Oakfern Properties Ltd v Ruddy

Neutral Citation Number: [2006] EWCA Civ 1389 IN THE SUPREME COURT OF JUDICATURE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE LANDS TRIBUNAL His Honour Michael Rich QC LRX/93/2005 Case No: C3/2006/0488 Royal Courts of Justice Strand, London, WC2A 2LL Wednesday 25 th October 2006 Before: LORD JUSTICE PILL LORD JUSTICE JONATHAN PARKER and LORD JUSTICE MOSES - - - - - - - - - - - - - - - - - - - - - Between: OAKFERN PROPERTIES LIMITED - and - DESMOND RUDDY - - - - - - - - - - - - - - - - - - - - - (Transcript of the Handed Down Judgment of WordWave International Ltd A Merrill Communications Company 190 Fleet Street, London EC4A 2AG Tel No: 020 7421 4040 Fax No: 020 7831 8838 Official Shorthand Writers to the Court) - - - - - - - - - - - - - - - - - - - - - Appellant Respondent Anthony Tanney and Lisa Busch (instructed by Messrs Russell-Cooke) for the Appellant Andrew Lane (instructed by Bar Pro Bono Unit) for the Respondent - - - - - - - - - - - - - - - - - - - - - Judgment Lord Justice Jonathan Parker : INTRODUCTION 1. The appellant, Oakfern Properties Ltd (“Oakfern”), is the freeholder of a building in Fulham Road, London SW6, consisting of a basement, ground floor and three upper floors. The ground floor and the basement are commercial premises which are let separately to a third party and do not feature in this appeal. The three upper floors consist of twenty-four separate residential flats, together with common parts, known as Kings Court Mansions. The upper floors are let by Oakfern on a long lease (“the headlease”), and the flats are separately sublet, also on long leases (“the subleases”). The present lessee under the headlease is Publicshield Property Management Ltd (“PPM”). PPM is a non-profit-making company owned by fifteen of the subtenants. The respondent, Mr Ruddy, is the subtenant of Flat 16. He is not a member of PPM. 2. 3. 4. 5. 6. 7. 8. Under the headlease, Oakfern is responsible for keeping the building (other than the flats themselves and the common parts) in a good and substantial state of repair, and PPM is obliged to pay Oakfern, by way of additional rent, a maintenance charge equal to 90 per cent of the costs incurred by Oakfern in discharging its repairing obligations. The maintenance charge is, in effect, passed on by the subleases, each of which obliges the subtenant to pay to PPM one twenty-fourth of the maintenance charge levied on PPM by Oakfern. Mr Ruddy seeks to challenge the amount of the maintenance charge levied by Oakfern on PPM in the years ended 28 September 2003, 2004 and 2005, on the ground that the amount charged was unreasonable. He seeks to do so by invoking provisions of the Landlord and Tenant Act 1985 (“the 1985 Act”) which limit the amount of a “service charge” (as defined) to costs which have been reasonably incurred, and which provide that application may be made to a Leasehold Valuation Tribunal for (among other things) a determination as to the amount which is properly payable. Mr Ruddy accordingly applied to the Leasehold Valuation Tribunal for such a determination in respect of the three years in question. The only respondent to the application is Oakfern. Notice of the application was given to PPM, but it has not applied to be joined as a party (a course which was, and is, open to it under the relevant regulations). At a pre-trial review four points raised by Oakfern were (at its request) identified by the Leasehold Valuation Tribunal as suitable to be determined as preliminary issues. In the event, Oakfern did not pursue its case on one of those issues. Of the remaining three issues, only two remain live issues on this appeal. The first live issue (which I will call “the service charge issue”) is whether the maintenance charge is a “service charge” within the meaning of the 1985 Act. The second live issue (which I will call “the jurisdiction issue”) is whether, in his capacity as a subtenant, Mr Ruddy has the requisite status in law (locus standi) to challenge the amount of the maintenance charge as against Oakfern, given that the obligation to pay it to Oakfern lies not on him, as subtenant, but on PPM as headlessee. By its decision promulgated on 15 July 2005 the Leasehold Valuation Tribunal (Ms Jane Dowell, Chairman) decided both the service charge issue and the jurisdiction issue in favour of Mr Ruddy. That is to say, it decided that the maintenance charge is a “service charge” within the meaning of the 1985 Act, and that it had jurisdiction under section 27A of the 1985 Act to hear and determine Mr Ruddy’s application. It decided the remaining preliminary issue in Oakfern’s favour, and Mr Ruddy has not appealed that decision. Oakfern appealed to the Lands Tribunal on the service charge issue and the jurisdiction issue. By its decision promulgated on 9 February 2006 the Lands Tribunal (Member, His Honour Michael Rich QC) upheld the decision of the Leasehold Valuation Tribunal on each of those issues. Oakfern now appeals to this court. Permission for a second appeal was granted by Neuberger LJ on the papers on 25 April 2006. THE RELEVANT LEGISLATION 9. Although ultimately the resolution of the service charge issue turns on the true construction of the relevant provisions of the 1985 Act, the arguments which have been addressed to us on this appeal make it necessary to set those provisions in their full legislative context. 