Rent Act 1977 — Fair rent — Whether fair rents should be determined by reference to market rent comparables — Whether rent officers and rent assessment committees should give reasons and arithmetical workings — Appeal — Whether successful party can appeal
The appellant
landlord owned two flats, in a block of flats, subject to regulated unfurnished
tenancies. The landlord referred fair rent assessments of these flats to the
rent assessment committee. At the hearing before the committee, the landlord
relied on, as comparables, seven assured shorthold tenancies of identical or
similar flats in the same block and a similar block nearby. He also put in
evidence the views of two local estate agents that there was no local scarcity.
The committee had the rent officer’s evidence of registered rents in the
locality. The committee rejected three of the landlord’s comparables and
concluded there was scarcity without quantifying it. They upheld the rents
registered by the rent officer. The landlord’s appeal to McCullough J was
allowed on one of 18 grounds of appeal; McCullough J quashed the decision of
the committee and remitted the reference to a different committee. The landlord
appealed.
court below, was entitled to appeal. The Court of Appeal had power under RSC
Ord 55 r 7(5) to remit the matter for rehearing and determination in accordance
with the correct opinion of the court where the judgment appealed from contains
rulings on the substantive issue which are wrong. A fair rent is a market rent
adjusted for scarcity and disregards: see Spath Holme Ltd v Greater
Manchester and Lancashire Rent Assessment Committee [1995] 2 EGLR 80. Where
close market rent comparables are available, it makes sense that they should be
treated as the best evidence for the purpose. If there are market rent
comparables enabling the identification of a market rent as a starting point,
there is normally no need to refer to registered rent comparables at all, still
less to engage in an arid exercise of verifying or reconsidering their
soundness as current indicators of an adjusted market rent. Where the
comparables are not exact and/or where there is a need to make disputed
adjustments for hypothetical lack of scarcity or for disregards, it necessarily
involves some workings. Where there is a significant difference between
registered fair rent comparables and close market rent comparables accepted by
the committee as providing current market rental evidence, they should not
normally have regard to the former at all, and cannot prefer them to the latter
without explanation. Where a committee’s assessment of fair rent differs
significantly from the market rent, the committee must have good reasons for it
and they must explain them. It will require some use of figures to demonstrate
the committee’s workings but a committee is not required to articulate their
reasons to the exacting standards and with the accuracy and precision required
of a court.
The following
cases are referred to in this report.
Albyn
Properties Ltd v Knox 1977 SLT 41; 1977 SC
108
Bolton
Metropolitan District Council v Secretary of
State for the Environment [1995] 1 WLR 1176; (1995) 71 P&CR 309; [1995]
3 PLR 37; [1995] JPL 1043, HL
BTE Ltd v Merseyside and Cheshire Rent Assessment Committee [1992] 1
EGLR 116; [1992] 16 EG 111; (1991) 24 HLR 514
Crake v Supplementary Benefits Commission [1982] 1 All ER 498
Crofton
Investment Trust Ltd v Greater London Rent
Assessment Committee [1967] 2 QB 955; [1967] 3 WLR 256; [1967] 2 All ER
1103
Curtis v London Rent Assessment Committee; Susands v London Rent
Assessment Committe (1996) 28 HLR 841
District
Estates Ltd v Chairman of Merseyside and Cheshire
Rent Assessment Committee [1997] NPC 39
Grea Real
Property Investments Ltd v Williams [1979]
EGD 131; [1979] 1 EGLR 121; (1979) 250 EG 651
Guppys
(Bridport) Ltd v Sandoe (1975) 30 P&CR
69; [1975] 2 EGLR 66; (1975) 235 EG 689
Guppys
Properties Ltd v Knott [1978] EGD 255;
(1977) 245 EG 1023
Guppys
Properties Ltd v Knott (No 2) [1980] 1 EGLR
67 (1979) 253 EG 907
Lake v Lake [1955] P 336; [1955] 3 WLR 145; [1955] 2 All ER 538,
CA
London
Rent Assessment Committee v St George’s Court
Ltd (1984) 48 P&CR 230; [1984] 1 EGLR 99; 270 EG 1186, CA
Mason v Skilling [1974] 1 WLR 1437; [1974] 3 All ER 977; (1973) 29
P&CR 88; [1974] EGD 230; 230 EG 1271, HL
Metropolitan
Properties Co (FGC) Ltd v Lannon [1969] 1 QB
577; [1968] 3 WLR 694; [1968] 3 All ER 304, CA
Metropolitan
Property Holdings Ltd v Finegold [1975] 1
WLR 349; [1975] 1 All ER 389; (1974) 29 P&CR 161; [1975] 1 EGLR 75; 233 EG
843, DC
Metropolitan
Property Holdings Ltd v Laufer (1974) 29
P&CR 172; [1975] 1 EGLR 77; 233 EG 1011
Mountview
Court Properties Ltd v Devlin (1970) 21
P&CR 689; [1970] EGD 513; 215 EG 303; [1971] JPL 113, DC
North
Western Estates Development Ltd v Chairman of
Merseyside and Cheshire Rent Assessment Committee unreported November 27
1996
Northumberland
& Durham Property Trust Ltd v London Rent
Assessment Committee unreported February 29 1996
Onslow v Inland Revenue Commissioners (1890) 25 QBD 465
Poyser
and Mills’ Arbitration, In re [1964] 2 QB 467;
[1963] 2 WLR 1309; [1963] 1 All ER 612; sub nom Poyser v Mills
[1963] EGD 421; (1963) 185 EG 609
R v Criminal Injuries Compensation Board, ex parte Cook
[1996] 1 WLR 1037; [1996] 2 All ER 144, CA
Save
Britain’s Heritage v Number 1 Poultry Ltd
[1991] 1 WLR 153; sub nom Save Britain’s Heritage v Secretary of
State for the Environment [1991] 2 All ER 10; (1991) 62 P&CR 105;
[1991] 3 PLR 17, HL
Spath
Holme Ltd v Chairman of the Greater Manchester
and Lancashire Rent Assessment Committee [1995] 2 EGLR 80; [1995] 49 EG
128; (1996) 28 HLR 107
Tormes
Property Co Ltd v Landau [1971] 1 QB 261;
[1970] 3 WLR 762; [1970] 3 All ER 653; (1970) 21 P&CR 923; [1971] JPL 112
Waddington v Surrey and Sussex Rent Assessment Committee [1982] 2 EGLR
107; (1982) 264 EG 717
Western
Heritable Investment Co Ltd v Husband [1983]
2 AC 849; [1983] 3 WLR 429; [1983] 3 All ER 65; [1983] 2 EGLR 100; (1983) 268
EG 266, HL
Young v Secretary of State for the Environment (1990) 60 P&CR
560; [1990] 2 PLR 82; [1990] JPL 673, CA
This was an
appeal by the landlord, Robert G Curtis, from a decision of McCullough J, who
had granted an order to quash a decision of the respondent London Rent
Assessment Committee, on the landlord’s application.
James Bonney
QC and Jonathan Gavaghan (instructed by Drewitt Willan, of Manchester) appeared
for the appellant; Kim Lewison QC and John Hobson (instructed by the Treasury
Solicitor) represented the chairman of the respondent rent assessment
committee; the second and third respondents did not appear and were not
represented.
Giving
judgment at the invitation of Butler-Sloss LJ, AULD LJ said: This is an appeal, following the grant of
leave by this court, by Robert G Curtis (the landlord), from an order in his
favour of McCullough J of November 27 1996, quashing determinations of the
London Rent Assessment Committee of ‘fair’ rents of two unfurnished regulated
tenancies for registration under Part IV of the Rent Act 1977 and remitting the
references to a differently constituted committee for determination in
accordance with his judgment. The appeal raises three main questions. The first
is whether and in what circumstances a successful party can challenge in the
Court of Appeal the reasoning of the judge below. If such a challenge can be
made, the second and third questions concern the lawfulness and rationality of
the committee’s mode of assessment and the adequacy of its written reasons.
The Rent Act
1965 introduced a scheme for regulating unfurnished tenancies and for rent
control of them by the registration of fair rents. The Rent Act 1974 extended
the scheme to furnished tenancies. Parts III and IV of the Rent Act 1977 now
contain the statutory scheme. It enables limitation of the recoverable rents of
regulated tenancies by entry of them in registers maintained by rent officers
for local authority registration areas. Either party may apply to a rent
officer to register a rent, which means, albeit indirectly introduced in
section 67(2) of the Act, ‘a fair rent’. The rent officer’s determination of
such a rent is subject to appeal by reference to a rent assessment committee,
consisting usually of a legally qualified chairman, a surveyor and a lay
member.
The 1977 Act
does not define ‘a fair rent’, but section 70 of it describes how it is to be
determined. Its effect is to take as its starting point the market rent for the
premises in their current state, assuming a hypothetical absence of scarcity of
similar properties available for letting in the locality and disregarding the
personal circumstances of the landlord and tenant and certain other matters,
including disrepair or defects for which the tenant is responsible or
improvements made by him.
The Housing
Act 1988 created new forms of tenancy from January 15 1989, assured periodic
tenancies and assured shorthold tenancies at open market rents. Such rents were
to be determined by the parties in the first instance and, on the proposal by a
landlord of a new rent, by a rent assessment committee if required by the
tenant. Section 14 provides that a market rent is that which, subject to
certain considerations, the property ‘might reasonably be expected to be let in
the open market by a willing landlord under an assured tenancy’. The Act also
provided for a phasing out of the regime of regulated tenancies and registered
‘fair’ rents provided by the 1977 Act. The phasing out will take a long time
since it is to be achieved by freeing only post-1988 Act tenancies, subject to
certain exceptions, from the control of the earlier legislation. There are thus
two systems of statutory control of tenancies and rents, a substantial but
dwindling body of pre-1989 regulated tenancies for which fair rents may be
registered and a growing number of assured tenancies at market rents. In most
cases registered fair rents are significantly lower than market rents for
comparable properties. McCullough J neatly summarised the effect of the two
systems on p4 of the transcript of his judgment:
unless the
tenant requires the intervention of the rent assessment committee, the rent is
fixed in a real market. Thus, given two dwellings in a comparable location,
with comparable accommodation, in a comparable state of repair and decoration …
and let on the same terms, if one was let before January 15 1989 and the other
on or after that date, the tenant of the former will pay a lower rent than that
paid by the latter unless there is no scarcity component in the rent of the
latter.
