Service Charges & Estate Management - November 2012 update




Birmingham City Council v Keddie [2012] UKUT 323 (LC)

Crosspite Ltd v Sachdev [2012] UKUT 321 (LC)

Keddie Summary: The LVT had no jurisdiction to determine whether it was reasonable to replace the old windows because it had not been asked to do so.

Crosspite Summary: The LVT had no jurisdiction to determine whether an administration charge was payable when it had not been raised the Respondent; the only issue was the amount of the admistration charge was reasonable.

I have been banging on for months about the LVT taking it upon itself to decide issues that have not been put in issue by the parties (see, for example, the summary of Beitov Properties Ltd v Martin [2012] UKUT 133 (LC)).

In these cases HHJ Gerald makes it clear that LVTs do not have jurisdiction to determine issues not identified by the parties (in their statements of case).  In exceptional cases, it may be appropriate for the LVT to raise issues not raised by the parties but which fall within the broad scope of the application, not something which arises outside it.  In those cases, the LVT must give the parties a fair opportunity to deal with the issue.

The following is a selection of the most helpful passages of the judgment in Keddie:

“13 It is regrettable that it appears to be a developing practice within some leasehold valuation tribunals to take it upon itself to identify issues which are of no concern to the parties and then reach a decision on issues they have not been asked to which then results in an appeal and all the waste of time and money and attendant general aggravation. It may therefore be helpful to set out the legislative framework and general principles applicable.

16  [The pleadings or statement of case] set out the nature and scope of the issues in dispute. They operate to limit the issues in respect of which the parties must adduce evidence in support of their respective cases. They also operate to define the issues in respect of which they seek resolution by the LVT. They therefore serve five functions. First, to identify the issues. Secondly, to enable the parties to know what issues they must address their evidence to. Thirdly, to vest the LVT with jurisdiction, and focus the LVT's attention on what needs to be resolved. Fourthly, setting the parameters of, and providing the tools within which, the LVT may case manage the application. Fifthly, by confining the issues requiring resolution to what is actually (as distinct from what might theoretically be) in dispute between the parties they will be assured economical and expeditious disposal of their dispute whilst also promoting efficient and economical use of judicial resources at first instance and appellate levels.

17 In this respect, it is important to bear in mind not just that the jurisdiction of the LVT is a creature of statute but that it is also a function of what the applicant and, by his response, the respondent wish the LVT to resolve. It is the jurisdiction and function of the LVT to resolve issues which it is asked to resolve, provided they are within its statutory jurisdiction. It is not the function of the LVT to resolve issues which it has not been asked to resolve, in respect of which it will have no jurisdiction. Neither is it its function to embark upon its own inquisitorial process and identify issues for resolution which neither party has asked it to resolve, and neither does it have the jurisdiction to do so. To do so would be inimical to the party-and-party nature of applications to the LVT and would greatly increase the costs (frequently recoverable from the tenant through the service charge) and difficulties attendant to service charge disputes which by their nature are frequently fractious, involving relatively small sums within a complex matrix of divers items of expenditure.

18 It follows from the above that the LVT does not have jurisdiction under section 27A “to determine the entire service charge not only the matters in dispute, pleaded or otherwise specifically identified in the Service Charge application” as stated in the Refusal Decision. It is not an inquisitorial tribunal. It is there to resolve issues it is asked to resolve, not uncover ones which do not exist or which the parties are not concerned about.

19 That said, there may of course be rare cases in which it is appropriate or necessary for the LVT to raise issues not expressly raised by the parties but which fall within the broad scope of the application in order to properly determine the issues expressly in dispute. But even then, the issues must fall within the scope of the application, not something which arises outside of it. This no doubt is what His Honour Judge Mole QC had in mind when he said in Regent Management Limited v Jones[2012] UKUT 369 (LC), LRX/14/2009 that:

“29. The LVT is perfectly entitled, as an expert tribunal, to raise matters of its own volition. Indeed it is an honourable part of its function, given that part of the purpose of the legislation is to protect tenants from unreasonable charges and the tenants, who may not be experts, may have no more than a vague and unfocussed feeling that they have been charged too much. But it must do so fairly, so that if it is a new point which the tribunal raise, which the respondent has not mentioned, the applicant must have a fair opportunity to deal with it.”

20 In those rare cases where an LVT does feel compelled of its own volition to raise an issue not raised by the application or the parties, it must as a matter of natural justice first give both parties an opportunity of making submission and if appropriate adducing further evidence in respect of the new issue before reaching its decision. Failure to do so is not only unfair, but may give the unfortunate impression that the LVT has descended into the fray and adopted a partisan position which may well serve to undermine the confidence of the parties in the impartiality of the LVT.”

In Crosspite, HHJ Gerald concluded with the following comments:

“It should be noted that this is the fourth recent appeal (cf Fairhold Mercury Limited v Merryfield RTM company Limited [2012] UKUT, LRX/134/2011; Beitov Properties Limited v Martin [2012] UKUT 133 (LC); LRX/59/2011; and Birmingham City Council v Keddie LRX/54/2011) of an LVT of its own motion taking a point or issue not raised by the parties and deciding the case on that basis. In Fairhold and, probably, Beitov the points were within the broad scope of the application. In Keddie and the instant case the issues were outside the broad scope of the application and involve issues which were in effect against not just one but both parties. In all four cases considerable costs have been run up in appealing the LVT. It is hoped that the LVT will hesitate before raising novel points, and if it feels compelled to do so will take care to invite comment on them from all parties before deciding whether it is indeed appropriate or necessary to so and, if so, before deciding the point or issue.”

Comment:  Practitioners should take copies of Keddie and Crosspite to the LVT.  If the LVT raises an issue that is not within the scope of the application (according to the parties’ pleaded cases), it does not have jurisdiction to determine that issue.  If the issue is within the scope of the application, the parties must be given a fair opportunity to deal with it.  This may require an adjournment and the filing of further evidence.  It is hoped that the LVT will desist raising issues of its own motion and focus on the argument between the parties.