10. The starting-point is the Housing Finance Act 1972 (“the 1972 Act”), section 35(1) of which introduced the concept of regulated tenancy of a “dwelling-house which is let on a protected tenancy or subject to a statutory tenancy”. Section 104 of the 1972 Act defined “dwelling”, for the purposes of the Act, as meaning (so far as material): “… a building or part of a building occupied or intended to be occupied as a separate dwelling together with any yard, garden, outhouses and appurtenances belonging to or usually enjoyed with that building or part …”. Section 90 of the 1972 Act conferred on tenants of flats a right to require information as to the cost components of services charges levied by landlords. Section 90(12) contained definitions for the purposes of the section, including definitions of “flat” and “service charge”. “Flat” was defined as meaning a separate set of premises forming part of a building “being a set of premises occupied wholly or mainly as a private dwelling”. “Service charge” was defined as meaning (so far as material): “… any charge for services, repairs, maintenance or insurance, being a charge which is payable as part of, or in addition to, the rent, and which varies or may vary according to any costs … incurred from time to time by or on behalf of the landlord or any superior landlord”. The Housing Act 1974 inserted an additional section 91A in the 1972 Act, subsection (1) of which provided that a service charge should only be recoverable from the tenant of a flat in respect of the provision of chargeable items to a reasonable standard and to the extent that the costs incurred were reasonable. The next relevant statute is the Rent Act 1977, which was a consolidating Act. Section 1 of that Act provided that, subject to the provisions of the Act, “a tenancy under which a dwelling-house (which may be a house or part of a house) is let as a separate dwelling is a protected tenancy for the purposes of this Act”. Beyond the words in parenthesis, there is no further definition of “dwelling-house” in that Act. Next, the Interpretation Act 1978, section 6 of which provides (among other things) that, unless the contrary intention appears, “words in the singular include the plural and words in the plural include the singular”. Next, the 1985 Act. Section 3 of the 1985 Act imposes on the landlord “under a tenancy of premises which consist of or include a dwelling” a duty to inform his tenant of any assignment of his interest. The duty is supported by penal sanctions. The relevance of this section for present purposes lies in the contrast between the words which I have quoted and the expression “tenant of a dwelling” in section 18 of the 1985 Act, to which I refer below. Section 17 of the 1985 Act empowers the court to order specific performance in any proceedings in which “the tenant of a dwelling” alleges a breach of a repairing covenant relating to “any part of the premises in which the dwelling is comprised”. In so far as this section has any relevance to the service charge issue, such relevance lies in the use of the expression “tenant of a dwelling” – the same expression as is used in section 18. I now turn to section 18, which lies at the heart of the service charge issue. Section 18 is the first of a number of sections in the 1985 Act concerned with service charges (the other such sections being sections 19 to 30 inclusive). 11. 12. 13. 14. 15. 16. 17. 18. As originally enacted, section 18 provided as follows (so far as material): “18 Meaning of “service charge” and “relevant costs” (1) In the following provisions of this Act “service charge” means an amount payable by a tenant of a flat as part of or in addition to the rent – (a) which is payable, directly or indirectly, for services repairs, maintenance or insurance or the landlord’s costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs. (2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable. (3) ….” 19. Section 18 has since been amended in two respects. The only material amendment for present purposes is that made by section 41(1) of the Landlord and Tenant Act 1987, which substituted “dwelling” for “flat” in section 18(1), so that the relevant expression now reads “… tenant of a dwelling…”. 20. Section 19 of the 1985 Act provides as follows (so far as material): “19 Limitation of service charges: reasonableness (1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period – (a) only to the extent that they are reasonably incurred, and (b) …. ….” 21. 22. Sections 20 and 20ZA of the 1985 Act were substituted by section 151 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”). Section 20 requires a landlord to comply with “consultation requirements” before carrying out certain types of works (“qualifying works”) if the relevant costs incurred in carrying out such works exceed an amount to be prescribed by regulations (“an appropriate amount”). Section 20ZA(5) provides that such regulations may include provisions requiring the landlord (among other things) to invite tenants to propose the names of persons from whom the landlord should try to obtain other estimates of cost. Regulations were duly made pursuant sections 20, viz. the Service Charges (Consultation Requirements) (England) Regulations 2003 (“the 2003 Regulations”). Regulation 6 of the 2003 Regulations provides that for the purposes of section 20 “the appropriate amount is an amount which results in the relevant contribution of any tenant being more than £250”. The consultation requirements in respect of “qualifying works” are set out in Schedule 4 to the 2003 Regulations. They are wide- ranging, and include a duty on the landlord to have regard to the observations of any tenant or recognised tenants’ association in relation to the proposed works. 23. Section 27A of the 1985 Act (which was inserted by the 2002 Act) lies at the heart of the jurisdiction issue. It provides as follows (so far as material): “27A Liability to pay service charges: jurisdiction (1) An application may be made to a leasehold valuation tribunal for a determination whether a service charge is payable and, if it is, as to – (a) the person by whom it is payable, (b) the person to whom it is payable, (c) the amount which is payable, (d) the date at or by which it is payable, and (e) the manner in which it is payable. (2) – (7) ….” 24. 25. 26. 27. 28. 