For “Black” read “White” here – Marley v Rawlings

The Supreme Court are at it again.

In Marley v Rawlings EWSC 2  (22.1.14) they were faced with a problem that would be amusing if it wasn’t so important for those concerned. Mr & Mrs Rawlings wrote identical wills leaving everything to the survivor, failing which everything to Terry Marley, who they had treated as their son, but who had not been legally adopted. Unfortunately the solicitor handed Mr R’s will to Mrs R and vice versa and so they signed the wrong ones without anybody, including the witnesses, noticing. Indeed nobody noticed when Mrs R died either, and matters didn’t come to light until Mr R died and Terry tried to administer the estate.

The problem was important because Mr & Mrs R had two legitimate sons who would get the whole estate if the will failed, when Terry would get nothing.

So Terry applied for the will to be rectified under s 20 Administration of Justice Act 1982, which allows rectification in the case of “clerical errors”.

Now, unlike many cases of rectification it couldn’t be easier to see

  1. that this was a mistake, and
  2. what the intention was.

Indeed there was the exact wording of the will that Mr R intended to sign typed out perfectly but signed by his wife. The solicitor, whom the Supreme Court very tactfully don’t identify, (and whose insurers have probably had to pay for the litigation so far) freely admitted the error and gave evidence to that effect. So it should have been a doddle.

However the High Court Judge rejected the application, saying that the piece of paper that Mr R signed wasn’t a “will” at all, as it purported to be Mrs R’s will but was signed by Mr R and so didn’t comply with the formal requirements of s 9 of the Wills Act 1837. Thus it couldn’t be rectified under the 1982 Act because that only applied to “wills”. Furthermore, she doubted that this was a”clerical error” as it wasn’t to do with mistypings etc. And the Court of Appeal agreed with her.

I noticed the case at the CA stage and felt sorry for Terry (or more accurately for the solicitor’s insurers). It was clearly the wrong result in any fair and reasonable way of looking at things, although I could see where the courts were coming from. Their decision was entirely logical, if also entirely daft. But I noticed that the total estate only came to some £70,000 so I didn’t think that an appeal to the SC was really going to happen.The decision to appeal would be “very brave” in the sense that Sir Humphrey used the expression in Yes Minister.

Well, there are clearly brave people at the insurers because they went ahead with the appeal and the SC decided the case today, and rectified the will in Terry’s favour.

They skated over two lesser arguments – interpreting Mr R’s will as meaning the words in Mrs R’s will, or deleting all of the will apart from the gift to Terry and the signatures – as being rather cowardly ways of coming to what was the only fair decision, and faced the rectification argument head on.

Lord Neuberger, giving the judgement, said [at paras 55-67]  that you had to read the legislation broadly and that it is clear that “will” in s20 must mean “purported will” as well. So there was power to amend it. And [paras 68-83] there is a lot more to clerical work, and hence clerical errors than just typing things. You can also put things in the wrong envelope or send them by email to the wrong places. Or as here get them signed by the wrong people.  Game, set and match to the appellant.

I haven’t gone into the intricacies of the arguments here, and others will no doubt do so elsewhere over the next few days and weeks. This is because there is a bigger picture. Yet again the Supreme Court has done what it does best, and indeed is the real reason for its existence. They get a problem referred to them, they work out what the right solution is and then they just do it. If this means overruling lower courts or indeed departing from a previous decision then they do so, because as the SC they can. And they are bright enough to interpret legislation, or case-law in the way that suits their argument. They don’t run on rails. They do what needs to be done.

I’ve mentioned this before here and here but I give no apology for doing so again.

But this raises the still bigger picture of the balance to strike between rules and the exercise of judicial decisions. How far should a judge be constrained from doing what is plainly right in the case in front of him by detailed legislation, rules or guidance? That is something for another day.

What is the Best? Judging the Judges.

Sir John Thomas has been announced as  the new Lord Chief Justice, taking over from Lord Judge in October. He will undoubtedly be an excellent appointment – intelligent, experienced, clear, decisive – but despite this there has been widespread comment that he is a white middle-aged man, and as such should have been passed over in favour of Lady Justice Hallett (a woman), or a suitable candidate from the BME community. There was similar comment when Lady Hale failed to be appointed President of the Supreme Court, missing out to Lord Neuberger.

Much the same points are raised when judges are appointed in the lower courts, or when QCs are picked. Why are there so many white middle-aged men? Should we balance things up a bit?

