Key points
- Upper Tribunal decisions may bind lower tribunals
- They may still be binding even though they are not called “guidance” decisions
When the Upper Tribunal (Lands Chamber) (“UT”) hears appeals against decisions of the First-tier Tribunal (Property Chamber) (“F-tT”), in some cases it may set out guidelines concerning the general effect of its decision.
The Lands Tribunal (“LT”) (the predecessor to the UT) famously set out guidelines on the applicable deferment rate to use in enfranchisement and new lease claims in Earl Cadogan and another v Sportelli and another [2006] PLSCS 198 to which I will return later.
But what of a UT ruling on a specific issue, such as valuation? Is it justifiable, or necessary, for the F-tT to follow the guidance? Or is it no more than a factual decision which should not be applied unless it is supported by other evidence?
Sinclair Gardens
This concern was illustrated by the Court of Appeal in Sinclair Gardens Investments (Kensington) Ltd v Ray [2015] EWCA Civ 1247; [2015] PLSCS 343 in a claim by a flat leaseholder for a new lease. The court traced the recent history of cases concerning the application of the deferment rate (that is the rate used to calculate the value today of a dwelling as a future receipt, which will only be realised once the current lease expires).
The UT decided to uphold a valuation decision in which a higher deferment rate was used, based (in part at any rate) on a previous judgment of the LT. The landlord appealed against the decision. Its appeal to the UT was rejected but the tribunal gave permission to appeal to the Court of Appeal.
In the celebrated Sportelli litigation, a generic rate was propounded (that is 4.75% for house claims and 5% for flat claims). It is commonly known as the generic rate since the LT stated that these rates should apply whatever the location of the property. It stated that these rates should be used unless “compelling evidence to the contrary is adduced” (at [121]) (though this may seem counter-intuitive, the higher the rate the lower the premium to be paid).
One of the issues considered in the Sportelli appeals to the Court of Appeal ([2007] EWCA Civ 1042); [2008] 1 EGLR 137 was the status of this general guidance. The court accepted that such guidance was a function of the LT. However, it cautioned that as all of the cases concerned dwellings in “prime central London”, in areas outside this location there might be evidence to support a departure from the generic rate.
Disregarding the guidelines
Since Sportelli there have been two notable decisions on when such a departure is justified. In Zuckerman v Trustees of the Calthorpe Estate [2009] UKUT 235; [2010] 1 EGLR 187 the UT was persuaded that the greater risk of deterioration and obsolescence in flats in the West Midlands, compared to prime central London, justified an increase in the rate to 5.25%. Then in another UT decision – Re Clarise Properties Ltd [2012] UKHT 4; [2012] 1 EGLR 83 – a leasehold house claim where the 4.75% rate would usually apply, there was expert valuation evidence to defend a departure from the rate supporting a higher percentage.
In some cases the UT may proclaim that a particular decision is a “guidance” case. Should the F-tT only follow or apply a decision if it is described as such (for example Cadogan Square Properties Ltd v Earl Cadogan [2010] UKUT 427 (LC); [2011] EGLR 155, a case on the applicable deferment rate for leases with less than 20 years unexpired)?
In Sportelli the Court of Appeal said that it would be for the UT to lay down guidelines on the precedent effect of its decisions but in this, the Sinclair Gardens appeal, the court noted that this has not yet been done (except for what it described as the “ad hoc” Cadogan Square case). However, according to the court, the mere fact that the UT had not taken the formal step of proclaiming that its decision was to be treated as a guidance case did not “rob its value for a subsequent tribunal” ([25]).
Weight of non-“guidance” decisions
Where the conclusion is reached that a previous UT decision is admissible in the absence of any guidelines, it is a question of what weight should be given to it. Factors such as the extent to which any general points are of interest as opposed to its specific facts will affect this assessment of the precedental value of the earlier decision. In Sinclair Gardens, both the F-tT and the UT decided the weight to be given to the Zuckerman decision which, the court concluded, was a question of fact for the tribunal but not a point of law on which an appeal lay to the Court of Appeal.
Apart from considering Zuckerman, in Sinclair Gardens the tribunal accepted expert valuation evidence that since the Zuckerman decision, all negotiated settlements in the West Midlands had taken higher deferment rates (of between 5.75% and 6%).
The tribunal concluded that in the Midlands area a higher deferment rate was generally used in settlements and in arriving at this conclusion it also used its own professional knowledge.
In Sinclair Gardens the same 5.75% figure was used as in Zuckerman. It could not be said, concluded the Court of Appeal, that there was no evidence on which the tribunal arrived at its decision. Whether the decision was right or wrong on the facts there was no error of law. As the only relevant ground of appeal was an error of law, the appeal was dismissed. Presumably, the result would be different if a tribunal simply applied Zuckerman without other evidence.
James Driscoll is a solicitor, writer and consulting editor of the looseleaf The Handbook of Residential Tenancies