29. Section 30 of the 1985 Act contained definitions of “flat”, “landlord” and “tenant” for the purposes of the provisions of the Act relating to service charges. The definition of “flat” was repealed by the 1987 Act. “Landlord” is defined as including “any person who has a right to enforce payment of a service charge”. “Tenant” was originally defined as including, “where the flat or part of it is sub-let, the sub-tenant”, but the 1987 Act once again substituted “dwelling” for “flat”. Section 31 of the 1985 Act confers power on the Secretary of State to impose limits on increases in rents for “dwellings” or on rents payable under new lettings of “dwellings”. Finally, so far as the 1985 Act is concerned, section 38 provides that in the Act (that is to say wherever it appears in the Act) “dwelling” means “a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, outhouses and appurtenances belonging to it or usually enjoyed with it”: that is to say, it in substance repeats the definition of “dwelling” in section 104 of the 1972 Act, quoted earlier. Next, I note that section 81 of the Housing Act 1996 restricts the right of a landlord to terminate a tenancy for failure to pay a service charge. Lastly, so far as the service charge issue is concerned, section 168 of the 2002 Act provides that a landlord under a long lease of a “dwelling” may not serve a forfeiture notice under section 146 of the Law of Property Act 1925 unless certain conditions are satisfied; and that such a landlord may apply to a Leasehold Valuation Tribunal for a determination that a breach of covenant or condition in the lease has occurred. Section 169 of the 2002 Act provides that in section 168 “dwelling” has the same meaning as in the 1985 Act. Finally, reference was made in argument on the jurisdiction issue to the regulations governing the procedure of Leasehold Valuation Tribunals, viz. the Leasehold Valuation Tribunals (Procedure) (England) Regulations 2003 (“the procedural regulations”), regulation 6(1) of which provides that any person may make a request to the tribunal to be joined as a party to the proceedings. THE RELEVANT AUTHORITIES 30. On the service charge issue the Leasehold Valuation Tribunal and the Lands Tribunal were referred to two authorities, viz. Horford Investments Ltd v. Lambert [1976] 1 Ch 39 CA (“Horford”) and Heron Maple House Ltd v. Central Estates Ltd [2002] 1 EGLR 35, a decision of HHJ Cooke (“Heron”). In the Lands Tribunal reference was made to one further authority, viz. Altmann v. Boatman (1983) EGD 494 (“Altmann”). No authorities were cited to the Leasehold Valuation Tribunal or to the Lands Tribunal on the jurisdiction issue. Altmann 31. Altmann is authority for the proposition that the common parts in a block of flats are not “appurtenances” of the flats themselves. That proposition is common ground on this appeal. Horford 32. In Horford the landlord let to the tenant two houses, each of which had been converted into flats. The tenant, who lived in neither house, contended, relying on a provision in the Interpretation Act 1889 similar to section 6 of the Interpretation Act 1978 (the singular includes the plural), that he was a protected tenant within the meaning of section 1(1) of the Rent Act 1968 (which was, so far as material, in identical terms to section 1(1) of the Rent Act 1977). The Court of Appeal (Russell and Scarman LJJ and Plowman J) dismissed his appeal, holding that, in the context of the Act, and bearing in mind the policy of the Rent Acts, the singular did not include the plural; and, accordingly, that neither tenancy was within the definition of a protected tenancy as each of the two houses had been let as a house comprising several dwellings. The first judgment was given by Russell LJ. In the course of it, he identified the question for decision as follows (at p.46D-F): “As to the first question, the point appears to me to be this: whether the phrase “a tenancy under which a dwelling-house (which may be a house or part of a house) is let as a separate dwelling” embraces a case in which the tenancy includes when created a residential building containing more than one of what might conveniently be described as units of habitation. The question appears to be ultimately whether by force of the Interpretation Act 1889 “is let as a … dwelling” is to be construed as “is let as a … dwelling or dwellings”. On this point it seems to me immaterial that the houses in question are physically adapted for a great number of units of accommodation: the question really is the same as would arise for solution when on the granting of the tenancy of a house it consisted of two separate self-contained flats.” 33. After reviewing the authorities at some length, Russell LJ concluded that, notwithstanding that the result contended for by the respondent landlord was in his view somewhat anomalous, the weight of authority was in favour of accepting such anomalies and holding that the Interpretation Act 1889 did not apply, and that the singular did not include the plural. 34. Scarman LJ agreed. In the course of his judgment, he said this (at p.52C-F): “The letting in each case was of a house comprising more dwellings than one. Was it the letting of a house as a dwelling (both parties agree that the word ‘separate’ is of no importance in this connection)? If [counsel for the tenant] is right that the Interpretation Act 1889 requires us to construe the subsection’s phrase ‘a dwelling’ so that it includes ‘dwellings’, cadit quaestio: each tenancy is protected. But I agree with the county court judge in thinking that Parliament when it enacted section 1(1) used the singular deliberately, and in this instance did not intend the singular to include the plural. The policy of the Rent Acts was and is to protect the tenant in his home, whether the threat be to extort a premium for the grant or renewal of his tenancy, to increase his rent, or to evict him. It is not a policy for the protection of an entrepreneur such as Mr Lambert whose interest is exclusively commercial, that is to say, to obtain from his tenants a greater rental income than the rent he has contracted to pay his landlord. The Rent Acts have throughout their history constituted an interference with contract and property rights for a specific purpose – the redress of the balance of advantage enjoyed in a world of housing shortage by the landlord over those who have to rent their homes. To extend the protection of the Acts to tenancies such as these in this case would be to interfere with contract and property rights beyond the requirements of that purpose.” 35. Plowman J agreed with both judgments. Heron 36. 37. 38. 39. 