Compatriot Holdings Ltd and another v Chairwoman of London Rent Assessment Committee and others

Rent Acts (Maximum Fair Rent) Order 1999 – Determination of maximum fair rent – Statutory rent-capping formula in article 2(1) of 1999 Order – Requirement for comparison between retail price index figures for month when fair rent last registered and month preceding current determination of fair rent – Effect of “rebasing” of RPI figures – Whether arithmetical adjustment required to earlier figure where derived from different base from later figure – Rent assessment committee making no such adjustment – Appeal allowedThe appellants were the successive freeholders of a building in Ladbroke Grove, London W11. The second and third respondents were the tenants of the third-floor flat in the building; the fourth respondent was the tenant of the ground-floor flat. Their tenancies were protected under the Rent Acts, such that their rent was limited to a maximum fair rent registered by the rent officer, subject to a statutory cap that fell to be calculated in accordance with the formula inaArticle 2(1) of the Rent Acts (Maximum Fair Rent) Order 1999. That formula took into account movements in the retail price index (RPI) by requiring “y”, the “published index” for the month in which the rent was last registered, to be subtracted from “x”, the published index in the month immediately preceding that in which the new fair rent was determined.Since 1985, the registered fair rents for the two flats had been £38 per week for the third floor and £38.50 for the ground floor. In 2008, new maximum fair rents were determined, with an effective date of November 2008. The figures reached by the rent officer were £88 and £89 per week for the third-floor and ground-floor flats respectively, inclusive of services. However, following objections by the appellants, the matter was referred to the first respondent rent assessment committee, which substituted £30.32 for the third floor and £31.32 for the ground floor. In applying the capping formula, it took a different approach from the rent officer to the “rebasing” of the RPI, whereby the index figure, having risen rapidly over the years, had dropped back to its original figure of 100 on several occasions; its commencement in 1947. This had last occurred in 1987, and the rent officer’s calculations had accordingly included an arithmetical adjustment to the May 1985 index figure so as to as to provide a like-for-like comparison with the September 2008 figure. The committee, on the other hand, had felt unable to do this since it considered that the reference in the formula to the “published index” required the use of the published figure without adjustment. Accordingly, it had compared the unadjusted figure of 375.6 for May 1985 with the September 2008 figure of 218.4. The appellants appealed.Held: The appeal was allowed.The capping formula required the earlier index to be subtracted from the later index so as to obtain the relative movement between the two indices over the relevant period. It followed that the phrase “published index” had to refer to two indices expressed numerically so that they were measured from a common base; it referred to the relative percentage change between the two indices so measured. The RPI monthly index was published in such a way as to enable a published figure readily to be rebased if it was to be used in conjunction with another index figure that was expressed by reference to a different base. In context, therefore, the “published index” was the index figure rebased, if necessary, to enable it to be compared with the other index figure to be used. Any rebasing should be undertaken using the figures published in the table of indices. All that was required was an arithmetical adjustment to the earlier figure of the kind suggested by the published indices and by the Department of the Environment in its advice to rent assessment committees on how to give effect to the 1999 Order and its prescribed rent-capping formula. In practice, a rent assessment committee would, for convenience, use one of the privately prepared tables of indices that were derived from the same base and had been prepared using the figures in the monthly published RPI.If that were not the result on a literal construction of the formula, a purposive construction would be permissible to avoid the nonsensical result flowing from a comparison between two indices that were differently based and that could not be used together to obtain the required relative movement in the index. The rent assessment committee should have appreciated that its proposed method of applying the rent-capping formula was nonsensical because it could not yield a capped revised figure where the two indices to be used were placed in different bands in the table of indices. The approach taken by the rent officer, involving the simple arithmetical exercise of rebasing the earlier index, was the correct approach when using the statutory formula prescribed by the 1999 Order.Maximum fair rents similar to those fixed by the rent officer should be reinstated with effect from November 2008. The landlord, having succeeded in its appeal, should have the benefit of the maximum fair rents from the date that those rents would, and should, have taken effect had the rent assessment committee not fallen into error.Jonathan Gavaghan (instructed by Singletons Austin Ryder) appeared for the appellants; the respondents did not appear and were not represented.Sally Dobson, barrister