Before 1989
rent officers and rent assessment committees, when determining fair rents for
registration under the 1977 Act, most commonly looked to other registered rents
as comparables. There were then relatively few market rent comparables. Since
that time market rents of assured tenancies of similar dwellings have become
increasingly available as comparables and starting points for determination of
1977 Act fair rents.
The main
substantive issues raised by this appeal are whether rent officers and rent
assessment committees:
1. should
normally determine fair rents by reference to market rent comparables rather
than fair rent comparables when both are available;
2. should, if
they prefer fair rent comparables or some other method to available market rent
comparables, have good reasons for doing so; and
3. should
explain their reasons adequately, setting out their workings arithmetically if
necessary.
The Court of
Appeal considered these issues, obiter, in Spath Holme Ltd v Chairman
of the Greater Manchester and Lancashire Rent Assessment Committee [1995] 2
EGLR 80, CA. Morritt LJ, with whom Glidewell LJ and Sir John May agreed, held,
as part of the ratio, that a ‘fair rent’ under the 1977 Act is the same as a
‘market rent’ under the 1988 Act save for the assumption of no scarcity and
allowing for the statutory ‘disregards’, and that, in assessing a fair rent,
regard should be had to market rent comparables if any. He said, at p85K:
the fair rent
to be determined is a market rent less the disregards and discounted for
scarcity. Thus … if there is no scarcity and no disregards then the rents
should be the same whether the tenancy is a regulated tenancy or an assured
tenancy.
As to the
issues here, the sense of Morritt LJ’s obiter observations was:
1. that where
there are good market comparables, such as assured tenancies of flats in the
same block virtually identical to that for which a fair rent is to be
determined, those comparables should normally be adopted as the means of
assessing the fair rent; and
2. that in
such circumstances if a committee departs from such approach they should
explain why; and
3. the extent
to which they should explain their reasoning must vary with the nature of the
decision and of the case generally and that their ‘workings’ or figures may
well be required.
Uncertainty
about the interpretation of those observations and about their effect in law
have caused difficulties for at least some rent assessment committees. Those
difficulties are reflected in some inconsistency in approach by judges at first
instance on appeal from assessments. It is said that landlords rely on the
observations as authority for the propositions that rent officers and rent
assessment committees should no longer rely on previous determinations and
registered fair rent comparables, but should instead refer to market rent
comparables and should explain their determinations, setting out their
arithmetical workings. Some rent assessment committees have taken a contrary
view — dismissing Morritt LJ’s observations as obiter — stating that it
is sufficient to rely without more on general or particular registered fair
rent comparables to meet a challenge based on market rent comparables, and
that, in any event, there is no need to give detailed reasons, still less
arithmetical workings, whichever method of assessment they use.
Before
considering the Spath Holme case and its effect in greater detail, I
should set out section 70 of the 1977 Act. It provides for the determination of
‘a fair rent’ for registration under the Act. In subsections (1) and (2) it
sets out respectively the criteria for and the assumption of no scarcity to be
made in determining such a rent and, in subsection (3), the matters to be
disregarded when making the determination:
(1) In
determining, for the purposes of this Part of this Act, what rent is or would
be a fair rent under a regulated tenancy of a dwelling-house, regard shall be
had to all the circumstances (other than personal circumstances) and in
particular to —
(a)
the age, character, locality and state of repair of the dwelling-house …
(b) if
any furniture is provided for use under the tenancy, the quantity, quality and
condition of the furniture, and
(c)
any premium, or sum in the nature of a premium, which has been or may be
lawfully required or received on the grant, renewal, continuance or assignment
of the tenancy.
(2) For the
purposes of the determination it shall be assumed that the number of persons
seeking to become tenants of similar dwelling-houses in the locality on the
terms (other than those relating to rent) of the regulated tenancy is not
substantially greater than the number of such dwelling-houses in the locality
which are available for letting on such terms.
(3) There
shall be disregarded —
(a)
any disrepair or other defect attributable to a failure by the tenant under the
regulated tenancy or any predecessor in title of his to comply with any terms
thereof;
(b)
any improvement carried out, otherwise than in pursuance of the terms of the
tenancy, by the tenant under the regulated tenancy or any predecessor in title
of his; …
(e) if
any furniture is provided for use under the regulated tenancy, any improvement
to the furniture by the tenant under the regulated tenancy or any predecessor
in title of his or, as the case may be, any deterioration in the condition of
the furniture due to any ill-treatment by the tenant, any person residing or
lodging with him, or any sub-tenant of his.
Spath
Holme
In Spath
Holme the rent assessment committee had rejected market rent comparables as
an indicator of market rent for the subject premises, because, inter alia,
they were not satisfied of the actual absence of scarcity, and thus found that
the landlord had not demonstrated the unsoundness of registered fair rent
comparables. Harrison J, whose first instance judgment, at (1994) 27 HLR 243,
to quash the determination of the rent assessment committee was upheld by the
Court of Appeal, set out the following six principles, at p257:
(1) A ‘fair rent’
under section 70 of the Rent Act 1977 is the market rent adjusted for the
scarcity element under section 70(2) and disregarding the personal
circumstances mentioned in section 70(1) and the matters specified in section
70(3).
(2) There are
various methods of assessing the fair rent, including the use of registered
fair rent comparables and the use of assured tenancy comparables.
(3) The
method or methods adopted by a rent assessment committee may vary according to
the particular circumstances of each case.
(4) The rent
assessment committee must consider, and have regard to, the method or methods
suggested to them by the parties.
(5) In
deciding which method to adopt the rent assessment committee must take into
account relevant considerations and give adequate reasons for their choice of
method.
(6) Subject
to compliance with those requirements, the rent assessment committee is free to
adopt the method which appears to them, on the evidence, to be the most
appropriate method provided it is not a method which is either unlawful or
unreasonable.
It follows
from a consideration of those principles that a rent assessment committee is
not bound to use assured tenancy comparables in determining a fair rent under
section 70, although that method may be expected to be used increasingly in the
future in the same way as registered fair rent comparables were used
increasingly following the advent of the Rent Acts.
Harrison J
added, at p258, that it was open to a committee to adopt either the market rent
or registered rent approach, or both, depending on the material before them,
and that the absence of scarcity was no reason for rejecting market rent
comparables. He said, however, that a committee would have to show weighty
reasons for departing substantially from market rents recently agreed on
similar flats within the same block, as in that case.
On appeal to
the Court of Appeal the rent assessment committee maintained that adjusted
market rents could not be used as comparables to determine fair rents. Not
unnaturally in the light of that contention, it also expressed concern about
Harrison J’s observation on the need to show weighty reasons for departing from
assured rent comparables, since market rents and fair rents are not the same.
As I have said, the Court of Appeal upheld Harrison J’s approach and implicitly
approved his six principles. It held that, subject to scarcity and disregards,
a fair rent is a market rent — ie an adjusted market rent — and that market
rent comparables where they exist are matters to which a rent officer or
committee may have regard when assessing a fair rent.
However, in
response to submissions made on behalf of the chairman of the committee, based
on his concern as to how a committee should approach and explain their decision
when there are both fair and market rent comparables, Morritt LJ went on to
give some general guidance on those matters. In observations, at p86C–G, that
may be obiter but, in my view, flow from the main ratio of his judgment
that a fair rent is an adjusted market rent and that market rent comparables
are relevant to the assessment of a fair rent, he said:
In this case
there are a number of flats in the same block let on assured tenancies at, by
definition, open-market rents which are virtually identical to those for which
a fair rent is to be determined. In my judgment, if, in those circumstances, a
rent assessment committee wishes to exercise its discretion to adopt some other
comparables or method of assessment it will be failing in its duty to give
reasons if it does not explain why.
In this case
the third reason given by the rent assessment committee as recorded by the
judge was that the registered rent comparables had not been demonstrated to be
unsound. That is not, of course, a reason for rejecting the assured tenancy
comparable. It is not for the court to say in advance what would be a good
reason for doing so, but if such a reason involves ‘working through’ such
comparables so be it: that consequence is no ground for rejecting the validity
of its cause. But it should also be noted that the registered rent comparables
are not in their nature any more or less sound than the open-market rent with
or without discount. Any registered rent has built into at least two variables,
namely the open market rent and the discount for scarcity. Each should have
been considered at the time of the original determination. The assessment of
the soundness of that registered rent for use as a comparable would require
each of those variables to be reconsidered at the time of their possible use as
a comparable.
In this
connection it was also objected that if the rent assessment committee were
required to give detailed reasons that might necessitate giving detailed
arithmetical workings or quantifying the degree of scarcity involved contrary
to statements in Guppy’s Property v Knott … and Metropolitan
Property Ltd v Laufer … But those statements were made in relation
to the facts of those cases. It does not follow that there will not be cases in
which the duty to give reasons will require such workings or quantification to
be afforded.
Before I turn
to the facts of this case, I should mention that Morritt LJ’s observation in
the above passage, that the soundness of registered rent comparables should be
reassessed at the time of their possible use as comparables, has occasioned
some confusion. McCullough J read it, at p18, as a reassessment of the original
determination. I read it as McCullough J, at p20, thought it should read, as a
reassessment in the light of the circumstances at the time of its possible use
as a comparable. However, as the most usual yardstick for such reassessment1 is likely to
be the market rent derived from market rent comparables, it is difficult to see
the point of such an exercise. If there are market rent comparables from which
the fair rent can be derived, why bother with fair rent comparables at all?
