Estate management scheme – Estate charge – Variation – Application to vary scheme to alter proportion of charge payable by owners of houses – Section 159 of Commonhold Leasehold Reform Act 2002 – Leasehold valuation tribunal concluding that no power to vary scheme providing for variable estate charge – Parties agreeing that LVT’s decision wrong in light of decision of Upper Tribunal in another case – Appeal allowed – Guidance given on power of review of new First-Tier Tribunal (Property Chamber) replacing LVT – Upper Tribunal expressing view on power to vary estate charge
The first respondent was the administrator of an estate management scheme established in 1974, under section 19 of the Leasehold Reform Act, in respect of a 1970s residential estate in Edgbaston, Birmingham; the estate comprised 19 houses that had originally been let on long leases but had since been enfranchised under the 1967 Act. The first respondent was responsible under the scheme for the upkeep of the four private roads on the estate and the provision of other services. It was entitled to recoup its costs in full from the owners of the 19 houses through an estate management charge. The charges payable by the individual property owners varied according to the road on which their property was located; there were four roads in all, with four different levels of contribution. The appellants owned the houses on three of the roads; the other respondents owned houses on the fourth road.
The appellants applied to the leasehold valuation tribunal (LVT) to vary the estate management charge under section 159 of the Commonhold Leasehold Reform Act 2002. They contended that the weighting given to each of the roads under the scheme was not proportionate to the expenditure incurred on that road and they proposed a variation to make the residents of each road wholly responsible for the expenditure on their road.
The LVT took the view that it had no jurisdiction to vary the charge since it was a variable estate charge, as defined in section 159(2), and there was no power under section 159(3) of the 2002 Act to vary a scheme that made provision for such a charge. In reaching that conclusion, it applied to the decision of an earlier LVT in Walker v Hampstead Garden Suburb Trust Ltd, which, unknown to it, had since been reversed by the Lands Tribunal, on an unopposed appeal, in Botterill v Hampstead Garden Suburb Trust Ltd [2008] PLSCS 16.
On an appeal to the Upper Tribunal, the parties agreed that the LVT’s decision was wrong to reach that conclusion and that the application for a variation of the charge should be reconsidered on its merits by the First-Tier Tribunal (Property Chamber), which had by then succeeded to the LVT’s jurisdiction.
On the appeal, issues were raised concerning the scope of the new powers given to the Property Chamber under the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 and the applicability of the existing jurisprudence from other chambers of the First-Tier Tribunal to the scope of those powers.
Held: The appeal was allowed; guidance was given on the review power of the new Property Chamber of the First-Tier Tribunal.
(1) Had the LVT been asked to grant permission to appeal after 1 July 2013, the procedural tools now at its disposal would have enabled it to take a very different approach. Once it became part of the Property Chamber of the First-Tier Tribunal (FTT), it acquired for the first time the power to review its own decisions. That power arose under section 9 of the Tribunals, Courts and Enforcement Act 2007 and the 2013 Rules.
Valuable guidance on the effect of the statutory provisions was available in decisions of the Upper Tribunal (Administrative Appeals Chamber) in whose jurisdictions the power of review had been exercisable since 2008. The review power review power was flexible and involved a large element of judgment or discretion, but should not be used in a way that usurped the Upper Tribunal’s function of determining appeals on contentious points of law, or otherwise subverted the integrity of the appeal process: R (on the application of RB) v First-Tier Tribunal (Review) [2010] UKUT 160 (AAC) and JS v Secretary of State for Work and Pensions [2013] UKUT 100 (AAC) applied. The power was important and valuable and its exercise in appropriate cases had the potential to achieve significant savings for parties and tribunals, by avoiding expensive and time-consuming appeals. It should therefore be kept in mind when an FTT was invited to grant permission to appeal. Its purpose was to allow the FTT to avoid the need for an appeal to the Upper Tribunal in the case of clear errors: JS v Secretary of State for Work and Pensions [2013] UKUT 100 (AAC) applied.
(2) The power was discretionary and was exercisable by a tribunal on its own initiative or on application by any party. The power to conduct a review was limited to circumstances where the FTT received an application for permission to appeal: see r 55(1) and (3) of the 2013 Rules There was therefore no power to review a decision at any other time. The FTT could only “undertake a review of a decision” if it was satisfied that a ground of appeal was likely to be successful: see r 55(1). In context, the reference to undertaking a review meant taking action in consequence of a review, rather than embarking on the process of considering whether to review. The power should therefore be used only in cases where a decision was clearly wrong. It did not enable the FTT to take a different view of the law from that which it had previously reached, when both view were tenable.
(3) The steps that could be taken consequent on a review were specified in section 9(4) of the 2007 Act. The FTT could correct accidental errors in the decision, amend the reasons given for the decision, or set the decision aside; it could also decide that no action was required, in which case it was required by r 52(2) to proceed to a consideration of whether to grant permission to appeal. In either case, the parties had to be notified of the outcome of the review and of their right to appeal. Where the outcome of a review was that a decision was set aside, the FTT would then either re-decide the matter under section 9(5)(a) or refer it to the Upper Tribunal for it to re-decide under section 9(5)(b).
(4) Before exercising any of the powers conferred by section 9(4), the FTT should consider whether it was appropriate to give notice to every other party to the proceedings that an application requesting a review had been received or that it proposed to carry out a review of its own initiative. Where the FTT was considering making any significant change to its decision, fairness, transparency and convenience all seemed to require that it first allow the parties to make representations on the proposed change if they had not yet had an opportunity to do so. Although prior notification might not be essential and a more robust approach might be permissible in light of the safeguards provided by r 55(3) for parties who were not heard at that stage, in a case where the consequence of a review might be to deprive a successful party of the benefit of a decision in its favour, the fairer and more efficient course would be to allow representations to be made at the outset. If the FTT took any action following a review without first giving all parties the opportunity to make representations, r 55(3) would oblige it, when giving notice of the outcome of the review, to inform any party that did not have an opportunity to make representations of its entitlement to apply for the action to be set aside and for the decision to be reviewed again.
Had the LVT in this case received an application for permission to appeal its decision after 1 July 2013, on the grounds that it had overlooked the binding decision of the Upper Tribunal in Botterill, it would have been a clear case in which the power to review the decision and set it aside could swiftly have been exercised by the LVT, so avoiding the delay and expense of an appeal and allowing the merits of the application to be considered promptly by the same tribunal. As it was, the appeal was allowed and the case remitted for a consideration on the merits.
Per curiam: It was doubtful whether the decision in Botterill was correct. Section 159(2) identified a sub-category of estate charges, the “variable estate charge”, which was payable only to the extent that the amount of the charge was reasonable. Section 159(3) created an entitlement of a different type, permitting an application to be made to the LVT for an order varying the scheme. The grounds identified in section 159(3), which had to exist before the LVT could make an order varying a scheme, were couched in similar terms to those used in section 159(2) to identify charges that were not variable estate charges. Although section 159(3) applied in terms to “any person on whom an obligation to pay an estate charge is imposed” by a scheme, and the draftsman had not said in terms that it did not apply to variable estate charges, there was a respectable argument that that was its effect, since a variable estate charge would not possess the features necessary to satisfy either of the grounds that had to exist before an application could be made to vary the scheme. The contrary argument might create difficulties that had not been explored in detail in Botterill, where the parties had agreed at first instance that the LVT had jurisdiction and where, as in this case, the appeal was unopposed. However, since no argument had been advanced in the instant case concerning the proper construction of section 159, it was not appropriate to reconsider the decision in Botterill and it would be followed accordingly.
The appeal was determined on the written representations of the parties.
Sally Dobson, barrister