Guppys Properties Ltd v Knott and another (No 3)

Rent assessment committee’s duty to give reasons — Nature and extent of duty — Landlords’ complaint that additional reasons supplied by committee after case had been remitted to them by the judge were still inadequate — Review of English authorities and of the conflict between them and the views of the Scottish Court of Session, who had defined the duty of committees in this respect in much more stringent terms — Scottish doctrine as expressed in Albyn Properties Ltd v Knox not applicable to England and Wales — Judge rejects proposition that it was incumbent on committees to say how they used the ‘comparables’; to say what would be a fair return on capital; to analyse the effect of scarcity or to carry out an arithmetical apportionment of factors such as amenity and scarcity affecting their decision — Three rules, however, formulated by judge — (1) the reasons must be intelligible; (2) although they do not have to deal with every point raised, they must deal with the substantial points, showing what matters were taken into consideration and what view was reached on them; (3) where the committee (having conformed with rule (2)) decide to rely on their own knowledge and experience they are not required to explain further how their figure is determined — Although the committee’s reasons as amplified were not as explanatory as they could have been, the committee had shown that they had taken all relevant matters into account — Application to set aside and remit decision dismissed, but leave given to appeal to Court of Appeal This is the third case reported between the same parties. The first, Guppys Properties Ltd v Knott And Another (No 1) (1978) 245 EG 1023, [1978] 1 EGLR 67, was heard, together with another case with a different respondent, by the Queen’s Bench Divisional Court (Lord Widgery CJ, Cantley and Peter Pain JJ) and was an appeal from a decision of a rent assessment committee of the Devon and Cornwall Panel on an objection to a fair rent registration. The second case, Guppys Properties Ltd v Knott And Another (No 2) (1980) 253 EG 907, and the present case both related to the reference to a committee of the panel of an application for a certificate of fair rent. In the second case the judge (Sir Douglas Frank QC) remitted the matter to the committee for further consideration of the reasons in the light of his judgment. The present case (No 3) arose because the appellants, Guppys Properties Ltd, were dissatisfied with the additional reasons given by the committee in response to the judge’s order. The application for a certificate of fair rent related to works proposed to be carried out by the appellants to a house owned by them near Truro in Cornwall. The committee determined that only certain of the works in question constituted improvements which could be taken into account in assessing the fair rent for the purpose of the certificate. The present proceedings were concerned only with the adequacy of the reasons given by the committee. The respondents did not appear and were not represented at any of the appeals. R Pryor (instructed by Turner Peacock) appeared on behalf of the appellants; John Laws (instructed by the Treasury Solicitor) appeared as amicus curiae; the respondents, Mr and Mrs A Knott, did not appear and were not represented. Giving judgment, SIR DOUGLAS FRANK QC said: This is an application by the landlords to set aside and remit a decision by a rent assessment committee sitting in Cornwall, when they determined the fair rent to be £9.75p per week after the completion of proposed works of improvement. The matter first came before me in December 1979 when I decided to remit the decision on the ground that the committee had failed to fulfil their statutory obligation to give reasons. In my judgment I said: I turn now to the main grounds upon which the decision is attacked and that is, that it is said that it failed to give reasons. The decision deals thoroughly with the state of the property as they must assume it to be, but when they come to the valuation of the property in that state they said: ‘Having considered all the evidence put before them, and having regard to the provisions of the Rent Act 1977 and to their inspection, the Committee are of the opinion that the only alterations to qualify as admissible improvements are the provision of an inside we, of an insulating quilt to the first floor ceilings, and of a hot water system and linen cupboard, and accordingly determine that after the completion of those improvements a fair rent will be £9.75p per week exclusive of rates.’ Thus, all they said about the evidence is that they have considered it and, without giving any reason beyond that, they determine the fair rent to be £9.75p. . . . In the instant case it is quite impossible to discern from the decision what reasons lay behind the assessment of £9.75p per week, other than that the committee disregarded works which were not improvements. In particular, they have failed to state whether and to what extent the submissions concerning capital value and comparables were accepted as convincing or not. Consequently, the applicant knows not whether any consideration was given to his submissions and thus is left in a state of mind of dissatisfaction, which the requirement to give reasons was enacted to avoid. On June 12 1980 the committee issued what they described as ‘an addendum’ to their decision in these terms: The purpose of this additional decision is to comply with the directions in the judgment in Guppys v Knott (QBD 1979) by explaining the reasons leading us to set the rent at £507 a year. 2. In his application Mr Parlett proposed a rent of £936 a year and at the hearing supported this by the assertion that in his opinion the current capital value of the improved property with vacant possession would be £17,500, a figure which we accept as reasonable. In calculating the fair rent from this figure Mr Parlett did not suggest any deduction for security. On the contrary he argued that there was not local scarcity of the sort of accommodation provided by the subject property. We do not accept this argument: there is undoubtedly a sizeable demand throughout Devon and Cornwall for houses and flats. Some of the pressure is due to the number of people coming south to retire but where two and three bedroomed properties are concerned the queue is joined by local home-seekers. In our opinion the scarcity element is relevant to the present case. 3. Mr Parlett discounted the usefulness of the comparable properties listed in the case papers but we consider that of the other registered rents86 brought to our notice, Nansavallan Cottage, Kea, and 2 Chelean Cottages, Frogpool, are both relevant. Although neither is as attractive as the subject property they do give an indication of the general level of registered rents for rural properties in the area and are useful for the purposes of comparison and contrast. 4. Mr Parlett also submitted that his rental figure of £936 per annum was supported by the inherent amenity value of the property. Our inspection showed us that even when the problem of sanitation has been solved this undoubtedly attractive property still has its limitations in that its proximity to the quarry face means that on three sides there are no windows and consequently there is no through ventilation. 5. Finally we have had regard to the relevant provisions of section 70 of the Rent Act and our own knowledge and experience in making our determination. The matter comes before me again following a fresh notice of motion in which the landlords contend that the addendum still fails adequately to explain the committee’s reasons for determining the rent at £507 a year. Mr Pryor made the following submissions: (1)  The committee have not dealt adequately with capital value, as they have made no comment on what would be a fair return on capital, which was the whole basis of the landlords’ case and they did not analyse the effect of scarcity. They failed to state the extent to which they found the submissions on capital value convincing. (2)  The committee have not said how they used the comparables, for example, on the basis of a rent per sq ft and have not explained how they derived their rent from them. The comparables had been seriously criticised by the landlords in their written evidence and the committee did not warn themselves of their potential unreliability. (3)  One cannot derive from paragraph 4 of the decision any clear understanding of how the committee sought to balance scarcity and amenity value and do not say what they attribute to each. (4)  The decision does not convey what the committee have done with the evidence and gives no indication of how it was used or how it affected their view. Mr Pryor referred to Mason v Skilling [1974] 1 WLR 1437 and Metropolitan Property Holdings Ltd v Finegold [1975] 1 WLR 349, saying that those cases show that capital value is highly relevant and that the committee should have given reasons for rejecting it. Although the committee were entitled to rely on their own knowledge and experience it is not clear whether in this case they did so. Mr Laws appeared as amicus curiae and most helpfully analysed what he described as the marked dichotomy between the English courts’ view of the duty to give reasons and that of the Scottish courts and concluded that if the former applies the committee’s decision is supportable, but not if the latter applies. He traced the English jurisprudence, starting with R v Brighton and Area Rent Tribunal, ex parte Marine Parades Estates (1936) [1950] 2 KB 410 where it was held, inter alia, that a rent committee may act on their own impression and knowledge. In the course of his judgment Lord Goddard CJ (p 420) said: The procedure which I have indicated can only work if the tribunal can act in that way and on their own inspection, if they like to make an inspection, of the premises, or on any information which they themselves may have. If witnesses are tendered, I have no doubt that it is the duty of the tribunal to hear them. If they are tendered and cross-examination is desired, it is the duty of the tribunal to allow cross-examination. Then, if the other side wish to call evidence to answer it, it is, again, their duty to allow it. . . . The tribunal heard all the evidence which was submitted to them by the landlords. Having done that, they were not bound to accept the figures which were put before them. That, I think, is made clear by R v Westminster Assessment Committee, ex parte Grosvenor House (Park Lane) Ltd [1941] 1 KB 53. The Brighton case was applied in Crofton Investment Trust Ltd v Greater