1 Judge’s footnote: There is a possibility of using return on capital
as a means of determining market, and hence fair rent: see Western Heritable
Investment Co Ltd v Husband [1983] 2 AC 849; [1983] 2 EGLR 100;
(1983) 268 EG 266, HL, Sc, per Lord Keith at p854F — but recourse to
such a method appears to be unusual.
Perhaps more
importantly, Morritt LJ, in making that observation, seems to me simply to have
been making the point that registered rent comparables if relied on, just as
market rent comparables if relied on, must be brought up to date by some
process of working through or quantification. He was not suggesting, as has
been assumed by Mr James Bonney QC in his submissions, that where there are
both market and fair rent comparables the former or some other yardstick should
be used to test the current validity of the latter. As I understand his general
reasoning, his view was that where there are close market rent comparables,
there is normally no need to consider fair rent comparables.
Facts
I turn now to
the facts of this case, the determination of the rent assessment committee and
the judgment of McCullough J.
The landlord
owned two similar flats in a two-storey purpose-built terrace of flats, one on
the ground floor and one on the first floor. Both were regulated unfurnished
tenancies. On July 8 1993 a rent assessment committee had determined fair rents
of £3,100 pa for the ground-floor flat and £3,400 pa for the first-floor flat.
Two years later, on July 14 1995, on the landlord’s application for the
determination of £5,200 pa and £5,720 pa as fair rents for the flats
respectively, the rent officer registered rents of £3,640 and £3,900. The
landlord referred these assessments to the respondent rent assessment
committee, seeking before it somewhat higher rents than he had put to the rent
assessment officer, namely £5,720 pa and £6,240 pa respectively. There was thus
a very substantial difference between the rent officer’s registrations and the
market rents based on the landlord’s market rent comparables, over £2,000 pa in
each case.
At a hearing
on December 21 1995 the committee received written and oral submissions from
the landlord and written submissions from the tenants, who did not attend. The
landlord relied on as comparables seven assured shorthold tenancies of
identical or very similar flats in the same block and in a similar block in an
adjoining road, the market rents of which broadly matched those which he
sought. He also maintained, producing written confirmation from two local
estate agents, that there was no scarcity of such properties in the area, the
relevance being that the market rent that such comparables might suggest for
the subject properties would not require adjustment downwards to take account
of the no scarcity assumption required by section 70(2).
The landlord
invited the committee to adopt the approach indicated by Morritt LJ in Spath
Holme. He urged them to deal with each of his assured tenancy comparables,
indicating their workings and quantifying any substantial scarcity that they
found and, if it departed from them, stating their reasons for doing so.
The committee
also had before it the registered rents for the two flats as determined by the
rent officer in 1993 and a report and a schedule prepared by her of registered
rents of other properties in the area indicating a range of comparables well
below the market rent comparables on which the landlord relied. The rent
officer’s report also referred to recent market research information and a
market evidence database held by her office indicating a local scarcity of
similar property. The tenants, in their written submissions, referred
respectively to the extent of the increases in rent over the preceding 10
years, in contrast to increases in pension and to the installation of tenant’s
fittings. On the day of the hearing the committee inspected both of the subject
flats externally and one internally. They also inspected externally the main
comparables upon which the landlord relied.
After the
hearing, but before the committee provided their decision, Latham J allowed an
appeal by the same landlord against the same committee in respect of their
determination of a fair rent for one of the comparables relied upon by the rent
officer in this case, a ground-floor flat almost identical to the subject
ground-floor flat: see Curtis v London Rent Assessment Committee;
Susands v London Rent Assessment Committee (1996) 28 HLR 841.
There, the landlord had contended for a fair rent of £5,200 pa and the
committee had determined a fair rent of £3,380 pa. Latham J, in quashing the
assessment and remitting it for redetermination by a differently constituted
committee, criticised the committee for only paying lip service to the Spath
Holme principles, for apparently applying an uplift from the previous
registered rent, rather than having regard to an obvious market rent
comparables and for failing adequately to explain why they had taken that
course. They had purported to explain it by stating that they had ‘gained more
help’ from the committee’s previous determinations of the subject premises and
by concluding in para 7 of their statement of reasons:
Having regard
to the evidence, to our inspection, to our own knowledge and experience, and to
the provisions of Section 70 of the Rent Act 1977 we determined the fair rent
exclusive of rates to be … [£3,380 pa]
Latham J’s
comment on an almost identical paragraph in the committee’s reasons in one of
two unsuccessful appeals by Susands, heard together with that of Curtis,
was:
Now that the
Court of Appeal has underlined both the objective as identified by Harrison J,
and the need to give reasons, Rent Assessment Committees can expect the court
to look with some care at the sort of bare assertions that are set out in
paragraph 9 of these reasons.
Returning to
this case, the landlord, by letter to the clerk of the committee of February 6
1996, sought to make further submissions, which he set out in the letter. He
referred to Latham J’s criticisms in Curtis and Susands, in
particular, as to the committee’s failure to explain their decision so as to
demonstrate that they had had proper regard to the market rent comparables and
how they had dealt with them. By letter of February 9 1996 the clerk to the
committee wrote enclosing their decision and returning his letter, stating that
the chairwoman had determined that the committee would not consider it because
neither the sealed court order nor the approved transcript of Latham J’s
judgment was available. The letter did, however, indicate that the committee
had removed the property from their consideration as one of the fair rent
comparables relied upon by the rent officer.
Rent
assessment committee’s determination
By their
decision the committee confirmed the rent officer’s determinations of £3,640 pa
for the ground-floor flat and £3,900 for the first-floor flat, a modest increase
in each case on the 1993 determinations for the premises.
The written
reasons of the committee indicate how they say they approached their task. I
summarise it as follows. They considered the seven market rent comparables upon
which the landlord relied, and accepted four of them as ‘provid[ing] current
market rental evidence for the subject flats forming the basis of their
assessment of their fair rent assessment’. They gave reasons for rejecting the
other three. They identified in some detail differences between the four market
rent comparables and the subject flats, but did not quantify the effect of
those differences in monetary or percentage terms. They concluded, having heard
conflicting evidence from the landlord and the rent officer, that there was scarcity,
which they did not quantify in percentage or other terms. They referred to the
1993 determinations of fair rents for the subject premises, which they stated
had ‘not been demonstrated to be unsound’. They presumed that those
determinations reflected the scarcity element at the time they were made and
accepted evidence from the rent officer, seemingly derived from her own market
research survey and/or database, that market rent levels in the area had been
static for two years. They had regard to the previous determinations and to
their general knowledge of comparable registered rents. They made ‘appropriate
deductions’ for the differences between the four market rent comparables and
the subject premises and allowed for scarcity, neither of which they quantified
in any way. ‘Having done so, they saw no reason to disturb the Rent Officer’s
registrations.’
I set out
below some of the more critical passages of the written reasons. First, the
chairwoman rehearsed the scheme of the landlord’s submission:
7. On the
subject of a fair rent the landlord cited passages from the Spath Holme
case and summarised the findings of the SLA [Small Landlords’ Association]. He
requested the committee, following the Spath Holme case, to work through
the assured tenancy comparables giving their workings or quantification of any
substantial scarcity. He concluded … by stating that the starting point for
assessing a fair rent is the market rent adjusted for any scarcity element …
She mentioned
the other material and submissions to which I have referred and the committee’s
inspections, and set out the legal basis of their approach to the factual
issues before them:
13 The
committee’s objective was to determine a fair rent which was a market rent
adjusted for scarcity in accordance with the first principle laid down by
Harrison J in the Spath Holme High Court case and approved by the Court
of Appeal. They accepted that in this instance [four of seven of] the
landlord’s assured shorthold tenancy comparables … provided current market
rental evidence for the subject flats forming the basis of their fair rent
assessment. Whilst they observed that the properties were similar, the lettings
were not identical to the regulated tenancies because they were assured
shorthold tenancies, as opposed to assured tenancies, as in the Spath Holme
case. As the committee are bound to have regard to all the circumstances (other
than personal circumstances) under section 70(1) of the Rent Act 1977 they
found that there were the following differences between the market rent
comparables and the subject flats …
The chairwoman
then referred to differences of size, standard of kitchen fittings, repairing
liabilities and ‘a perceived enhanced value arising in short term lettings’.
On the issue
of scarcity, the chairwoman referred to the test of Lord Widgery CJ, with which
Mais and Croom-Johnson JJ had agreed, in Metropolitan Property Holdings Ltd
v Finegold [1975] 1 WLR 349, DC, at pp353–354, that it must be taken
over a broad area, not just the immediate locality. She and her fellow members
of the committee rejected the views of the two local estate agents on whom the
landlord relied because, in their view, they related to the immediate locality
only and because they were simply assertions of opinion unsupported by ‘hard
evidence’. In para 15 she expressed the committee’s view, in reliance on the
rent officer’s report based on her general knowledge of scarcity of property of
the sort in the area and on the short time it had taken the landlord to let
some of the properties on which he had relied as comparables:
that there
was a substantial shortage of basic unimproved property to let at lower levels
of rent for which there is an unfulfilled demand and which is reflected in the
market rents the landlord [was] able to achieve … They concluded that a
discount from market rents must be applied to account for the scarcity factor.
Having gone
thus far along the market rent comparables route, the chairwoman then purported
to test them and their conclusion as to scarcity by reference to registered
rents comparables, before expressing the committee’s conclusion:
16. The
committee had regard to the report from the rent officer which was in evidence
and which referred to her own extensive market evidence research and survey recently
conducted from information obtained from many agents and landlords from which
the rent officer had concluded that there was a dearth of flats available to
rent in Waltham Forest without floor covering, white goods and central heating.
