London Rent Assessment Committee and another v St George’s Court Ltd

Rent Act 1977 — Rents of comparable properties — Duty of rent assessment committee — Whether a committee are entitled to go behind the rents determined by another committee for properties prima facie fully comparable and treat the determinations as unfair — Appeal from decision of McCullough J in a case which resulted in considerable litigation — The committee’s determination of a fair rent for a number of flats in a block came before the judge on two occasions — On the first occasion it was remitted for further reasons — On the second occasion the judge found the amplified reasons adequate, but held that they revealed an error of law — The committee had not followed the findings of a previous committee sitting three months earlier to determine rents for other flats of a similar type in the same block — They explained that (inter alia) in their view the evidence before the previous committee had not been tested to the extent that it might have been if the tenants had been properly represented — Moreover, the previous committee had not had the benefit of submissions put to the present committee on behalf of the tenants — The judge considered that in questioning the material on which the previous determinations had been based the committee were in effect saying that they were unfair — He held that, on the principle stated by Lord Parker CJ in Tormes Property Co Ltd v Landau, this amounted to an error of law; and he ordered the determinations to be questioned and the case reconsidered by a fresh committee — The rent assessment committee and the rent officer appealed against this decision — Court of Appeal upheld the judge’s decision and their judgments contain the following guidance of importance for rent officers and rent assessment committees — Unless it can be demonstrated that the rent assessed for a comparable property has been arrived at under a fundamental misapprehension, it is the duty of a committee to regard the previous assessment as a proper assessment of the fair rent and as the best evidence of the fair rent for the subject property — It is open to a party to attack a previous determination by showing that the rent was based on some fundamental misapprehension of the true state of affairs surrounding the particular property — Possible examples are where a particularly cogent piece of evidence or a particularly significant argument had not been put before the previous committee — Where the subject-matter was a purpose-built block of flats, with the same layout, one on top of another, very weighty reasons would have to be shown for a departure from a recently assessed fair rent — In the present case there were not sufficient reasons to enable the committee to disregard a recent assessment of the same type of flats in the same block — By doing so, and thus in effect treating the previous assessment as unfair, the committee fell into an error of law — Appeal dismissed This was an appeal from a decision of McCullough J reported at (1983) 267 EG 523. This followed an earlier decision by the same judge reported at (1982) 265 EG 984, [1983] 1 EGLR 98. In the decision under appeal the judge quashed the committee’s decision, remitted the matter for a rehearing and ordered the rent officer to delete the rents registered pursuant to the committee’s decision and restore the rents as previously determined. The properties in question were flats at St George’s Court, London SW7. Simon Brown (instructed by the Treasury Solicitor) appeared on behalf of the appellants, the London Rent Assessment Committee and the rent officer for Kensington and Chelsea; Nicholas Patten (instructed by Pickering, Kenyon) represented the respondent landlords, St George’s Court Ltd. Giving judgment, GRIFFITHS LJ said: This is an appeal from a judgment of McCullough J, given on April 29 1983, by which he quashed the fair rent which had been assessed by the London rent assessment committee in respect of a number of flats in St George’s Court, Gloucester Road, London SW3. The history of the matter is briefly as follows: in July 1981 the rent officer assessed the fair rents under the provisions of the Rent Act 1977 for a number of flats in St George’s Court. The landlords, not being satisfied with that assessment of the rent, appealed to the rent assessment committee. They presented their evidence to the rent assessment committee through a surveyor, Mr N C M Renny, who is an associate in the well-known firm of Chestertons. Mr Renny’s evidence attacked the fair rent assessed by the rent officer by founding upon a decision of the rent assessment committee given in August 1981 in respect of a number of other flats in St George’s Court. Those other flats were all types similar, if not identical, to the type of flat the rent of which the rent officer had fixed in July. Mr Renny took, as his starting point, the fair rent for those comparable flats fixed by the rent assessment committee in August 1981 and then submitted that there should be a modest increase on those rents to allow for an element of inflation, which he submitted to the committee at 16% per annum. The tenants attacked this method of assessment, and they put evidence before the committee based primarily upon a proof of evidence produced by a Professor W A West. This proposed a radically different method of assessment to that based upon a comparison of the fair rent of other comparable flats in the block. They also invited the committee to have regard to the fair rent which had been fixed for a flat in another block known as Sussex Mansions, which they submitted was comparable. In addition, they gave a good deal of evidence attacking the condition of the flats, and the conduct of the management. In the decision which was given by the rent assessment committee100 by written reasons dated December 21 1981 the committee accepted the general approach of Mr Renny as the correct method of assessment. They rejected Professor West’s approach, and it is clear that they placed little weight upon the rent that had been assessed for 22 Sussex Mansions. But despite the fact that they said they accepted the general approach put forward by the landlords, the committee went on to say that they did not agree with the conclusions drawn from particular comparisons, which must, in this context, refer to the August fair rent; nor did they accept the allowance adopted for the passage of time, and in the event they confirmed the rent officer’s July assessment with a marginal but immaterial alteration