40. In Heron the claimant was the freehold owner and superior landlord of a building containing, on its upper floors, a mixture of offices, domestic and commercial accommodation, together with common parts. The domestic accommodation was in turn divided into a number of separate flats. The defendant, Central, was the headlessee of the upper floors (including the common parts and the roof of the building), which were in turn let to Camden (which was joined in the action as a Part 20 defendant). Camden had in turn sublet the flats to individual occupiers. The headlease and the sublease to Camden each contained provisions for the recovery of expenditure incurred by the landlord in repairing and maintaining the building. The claimant carried out substantial works of repair to the building, thereby incurring expenditure which it sought to recover under the terms of the headlease. However, the claimant had not carried out the consultation exercise required by section 20 of the 1985 Act in the case of a “service charge” within the meaning of the Act. A preliminary issue arose as to whether section 20 applied: that is to say, whether the charge imposed by the headlease was a “service charge” within the meaning of the Act. For the claimant it was contended, relying on Horford, that the provisions of the 1985 Act relating to services charges had no application to parties such as Central and Camden, which were not tenants of individual dwellings but mesne landlords of a substantial part of the building, including the roof; and that in such circumstances section 6 of the Interpretation Act 1978 had no application. For Central and Camden it was contended that the Interpretation Act did apply, with the consequence that references to a single dwelling included references to several dwellings; and that such references included the common parts in the building and the roof. Both sides pointed to the practical anomalies which would result if their construction of the 1985 Act were rejected (pleas ad misericordiam which have found an echo in the arguments on this appeal). HHJ Cooke observed that whilst there were a number of provisions in the 1985 Act which were more obviously geared to individual occupiers, none of those provisions necessarily excluded a tenant of mixed premises which included a dwelling or dwellings. 41. He went on to say this (at paragraph 24(c)): “It is not particularly unusual to find that more than one flat in a block is let to the same tenant, for example: (i) employers, especially international ones, may take a group of flats and use them for employees; (ii) investors may again take a group of flats and let them (possibly furnished) at rack rents; (iii) in some areas, individuals may own several flats and let them as holiday lets. There are numerous other permutations. If [counsel for the claimant] is right and the strict construction is that section 20 applies only where one flat is let individually to an actual resident, none of these arrangements will have the protection of section 20. One must ask rhetorically why this should need to be.” 42. In paragraphs 30 and 31 of his Judge Cooke turned to the submissions of counsel for the claimant based on Horford, saying this: “30 …. For my part I would not seriously doubt that the protection of the individual resident is the primary object of the legislation. But it does not seem to me that where there is a chain of leases that object has necessarily to be achieved by protecting only those at the end of the chain and denying protection to those higher up. 31 [Counsel for the claimant] took me to two authorities. They were respectively Horford and Uratemp Ventures Ltd v. Collins [2000] 1 EGLR 156. Both are cases concerned with familiar Rent Act concepts. In Horford, the Court of Appeal held that the protection of the statute was intended to apply to a single dwelling and not several let together. In Uratemp the House of Lords was concerned with the familiar question of what was and what was not let as a separate dwelling. With all respect, I think both authorities are more distant cousins than twins to this case. The overall policy of the Rent Acts is to give security of tenure to the occupant and not to anybody else. In the case of service charge provisions, the policy of the Rent Acts is undoubtedly to stop the exploitation of residential tenants, but (cf. the Rent Acts, where the occupier’s security need only be achieved by protecting him and nobody else) that object does not have to be achieved by ignoring the practical problems that occur where there are chains of tenancies.” 43. Judge Cooke went on to reject the claimant’s arguments. At paragraph 38 of his judgment he said this: “38 I think the answer is to be found in an argument not originally put by [counsel for Camden], and pre-emptively met by [counsel for the claimant] in his skeleton submissions, which is this: that, in relation to any individual flat/dwelling Central or Camden is the tenant of that dwelling. It may be the tenant of other things as well, but, of that dwelling, it is, under its lease, the tenant. I cannot for my part see why, where a lease contains a mixed estate of properties, you cannot properly call yourself the tenant of one of the properties if they can be individually identified (as here they can be). Thus, why can you not properly be identified under the same lease of Wuthering Heights and the tenant of Wildfell Hall, if they are identifiably different parcels? [Counsel for the claimant’s] counter to this is that this is absurd because the Act envisages the subject-matter of the tenancy as a dwelling, not premises that include a dwelling. But this is not what the Act says; it says ‘tenant of a dwelling’ not ‘tenant of a dwelling and of nothing else’.” THE DECISION OF THE LEASEHOLD VALUATION TRIBUNAL 44. The Leasehold Valuation Tribunal addressed the service charge issue in paragraphs 20 to 26 of its decision, as follows: “20. If the Tribunal accepts the landlord’s arguments, which are not without force, the effect will be that [PPM], a not-for-profit company made up of fifteen of the tenants will not have protection of the service charge regime in the 1985 and 2002 Acts. We do not believe that Parliament intended to exclude any type of residential premises from the protection of the service charge regime which has been consistently expanded and extended since 1972. 21. Mr Ruddy’s application relates to service charges between Oakfern and [PPM], which Mr Ruddy submits are service charges for which he is liable. It is our determination that section 18(1) of the Act can be interpreted as an amount payable by a tenant of a dwelling notwithstanding that the dwelling is part of a larger demise. By analogy a tenant leasing a block of flats under a single long lease has the right to acquire a new lease of just one of the flats under the Leasehold Reform and Housing and Urban Development Act 1993. 