17. The rents
previously determined for the subject flats by a committee … with effect from
June 21 1993 have not been demonstrated to be unsound and are presumed to have
reflected the scarcity element at that time. Evidence obtained by the rent
office suggests that market rent levels have been static, Forest Bureau [one of
the agents upon whom the landlord relied] apparently stating that it has been
static for over two years. This would tend to show that there has been no
marked diminution in scarcity since the last fair rent determination …
19. The
committee had regard to their knowledge of comparable registered rents and also
to the last committee decision in respect of the subject flats …
21. In
reaching their decision based on likely market rents for the subject flats the
committee have made appropriate deductions from the landlord’s market rent
comparables for the difference commented on between those and the subject flats
as well as a discount for the scarcity element. Having done so they see no
reason to disturb the rent officer’s registrations. Nor did they consider that
in the circumstances of this case it was appropriate to offer artificial
calculations, detailed workings or hypothetical percentages; they were entitled
as a tribunal expert in valuation to rely upon a broad but well founded
assessment approach.
22. Having
regard to all the evidence put before them, to their inspection, to their own
knowledge and experience, and to the provisions of section 70 of the Rent Act
1977 the committee confirmed those fair rents to be registered …
That last
paragraph, it should be noted, was in the same terms as the paragraph in Curtis
and Susands which Latham J had regarded as unsatisfactory. However, here
the committee have reasoned their decision more fully before expressing their
conclusion in that way than they did in that case.
McCullough
J’s judgment
The landlord
appealed to McCullough J on 18 grounds. He succeeded on one only, namely that
the committee had taken into account written assertions of the tenants as to their
responsibility for internal repairs made after the hearing and of which they
(the committee) only informed him after their decision. On that procedural
ground McCullough J quashed the committee’s decision and remitted the matter to
a differently constituted committee for determination in accordance with his
judgment.
The landlord
is concerned about the grounds on which he failed before the judge,
notwithstanding his success in having the committee’s decision quashed and
remitted for redetermination. That is because he maintains that the judge
wrongly rejected those grounds and that the new committee, having regard to the
judge’s rulings, are likely to make the same mistakes again. He maintains that
the committee, while acknowledging the Spath Holme principle that a fair
rent is a market rent adjusted for scarcity and the ‘disregards’, failed to
apply it on the evidence before them and failed adequately to explain their
decision. He says that, despite what they said, they wrongly rejected the
assured tenancy comparables as the best evidence of fair rents for the subject
properties and wrongly relied on the registered rent comparables and their own
knowledge of the registered rents of other unspecified properties. He argues
that the committee failed to identify any workings or calculations quantifying
the differences to which they had referred between his market rent comparables
and the subject premises or as to the scarcity element and that, overall, they
had shown no good reasons for departing from the comparable market rents as
indicators of fair rents. He relies also, in this connection, on the
chairwoman’s refusal to take account of Latham J’s judgment in Curtis
and Susands.
McCullough J
found, in reliance on the committee’s assertions in paras 13 and 21 of their
reasons, that they had ‘accepted’ four of the landlord’s seven assured tenancy
comparables as ‘forming the basis of their fair rent assessment’; that they had
made ‘appropriate’, though unspecified, deductions for the differences, which
they had identified, and for scarcity. He regarded that as sufficient ‘working
through’ — as sufficient and implicit reasoning that the deductions taken
together were of sufficient weight to adjust the market rent comparables to the
rent officer’s registrations. He held that it was well established that the
committee was entitled to rely on their own knowledge of comparable registered
rents without having to specify the properties for which they had been
registered2. He equated the exercise with the reliance of a judge in a criminal
court on his general knowledge of sentencing levels when fixing on an
appropriate penalty.
2 citing Crofton Investment Trust Ltd v Greater London Rent
Assessment Committee [1967] 2 QB 955, CA, per Lord Parker CJ at
p967; Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB
577, CA, per Lord Denning MR at p597F and Edmund Davies LJ at p603C; and
Metropolitan Property Holdings Ltd v Laufer (1974) 29 P&CR
172, DC, per Lord Widgery CJ at p176.
As to the
committee’s reliance on the previous (1993) registered rents for the flats,
McCullough J accepted, in reliance on pre-1988 Act authorities, that, in the
absence of material to suggest to the contrary, a rent officer or rent
assessment committee was entitled to assume that the fair rent last determined
for the premise had been properly determined3. However, he was of the
view that where, as in Spath Holme, there was evidence that fair rents
had fallen far behind market rents, allowing for the element of scarcity in the
latter, such difference would, as Morritt LJ said, require reconsideration of
the ‘soundness’
p19 of the transcript of his judgment:
3 See Tormes Property Co Ltd v Landau [1971] 1 QB 261,
DC, per Lord Parker LCJ at p266G; Mason v Skilling [1974]
1 WLR 1437, HL, per Lord Reid at p139H; and London Rent Assessment
Committee v St George’s Court Ltd (1984) 48 P&CR 230, CA, per
Griffiths LJ at p235.
in general …
experience since 1989 has increasingly shown that fair rents have fallen too
far behind market rents (allowing for the element of scarcity in the latter).
As the years progress this disparity may be expected to diminish and, ideally,
should be eliminated … If that is right, then the assumption … will more often,
and perhaps generally be displaced. Nowadays it will more often, and perhaps
generally, be shown that the market rents of matching premises (ie those to all
intents and purposes exactly comparable) let on matching assured tenancies
suggest a fair rent significantly greater than that suggested by the last rent
registered for the subject premises. Where it is, the very fact of this difference
will prompt the need for the reconsideration of which Morritt LJ spoke.
McCullough J,
having gone that far, and while expressing concern about the committee’s
failure to quantify its deductions for the differences between the assured
tenancy comparables and the subject flats and for the element of scarcity,
nevertheless appears to have felt trapped by the committee’s implicit reasoning
in para 21 of their statement of reasons that their ‘appropriate deductions’
for those factors reduced the market rents to the levels of those registered by
the rent officer. This is how he dealt with the matter, at p20:
It does not …
necessarily follow that with ‘appropriate deductions’ the market rents of his
comparables will have reduced to the level of the previously registered rents
of the subject premises, suitably adjusted for inflation. The committee would
appear to have thought that they did, and it is difficult to say that this was
a conclusion that they could not reasonably reach. [Had they disclosed figures
for their ‘appropriate deductions’ one could have seen whether this was so, but
they did not.]
As to the
landlord’s complaint and his counsel’s submission about the absence of figures,
McCullough J said, at p21:
I think there
is force in this submission. Spath Holme does not go so far as to
require figures in every case, but I would echo what Latham J said in Curtis
v London Rent Assessment Committee by saying that the court is more
likely than hitherto to expect them. If adequate reasons are not given for the
decision of a rent assessment committee the fact that its members have
knowledge and experience of their subject provides, in my judgment, no excuse.
Rather should it facilitate the explanation of the reasoning used. If figures
are used there is no difficulty in telling the parties what they are. In this
case ‘appropriate deductions’ were made; so figures were used. The committee
considered whether ‘to offer artificial calculations, detailed workings or
hypothetical percentages’ and decided it would not be ‘appropriate’. Those
dissatisfied with decisions of rent assessment committees do not ask for
anything artificial or hypothetical; they want to know how the committee
reached its conclusion. I would be surprised if any complicated mathematics was
ever needed: some simple subtraction and perhaps the odd percentage should
surely do.
McCullough J
then set out an example of what he had in mind from a decision of the Southern
Rent Assessment Panel in December 1994 and continued, at pp22–24:
The question
for the court, however, is not whether figures could easily have been provided
let alone whether the court would have preferred to see them included — as it
would; it is whether the decision of the committee can be castigated as
unlawful because they were not provided. I would like to hold that it should,
but, at the end of the day, though I have hesitated about it, I do not think
that I can. This is chiefly because the committee dealt so fully, albeit
without providing figures, with the differences between … [the landlord’s]
comparables and the [subject] tenancies … Of a committee’s reasons the opaque
paragraph to which Latham J referred, and which the London Rent Assessment
Committee appears to adopt as a matter of routine, says nothing. Had it stood
alone my decision would have been to the contrary …
I would
express the hope that, when … [the landlord’s] application is reconsidered, the
committee’s reasons, whatever their decisions will inform the parties of such
simple arithmetic as was used in reaching them.
Appeal by
a successful party
The first
matter for consideration is whether the landlord can appeal from the order of
McCullough J, notwithstanding that it was the order he sought, because he is
dissatisfied with some of the judge’s reasoning with which, in accordance with
the order, a differently constituted committee is to redetermine the matter.
The judge’s order had two parts, a quashing of the decision of the committee
and a remission of the matter, pursuant to RSC Ord 55, r 7(5), to a differently
constituted committee for determination in accordance with his judgment.
Lake v Lake [1955] P 336, CA, a divorce case, is the authority
most commonly cited for the proposition that an appeal lies only against an
order, not the reasons for it. There, a wife respondent who had been found
guilty of adultery, but who had succeeded in defending her husband’s divorce
petition on the ground of condonation, sought to appeal the finding of
adultery. Lord Evershed MR, with whom Hodson and Parker LJJ agreed, held that
the wife’s right of challenge went only to the form of order not to the reasons
for it.
Lord
Evershed’s reasoning turned on two points: first, the form of the order, namely
that the husband ‘had not sufficiently proved the contents of the petition’;
and, second, the wording of the then RSC Ord 58, r 1 (the predecessor of
today’s Ord 59, r 3(2)), permitting appeal from ‘the whole or any part of any
judgment or order’. As to the form of the order, he said, at pp342–343:
The …
question that we must decide is whether … there is, properly speaking, any
subject-matter upon which we could properly entertain an appeal. I have come to
the conclusion that there is not. It is quite clear from the form of order or
judgment … that it records accurately the conclusions which, in the end of all,
the commissioner reached … I start by assuming and accepting that this is an
appropriate and correct form of order. From that it seems to me to follow
inevitably that we could not now entertain an appeal upon the matter of fact,
Aye or No, was the wife guilty of adultery? for the short and simple reason
that, even if we came to the conclusion that the commissioner formed a wrong view
on the facts, we could not make any alteration in the form of the order under
appeal. It would still stand correctly recording the result of the proceedings,
exactly as it stands now. I go further. Let it be supposed that Mr
Laughton-Scott were free to raise this matter in the court, and that the court
came to the conclusion … that the manner of the trial of this issue was not
satisfactory … the right course for the court to take, presumably, would be
then to order a new trial. A new trial of what? That again, as I think, shows
the impossibility of our acceding to Mr Laughton-Scott’s request, for I cannot
see how we could possibly order the issue of adultery as such to be retried,
seeing that a retrial could not possibly lead, in the circumstances, to any
effective result whatever.
