Where am I? – Edwards v Kurasamy in the Supreme Court

Sometimes the most interesting cases arise from pretty ordinary events. In this case Mr Edwards fell over on his way to the dustbins in his block of flats, because of uneven paving. He can’t have been too badly hurt because the DDJ awarded him £3,750 in damages, but it started a chain of appeals all the way up to the SC, where the decision came out on 13th July. So it was obviously thought very important by a number of insurers, landlords and others. A link to the full report is here [2016] UKSC 40.

Before I tell you about the decision you will need some background. Mr K had a long lease of a flat in a block of flats in Runcorn. Access was over a paved courtyard leading to the entrance into the communal hallway, and then on into the individual flats. Mr K sub-let his flat to Mr E in 2009, and one day in 2010 Mr E was crossing the courtyard to put out the rubbish in the dustbins when he tripped over an uneven paving slab and suffered the injuries from which he has no doubt long recovered.

Under s11 Landlord & Tenant Act 1985 a landlord of a residential lease for less than 7 years is liable for structual and exterior repairs. The obligation is extended in the case of flats etc to include other parts of the the building in which the landlord has an estate or interest. The wording is of some importance:

s 11 Repairing obligations in short leases

(1)In a lease to which this section applies (as to which, see sections 13 and 14) there is implied a covenant by the lessor—

(a)to keep in repair the structure and exterior of the dwelling-house (including drains, gutters and external pipes),

(b)to keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), and

(c)to keep in repair and proper working order the installations in the dwelling-house for space heating and heating water.

(1A)If a lease to which this section applies is a lease of a dwelling-house which forms part only of a building, then, subject to subsection (1B), the covenant implied by subsection (1) shall have effect as if—

(a)the reference in paragraph (a) of that subsection to the dwelling-house included a reference to any part of the building in which the lessor has an estate or interest; and

(b)any reference in paragraphs (b) and (c) of that subsection to an installation in the dwelling-house included a reference to an installation which, directly or indirectly, serves the dwelling-house and which either—

(i)forms part of any part of a building in which the lessor has an estate or interest; or

(ii)is owned by the lessor or under his control.

(1B)Nothing in subsection (1A) shall be construed as requiring the lessor to carry out any works or repairs unless the disrepair (or failure to maintain in working order) is such as to affect the lessee’s enjoyment of the dwelling-house or of any common parts, as defined in section 60(1) of the Landlord and Tenant Act 1987, which the lessee, as such, is entitled to use.

So what mattered here was whether the paving was:

  • part of the exterior of the building, or of the hallway;
  • an area over which Mr K had an estate or interest;  and
  • whether it mattered that Mr K hadn’t been given notice of the defect in the paving before the accident, given the long-standing rule that a  landlord is not liable to repair the let property unless the tenant has given him notice of the defect.

The DDJ found for the tenant. This was reversed by the Circuit Judge on appeal, but her decision was reversed again by the CA, and so we get to the SC.

The Supreme Court Decision

You might wonder why things got so far, given the comparatively minor injuries. The answer is that landlords, and their insurers, got seriously worried about the idea of being held liable for defects about which they had received no prior ntice, and could see a whole army of trip-and-slip cases coming their way, and were determined to do something about it if at all possible.

Lord Neuberger gave the judgment in the SC, with a very short comment by Lord Carnwath.

He dealt with the first point robustly: – external paving is not part of a building, being outside the walls and roof, especially as it was felt necessessary to include “drains, gutters and external pipes” in the definition, and you can’t interpret the section so as to get round this. The CA decision of Brown v Liverpool Corporation (1969) (on earlier legislation) to the contrary was wrong, and the CA decision in Campden Hill v Gardner (1977) (on different earlier legislation) was to be preferred.

That disposed of the appeal, but the court gave its views on the other points as well.

The second point looks impossible to dispute – Mr K had a right of way over the paving and this is an “interest” for conveyancing purposes, even if it doesn’t amount to an “estate”. Attempts by Mr E’s counsel to argue that he had lost the interest while the sub-tenancy was in existence got nowhere. It was also pointed out that s3A of the Act protects landlords from limitations in their powers:

(3A)In any case where—

(a)the lessor’s repairing covenant has effect as mentioned in subsection (1A), and

(b)in order to comply with the covenant the lessor needs to carry out works or repairs otherwise than in, or to an installation in, the dwelling-house, and

(c)the lessor does not have a sufficient right in the part of the building or the installation concerned to enable him to carry out the required works or repairs,

then, in any proceedings relating to a failure to comply with the lessor’s repairing covenant, so far as it requires the lessor to carry out the works or repairs in question, it shall be a defence for the lessor to prove that he used all reasonable endeavours to obtain, but was unable to obtain, such rights as would be adequate to enable him to carry out the works or repairs.