22. We accept that Judge Cooke’s decision in the Heron case is not binding but it was made over four years ago and there is no other reported case which has overruled this decision where it was clearly held that the mesne landlord of a number of residential units could rely on the provisions of the Act in respect of an individual dwelling. 23. We do not accept the argument that the wording of sections 20 and 21 of the Act have the effect of preventing a mesne landlord from relying on the provisions of the Act. In the alternative it is our view that the Applicant can in any event 24. rely on section 18(2) of the Act since it is his application and the costs he has been asked to pay are those of the superior landlord albeit the demands are not made to him direct. Indeed some of the invoices which have been supplied to the Applicant to justify the service charges he has to pay are made out to Oakfern and Oakfern produce a “service charge account” to [PPM]. The freeholders now seek to oust the jurisdiction of the Act to enable them to impose service charges affecting residential accommodation without any fetter or regulation. 25. Ownership and/or management by lessees has been encouraged by legislation in recent years and seeks to enable lessees to have more control over the charges levied by landlord under service charge provisions in residential leases. It seems unlikely Parliament intended a result which could enable a freeholder to charge a mesne landlord (in this case made up of a group of tenants) without regulation while the sub-tenants could challenge the reasonableness of what are in fact the freeholder’s service charges. As the mesne landlord is a not-for-profit company and has no financial resources of its own, if the service charges it collects are not sufficient to pay the head landlord then the mesne landlord will be in serious financial difficulties. 26. In conclusion it is our decision that the amounts which are the subject of the Applicant’s application are service charges within the meaning of section 18 of the Act.” 45. The Leasehold Valuation Tribunal resolved the jurisdiction issue in paragraph 29 of its decision, as follows: “The application is made under section 27A of the Act. The wording of section 27A does not include any restriction on who may apply to an LVT for a determination of service charges. Mr Ruddy’s reason for making the application is that he believes he has a financial interest in the outcome of the application. Our decision is that whether or not there is a relationship of landlord and tenant between Mr Ruddy and Oakfern the Tribunal has jurisdiction to entertain this application.” THE DECISION OF THE LANDS TRIBUNAL 46. Addressing the service charge issue, HH Michael Rich QC accepted the submission of Mr Anthony Tanney, that HHJ Cooke in Heron was wrong to conclude that section 6 of the Interpretation act 1978 (the singular includes the plural) applied to section 18(1) of the 1985 Act, with the consequence that “dwelling” includes “dwellings”. In paragraph 11 of its decision, HH Michael Rich QC said this: “Judge Cooke did not have it drawn to his attention, as Mr Tanney has drawn to mine, that the definition “dwelling” in the Act of 1985, which falls to be construed, derives from s.104(1) of the Housing Finance Act 1972. The definition as it appeared in that Section of the 1972 Act, as can be seen from the citation of s.1 of the Rent Act 1968 did have its origins in the Rent Acts but in the 1972 Act it was applied equally to Parts IV and V of that Act, which amended the Rent Acts, and to s.90, which as Judge Cooke set out in paragraph 13 of his judgement took the first step to provide a regime which protected the residential tenant against overcharging for service charges. Section 90 required no more than the provision of information but s.124 of the Housing Act 1974 inserted s.91A into the Act of 1972. It is this Section which limited recoverable service charges by reference to reasonableness and compliance with requirements for consultation. Thus the provisions now contained separately in the Housing Act 1985, were first enacted to be part of an Act (that of 1972) which used a single definition of “dwelling” for both Rent Act and Housing Act purposes. If the Court of Appeal holds that the context of that definition excludes the singular from including the plural, then unless the contexts of the different parts of the 1972 Act lead to a difference of meaning in the one Act, I must conclude that Judge Cooke should have regarded himself as bound to reject that submission. As, on his reasoning it led nowhere, my reconsideration of the point is academic. Nevertheless, I set out my conclusions, because Mr Tanney addressed these arguments to me on the supposition, which only closer analysis shows to be mistaken, that Judge Cooke had based his on this construction of “dwelling”. ” 47. However, HH Michael Rich QC concluded that success on that issue did not assist Mr Tanney, since the true ratio of the decision in Heron was not that the singular included the plural, but that a tenant was a “tenant of a dwelling” within the meaning of the definition of “service charge” in section 18 of the 1965 Act notwithstanding that he was also the tenant of other property in addition to a dwelling (whether or not such other property included a dwelling or dwellings). As HH Michael Rich QC put it at the conclusion of paragraph 9 of the decision: “Judge Cooke’s reasoning in relation to the present case would be that the lease to [PPM] is of Flat 16 as well as 23 other flats and common parts, therefore it is of a dwelling (in the singular) as well as other dwellings and other premises.” 48. 49. 