As to the
words ‘judgment or order’ in Ord 58, r 1, Lord Evershed said, at p343:
Nothing which
Mr Laughton-Scott brought to our attention from the cases which he mentioned
persuades me that by the words ‘judgment or order’ in the rule, or where they
occur in the Judicature Act, 1925, is meant anything other than the formal
judgment or order which is drawn up and disposes of the proceedings, and which,
in appropriate cases, the successful party is entitled to enforce or execute.
Hodson LJ, in
his concurring judgment, at p346, referred with approval on this point to Lord
Esher MR’s distinction between a ‘judgment’ and an ‘order’ in Onslow v Inland
Revenue Commissioners (1890) 25 QBD 465, namely ‘[a] ‘judgment’ is a
decision obtained in an action, and every other decision is an order’.
Mr James
Bonney QC, on behalf of the landlord, submitted that the principle in Lake
v Lake applies only where the Court of Appeal cannot alter the order
made below or cannot otherwise grant effective relief. Neither of those
circumstances, he maintained, apply here; the relief sought includes the
remission of the matter for determination by a differently constituted
committee in accordance with the judgment of this court, which relief, if
granted, should affect that committee’s determination. He added that it would
be unjust to require the landlord to submit to a redetermination in accordance
with McCullough J’s reasoning, which he maintained was wrong, possibly
requiring him to seek further recourse to the courts to resolve matters that
can be dealt with now. He added that there is some urgency for this court to
deal with them now because McCullough J’s judgment differs from that of Turner
J, delivered on the same day in North Western Estates Development Ltd v Chairman
of Merseyside and Cheshire Rent
many pending cases will turn upon the guidance the court can give.
Mr Kim Lewison
QC, on behalf of the committee, made no submissions on the point, indicating
that its attitude was neutral on it. He suggested, however, that McCullough J’s
judgment did not preclude the landlord from urging a new committee to adopt and
demonstrate in its written reasons an arithmetical approach, the judge having
said that such would be desirable though not, as a matter of law, necessary.
In my
judgment, there is force in Mr Bonney’s submissions. If he is right in saying
that McCullough J’s rulings on the substantive issue are wrong or are such as
possibly to mislead a new committee into repeating the errors of the present
committee, the judge’s order has not given the landlord all that he wants and
to which he is entitled and the Court of Appeal can do something about it. The
court cannot do anything about the first part of the order, the quashing of the
determination, and the landlord naturally does not seek that. However, it can
give a different and proper effect to the second, the remission of the
reference for determination in accordance with the order of the court. It can
exercise, under RSC Ord 59 r 10(3), the power of the court below to remit the
matter for rehearing and determination under RSC Ord 55 r 7(5) in accordance
with the correct opinion of the court4. Accordingly, I would
hold that the landlord may appeal against the order of McCullough J.
4 See also on the precise form of the order and whether it gives the
successful party all that he wants Young v Secretary of State for the
Environment [1990] 2 PLR 82, CA, per Dillon LJ at p87A–D, per
Woolf LJ at p89C–D and per McCowan LJ at p90C–D.
Post Spath
Holme cases
Since the
Court of Appeal’s judgment in Spath Holme there have been a number of
first instance judgments which suggest some uncertainty as to the application
of its principles, in particular, as to manner and detail in which a rent
assessment committee should demonstrate its process of reasoning in fixing on a
fair rent. That uncertainty necessarily turns in part on the earlier question
to which I have referred, whether when good market rent comparables are
available a committee should use them as the starting point for their
assessment and should only depart substantially from them where there are good
reasons for doing so. Here, the committee purportedly took market rent
comparables as their starting point. McCullough J appears to have accepted that
that was an appropriate approach because he regarded such comparables as the
best indicators of market rent. As I have indicated, he was uneasy about the
committee’s failure to furnish their reasons with figures, but he did not
regard that deficiency as sufficient to render their determinations unlawful.
As I have also indicated, he took the same view as Latham J in Curtis
and Susands on the inadequacy of the London Rent Assessment Committee’s
routine concluding paragraph, if it had stood on its own. The main difference
between the two cases is that here, the committee, having purportedly relied on
market rent comparables, set out some reasons for adjusting them to the
previously registered rents for the subject premises subject to a modest
uplift.
There is much
in common in the approach of McCullough J in this case and that of Turner J in North
Western Estates Development case. They are both of the view that committees
must explain their process of reasoning in fixing on their assessments,
McCullough J expressly stating that some use of figures would be desirable and
Turner J implicitly calling for figures as part of the reasoning process. The
main difference between them is that McCullough J was prepared to accept as
adequate reasoning for differing from market rent comparables5 the
committee’s statement of reliance both on their previous determinations for the
subject premises and on their general knowledge of comparable registered rents
without identification of the properties or reassessment of their current
applicability; whereas Turner J held, on his understanding of Morritt LJ’s
observation in Spath Holme, that if a committee has in mind relying on
such comparables to depart substantially from market rent comparables, they
must first reassess their soundness and must demonstrate by their reasoning
that they have done so.
5 in addition to the differences between them and the subject
premises identified by the committee.
In the North
Western Estates Development Ltd case, the committee had to consider as
comparables both assured shorthold tenancy market rents and registered fair
rents. The landlord’s case was that there was no scarcity requiring a discount
from the market rent. However, the committee made a significant deduction for
scarcity without explaining why, save for a general reference to registered
fair rent comparables, by clinging to a particular fair rent determination
comparable because they ‘had no reason to believe that it was suspect’, and
otherwise in the most general terms in para 7 of their reasons:
by quantifying
scarcity to the best of our ability using our knowledge and experience of
supply and demand; by taking into account rents in this neighbourhood as
indicated by the landlord’s comparable[s] as well as comparable[s] relating to
the registered rent of other regulated tenancies in the immediate vicinity; by
taking account of the statutory provisions …; by noting the general level of
rents as an indication of the character of the locality and lastly the evidence
of our inspection and thus we determined that the fair rent herein should be
£33.50 per week.
On appeal by
the landlord, Turner J allowed all but one of the grounds of appeal. On the
issue of the adequacy of the committee’s reasons, he summarised, at pp2F–13B of
the transcript of his judgment, the law as he understood it in the light of
Morritt LJ’s judgment in Spath Holme and of a number of earlier
authorities, including pre-1988 decisions of the Divisional Court on the giving
of reasons:
What Morritt
LJ was clearly seeking to avoid was that an assessment committee would
perpetuate a level of rent which was not fair merely by referring to, and being
guided to the point of exclusion, by other registered rents. Before a
registered rent was used as a comparable it required to be re-examined and justified,
or, in his language, ‘worked through’.
It is
manifest from the above, that unless there is clear evidence of the validity of
a comparable … it will usually be the case that ‘working through’ of open
market rents, discounted and subject to disregards, as appropriate, and of
registered fair rents will be required.
He described,
at pp16C–17A, para 7 of the committee’s reasons as a ‘hotchpotch’ containing no
clear findings of fact:
Although
paragraph 7 of the reasons says that the committee did quantify scarcity by
‘using our knowledge and experience of supply and demand’, it did not refer to
the evidence adduced in regard to the general supply of properties available
for renting as assured tenancies. On this ground, the decision may be
criticised for a lack of sufficiency. Again, there being evidence which was fit
for the committee’s consideration, the fact that it did not expressly bring it
into account suggest[s] that the muddled approach, above described as ‘hotch
potch’, readily gives rise to the inference that the committee wrongly directed
itself in law. Significantly, within that information there was nothing to
indicate the extent to which the two critical variables, identified by Morritt
LJ in Spath Holme, which were scarcity and disregards [sic] could
have influenced the determining committees to fix a fair rent at a figure which
must be assumed to have been below the open market rent.
And at
pp18E–19C he added the following general observations on adequacy of reasons:
much has
changed since the early decisions of the Divisional Court concerned with the
reasons that RACs were required to give … These early cases [sic] may in
some instances have been reached on the basis that RACs were not composed of
legally qualified individuals and that it would be wrong to expect too much of
them by way of reasons which would stand up to rigorous judicial scrutiny.
Nevertheless, it would be wrong to ignore the factors of (a) a jurisprudential
need for such a tribunal to provide adequate and sufficient reasons for its
decisions; Poyser and Mills and subsequent cases (b) the increased
training which is now afforded to all members of the tribunals under the
auspices of the Judicial Studies Board and (c) the qualifications of those who
are now selected to become members of RACs. All those factors strongly point to
the requirement that reasons should not merely pay lip service to the
statutory umbrella under which the particular tribunal is operating, rather
that they should condescend to articulate the actual process that has led to
the decision which is, in this court, sought to be impugned. This is a natural
and logical development of the decision in Crake v Supplementary
Benefits Commission [1982] 12 All ER 498.
Owen J adopted
a similar approach in District Estates Ltd v Chairman of Merseyside
and Cheshire Rent Assessment Committee [1997] NPC 39. There, he allowed the
landlord’s appeal following a concession by the committee that they had given
insufficient reasons, but went on in his judgment to express, obiter, a
number of general propositions, including the following: that in most cases in
which registered rent comparables are put forward it might well be necessary to
reconsider the variables inherent in them, and that in calculating a fair rent
from market rent comparables by reference to differences between properties and
the statutory disregards, and by discounting for scarcity, some calculations
are likely to be required and that ‘if proper reasons are to be given those
calculations will need to be disclosed’.