London Rent Assessment Committee [1967] 2 QB 955 where it was held that the committee were entitled to act on their own impression and knowledge of conditions in the locality and were not obliged to act only on the evidence before it. The Brighton case and the Crofton case were both referred to in Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577 and Lord Denning MR, having done so and said that the committee are of course entitled to use their own knowledge and experience, went on to say: But that does not mean that they should throw over the evidence altogether. At any rate, they should not throw over the evidence without saying why. That is what troubles me most about their written decision. They threw over the figure of the rent officer (himself an expert), the figures of the experts on each side, and the figure of the tenant himself. They fixed a much lower figure — without a word to say why they did it. If the only failure of the committee had been to give their reasons, the courts could no doubt have ordered them to do so: see Iveagh (Earl of) v Minister of Housing and Local Government [1964] 1 QB 395; [1963] 3 WLR 974; [1963] 3 All ER 817 CA. But no application was made for the purpose. Nor was it made a ground of appeal, as it might have been. Mr Laws said that this part of Lord Denning’s judgment was obiter and I shall return to that question later. He then referred to Mountview Court Properties Ltd v Devlin (1970) 21 P&CR 689 and said the question there was the effect of a failure to give reasons, the failure being ex concessis and stated that the case was wholly consistent with the earlier and later decisions of the Divisional Court. This I regard as an important authority and shall consider it further later. Mr Laws’ next case was Tormes Property Co Ltd v Landau [1971] 1 QB 261 and he said that three propositions can be derived from it, namely: (1) the committee may choose their own standard of comparison; (2) they are not obliged to explain their rejection of a different standard of comparison; and (3) they are not obliged to state how they use the comparables and what weighed with them. He then mentioned Mason v Skilling [1974] 1 WLR 1437 but, as he said, that case did not concern the duty of a committee to give reasons but gives authority for the proposition that any method of ascertaining a fair rent might be adopted provided that it was not unlawful or unreasonable. It was said that the nature and extent of the reasons given must in some measure be governed by the nature of the problem before the committee. In the case where the committee was not satisfied with either of the alternative figures put forward in evidence by each side and on its own expert knowledge preferred another figure, there was no need for it to give, nor was it bound to give, a reason, save that it thought that its figure was right. That case was very much like the later case of Guppys (Bridport) Ltd v Sandoe (1975) 30 P&CR 69 and Guppys Properties Ltd v Knott (unreported, but of which I have seen the transcript). [This case was reported at (1978) 245 EG 1023, [1978] 1 EGLR 67.]. Mr Laws then turned to the Scottish cases starting with Learmonth Property Investment Co Ltd v Aitken [1971] SLT 349 which he said demonstrates the different approach by the Scottish courts, but I do not find that the court there was concerned with the duty to give reasons. However, the next case cited, namely, Albyn Properties Ltd v Knox [1977] SLT 41, was concerned only with that question. The opinion of the court can be summarised in the following extract: The statutory obligation to give reasons is designed not merely to inform the parties of the result of the committee’s deliberations but to make clear to them and to this court the basis on which their decision was reached, and that they have reached their result in conformity with the requirements of the statutory provisions and the principles of natural justice. In order to make clear the basis of their decision a committee must state: (i) what facts they found to be admitted or proved; (ii) whether and to what extent the submissions of parties were accepted as convincing or not; and (iii) by what method or methods of valuation applied to the facts found their determination was arrived at. In short they must explain how their figures of fair rent were fixed. Mr Laws submitted that that case places a degree of judicial consideration not justified by the English cases on a committee and to apply it to English cases would be in conflict with the authorities. He then went on to demonstrate why, for what he described as good practical reasons, the English approach should be followed. There must be a degree of informality because the committee deal with a lot of cases, often with unrepresented parties, thereby requiring loose procedures and sometimes inspections. The committees were composed of persons with expertise, including a qualified lawyer. Their task was different from that of a judge who goes as a stranger87 to a dispute. Hence for a proper working of the committees the duty to give reasons must be in conformity with the nature of the tribunal. The decisions have to take into account a great amalgam of factors, such as the age, the layout and the condition of the property. The committees must act speedily, informally and untrammelled with the