50. He also rejected Mr Tanney’s submissions based on the use of the contrasting phrase “which consist of or include a dwelling” in section 3 of the 1985 Act and on the practical anomalies of applying the consultation requirements of section 20 of the 1985 Act to a mesne landlord in the position of PPM. He accordingly upheld the Leasehold Valuation Tribunal’s decision on the service charge issue. Turning to the jurisdiction issue, HH Michael Rich QC said this (in paragraphs 13 and 14 of the decision): “13 ... On that basis the suggestion that the paying undertenant should not be able to make an application against the superior landlord hardly bears examination. The mesne landlord, who merely passes on the liability to the superior landlord to be paid by the Tenant has no interest, as well as having knowledge only by procuring it from the superior landlord, to dispute the unreasonableness of the costs incurred. Clearly the superior landlord is, in such circumstances, the appropriate respondent to any application, although it might have been prudent to have joined [PPM] also, in order to make the LVT’s determination binding on them. This may, even now, be possible. 14 One therefore turns to s.27A to see whether there is anything in its wording which precludes an application by the person ultimately liable to pay the costs from seeking a determination as to their reasonableness and consequent recoverability, against the person who incurred them. As the LVT pointed out “the wording of section 27A does not include any restriction on who may apply to a LVT for a determination of service charges.” It provides that “An application may be made to a leasehold valuation tribunal”. Mr Tanney has therefore to submit that a restriction on the LVT’s jurisdiction arises by implication in order to exclude its determining an issue specifically within its jurisdiction between the persons most concerned. I see no basis for such implication. The interests of others who may be affected by the determination are protected by the rules to which I drew attention in paragraph 3 above. The risk of strangers to the issue seeking to invoke the LVT’s jurisdiction can be sufficiently protected against, by the LVT’s power to dismiss frivolous applications under Regulation 11 of the 2003 Procedure Regulations. I therefore hold that the LVT also answered the second question addressed to it correctly.” THE ARGUMENTS ON THIS APPEAL The jurisdiction issue 51. Mr Tanney points to what he submits would be surprising results if the decisions below were correct. 52. First, he points out that in that event Parliament would have used the word “dwelling” in different senses in section 3 and section 18 of the 1985 Act; and this notwithstanding that the definition of “dwelling” in section 38 expressly applies throughout the 1985 Act. Next he points out that if the decisions below were correct sums payable by a headlessee of a shopping centre would be “service charges” within the meaning of the 1985 Act if the shopping centre happened to include a janitor’s flat, whereas, absent the janitor’s flat, they would not. He submits that it is impossible to identify any sensible policy reason justifying such a distinction. He further points out that the decisions below, if correct, would lead to a most inconvenient application of section 20 of the 1985 Act in a case such as the present, since the consequence would be that the headlessor would be obliged to meet the onerous consultation requirements contained in the 2003 Regulations even in the case of minor works the cost of which barely exceeded the £250 limit, and where the contribution of each subtenant might be no more than a miminal amount. He submits that these surprising results suggest that it cannot have been Parliament’s intention that a mesne landlord in the position of PPM should be able to take advantage of the service charge provisions of the 1985 Act. Turning to the relevant legislation, Mr Tanney took us through the legislative history, reminding us that statutory provisions relating to service charges first appeared in the 1972 Act. He points out that the 1972 Act included provisions relating to protected and statutory tenants, and in so doing adopted the language of the Rent Acts (see, for example, the expression “dwelling-house which is let on a protected tenancy or subject to a statutory tenancy” in section 35 of the 1972 Act); and that only a dwelling-house which is “let as a separate dwelling” can be a protected tenancy (see section 1 of the Rent Act 1977, reproducing section 1 of the Rent Act 1968). He submits that the explicit use of Rent Act concepts elsewhere in the 1972 Act makes it likely that the draftsman intended something similar when he used the expression “occupied as a separate dwelling” in section 104(1) of the 1972 Act. He accordingly relies on Horford in support of his contention that in construing the expression “a tenant of a dwelling” in section 18 of the 1985 Act section 6 of the Interpretation Act 1978 does not apply, with the consequence that the singular does not, in that context, include the plural. As to Heron, Mr Tanney points out that the arguments based on section 3 of the 1985 Act and on the legislative history were not before HHJ Cooke. He further submits that the Lands Tribunal appears to have treated Heron as if it were a binding precedent, when it was not. He accepts that, if his contentions were correct, an anomalous consequence would follow in that (as HH Michael Rich QC put it in paragraph 5 of the Lands Tribunal decision): “[s]ince by reason of the definition in section 18(2) [of the 1985 Act] relevant costs may be incurred ‘by a superior landlord’, the effect of Mr Tanney’s submissions … would be that if the costs incurred by the freeholder are unreasonably incurred, [PPM] is still obliged to pay them but cannot, to the extent that they are unreasonably incurred, recover them from its subtenants.” However, Mr Tanney submits that this anomaly is outweighed by the anomalies to which he has pointed (and in particular his example of the shopping centre with the janitor’s flat) if the decisions below were correct. He submits that in the instant case PPM is the tenant of what he described as a plurality of flats, and as such falls outside the protection of the service charge provisions in the 1985 Act. In any event, he submits, PPM’s ownership of the 53. 54. 55. 56. 57. 58. common parts in the upper floors of the building suffices to take PPM outside that protection. 