A recent
judicial observation, which — possibly influenced by the particular
circumstances of the case — is not of a piece with the above approaches as to
the need for reasons, is that of MacPherson of Cluny J in Northumberland
& Durham Property Trust Ltd v London Rent Assessment Committee
unreported February 29 1996. There, the committee had regard to a single market
rent comparable, to seven recently determined fair rents of similar flats in
the same terrace (one of them in the same house) as the subject premises and to
all the material differences between the various premises. In considering the
scarcity element, the committee took the view, without putting a percentage to
it, that the recently determined fair rents must have reflected ‘a high degree
of scarcity from which a substantial discount from the market rent must be
applied’. The main argument on behalf of the landlord, which MacPherson J
rejected, was that the committee should not have considered the fair rent
comparables. However, the landlord, who had contended for a fair rent based on
its market rent comparable discounted for scarcity, also challenged the
committee’s approach to that issue. In the course of rejecting that challenge
too, MacPherson J said, at pp12A–13A of the transcript of his judgment:
They were
experienced in applying the discount for scarcity to figures which were put
before them because that is part of the experience of committees operating in
this field. I see no error in law in their approach in connection with
scarcity. How much they discounted in connection with scarcity is not
identified. But, as the cases show, there is no need for a rent committee to
show the mathematical working which they employ. Cases have been cited to me
which, in my judgment, establish that beyond peradventure. I do not need to
name them because it seems to me that the basis of that argument on behalf of
the respondents is unassailable. What the committee must do is to show that
they have approached the case in the proper way. They must heed all the arguments
that are put before them. They must follow the advice and instruction given to
them in any case which is put before them. But, at the end of the day, provided
they follow the principles set out and consider both the market rent discounted
and the other comparables which they must unavoidably consider, they do not
have to give fuller reasons than this committee gave for its own conclusions.
At the end of the day what they are entitled to say is that they determined the
fair rents as they conclude them to be in the final paragraph of their
decision.
Grounds of
appeal and the submissions
There are 33
grounds of appeal. With one or two exceptions, Mr Bonney’s submissions on them
may be summarised in the following five propositions:
1. A fair rent
is an adjusted market rent. Thus, the identification of a market rent is the
first step in assessing a fair rent. Comparable market rents, if they are
present, are the best evidence of the market rent (a fortiori in this
case where four of the comparables were similar flats in the same and/or an
adjacent purpose-built block).
2. Where there
are market rent comparables from which a rent assessment committee can derive a
fair rent, they should rely on them without reference to any registered fair
rent of the subject premises or of fair rent comparables unless they have
reassessed and found them to be reliable indicators of the current market rent
suitably discounted for scarcity and disregards if any. The committee did not
do that. On the contrary, their approach was to require the landlord to
demonstrate that the previously registered rents for the subject premises were
unsound by reason of scarcity or otherwise and to act on their previous
determinations in respect of the subject premises and on their knowledge of
fair rent comparables generally without reassessing their current
applicability.
3. If there
are market rent comparables, a rent assessment committee must have and must
identify good reasons for departing substantially from them, if they do, in
their assessment of a fair rent.
4. A
committee’s assessment of a fair rent from the starting point of a market rent
requires it to identify a number of figures: first, the market rent, which will
include, depending on the closeness of the market rent comparables, figures or
percentages to allow for differences between them and the subject premises, a
figure or percentage for scarcity, if any, and a figure or figures to reflect
the appropriate disregards, if any.
5. The
committee’s statement in para 21 of their reasons that they had made
‘appropriate deductions’, without identifying figures, from the market rent
comparables is inadequate reasoning. It deprives the landlord of information
which, if it existed, should have been readily available to demonstrate and justify
their decision to depart so substantially from those comparables and invites
the inference that the committee had not in fact made appropriate calculations
or deductions and had, therefore, determined the matter unlawfully or
irrationally.
Mr Lewison, in
reply, relied on the following propositions:
1. Fair rent
is not an adjusted market rent6. Morritt LJ was wrong when he said
in Spath Holme, at p122, that a fair rent is ‘the market rent less the
disregards and discounted for scarcity’. The 1977 Act has not prescribed market
rent as the starting point — section 70 does not even mention it, and it is not
for the courts to tell rent assessment committees, who are in the position of
valuers, how to assess fair rents. The Act requires only the assessment of a
fair rent, and identifying and starting with a market rent is only one of
several methods of achieving that end. Depending on the available material, two
other possibilities are the use of fair rent comparables and/or the assessment
of return on capital value. On the material before it, the committee were
entitled to use market and/or fair rent comparables as they saw fit7.
6 contrary to the committee’s purported approach to its
determinations.
7 See eg Tormes Property Co Ltd v Landau [1971] 1 QB
261, DC, per Lord Parker CJ at p266B–E; and Mason v Skilling
[1974] 1 WLR 1437, HL, per Lord Morris at p1441.
2. The 1988
Act has not changed the law governing fair rents or introduced any new culture.
Market rent comparables, where available, have always been potentially relevant
in the assessment of fair rents8; there are just more of them now.
There is therefore no reason to discard pre-1989 jurisprudence to the effect
that a committee should, subject to allowing for inflation, rely on close
registered fair rent comparables and may do so without reassessing them.
8 Metropolitan Property Holdings v Laufer (1974) 29
P&CR 172, DC; Mason v Skilling [1974] 1 WLR 1437, HL.
3. Market rent
as a starting point may be relevant, but it is not determinative. Even if it is
a better approach in any individual case than that of taking registered fair
rent comparables, that does not make reliance on the latter unlawful. Here, the
committee, having considered both sets of comparables, would have been entitled
to assess the fair rents ‘in the round’ or by reference to fair rent
comparables only and without first identifying the market rent from the market
rent comparables. In the event, the committee applied the Spath Holme
principle of taking as their starting point market rent derived from market
rent comparables, and, in para 21 of their reasons, made the assessments on
that basis.
4. Rent
assessment committees are in the position of valuers and may rely on their own
knowledge, experience and expertise in assessing a fair rent. They do not have
to give specific reasons and, certainly, are not bound to give figures to show
how they have reached
which Lord Widgery CJ gave the leading judgment9, the observation of
Harrison J in Spath Holme, at p260, that a committee need not quantify
the scarcity element ‘in any precise way’, and the passage I have cited from
the judgment of MacPherson J in the Northumberland & Durham Property
Trust Ltd case. In any event, the committee had given reasons, which
amounted to a sufficient ‘working-through’ of their decision-making process.
9 Metropolitan Property Holdings Ltd v Laufer (1974) 29
P&CR 172; Guppys (Bridport) v Sandoe (1975) 30 P&CR 69
and Guppys Properties Ltd v Knott [1978] EGD 255; (1977) 245 EG
1023.
5. Inadequacy
of reasons is not a ground for quashing an assessment or for remitting it for
redetermination unless the inadequacy leads the court to infer that a committee
have determined the matter irrationally or otherwise unlawfully10.
Here, even if the reasons are inadequate, they do not justify such an
inference.
10 Mountview Court Properties Ltd v Devlin (1970) 21 P&CR 689, DC.
Conclusions
Nature of
a fair rent
In my
judgment, a fair rent is a market rent adjusted for scarcity and disregards, as
Morritt LJ held as part of the ratio in Spath Holme, at pp118–119 and
pp121–122, and as Lord Widgery analysed it as long ago as 1975 in Metropolitan
Property Holdings Ltd v Finegold [1975] 1 WLR 349, DC, at pp351–35311. The
concept of ‘fair’ in such a context is elusive unless it is tied to particular
criteria. Section 70 of the 1977 Act contains those criteria. Its scheme is to
set out, in section 70(1), a number of circumstances which together would
identify a market rent and, in sections 70(2) and (3), the required adjustments
where appropriate. It hardly needs saying that the assumption of a hypothetical
absence of scarcity required by section 70(2) presupposes that the starting
point in section 70(1) is market rent. Although I agree with the judgment of
Harrison J endorsed by this court in Spath Holme, that, depending on the
material available, there may be more than one route to determine a fair rent,
every route must have that starting point. That is so, whether reliance is
placed on market or fair rent comparables or on return on capital. In each of
the former two methods there is a need to reassess their validity and
applicability at the time of their use as comparables12. In the case
of return on capital, which seems to be rarely used, the criteria in section
70(1) cannot be bypassed; the exercise must in some way identify a market rent
en route to assessing a fair rent.
11 See also BTE Ltd v Merseyside and Cheshire Rent
Assessment Committee (1991) 24 HLR 514; [1992] 1 EGLR 116; [1992] 16 EG
111, per Hutchison J at pp516–517 and Western Heritable Investment Co
Ltd v Husband [1983] 2 AC 849, HL(Sc), per Lord Keith at
p856C–F and per Lord Brightman at p860C–E.
12 as is implicit in the reasoning of Morritt LJ said in Spath
Holme, at p124.
Market
rent comparables; the best evidence
Clearly, rent
officers and rent assessment committees should rely on the best evidence of
fair rents; that has always been the approach of the courts13.
Before the introduction of assured tenancies by the 1988 Act the best evidence
available was usually registered fair rent comparables. Now, with the advent
and growing volume of assured tenancy market rent comparables, they are most
commonly relied on as the best evidence of the starting point for determining a
fair rent. The 1988 Act has not changed the law as to the assessment of fair
rents. But, by preventing the creation of new regulated tenancies and
introducing assured tenancies at actual market rents, it set in train the
progressive diminution in numbers of fair rent comparables and brought into
being an ever increasing supply of market rent comparables. Market rents are
thus the natural successors to the declining regime of registered fair rents.
As Hirst LJ put to Mr Lewison in the course of his submissions, they are ‘a
much more potent way of assessing market rent’, and hence fair rent.