duty of giving reasons on every point. In contrast, the Scottish approach demands a process of reasoning, full and objectively demonstrable, that is testable, at least as far as it is possible to be, including the quantification of the component of the rent and the detail of the method of valuation. He drew attention to the Tenants Rights, Etc (Scotland) Act 1980, section 47 of which imposes a duty on the committee to have regard to all the circumstances and in particular to apply their knowledge and expertise of current rents and comparable property. However, I remark that that only disposes of one difference between England and Scotland and does not go to the question of the duty to give reasons. Further, what Mr Laws describes as compelling reasons are applicable with equal force in Scotland but apparently have left the Court of Session unmoved. Mr Laws then turned to his submission on stare decisis and, having referred to a number of authorities, submitted that I am bound by the decisions of the Divisional Court. Mr Pryor argued to the contrary and cited Kruse v Johnson [1898] 2 QB 91. I cannot find that the question has ever been decided, but the balance of judicial opinion seems to favour Mr Laws, see for example Lord Goddard CJ in Police Authority for Huddersfield v Watson [1947] 1 KB 842 at 848. However, as will transpire, I do not have to decide this question as I find it sufficient to rely on decisions of the Court of Appeal and the Divisional Court and, where there is apparent conflict with the decisions of the Divisional Court, then to prefer the former. Mr Laws then dealt specifically with Mr Pryor’s submissions. He said that the first submission directly adopts the approach of the Scottish courts and is in conflict with the English cases and that the last sentence of the second paragraph of the committee’s addendum was sufficient. The second submission failed for the same reason and paragraph 3 of the addendum gave a sufficient indication of the way the committee had used the comparables. Again, the third submission implied a necessity to carry out such a balancing act as was required by the Scottish approach. Finally, he said that the committee have told us what they have done with the evidence so far as they have to; and they are not required to carry out a scientific exercise involving the calculations. I have found, in my consideration of the authorities, the case of Mountview Court Properties Ltd v Devlin (supra) to be the most helpful. I do not accept that the case proceeded on the footing that the failure to give reasons was accepted ex concessis, because Lord Parker CJ said: the first point, as I see it, is whether the reasons given in the decision as supplemented, as they were, in January of this year are, even now, sufficient, or, in other words, whether the committee have fulfilled their duty under section 12 of the Tribunals and Inquiries Act 1958, which provides that ‘It shall be the duty’ — now of the committee — ‘to furnish a statement, either written or oral, of the reasons for the decision if requested, on or before the giving or notification of the decision, to state the reasons . . .’ Then follows an important passage: What reasons are sufficient in any particular case must, of course, depend upon the facts of the case. I approach the matter in this way: that reasons are not deficient merely because every process of reasoning is not set out. I further think that reasons are not insufficient merely because they fail to deal with every point raised before the committee at the hearing. Indeed, I would adopt the words used by Megaw J in Re Poyser and Mills’ Arbitration [1964] 2 QB 467 at 477-478. That was dealing with an arbitrator’s award, but Megaw J said: ‘The whole purpose of section 12 of the Tribunals and Inquiries Act 1958 was to enable persons whose property, or whose interests, were being affected by some administrative decision or some statutory arbitration to know, if the decision was against them, what the reasons for it were. Up to then, people’s property and other interests might be gravely affected by a decision of some official. The decision might be perfectly right, but the person against whom it was made was left with the real grievance that he was not told why the decision had been made. The purpose of section 12 was to remedy that, and to remedy it in relation to arbitrations under this Act. Parliament provided that reasons shall be given, and in my view that must be read as meaning that proper, adequate reasons must be given. The reasons that are set out must be reasons which will not only be intelligible but which deal with the substantial points that have been raised.’ A little further down he said: ‘I do not say that any minor or trivial error, or failure to give reasons in relation to every particular point that has been raised at the hearing,’ — and he was dealing with an error of law on the face of an award — ‘would be sufficient ground for invoking the jurisdiction of this court.’ . . . Indeed, as Lord Denning MR said in Iveagh (Earl of) v Minister of Housing and Local Government [1964] 1 QB 395 at 410: ‘The whole purpose of the enactment is to enable the parties and the courts to see what matters he’ — and that was the Minister of Housing in this case — ‘has taken into consideration and what view he has reached on the points of fact and law which arise. If he does not deal with the points that arise, he fails in his duty: and the court can order him to make good the omission.’ The landlords had relied strongly on a fair rent which had been fixed for another flat (No 64) and, as to that, Lord Parker said: . . . the striking bit of evidence which they [the tribunal] had before them was No 64, and, beyond their saying, in the first reasons which they gave, that they had, to use their own words, ‘considered the evidence adduced’, . . . there is no explanation at all to show why they rejected what one would think would have to be a greater market value, a greater fair rent . . . . In my judgment, that failure does result in the fact that they have here given insufficient reasons; they have not complied fully with their duty under section 12 of the Tribunals and Inquiries Act 1958. The other members of the court agreed with Lord Parker and in particular Bridge J (as he then was) said: It seems to me that there was here a lack of adequate reason for the decision. Pausing there, it seems to me that from that judgment the following rules may be derived: (1)   The reasons must be intelligible; (2)   although they do not have to deal with every point raised, they must deal with the substantial points, showing what matters were taken into consideration and what view was reached on them. On the other hand there is no support given for the principle apparently applied in Scotland that the committee must state what method or methods of valuation they used and apply them to the facts found. Applying Guppys Properties Ltd v Knott (supra) I would add another rule: (3)   Where the committee (having conformed with rule (2)) decide to rely on their own knowledge and experience they are not required to further explain how their figure is determined. It follows from Mountview that whether Lord Denning’s judgment in the Lannon case was obiter or not, it seems fully supported by the judgment in Mountview, as does that part of the judgment of Edmund Davies LJ (as he then was) in Lannon where he said that ‘the committee were not obliged to accept any of the proffered evidence . . . but if they had in mind to do so (as they did) they should have made it clear why they did it . . .’. I am bound to say that I find it difficult to reconcile the Tormes case, particularly where Lord Parker held in terms that the committee were perfectly entitled to reject the yardstick (one based on replacement costs) put forward by the landlords without criticising it. However, the main argument seems to have been directed to the question whether the committee were entitled to look straight to a fair rent fixed for another property without investigating it and no consideration seems to have been given directly to the question whether there was a failure to comply with the rule that reasons must be given. Be that as it may, if Tormes is indistinguishable from Mountview and Lannon I am entitled to and do prefer the latter cases. Hence although I accept Mr Laws’ proposition that the committee may choose their own standard of comparison I reject his other two propositions said to be derived from Tormes. Therefore I conclude that the principles enunciated in Re Poyser88 and Mills’ Arbitration apply to rent assessment committees as they do in other jurisdictions and particularly as they were further described in Mountview and Lannon. Those principles I have already summarised in the form of rules which I now apply to the instant case by reference to Mr Pryor’s submissions. 1. It was not incumbent on the committee to say what would be the fair return on capital, nor to analyse the effect of scarcity, although the quality of the reasons would have been better had they done so. It is somewhat surprising, having regard to my previous judgment, that the committee did not state in terms whether they took capital value into account or rejected it and in not doing so they came close to failing to comply with the second rule I have already specified. However, it seems to me that either they could have said that they took it into account although mentally modified it on account of scarcity value or, alternatively, because of scarcity value they rejected it. They were entitled to take either course and so whichever they had adopted would not have vitiated their decision. Accordingly Mr Pryor’s first submission fails. 2. I think it follows from the English cases, in contrast to the Scottish cases, that it was not incumbent on the committee to say how they used the comparables and that they were entitled merely to set out their conclusions in the way they did. 3. It also follows that it was not incumbent on the committee to carry out the kind of arithmetical apportionment postulated in this submission. 4. I agree that the reasons are not as explanatory as they could be, but nevertheless I think the committee have shown that they took all relevant matters into account and, having regard to the third rule I have adumbrated, this submission must also fail. In view of the forgoing this application must be dismissed. The appeal was dismissed. There was no order for costs. Leave was given to appeal to the Court of Appeal. Leave has subsequently been given also to appeal on the point raised with regard to improvements in Guppys Properties Ltd v Knott (no 1).