59. Mr Andrew Lane (who appears for Mr Ruddy under the pro bono scheme) submits that the language of section 18(1) of the 1985 Act is, at least on first impression, tolerably clear. PPM is the headlessee of the upper floors of a building which comprises twenty-four residential flats and common parts. Each of the flats is “occupied or intended to be occupied as a separate dwelling” (see the definition of “dwelling” in section 38 of the 1985 Act) and PPM is the tenant of each of the flats. Hence, he submits, PPM is properly described as a “tenant of a dwelling” for the purposes of section 18(1). The fact that PPM may also be the tenant of other parts of the building is, he submits, of no consequence. In support of this submission, Mr Lane naturally relies heavily on HHJ Cooke’s reasoning in Heron. 60. Mr Lane submits (rightly) that whichever of the rival constructions of section 18(1) is adopted, anomalies will follow. However, he submits that Mr Tanney’s example of the shopping centre with the janitor’s flat is not as anomalous as it might at first appear. He asks, rhetorically, why should the janitor, as tenant of the flat, not be protected against an unreasonable service charge? He submits that even if one were to include a mesne landlord in such an example, there is no reason to suppose that the application of the service charge provisions of the 1985 Act would prove unduly onerous in practice. 61. 62. 63. Per contra, he lays considerable stress on the anomaly identified by HH Michael Rich QC if Mr Tanney’s submissions are accepted (see paragraph 56 above). As to Mr Tanney’s submissions based on section 3 of the 1985 Act, Mr Lane points out that the context of section 3 is an entirely different one, and that there is no reason to assume that when he used the expression “tenant of a dwelling” in section 18(1) the draftsman was intending to draw some material distinction between the two expressions. As to Mr Tanney’s submissions based on the Rent Acts and on Horford, Mr Lane submits that, important though the decision in Horford was in a Rent Act context, account must be taken of the particular policy of the Rent Acts, as identified in the passage in Scarman LJ’s judgment in that case quoted in paragraph 34 above. He submits that the decision in Horford must be viewed in that context of that policy, and that so viewed it has no necessary application to service charges. Provisions as to security of tenure and rent increases are, he submits, materially different in nature from the regulation of service charges. He relies on HHJ Cooke’s observations in paragraphs 30 and 31 of his judgment in Heron, quoted in paragraph 42 above. 64. He submits that it cannot have been Parliament’s intention that ownership of more than one flat, or ownership of common parts of a building which contain the flat or flats, should have the effect of taking the tenant of a flat (i.e. of any single flat) outside the protection of the service charge provisions. 65. Mr Lane’s written skeleton argument also contained submissions based on section 3 of the Human Rights Act 1998, but he rightly pointed out that if his submissions as to the true construction of section 18(1) were accepted no human rights point arose. The jurisdiction issue 66. On the footing that his submissions on the service charge issue are not accepted, Mr Tanney submits that some limits must be implied into section 27A, since Parliament cannot have intended, for example, to allow a busybody to litigate matters of no concern to him; and that the only question is what limits should be implied. 67. He submits that the appropriate implication is that section 27A is triggered only where the amounts in issue are payable by the applicant. 68. Mr Lane relies, naturally, on the absence of any express limitation in section 27A as to who may apply for a determination. He submits that in cases where the mesne landlord is merely passing on the obligation to pay a service charge to its subtenants (which he submits is the position in the instant case) it is entirely sensible that the subtenants should be able to challenge the amount of the charge as against the freeholder, and that there is no necessity to imply any limitation into the section. Moreover, he draws attention to the fact (accepted by Mr Tanney) that the Leasehold Valuation Tribunal has ample power to strike out a vexatious application. CONCLUSIONS The service charge issue 69. 70. 71. 72. 73. The picture which emerges from Mr Tanney’s review of the legislative history is, to my mind at least, not entirely coherent. Moreover, as counsel have rightly pointed out, a decision either way on this issue will lead to anomalies. In such circumstances, it seems to me that the right approach must be to attempt to construe the relevant statutory provision in its legislative context, and having reached a provisional conclusion as to what it means, to test that meaning to see whether it would, if adopted, lead to such absurd consequences in practice that Parliament cannot possibly have intended it. If the provisional conclusion would lead to absurd consequences, then it may be necessary to revisit it. I turn, therefore, to the 1985 Act and to the expression “tenant of a dwelling” in section 18(1). In the first place I accept that, as forcibly pointed out Judge Cooke in Heron, and in contrast to section 3 of the 1985 Act, the expression “tenant of a dwelling” in section 18(1), taken in isolation, says nothing expressly about any other property of which a person may be the tenant, whether by way of inclusion or exclusion. Nor, for that matter, does it say anything expressly about occupation of a dwelling: a person may be a “tenant of a dwelling” notwithstanding that he has, for example, sublet it. However, before turning to any of the other legislative provisions to which our attention was drawn in argument, it is first necessary to read into the expression “tenant of a dwelling” in section 18(1) the definition of “dwelling” in section 38 of the 1985 Act: a definition which is expressed to apply throughout the 1985 Act. For convenience, I repeat the material part of the definition, which reads “a building or part of a building occupied or intended to be occupied as a separate dwelling …”. The definition in section 38 does not require that the tenant should himself be in occupation of the dwelling, and hence it is apt to include a tenant who has sublet (i.e. a mesne landlord). However, the question arises whether a mesne landlord who, like PPM, is tenant of a building comprising a number of dwellings together with common parts falls within the definition. Such a mesne landlord is plainly a tenant of “ a building”, but not of “a building … occupied or intended to be occupied as a separate dwelling”. Can it then be said that, notwithstanding that he owns the entire building, he is nevertheless a tenant of “part of a building occupied or intended to be occupied as a separate dwelling” (my emphasis). I have come to the conclusion that the answer to that question is yes. 74. 