13 Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577; Tormes
Property Co Ltd v Landau [1971] 1 QB 261; Mountview Court Properties Ltd v
Devlin (1970) 21 P&CR 689, DC; and Waddington v Surrey and Sussex Rent
Assessment Committee [1982] 2 EGLR 107; (1982) 264 EG 717, QBD.
Where close market
rent comparables are available, it makes sense that they should be treated as
the best evidence for the purpose. That is clearly how Morritt LJ regarded the
matter in Spath Holme, at p123, in observations, which I have set out,
flowing necessarily from the part of the ratio of his judgment that market rent
is the starting point for assessment of fair rent. This approach is not a
change of law or principle; it is consistent with that of the courts to
registered fair rent comparables before the 1988 Act. Only the material has
changed. It is for that reason, as Morritt LJ also indicated, that earlier
judicial observations about the primacy of registered rent comparables14,
as to reliance on them unless they can be demonstrated to be wrong15
and of combining one or more method of assessment16 are now
inapplicable where there are market rent comparables on which a fair rent
assessment may be based. The best evidence of the starting point for assessment
of fair rents is now that of market rent comparables where they are available.
14 See Tormes Property Co Ltd v Landau [1971] 1 QB 261,
at p267; Mason v Skilling [1974] 1 WLR 1437, HL, per Lord
Reid at p1439H; Western Heritable Investment Co Ltd v Husband
[1983] 2 AC 849, HL, per Lord Brightman at p859G; and London Rent
Assessment Committee v St George’s Court Ltd (1984) 48 P&CR 230,
CA, per Griffiths LJ at pp233 and 235, per Slade LJ at pp236–237
and per Browne-Wilkinson LJ at p238.
15 Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577;
Tormes Property Co Ltd v Landau [1971] 1 QB 261; Mountview Court Properties Ltd
v Devlin (1970) 21 P&CR 689, DC; and Waddington v Surrey and Sussex Rent
Assessment Committee [1982] 2 EGLR 107, QB.
16 Mason v Skilling [1974] 1 WLR 1437, HL, per
Lord Reid at pp1438–1440; Guppys (Bridport) Ltd v Sandoe (1975)
30 P&CR 69, DC, per Lord Widgery CJ at pp70–71 and Guppys
Properties Ltd v Knott [1978] EGD 255; (1977) 245 EG 1023, DC, per
Lord Widgery CH at p258.
In this case,
just as in Spath Holme, market rent comparables were available and were
close. The committee accepted four of them as good enough to form the basis of
their fair rent assessment, subject to individual differences that they
identified between some of them and the subject premises. In that circumstance,
was it necessary or logical for them to turn also to the previously determined
registered fair rents for the subject premises and/or to fair rent comparables?
In my view, if there are market rent comparables enabling the identification of
a market rent as a starting point, there is normally no need to refer to
registered fair rent comparables at all, still less to engage in an arid
exercise of verifying or reconsidering their soundness as current indicators of
an adjusted market rent. Such an exercise is circular, since it can only be
done by reference to market rent comparables or some other yardstick which a
committee is prepared to accept as an indicator of the current market rent of
the subject property. As I have said, I do not believe that that is what
Morritt LJ intended in his observations, at p124, about reassessment of the
soundness of registered fair rent comparables. His clear intention, with which
I agree, is that if reliance is to be placed on registered fair or market rent
comparables, their current validity and applicability as comparables for the
subject premises must be reassessed.
In my view,
where there are good market rent comparables upon which a committee can act in
identifying market rent of the subject premises it can only cause confusion to
attempt to use the two regimes of market and fair rent comparables, calibrating
one against the other, to determine a fair rent. It follows, a fortiori,
that to rely in such a circumstance on registered fair rents, whether generally
or particularly, unless one or other party can dislodge them as suitable
comparables, is wrong. Such an approach would freeze the fair rents by
reference to precedent rather than achieve what is intended by the legislation;
an exercise of ‘valuation’, an assessment of current fair rents by
knowledgeable and experienced committees responsive to the
17 cf the North Western Development Estates case, in
which Turner J, rightly in my view, criticised the committee there for
preferring a single fair rent determination to market rent comparables on the
ground they ‘had no reason to believe that it was suspect’.
Process of
assessment
The assessment
of a fair rent is routinely described as more of an art than a science. Lord
Keith, in Western Heritable Investment Co Ltd v Husband [1983] 2
AC 849, HL, at p858, called it ‘an exercise of the valuer’s professional
skill’. The members of a rent assessment committee, at least one of whom is
normally a chartered surveyor, are expected to be experienced in such valuation
and to know and to have a ‘feel’ for the rental property market in their area.
But, however much experienced ‘feel’ or judgment the exercise requires and is
given, the end product is a figure for rent of particular premises. Where the
comparables are not exact and/or where there is a need to make disputed
adjustments for hypothetical lack of scarcity or for disregards18,
it necessarily involves some working through — some sums, however few and
approximate — some arithmetical markers whether in percentage form or otherwise
on the way to the final figure. There is no other rational way of giving effect
to the scheme of assessment set out in section 70 of the 1977 Act.
18 Where there are no such disputed issues it may be possible for a
committee to take a short cut; see eg Grea Real Property Investments Ltd
v Williams [1979] 1 EGLR 121; (1979) 250 EG 651, per Forbes J at
p653.
That is not to
say that the committee should have no recourse to its general knowledge and
experience of local market rents, of the appropriate adjustments to make for
differences between comparables and the subject premises, of the existence and
degree of local scarcity, if any, and of their treatment of disregards where
necessary. It does mean, however, where there is a significant difference
between registered fair rent comparables and close market rent comparables
accepted by a committee as providing current market rental evidence for the
subject premises, they should not normally have regard to the former at all, and
cannot, in any event, properly prefer them to the latter without explanation.
Such an explanation would necessarily require some analysis, not simply
assertions of the general nature criticised by Latham J in Curtis and Susands
and of the sort employed by this committee in paras 19 and 22 of their reasons.
It follows that, where there is a significant issue as to a fair rent turning
on rival comparables, I do not agree with McCullough J’s description of the
exercise as analogous to the sentencing function of a judge who may have regard
to his general knowledge of sentencing levels.
Reasons
Rent
assessment committees are required, if requested, to state the reasons for
their determination in writing19.
19 Tribunals and Inquiries Act 1992 section 10 and Schedule 1; and
Rent Assessment Committees (England & Wales) Regulations 1971, as amended,
regulation 10A.
From examples
of rent assessment committees’ written reasons that I have seen in the
authorities and in material put before the court, many, if not most, committees
clearly see their task as working through the requirements of section 70 in
some arithmetical way and giving, in their reasons, a summary account of their
workings. According to this committee’s written reasons, they started with the
landlord’s market rent comparables and, in para 21 of them, made ‘appropriate
deductions’ from them to mark the differences between them and the subject
flats and a scarcity element. That, I assume, is what they meant in referring,
in the concluding words of the paragraph, to their entitlement ‘to rely upon a
broad but well-founded assessment approach’. If indeed they did work through
the exercise in that way, I do not understand why they could not give some arithmetical
indication of their workings, rather than merely concluding that ‘they saw no
reason to disturb the Rent Officer’s registrations’. And I share McCullough J’s
puzzlement as to why, if they had made ‘appropriate deductions’, they felt it
necessary to declare the inappropriateness of offering, inter alia,
‘artificial calculations’ or ‘hypothetical percentages’. If they had made
appropriate deductions they could have identified them in summary form without
recourse to artificialities, which, as I understand their wording, had not been
their approach. As to ‘hypothetical percentages’ it should be remembered that
section 70(2) required them to make an assumption of a hypothetical absence of
scarcity, a hypothesis which would normally require articulation in percentage
terms.
It is well
established that the adequacy of reasons in any case depends upon the facts of
and the issues in the case: see eg Save Britain’s Heritage v Number 1
Poultry Ltd [1991] 1 WLR 153, HL, per Lord Bridge of Harwich at
p167C and per Morritt LJ in Spath Holme at p123. While there are
decisions of the Divisional Court in rent assessment cases in the 1970s
asserting the sufficiency of general conclusions, without any or any detailed
reasons, based on committees’ great experience and local knowledge20,
they appear to have overlooked the Divisional Court’s decision in Mountview
Court Properties Ltd v Devlin (1970) 21 P&CR 689, acknowledging
the well known statement of principle by Megaw J in In re Poyser and Mills’
Arbitration [1964] 2 QB 467, that proper, intelligible and adequate reasons
should be given and that in their absence the court may infer an error of law
justifying the quashing of the decision.
20 Metropolitan Property Holdings v Laufer (1974) 29 P&CR
172, DC; Guppys (Bridport) Ltd v Sandoe (1975) 30 P&CR 69;
[1975] 2 EGLR 66; (1975) 235 EG 689; DC and Guppys Properties Ltd v Knott
[1980] 1 EGLR 67; (1979) 253 EG 907, DC. cf Albyn Properties Ltd v Knox
1977 SC 108, per Lord Emslie, LP, at p112 — ‘… they must explain how
their figures of fair rent were fixed’.
In those cases
where a committee’s determination is close to the market rent indicated by good
market rent comparables and there is no actual scarcity, little or no arithmetical
explanation may be necessary. But where a committee’s assessment of a fair rent
differs significantly from the market rent indicated by market rent
comparables, I agree with Morritt LJ’s and Harrison J’s reasoning in Spath
Holme and that of Latham J in Curtis and Susands, at p848,
that they must have good reasons for it and they must explain them. As Mr
Bonney submitted, this is consistent with the pre-1989 approach of the courts
in relation to registered fair rent comparables21; there is no change
in approach, only as to the available evidence on which it operates. In most
such cases, certainly those where there have been important issues on the
comparables and/or on the appropriate adjustments to the market rent figure22,
an explanation will require some ‘working through’, as Morritt LJ put it in Spath
Holme. It will require some use of figures to demonstrate the committee’s
workings towards, or calculation of, the final fair rent figure. In Megaw J’s
words in In re Poyser & Mills’ Arbitration, at p478, the reasons
must be proper, intelligible and adequate. And, as McCullough J observed in a
passage to which I have already referred at p21 of his judgment:
21 eg in Mountview and Lannon.