This brings up a number of interesting questions. The first is whether the selection is unfair because the process is biased against other candidates. Once upon a time when selection was based on the tap on the shoulder this was almost certainly the case. Now, when the process is full of “person specifications” and structured interviews and so on it is much less likely, and although still possible, I think that most observers would say that, by and large, the best candidates are selected.

So the second question is whether this is because inadequate numbers of suitably qualified other candidates apply. The answer is almost certainly yes. The reason is historical. Candidates for the judiciary are generally in their fifties, having spent many years building up the experience and knowledge that the post requires. Sir John Thomas is 65, and Lady Hallett 63, reflecting the elevated level of the post. They would have entered the profession in the early 1970s, when virtually all barristers and indeed most solicitors were white men. I remember how unusual it was to appear before a female judge when I started my career in the late 1970s, and can only recall Elizabeth Butler-Sloss, who sat as a Registrar in the Family Division. It has taken many years for women, and for members of the ethnic communities, to take their places as lawyers. The reason for this is something for another day. But the result has been that while there are almost equal numbers of men and women joining the profession now, there are still only 5 female members of the Court of Appeal (out of 38). It takes time for the candidates to work through, and only now are the numbers getting at all representative. In the next appointment of 4 members, to replace forthcoming retirements, there will be 2 men and 2 women. In the lower judiciary things are much more even, with virtually equal appointments of male and female District Judges. But a significant inequality remains at the top.

Moving on from there some people ask what can be done to even things up. Are there aspects of a legal career and judicial preparation that are discouraging for a woman or somebody from a minority community? Can these be changed? Is child-care an issue? Or discrimination? Is it more difficult to get a tenancy as a barrister, or a partnership as a solicitor? And should there be a quota for future appointments? How long should the present unsatisfactory balance be allowed to remain?

Others ask however whether this is a real issue. If the selection process is fair, and we appoint the best candidates, then in due course we will reach a better balance, if not equality. It may take years, but the alternative is to appoint a candidate who is rated as inferior to the best, solely because of their race or gender. Is that right? Isn’t it degrading and insulting to those appointed, and indeed to all women and minorities appointed, who will look as if they have only got there because of a quota? And won’t the public suffer because second-rate candidates are being put on the bench for “PC” reasons?

Against that you may say that although the Supreme Court and Court of Appeal, and the judiciary generally are not appointed to represent the public in any precise way, such as having the same mix of political views as the electorate hold, they do represent the public, and the state, in a more general way, and if a significant part of the population is unrepresented, or severely under-represented, then this says to parts of the community that they don’t count, and that matters. Furthermore, it removes certain areas of expertise and knowledge from the bench, which is less effective as a result.

This article isn’t going to produce the answer to these difficult questions. The purpose is to make it clear that the questions are difficult, and that simple solutions don’t work. The best solution is probably a combination of nudging, mentoring, and time. It isn’t something that can be changed overnight. And nor should it. We do after all want the best. Whatever that is.

How do we Pay for the Repairs? – Two Recent Decision

Like with buses, there are often large gaps when there are no interesting developments in an area and then two come along at the same time. In this case the particular area is the recovery of service charges by landlords , and the two cases are Phillips v Francis [2012] EWHC 3650(Ch), a decision of the Chancellor in the High Court in December 2012, and, much more recently, Daejan Investments Limited v Benson and others [2013] UKSC 14, a decision of the Supreme Court on 6th March 2013.

They are both of considerable interest, although operating in essentially opposite directions. However, before I get into things properly we need to set out the broad outlines of the problem that they tackle in their own ways.

The Law

Under s 20 Landlord & Tenant Act 1985 landlords of residential premises that levy a service charge are required to consult with tenants before contacting for qualifying works, or a qualifying long-term agreement. If they don’t do this then they can only recover £250 per tenant (or £100 per tenant if it is a QLTA). Unless the Leasehold Valuation Tribunal (LVT) gave dispensation, either before or after the event. The requirements for public sector housing are slightly different and I won’t cover them specifically in this article, so as to keep it a sensible length. And although the obligation is to consult and not necessary to agree with the tenants, in practice the landlord has to be prepared to justify his decision before the LVT if the tenants ask them to find that the service charge, including the cost of the works, is unreasonable, under s27A of the 1985 Act. So the provisions have real teeth.