75. 76. 77. 78. In the first place, unless the legislative context (and in particular the relationship, if any, between the service charge provisions in the 1985 Act and the Rent Acts) or the practical consequences of such a construction require otherwise, I can find no satisfactory reason for construing the definition of “dwelling” in section 38 so as to exclude a tenant from the definition merely because whilst he is the tenant of a dwelling which extends only to part of a building, he is also the tenant of other parts of the building, be such other parts dwellings or common parts or some other type of property altogether (e.g. commercial property). Taking the definition in isolation for the moment, I read it as consisting of two parts. The first part is “a building … occupied or intended to be occupied as a separate dwelling”: the second part is “part of a building occupied or intended to be occupied as a separate dwelling”. If that be the right way of reading of the definition, then (looking no further for the moment) a tenant of a property which falls within the second part of the definition is not taken out of the definition by reason merely of the fact that he is not the tenant of a property which falls within the first part. Judge Cooke put the point succinctly when he said (in paragraph 38 of his judgment, quoted in paragraph 43 above) that what section 18(1) says is “tenant of a dwelling”, not “tenant of a dwelling and of nothing else” (my emphasis). The next question is whether the legislative context requires a contrary construction. In my judgment it does not. I turn first to section 3 of the 1985 Act, and the expression “which consist of or include a dwelling” (my emphasis), on which Mr Tanney relies. As noted earlier, section 3 imposes a duty on a landlord to inform a tenant of any assignment of his interest where the demised premises “consist of or include” a dwelling. That is an entirely different context to the context of service charge provisions. I entirely accept that (on Mr Lane’s construction of section 18(1)) the draftsman could have used the same expression in section 18(1), but, like HH Michael Rich QC (see paragraph 12 of the Lands Tribunal decision) I do not consider that that circumstance should force a different construction of section 18(1). To my mind it comes as no surprise if close examination of an extensive patchwork of statutory provisions reveals differences of expression in different statutory contexts, albeit that such differences of expression may occur in the same statute. I also reject the suggestion that there is any significant relationship between the service charge provisions and the Rent Acts. As the judgments in Horford make clear (see in particular the extract from Scarman LJ’s judgment, quoted in paragraph 34 above), the decision in that case was materially influenced by the underlying policy of the Rent Acts. The policy underlying the service charge provisions in the 1985 Act and earlier Acts is, however, a different policy in that its emphasis is not so much on protecting the tenant in his home as on providing him with a way of challenging unreasonable charges sought to be levied by his landlord. I can, for my part, see no reason why the policy considerations which led this court in Horford to decide that a tenancy of a block of flats is not within the protection of the Rent Acts should lead to the conclusion that a tenant of a flat in a block who happens also to be a tenant of another flat (or flats) in the same block, and/or of the common parts in the building, is not, for that reason, within the protection of the service charge provisions. Once again, Judge Cooke put the point better than I can in paragraph 31 of his judgment in Heron (quoted in paragraph 42 above). 79. Indeed, looking at the entirety of the legislative history, as presented in argument, it does not seem to me to lead to the conclusion that section 18(1) should have any meaning other than that which, on its face, it bears. 80. Nor am I assisted in construing of section 18(1) of the 1985 Act by the array of potential anomalies paraded on each side. On balance, the greatest anomaly would appear to me to be that to which HH Michael Rich QC alluded in paragraph 5 of the Lands Tribunal decision (see paragraph 56 above), but that, I think, is as far as it goes. At all events, it is enough for present purposes to say that I am not satisfied that the potential anomalies identified in argument are such as to compel any different conclusion as to the true construction of section 18(1) from that which I would otherwise have reached. 81. For those reasons, I agree with the decisions below on the service charge issue. In the light of my conclusions on this issue it is not necessary for me to address Mr Lane’s submissions based on the Human Rights Act 1998. The jurisdiction issue 82. In my judgment there is no justification for implying any restriction into the entirely general words of section 27A of the 1985 Act. In most cases, one may suppose, the applicant for a determination under that section as to the proper amount of service charge payable will be the party who is liable to pay the service charge the subject of the challenge, and the respondent to the application will be the party who is seeking to levy it on the applicant; but there is no reason why that should inevitably be the case. In the instant case, for example, PPM, as the mesne landlord, may have its own good reasons for not wishing to undertake such a challenge as against Oakfern if one of its subtenants (e.g. Mr Ruddy) is ready and willing to do so. 83. As to possible abuses of process, the Leasehold Valuation Tribunal has ample powers to regulate its own procedures, including power to strike out vexatious or abusive applications. 84. Accordingly, I also agree with the decisions below on the jurisdiction issue. RESULT 85. I would dismiss this appeal. Lord Justice Moses: 86. I agree. Lord Justice Pill: 87. I also agree.