22 thus meeting the criterion of Lord Lloyd in Bolton Metropolitan
District Council v Secretary of State for the Environment [1995] 3
PLR 37, at p43C–D: that the reasons must condescend to ‘the principal important
controversial issues’. See also R v Criminal Injuries Compensation
Board, ex parte Cook [1996] 1 WLR 1037, CA, per Aldous LJ at
pp1044F–1045E and per Hobhouse LJ at pp1050H–1051D.
If adequate
reasons are not given for the decision of a rent assessment committee the fact
that its members have knowledge and experience of their subject provides, in my
judgment, no excuse. Rather should it facilitate the explanation of the
reasoning used.
It is trite
law that rent assessment committees, like other tribunals, are not required to
articulate their reasons to the exacting standards and with the accuracy and
precision required of a court23. I am conscious too of the many
cases with which committees may have to deal in the
avoid over-burdening their chairmen and chairwomen in stating their reasons.
However, as I have said, in cases where their assessment of fair rent differs
significantly from that, on the face of it, indicated by market rent
comparables, that exercise, if rational, must involve some sums. The committee
says that it did so here, because they claim to have made ‘appropriate
deductions’ from the market rent comparables. It should have been no great
burden for them to have indicated their thought process by a brief indication
of their arithmetic. Mr Bonney has told us that many committees do so, and
referred in particular to the practice of the Southern and South Western
Assessment Panels, citing examples of their assessments. The scheme of each is
similar and they seem to me to be adequate for the purpose. That was the view
of McCullough J in relation to an example of the Southern Panel, of December
1994, put before him. He set it out at p22 of his judgment with words of
approval which, for convenience, I repeat:
23 See Metropolitan Properties Co (FGC) Ltd v Lannon
[1969] 1 QB 577, CA, per Danckwerts LJ at p601, Edmund Davies LJ at
p603.
Those
dissatisfied with decisions of rent assessment committees do not ask for
anything artificial or hypothetical; they want to know how the committee
reached its conclusion. I would be surprised if any complicated mathematics was
ever needed; some simple subtraction and perhaps the odd percentage should surely
do. An example is provided by a decision of the Southern Rent Assessment Panel
in December 1994. They said:
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and condition of |
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Less allowance for scarcity (5%) |
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Less allowance for kitchen in basic condition |
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Less allowance for lack of central heating |
£5 |
£14 |
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£66 |
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An example of
the South Western Panel, of October 1996, produced to us is similar. The
statement of reasons, which relates to a large number of properties referred to
the committee, sets out in narrative form their conclusions under a series of
headings, namely: market rent, scarcity, tenant’s obligations and other
deductions. Then, in an attached schedule, they set out against each property
and under each of those heads the figure leading to its assessment.
I respectfully
share McCullough J’s view that this committee’s statement of their reasons is
inadequate. In my view, this was a classic case for the committee to explain,
with some use of figures, how they reached their fair rent determinations.
Those determinations were substantially below those indicated by market rent
comparables accepted by the committee as providing current market rental
evidence for the subject premises. As to the ‘appropriate deductions’, they
have clearly had regard in some unexplained way to their previous
determinations and to their general knowledge of registered rent comparables.
The obvious deficiencies of explanation are not, in my view, compensated for in
committee’s full narrative treatment of the differences between the market rent
comparables and the subject premises or in their explanation of their rejection
of the landlord’s case on the issue of scarcity.
Inference
of irrationality or other unlawfulness from inadequacy of reasons
In Mountview
Court Properties Ltd v Devlin (1970) 21 P&CR 689 the Divisional
Court held that a failure by a rent assessment committee to give adequate
reasons, though entitling the court to remit the matter to the committee for
them to give adequate reasons, was not on its own a ground for quashing the
assessment unless the inadequacy gave rise to an inference that the committee
had erred in law in reaching their decision.
As Woolf LJ
said in Crake v Supplementary Benefits Commission [1982] 1 All ER
498, at pp507–508b, the law in this respect has moved on considerably:
I would …
regard the Mountview case as being the main authority to be applied.
However, it has to be applied in the light of the ten years which have elapsed
since that case was decided. Over that period of ten years the approach of the
courts with regard to the giving of reasons has been much more definite than
they were at that time and courts are now much more ready to infer that because
of inadequate reasons there has been an error of law, than perhaps they were
prepared to at the time that the Mountview case was decided.
in practice I
think that there will be few cases where it will not be possible, where the
reasons are inadequate, to say one way or another whether the tribunal has gone
wrong in law. In some cases the absence of any reasons would indicate that the
tribunal had never properly considered the matter (and it must be part of the
obligation in law to consider the matter properly) and that the proper thought
processes have not been gone through.
As I have
said, I agree with McCullough J as to the inadequacy of the committee’s stated
reasons for their determinations, but I do not agree with his view that they
were not so inadequate as to lead to an inference that their decision-making
process was irrational or otherwise unlawful.
The
committee’s ready recourse in paras 17 and 19 of their reasons to their
previous determinations in respect of the subject premises and to their general
knowledge of registered rent comparables to support in each case the rents
registered by the rent officer is inconsistent with their claimed reliance, in
para 21, on appropriately adjusted market rent comparables. As I have said,
they do not indicate how they have had regard to their previous determinations,
other than to state in para 17 that the landlord had not demonstrated them to
be unsound, and that they presumed them to have reflected the scarcity element
at the time they were made. Nor have they given their workings giving rise to,
or identifying, the ‘appropriate deductions’ which they say they have made from
the market comparable rents they claim to have taken as their starting points.
In my view, this goes beyond inadequacy of reasons; it has all the signs of the
adoption of an irrational or otherwise unlawful approach to the exercise. It
suggests that the committee have preferred their previous determinations and
their unparticularised knowledge of registered rent comparables to the market
rent comparables, and they have not adequately explained why, save to indicate
that the landlord had not demonstrated that the former were unsound. In short,
they appear to have treated the previously determined fair rent of the subject
premises and the registered rent comparables as prima facie the closest
to the fair rent figures that they had to assess.
Other
grounds of appeal
That leaves a
number of other complaints by the landlord. The first is the refusal of the
committee, through the chairwoman, to have regard to the judgment of Latham J
in Curtis and Susands quashing a decision of the same committee
because the order had not been sealed and an approved copy of the transcript
was not available. While I deprecate that refusal, I agree with McCullough J
that in the circumstances, it does not in itself vitiate the committee’s
decision. It adds nothing material to that which was already before them from
the judgment of Morritt LJ in Spath Holme. Nor is it material to the
appeal, the point of which is to give guidance for the redetermination of the
matter by a differently constituted committee.
Next, the
landlord made a number of complaints about the committee’s treatment of the
case on scarcity. The only one that deserves mention in this judgment is his
suggestion that the committee wrongly imposed a burden of proof on him to show
that there was no actual scarcity. He relied on the opening words of para 14 of
the committee’s reasons to the effect that, as he had contended that there was
no scarcity, he had to demonstrate it. In my view, there is no merit in this
complaint. Section 70(2) requires an assumption of a hypothetical absence of
scarcity in the exercise of assessing a fair rent. The landlord sought to
neutralise the effect of such an assumption by maintaining that it was the
reality and that his market rent comparables reflected that. It seems to me
that, however the committee expressed the matter in para 14, they were entitled
to test his case in that respect and to balance the evidence on both sides.
They concluded that he had
the immediate locality, not to a broader area as required by Metropolitan
Property Holdings Ltd v Finegold. In addition, they considered other
aspects of his evidence and also material relied upon by the rent officer
before finally determining the matter three paragraphs later in para 17. This
is an area in which a committee’s own knowledge and experience of the locality
is of particular value, and I would be reluctant to introduce into the exercise
any hard and fast rules of a forensic nature as to where the burden of proof
lies.
Finally, the
landlord complained about the committee’s statement, in para 16 of their
reasons, that they had had regard to the conclusion of the rent officer in her
report that there was scarcity, a conclusion based on her own market research
and database which he had not seen. The rent officer had discussed this material
with the landlord at a consultation in June 1995 before she registered the
rents the subject of the reference, but had refused to show him the database
material on the ground that it contained confidential information. However, the
rent officer did not put the research or database material before the committee
and the landlord did not repeat his request to see it at the hearing of the
reference. He had access to the rent officer’s report to the committee and to
all other material that she put before them and had an opportunity to comment
on it, which he did.
The landlord
now complains that the committee should not have had regard to the rent
officer’s report in this respect without considering the primary material on
which it was based and without giving him access to that material. I do not
consider that the committee were necessarily wrong in the circumstances in
referring to the rent officer’s report in the way they did on the issue of
scarcity. Such an issue, both as to the presence and degree of scarcity over a
broad local area, is not amenable to the same precision of analysis as is the
assessment of a market rent for the subject premises. It inevitably turns on an
accumulation of knowledge and experience of the pattern and speed of lettings
in an area, which is what the rent officer’s report in this respect amounted
to. It is to be contrasted with the more mechanical exercise of assessing fair
rent by reference, first, to market rent comparables, often in the immediate
locality, and as to the valuation of individual differentials and the fixing on
allowances for particular disregards. In any event, the rent officer’s reported
view on this issue was just one of a number of matters on which the committee
relied in concluding that there was scarcity. The landlord had an opportunity
to explore her report and test it before the committee, which he did without
seeking, at that stage, to examine the primary material. I would not criticise
the committee’s approach in this respect.
For the
reasons that I have given, I would allow this appeal so as to remit the
references for determination by a differently constituted committee in
accordance with the judgments of this court, and of McCullough J at pp24D–26E
of his judgment.
HIRST and BUTLER-SLOSS
LJJ agreed and did not add anything.
Leave to
appeal granted.
