6, consisting of a basement, ground floor and three upper floors. The ground floor and the basement are commercial premises which are let separately to a third party and do not feature in this appeal. The three upper floors consist of twenty-four separate residential flats, together with common parts, known as Kings Court Mansions. The upper floors are let by Oakfern on a long lease ("the headlease") , and the flats are separately sublet, also on long leases ("the subleases") . The present lessee under the headlease is Publicshield Property Management Ltd ("PPM") . PPM is a non-profit-making company owned by fifteen of the subtenants. The respondent, Mr Ruddy, is the subtenant of Flat 16. He is not a member of PPM.
Under the headlease, Oakfern is responsible for keeping the building (other than the flats themselves and the common parts) in a good and substantial state of repair, and PPM is obliged to pay Oakfern, by way of additional rent, a maintenance charge equal to 90 per cent of the costs incurred by Oakfern in discharging its repairing obligations. The maintenance charge is, in effect, passed on by the subleases, each of which obliges the subtenant to pay to PPM one twenty-fourth of the maintenance charge levied on PPM by Oakfern.
Mr Ruddy seeks to challenge the amount of the maintenance charge levied by Oakfern on PPM in the years ended 28 September 2003, 2004 and 2005, on the ground that the amount charged was unreasonable. He seeks to do so by invoking provisions of the Landlord and Tenant Act 1985 ("the 1985 Act") which limit the amount of a "service charge" (as defined) to costs which have been reasonably incurred, and which provide that application may be made to a Leasehold Valuation Tribunal for (among other things) a determination as to the amount which is properly payable.
Mr Ruddy accordingly applied to the Leasehold Valuation Tribunal for such a determination in respect of the three years in question. The only respondent to the application is Oakfern. Notice of the application was given to PPM, but it has not applied to be joined as a party (a course which was, and is, open to it under the relevant regulations).
At a pre-trial review four points raised by Oakfern were (at its request) identified by the Leasehold Valuation Tribunal as suitable to be determined as preliminary issues. In the event, Oakfern did not pursue its case on one of those issues. Of the remaining three issues, only two remain live issues on this appeal. The first live issue (which I will call "the service charge issue") is whether the maintenance charge is a "service charge" within the meaning of the 1985 Act. The second live issue (which I will call "the jurisdiction issue") is whether, in his capacity as a subtenant, Mr Ruddy has the requisite status in law (locus standi) to challenge the amount of the maintenance charge as against Oakfern, given that the obligation to pay it to Oakfern lies not on him, as subtenant, but on PPM as headlessee.
By its decision promulgated on 15 July 2005 the Leasehold Valuation Tribunal (Ms Jane Dowell, Chairman) decided both the service charge issue and the jurisdiction issue in favour of Mr Ruddy. That is to say, it decided that the maintenance charge is a "service charge" within the meaning of the 1985 Act, and that it had jurisdiction under section 27A of the 1985 Act to hear and determine Mr Ruddy's application. It decided the remaining preliminary issue in Oakfern's favour, and Mr Ruddy has not appealed that decision.
Oakfern appealed to the Lands Tribunal on the service charge issue and the jurisdiction issue. By its decision promulgated on 9 February 2006 the Lands Tribunal (Member, His Honour Michael Rich QC) upheld the decision of the Leasehold Valuation Tribunal on each of those issues.
Oakfern now appeals to this court. Permission for a second appeal was granted by Neuberger LJ on the papers on 25 April 2006.
THE RELEVANT LEGISLATION
Although ultimately the resolution of the service charge issue turns on the true construction of the relevant provisions of the 1985 Act, the arguments which have been addressed to us on this appeal make it necessary to set those provisions in their full legislative context.
The starting-point is the Housing Finance Act 1972 ("the 1972 Act") , section 35(1) of which introduced the concept of regulated tenancy of a "dwelling-house which islet on a protected tenancy or subject to a statutory tenancy". Section 104 of the 1972 Act defined "dwelling", for the purposes of the Act, as meaning (so far as material) :
"… 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 …".
Section 90 of the 1972 Act conferred on tenants of flats a right to require information as to the cost components of services charges levied by landlords. Section 90(12) contained definitions for the purposes of the section, including definitions of "flat" and "service charge". "Flat" was defined as meaning a separate set of premises forming part of a building "being a set of premises occupied wholly or mainly as a private dwelling". "Service charge" was defined as meaning (so far as material) :
"… 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".
The Housing Act 1974 inserted an additional section 91A in the 1972 Act, subsection (1) of which provided that a service charge should only be recoverable from the tenant of a flat in respect of the provision of chargeable items to a reasonable standard and to the extent that the costs incurred were reasonable.
The next relevant statute is the Rent Act 1977, which was a consolidating Act. Section 1 of that Act provided that, subject to the provisions of the Act, "a tenancy under which a dwelling-house (which may be a house or part of a house) is let as a separate dwelling is a protected tenancy for the purposes of this Act". Beyond the words in parenthesis, there is no further definition of "dwelling-house" in that Act.
Next, the Interpretation Act 1978, section 6 of which provides (among other things) that, unless the contrary intention appears, "words in the singular include the plural and words in the plural include the singular".
Next, the 1985 Act. Section 3 of the 1985 Act imposes on the landlord "under a tenancy of premises which consist of or include a dwelling" a duty to inform his tenant of any assignment of his interest. The duty is supported by penal sanctions. The relevance of this section for present purposes lies in the contrast between the words which I have quoted and the expression "tenant of a dwelling" in section 18 of the 1985 Act, to which I refer below.
Section 17 of the 1985 Act empowers the court to order specific performance in any proceedings in which "the tenant of a dwelling" alleges a breach of a repairing covenant relating to "any part of the premises in which the dwelling is comprised". In so far as this section has any relevance to the service charge issue, such relevance lies in the use of the expression "tenant of a dwelling" – the same expression as is used in section 18.
I now turn to section 18, which lies at the heart of the service charge issue. Section 18 is the first of a number of sections in the 1985 Act concerned with service charges (the other such sections being sections 19 to 30 inclusive).
As originally enacted, section 18 provided as follows (so far as material) :
"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) …."
Section 18 has since been amended in two respects. The only material amendment for present purposes is that made by section 41(1) of the Landlord and Tenant Act 1987, which substituted "dwelling" for "flat" in section 18(1) , so that the relevant expression now reads "…tenant of a dwelling…".
Section 19 of the 1985 Act provides as follows (so far as material) :
" 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...
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