Landlord and tenant – Service charge – Issue estoppel – Application by appellant lessees to challenge reasonableness of service charges – Leasehold valuation tribunal disallowing certain items as not recoverable under terms of lease – First-tier tribunal later allowing similar items in respect of service charges for subsequent years after reaching different conclusion on meaning of lease – Whether entitled to depart from decision of previous tribunal – Whether issue estoppel arising – Appeal allowed in part
The appellants were the long lessees of a first-floor flat in a block which formed part of an estate owned by the respondent local authority landlord. The estate comprised several buildings together with roads, footpaths, grassed areas and flowerbeds, communal areas and playgrounds. The appellants’ lease contained an obligation on the landlord to maintain and repair the common parts, with the costs of performing that obligation recoverable by means of a service charge. The common parts were defined to include various internal and external features including gardens, footpaths and parking areas “and other areas comprised in the Title above referring to or comprising part of [the landlord’s] Housing Estate and of which the Building forms part provided… for the common use of residents in the Building and their visitors”.
In May 2006, the appellants made an application to the leasehold valuation tribunal (LVT), under section 27A of the Landlord and Tenant Act 1985, challenging the reasonableness of the service charges for the years 2000 to 2005. In those proceedings, the LVT disallowed certain items of service charge after finding that, as a matter of construction of the lease, the costs of maintaining the estate, as opposed to just the appellants’ building, were not recoverable through the service charge.
The respondents did not appeal against that decision. However, they continued to include in the service charge items that were attributable to the estate. In due course, the appellants made a further application to the first-tier tribunal (FTT), as the successor to the LVT, in respect of the service charges for 2006 to 2014; their principal challenge related to estate items which were said to be irrecoverable in the light of the previous LVT decision. Upholding the charges, the FTT held that it was not bound to follow the decision of the LVT and that the definition of the common parts in the lease was wide enough to include the estate items claimed.
The appellants appealed. The central issue was whether the FTT was bound to follow the decision of a previous tribunal in circumstances where that decision had not been appealed and included a determination on the meaning or effect of the same lease in proceedings between the same parties.
Held: The appeal was dismissed.
(1) A decision of law by a tribunal such as the LVT did not create a binding precedent: West Midlands Baptist (Trust) Association (Inc) v Birmingham Corporation [1968] 2 QB 188 applied. Thus, in a case involving different parties, the FTT would be free to depart from a previous decision if, having scrutinised it with appropriate care, it believed it to be wrong. However, in a case involving the same parties and the same lease, the question of whether the FTT was entitled to depart from a previous decision would depend on whether there was an estoppel as between those parties. The fact that the service charges under challenge in the two sets of proceedings related to different periods, so that the causes of action were not identical and there could be no cause of action estoppel, would not prevent an issue estoppel from arising.
(2) Except in special circumstances where it would cause injustice, issue estoppel barred the raising in subsequent proceedings of points which were not raised in the earlier proceedings, or which were raised, but unsuccessfully. If the relevant point was not raised, the bar would usually be absolute if it could with reasonable diligence, and should in all the circumstances, have been raised: Arnold v National Westminster Bank plc [1991] 2 AC 93; [1991] EGCS 49 applied. The LVT’s decision contained a clear finding that the landlord’s obligations under the lease did not include obligations in respect of the estate. That issue was a necessary ingredient of the decision that the charges in respect of the estate were irrecoverable and, by reference, unreasonable. It followed that issue estoppel would arise in the absence of special circumstances.
(3) However, special circumstances existed to defeat the issue estoppel on the facts of the case. First, the decision of the LVT was plainly wrong. It was apparent from the LVT’s decision as a whole that it had not been referred to the definition of the common parts in the lease. Its decision was explicable only on the basis that it believed that the common parts did not include any part of the estate. However, it was clear from the definition of the common parts that the estate was included within that definition and that the respondents’ maintenance obligation extended to the estate, with the result that they could recover the appropriate proportion of those costs from the appellants.
Second, it was a reasonable inference from the terms of the decision that the question of whether the maintenance of the estate was within the landlord’s obligations under the lease was not argued before the LVT. The pleased issue had related to the reasonableness of the charges and that was the point that the respondents’ lawyer had been prepared to deal with at the LVT hearing. While the LVT was entitled to raise matters of its own volition, there was force in the argument that the respondents should have been given an opportunity to deal with the point.
Further, there was a continuing relationship between the landlord and the lessee under a long lease, such that, if an estoppel arose, it would result in the lessees and their successors in title underpaying the service charge for a very considerable period of time.
Moreover, while the respondents could, and probably should, have appealed the LVT’s decision, rather than ignoring it and carrying on as if it had not been made, they were not now seeking to overturn that decision but were instead seeking to be able to re-argue the point in respect of later charges.
In all those circumstances, justice would not be served by perpetuating a wrong decision over he whole life of the lease. It followed that the respondents were not estopped from arguing that they could recover an appropriate portion of the service charge in respect of maintenance of the estate.
(4) The FTT allowed the appeal in respect of a separate point relating to an error by the FTT as to the way in which the appellants’ contribution to the maintenance of television aerials should be calculated.
The first appellant appeared in person for the appellants; Rebecca Cattermole (instructed by the legal department of Tower Hamlets London Borough Council) appeared for the respondents.
Sally Dobson, barrister
Click here to read transcript: Hemmise and another v Tower Hamlets London Borough Council