Now the consultation procedure is quite a lengthy one as set out in the Act and prescribed regulations, lasting at least 2 months and requiring the landlord to give 30 days’ notice of the proposed works and to invite observations and nominations for invitation to estimate. Then once the estimates are in the landlord has to give another 30 days to allow for observations on the estimates, and finally they must give notice that the contract has been awarded and justify the choice if it isn’t the lowest estimate, or a contractor nominated by the tenants. The procedure for works under a QLTA is slightly different, and only involves one consultation, once the QLTA has been entered into at the outset. In either case there is a lot of scope for getting things wrong, and if there are many tenants the cost of all the consultation, tendering and so on can be considerable.

However, things are even worse if there are only a few tenants, because it means that even small maintenance projects get caught in the net. If there are 2 tenants anything over £500 has to be subject to the procedure , and you can’t get much done for that, especially in London. There is no way for tenants to waive their rights or to abbreviate the generous time-limits. So it becomes important to know what counts as a project: if repairing 2 doors is going to cost £750 can you split this into two projects of £375 each and save time and effort all round? What about minor works such as repairing a downpipe, changing light bulbs, and so on that add up to more than £250 a head over a year but individually cost a lot less than that?  And it also matters to know whether the LVT will dispense with the requirement, either if you go there first, or if you do the work first and then have to go and seek permission afterwards, possibly because you have messed up the procedure in some minor way.

It is important to note that although we normally call them “building works” the Act describes them as “works on a building or other premises” ie anything that is not purely the provision of services. So touching up the paintwork is covered as well as replacing the roof.

In practice landlords consulted on major projects , or faced the consequences, but didn’t if the cost worked out at less than the £250/head figure, and the tenants, and the LVT went along with this, more or less – the individual LVT members are well known for providing a wide range of views to the same facts. But you could very rarely get the LVT to agree to dispense with the procedure beforehand, unless the project was large and urgent, and virtually never get them to dispense with it afterwards. It was a far from ideal situation but al least we knew where we were, and could advise accordingly.

The Problem

Well, things have changed. Phillips v Francis was an appeal to the High Court from Truro County Court about the service charges payable on a holiday estate near Padstow. The landlords embarked on what appears to have been a rather disorganised scheme to improve the facilities, where one thing lead to another without any overall plan. But as it was a large site, with over 150 houses on it, the £250/head limit came out at about £41,000. And the county court judge had decided that no individual part of the scheme cost more than that in any year, so it wasn’t caught by the limit.

The Chancellor wasn’t having any of this. He looked at the CA decision Martin v Maryland (1999) which the landlord relied on and which indicated that you looked at the individual projects to see if they needed consultation, and said that he wasn’t bound by this because of changes in the scheme brought in by the Commonhold and Leasehold Reform Act 2002. You  no longer had to look at the overall cost of the project but had to look at the annual cost to each tenant. There is no “triviality threshold”:

Accordingly, I see nothing in the present legislation which requires the identification of one or more sets of qualifying works. If the works are qualifying works it will be for the landlord to assess whether they will be on such a scale as to necessitate complying with the consultation requirements or face the consequence that he may not recoup the cost from the tenants’ contributions. As the contributions are payable on an annual basis then the limit is applied to the proportion of the qualifying works carried out in that year. Under this legislation there is no ‘triviality threshold’ in relation to qualifying works; all the qualifying works must be entered into the calculation unless the landlord is prepared to carry any excess cost himself.

Commentators are unsure what exactly this means, but the most natural meaning is that if there is qualifying work in a year that adds up to more than £250/head then the procedure has to be complied with, even if each individual project is under £50. The decision by a High Court Judge is binding on the LVTs and on County Courts, but not other High Court Judges, and so until the CA clarifies things it stands, albeit subject to the possibility of alternative interpretation by other judges. But the parties have apparently confirmed that they are not going to appeal, so the matter is not going to be clarified soon.

ARMA and other landlord organisations are horrified. It means that not only are landlords probably going to have to consult at the beginning of every year if they want to do virtually anything, but also that tenants may now be able to claim back all excess service charges that they have made over the last 6 years, by going to the LVT under s27A(2) of the 1985 Act.

Commentators are puzzled, and some of them are looking forward to a raft of decisions in the LVT and the UT(LC) when the detailed implications are thrashed out. Many just say that the decision is wrong. The best summary is, as ever, in the Nearly Legal blog. The answer may be come in the form of legislation, or an amended regulation defining the limit for qualifying works, although given the present government’s track record this cannot be relied on with any certainty. Or a greater use of QLTAs to cover smaller maintenance, which would reduce the consultation but not remove it entirely.

