Landlord and tenant – Service charge – Limitation – Appellant tenant challenging service charges for past years on application to leasehold valuation tribunal under section 27A of Landlord and Tenant Act 1985 – LVT finding application to be time-barred on grounds of unreasonable delay by appellant – Whether any relevant statutory limitation period applying to section 27A application – Whether delay providing grounds for dismissing application – Appeal allowed
The appellant held long leases of two flats in a building managed by the respondent. The leases dated from the 1970s and provided for the payment of a service charge as additional rent. Two applications by the appellant under section 27A of the Landlord and Tenant Act 1985, challenging the amount of the service charge payable in respect of his flats, were the subject of decisions by the leasehold valuation tribunal (LVT) in August 2008 and June 2010. Those applications concerned the adequacy of the respondent’s consultation procedure in respect of major works falling within section 20 of the 1985 Act.
In November 2010, the appellant made another application under section 27A in which he challenged further items of expenditure in the service charges for the years 2001 to 2005. The disputed items included the cost of major works carried out in 2001, related expenditure in 2004 and legal costs incurred by the respondent from 2001 to 2003 and in 2005.
The LVT decided, on a preliminary issue, that it had no jurisdiction to determine the application since the proceedings were time-barred on the grounds of unreasonable delay by the appellant causing significant prejudice the respondent. The LVT noted that there was a history of dispute between the appellant and the respondent and that, in the appellant’s previous section 27A applications, he had not referred to any dissatisfaction with works undertaken in earlier years. It held that there was no question of any trust having arisen in relation to the sums collected for major works and legal costs and that consequently section 21 of the Limitation Act 1980, which would disapply any relevant limitation period in the case of an action by a beneficiary under a trust, did not apply.
The appellant appealed. He contended that none of the limitation periods under the 1980 Act applied to restitutionary claims. The respondent submitted that the LVT’s decision should be upheld because the service charge was reserved as rent and therefore the six-year limitation period under section 19 of the 1980 Act for actions to recover rent should be applied.
Held: The appeal was allowed.
There was doubt regarding the extent, if any, to which the Limitation Act 1980 applied to an application to a leasehold valuation tribunal under section 27A of the 1985 Act. Different considerations might apply depending on whether the application was brought by a landlord or a tenant.
In the instant case, the moneys obtained by the respondent for major works during the relevant period from 2001 and 2004 had not been spent on anything other than those major works. Although the moneys that the respondent received for the works from the tenants were held under the statutory trust imposed by section 42 of the Landlord and Tenant Act 1987, this was not a case where trust property received by a trustee had been converted to the trustee’s own use so as to engage section 21 of the 1980 Act: Warwickshire Hamlets Ltd v Gedden [2010] UKUT 75 (LC); [2010] PLSCS 164 distinguished.
In concluding that the appellant’s application was time-barred because of “unreasonable delay”, the LVT had not found that the application was barred by virtue of any specific section of the 1980 Act but had, in effect, applied the principle of laches. The doctrine of laches could not apply to a section 27A application, because such an application was an exercise of a statutory right rather than a claim for equitable relief.
Nor did section 19 of the 1980 Act operate to bar the section 27A application on the ground that the service charge was reserved as rent. The appellant was not bringing an action to recover arrears of rent or damages in respect of arrears of rent, within the meaning of section 19. Instead, he was applying to the LVT for a determination of what was properly payable by way of service charge for a particular period.
An application by a tenant under section 27A, for a determination of the LVT as to how much was payable in respect of service charges, was not an “action to recover any sum recoverable by virtue of any enactment”, so as to fall within the limitation period under section 9 of the 1980 Act. If the appellant could establish that the amount of service charge properly payable for a particular period was less than the amount that he actually paid, then any claim for repayment of the excess would be a restitutionary claim for recovery of an overpayment.
Nor was the section 27A application “an action founded on simple contract” so as to attract the limitation period in section 5 of the 1980 Act. Although any claim for repayment might fall within that description, the section 27A application itself did not. Questions might arise under section 32 as to whether the action for repayment was for relief from the consequences of a mistake and, if so, as to the date when the appellant discovered the mistake or could with reasonable diligence have discovered it; those were matters to be determined in the future in any restitutionary claim that the appellant might make. Moreover, an application under section 27A by a tenant was not necessarily made with a view to the making of a claim in restitution; the tenant might instead seek the determination of the LVT as a precursor to an application under section 24 of the Landlord and Tenant Act 1987 for the appointment of a manager.
It was unnecessary to consider whether an application under section 27A constituted “an action upon a speciality” within section 8 of the 1980 Act since, even if it did, the appellant’s application had been made within the limitation period of 12 years from the relevant date. It followed that the LVT had erred in finding that the application was time-barred and the application should be remitted to it for reconsideration accordingly.
The LVT had not considered whether it was appropriate to dismiss the appellant’s applications as being “frivolous or vexatious or otherwise an abuse of the process of the tribunal”, within regulation 11 of the Leasehold Valuation Tribunals Procedure (England) Regulations 2003 or any relevant successor regulations. The Upper Tribunal was unable to consider that issue on the present appeal. However, in light of the LVT’s conclusions that the delay in making the application was unreasonable and would cause considerable prejudice to the respondent, and in view of the significance that it had attached to the appellant’s failure to include his present complaints in his two previous section 27A applications, the LVT might wish to consider, when the matter was remitted to it, whether the application should be dismissed under regulation 11 as an abuse of process.
The appellant appeared in person; Edelle Carr (company secretary) appeared for the respondent.
Sally Dobson, barrister
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