The third point was the one which raised the greatest amount of heat. The SC started off by going through the cases starting in Moore v Clark (1813) and decided that it was clear that notice was required for the parts of the premises let to the tenant – especially the interior – but not for the parts that the landlord retained – eg the roof and external walls. The argument was that a landlord can’t go barging in to the tenant’s property on the off-chance that there is a defect, but is liable for his own parts, and this is a fair division of responsibilities given that the landlord has rights to inspect under s11(6):

(6) In a lease in which the lessor’s repairing covenant is implied there is also implied a covenant by the lessee that the lessor, or any person authorised by him in writing, may at reasonable times of the day and on giving 24 hours’ notice in writing to the occupier, enter the premises comprised in the lease for the purpose of viewing their condition and state of repair.

The position if the landlord had let other parts of the building to other tenants isn’t so clear, but on balance the landlord will be liable without notice.

It was argued that all s11 liability claims needed notice, but this was rejected: the general law would apply.

Finally Mr E’s counsel argued that as the paving was outside the flat the general rule meant that no notice was needed in this case. However, the court ruled that in the particular case the rights on the paving were the limited rights of a right of way and that Mr K would have no rights as against the freeholder to carry our repairs. And he had lost the right to exercise these for the duration of the tenancy. Hence Mr E, who was there every day, should have given him notice of the defect.

The consequences

Mr K the landlord won the battle but the wider implications are not entirely clear. Landlords will be pleased that they aren’t liable for defects in outside paving, in these slightly unusual circumstances. And that notice of defects has to be given if they are going to be liable. In most cases. Some tenants may have to rely upon the more limited rights under the Defective Premises Act 1972. I suppose the lesson to all is to mind how you go.

.

 

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Ilott v Mitson – off to the Supreme Court

I have reported before on the case of Ilott v Mitson (here and here) but it is an unusual case and won’t go away.

Melita Jackson died in 2004 leaving some £486,000. She was a widow and had an only daughter, Heather Ilott, then aged in her 40s, who had 5 children, a husband who only worked part-time, and who relied very largely on state support. Even a small part of her mother’s estate would have been very useful to her. But Melita left all her money to three animal charities, and cut out her daughter entirely.

After several hearings up and down the system the CA allowed the daughter £163,000 odd, and the charities were presumably left with a large legal bill, so we all thought that was that.

Well, we were wrong. The Supreme Court has just (2.3.16) given leave to the charities to appeal from the CA order. The hearing might be 12 months away, but this is clearly not the end of the road, yet. Watch this space.

Note

Hearing now fixed for 12th December 2016. See note  here.

Spencer v Taylor update – Supreme Court refuse leave to appeal

Well this is just a short note, and the title says it all. On 24th July the Supreme Court refused the tenant leave to appeal against the CA decision which accordingly stands. This is all about ending Assured Shorthold Tenancies, and is in fact good news for both landlords (as you’d expect) and tenants as well, as it clarifies the law no end, so everybody knows where they are.

I wrote about this at the time, but in summary the CA had put an end to all those irritating problems caused by the complicated provisions of s21 Housing Act 1988. This provides for two forms of notice – one in s21(1)  for use with a fixed term tenancy which just needs to be 2 months expiring after the tenancy has come to an end, and one in s21(4) that is for use in periodic tenancies and needs a date after which possession is to be given that is on the last day of a period of the periodic tenancy, and at least 2 months ahead. There is lots of scope for getting this wrong, as the period of the tenancy may be different to the date when rent is paid, and many landlords forget that a tenancy starting on 5th May ends on 4th June, not 5th June.

Lewison LJ pointed out that s21(1) notices can be given in all cases

on or after the coming to an end of an assured shorthold tenancy which was a fixed term tenancy

so as virtually all periodic ASTs start as a fixed term, and then run on, a s21(1) notice can be used for them as well. And the cleverest bit is that he pointed out that a s21(4) notice, is a perfectly valid s21(1) notice, just one with added bells & whistles.

So landlords can throw away their s21(4) notices and use the simple s21(1) version in every case apart from the rare ones when the AST was always a periodic tenancy, or where the conversion to the periodic tenancy is contractual rather than the normal statutory one.

Of course you still have to make sure the notices etc about the deposit have been reserved following Superstrike (my piece here) but not for long, as remedial legislation is on its way – here’s the current position as at 22nd July. More of that when it arrives.

No doubt there will be more detail and analysis from the usual sources – Nearly Legal has promised an extended piece shortly. But good news all round.

 

PS – Nearly Legal’s extended piece is here.

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.

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.