I’m not sure whether you can say that the decision is wrong, as the previous interpretations certainly did some violence with the wording, and were open to abuse. But it cannot be disputed that the judgement did not consider the extremely wide implications of what was being said, or spell out the consequences in enough detail. And for a decision that expressly disagreed with the CA decision in Martin v Maryland

save in its reference to the need to use common sense

this is at the least disappointing.

The Answer

None of the above. For yet again the Supreme Court ride to the rescue. I am immensely impressed with the way that the SC looks at a problem, works out the sensible answer, and then gives it to us, by a combination of energetic distinguishing of inconvenient authorities, or if need be just overruling them. I have commented previously on their efforts in Day v Hosebay (on enfranchisement) and in Berrisford v Mexfield (on leases without terms), when they rescued the law from the inconvenient and downright idiotic position that a long succession of entirely logical but cumulatively daft decisions have left it in, by going back to basics.

In Daejan v Benson the court, lead by Lord Neuberger, looked at the provision in s20ZA of the 1985 Act allowing the LVT to dispense with the need to consult on qualifying works, as set out above. The provision itself is a simple one:

Where an application is made to a leasehold valuation tribunal for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works or qualifying long term agreement, the tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements.

It would appear to give the LVT a wide discretion if it is satisfied that it is reasonable, and normally you would expect such a power to be exercised fairly frequently. However, a succession of cases had built up guidance that meant that it was virtually impossible to get dispensation beforehand, unless the matter was extremely urgent, and impossible to do so in practice after the event. The CA in Daejan itself had said that consultation in itself was what the Act was trying to achieve and so if consultation had not been carried out in full (in this case the decision to award the contract was made shortly before the consultation ended, rather than afterwards as it should have been) then the tenants had suffered prejudice, and the landlords could therefore not show there was none. The financial consequences (£280,000 here) were not even relevant.

Lord Neuberger made pretty short shrift of that. He said that

Given that the purpose of the Requirements is to ensure that the tenants are protected from (i) paying for inappropriate works or (ii) paying more than would be appropriate, it seems to me that the issue on which the LVT should focus when entertaining an application by a landlord under section 20ZA(1) must be the extent, if any, to which the tenants were prejudiced in either respect by the failure of the landlord to comply with the Requirements

And so if the quality, extent and cost of the works haven’t been affected by the failure to properly consult then dispensation ought to be granted in virtually all cases. If there is some prejudice, such as additional cost, this can normally be compensated for by imposing conditions, such as payment of compensation, or more usually restricting the amount the landlord can recover. In Daejan itself the landlord proposed a reduction of £50,000 in the amount that they were seeking, to cover any potential losses. And if need be the landlord could pay the tenants’ reasonable legal and surveyors’ costs in investigating the matter, and being represented at the tribunal.

There was no benefit in itself in having a consultation. It was just a mechanism for achieving the end of only having to pay an appropriate amount for appropriate works. And virtually all applications for dispensation should succeed, subject to the grant of compensation in cases where the works have cost more than they should because of the failure to consult properly.

Which, given Phillips v Francis, is just as well, because there are going to be an awful lot more applications in future.

Some commentators say this is a bad decision, that openness and transparency are good in themselves, and the result means that s20 adds very little to the existing power under s19 to disallow inappropriate costs. But I disagree. Law is the servant of man, not his master, and our laws must work in practice. This law was no longer working in any useful way, and has now been brought back to life. The management of blocks of flats on long leases is difficult enough without making the escape clause impossible to use. Tenants often don’t want to pay for repairs, and landlords often charge more than they ought. You have to have an effective mechanism for resolving these matters, and thanks to the Supreme Court the useful tool that is s20ZA(1) has now been dusted off and restored to the front line.

You have to Laugh

In the middle of a distressingly dry judgment today in the Court of Appeal  in the case of Sillitoe v Jacuzzi (all about when interest runs on costs)  Lord Neuberger said:

‘Judgment’ is only used once in CPR 40.8(1), whereas it is used three times in article 2(1) of the 1991 Order, but that does not help the defendant (as the Bellman’s instruction that ‘what I tell you three times is true’ rarely assists on issues of interpretation).

You don’t get The Hunting of the Snark by Lewis Carroll cited as an aid to interpreting legislation often enough these days, more’s the pity. Well done, My Lord!