Service Charges & Estate Management - February 2012 update

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SERVICE CHARGES AND ESTATE MANAGEMENT

FEBRUARY 2012 UPDATE

Stenau Properties Ltd v Leek [2011] UKUT 478 (LC)

Facts: L appealed against an LVT’s refusal to order that the consultation requirements of the Landlord and Tenant Act 1985 s.20 could be dispensed with.  Although L had consulted T to some extent, the LVT found that that there had been “a substantial failure to engage in consultation as required by s.20”.  It did not set out in its reasons the extent of any prejudice to T arising from the breach.  The words used by the LVT when granting leave were “whether the Tribunal were wrong in not considering the issue of prejudice and ought to have considered whether the failure to comply must have adversely affected the lessees in some way.”

Issues: The issues were whether (i) it was open to a tribunal to find that a breach of the s.20 consultation requirement was so substantial that prejudice was to be taken as having flowed from it even though there was no evidence that the tenants would have acted differently had the consultation been carried out properly; (ii) such a conclusion had been open to the tribunal on the facts of the instant case.

Held: The LVT would have been entitled both in law and on the facts before it to conclude that the breach in the consultation process “must have prejudiced” the tenants. The LVT did not use those words in its conclusion but it was perfectly plain that it had the importance of prejudice well in mind.

The LVT was entitled to find that the breach was so substantial that prejudice must be taken to have flowed from it, even though there was no evidence of any work that would have been done differently if the consultation had been carried out properly.

“Where there has been a minor breach of procedure it will be important for a tribunal to find evidence that respondents were prejudiced or disadvantaged. Where the breach has been substantial it may be reasonable to assume prejudice ... Even if it were possible to prove that further consultation would have made no difference to the end result, it still does not follow that therefore there has been no prejudice if the breach has been substantial. The effect of a properly conducted consultation process should be to give the tenants confidence in the decisions that are reached and leave them feeling as comfortable as they can be with the service charges that are likely to flow from those decisions. The opportunity to participate in a meaningful way in the decision-making process is of real value. Even if the end result would probably have been the same without their participation, it [is] very arguable that tenants who are substantially deprived of their right to be included in the decision-making process are genuinely prejudiced” (per HHJ Mole QC at [22]).

Comment:  The Court of Appeal set out the principles applicable in an application for dispensation in Daejan Investments Ltd v Benson [2011] EWCA Civ 38, [2011] 1 W.L.R. 2330.

Attorney General v Singer Divisional Court, 24 January 2012 (unreported)

Facts: W was the long leaseholder of a flat. She and her husband (H) had a long-running service charge dispute with the company that managed the block of flats. The dispute had led to more than 30 applications in the LVT, the county and magistrates' courts, some of which were brought by the husband, and/or wife against the management company and its directors, some by the management company against H and W. H nearly always conducted the litigation on W's behalf. The tribunal had found that the most recent application brought by H and/or W was clearly an abuse of process and was vexatious.  The Attorney General applied for an all proceedings order under the Senior Courts Act 1981 s.42 against the H and W.

Held:  Application granted. (1) The LVT was clearly a court for the purposes of s.42. Its purpose was to resolve disputes regarding proprietary interests which would otherwise be determined by the civil courts. Its functions were classically judicial not administrative. Crucially, there was considerable scope for the transfer of proceedings from the tribunal to the courts; (2) H and W had both instituted both civil and criminal vexatious litigation. The test in s.42 was met in respect of both of them, even if the proceedings in the tribunal were ignored.  They had had limited success in the tribunal but none in the county courts or magistrates' courts. Their applications rarely had any basis in law, and they were sometimes branded as being without merit. All of them stemmed from the operation of the service charge. H had been prosecuted for harassment, which was relevant to s.42. They had conducted appeals without success. All of the proceedings had a cost, both to the other tenants through the service charge and to public funds. There was no sign of H and W's litigious activity abating. It appeared that H tended to repeat arguments on which he had previously lost. That pattern was likely to continue. W had signed the litigation documents and had also reached the threshold under s.42.

JONATHAN UPTON

TANFIELD CHAMBERS

FEBRUARY 2012