in the service element in those assessments. But although they stated their conclusions, they gave virtually no reasons for rejecting what they had agreed was, on the face of it, Mr Renny’s correct approach to the assessment of the fair rent for the subject flats. The landlords therefore proceeded by way of judicial review to challenge their decision, and the first hearing was before McCullough J on November 3 1982. He accepted the landlords’ submissions that the tribunal had not given understandable reasons for their rejection of Mr Renny’s approach, and he referred the matter back to the tribunal for a further statement of their reasons. The tribunal acceded to the judge’s request, and they gave a further statement of their reasons in a document dated December 9 1982. The learned judge, in his judgment of April 29 1983 accepted that the reasons they gave in that document explained the process by which they arrived at their decision, but he held that those reasons disclosed an error of law in their approach. At this stage I will read how the learned judge put the matter. He said: I regard the committee’s reason for rejecting the August decision as revealing an error of law. The mystery, as it were, is now solved. At the original hearing no one knew why Mr Renny’s comparison was rejected. Now we do. It was because the committee were of the view that the August 1981 determination had not been fair. This committee was placed in a difficult position. They were sitting only three months after the August determination. They knew, certainly by the time they put their own decision into writing, that the tenants had applied at the outset of the hearing in August for an adjournment for the reason that Queen’s Counsel, who had been going to represent them, was unable to attend. The adjournment was refused. The hearing proceeded. By the time of the hearing in this case, it was known that an application for judicial review of the August determination had been made or, at least, that leave to make such an application was being sought, and that that application was then still undetermined. I think that this was why they fell, no doubt unconsciously, into the error of going behind the August 1981 determinations and treating them, although they did not use these words, as unfair. Mr Patten was given leave to make the necessary amendment to his grounds without objection from Mr Brown. It is, I think, evident from the way in which the additional reasons are framed that the rent assessment committee gave little, if any, weight to the fair rents that had been assessed for similar flats in this block only three months before, in August. What they said was: The committee also had reservations about accepting Mr Renny’s conclusions drawn from particular comparisons because with one exception they were derived from the August decision. The evidence before that committee was not tested to the extent it might have been had the tenants been properly represented. Moreover, the members of that committee did not have the benefit of the submissions put to the present committee on behalf of the tenants, which, although not accepted in full, as can be evidenced by the committee’s determinations, did to some extent influence their consideration of the general level of fair rents for the subject flats. Now we are dealing here with a purpose-built block of flats, and there is no dispute that the flats which were being considered in the November assessment committee’s deliberations were the same type as the flats which were considered in the August decision. On the face of it, one would have expected that the fair rent of two flats of similar type in a purpose-built block would bear a very close relation to one another. That was clearly the view of the rent officer, because he assessed the fair rents during the summer of 1981 for the flats comprised in the August and the November applications as virtually identical. There was a variation of only £5 between them. The August committee considered that his fair rent was significantly too low, and they increased his assessment by some £200 to £300. I turn, as did the learned judge, to the decision of Lord Parker CJ in the Divisional Court in Tormes Property Co Ltd v Landau [1971] 1 QB 261. That was a case in which the landlords had submitted that an assessment committee ought not to proceed by way of reliance upon comparable rents of other properties, but ought to proceed upon a wholly different basis, based upon a fair rent calculated according to the capital employed. The main basis of the argument of the landlords was rejected by the court, and Lord Parker indicated, in the course of his judgment, that in order to develop a cohesive system which would be fair between tenants and landlords, the best evidence upon which to base a fair rent was the evidence of other comparable properties. The landlord’s counsel sought to escape from that by saying that the rent assessment committee should not be bound to follow or to have close regard to previous assessments of the fair rents of comparable properties because they might be based on some error of law or fact. Lord Parker said, of that argument: As I understand it, Mr Crawford says that that was quite improper because, for all one knows, the committee which assessed a fair rent with regard to the flats in 12 Belitha Villas, were wrong in law or fact and, if that rent is taken to be the yardstick in the future, then that wrong is just being perpetuated. For my part, I am quite unable to accept this. Unless and until it is shown that the committee which determined the fair rent in respect of the flat in 12 Belitha Villas were wrong in law, I must, and do, assume that they were right in law. The landlords did not appeal on any point of law. The appellants in the present proceedings did not criticise the fair rent assessed with regard to that fact on the basis that it was wrong in law. In so far as the committee may have been low in fact without an error of law this is, unfortunately, something which, as it seems to me, landlords have to face; the method of curing it is through Parliament. Parliament has entrusted the facts to these committees. More important, in my judgment, is the fact that these landlords have had these comparables, in particular the comparables in Belitha Villas, before them ever since the decision of the rent officer. There was no criticism, as I understand it, from reading the notes of the hearing, of any of these other fair rents fixed in respect of Belitha Villas, and, in these circumstances, it seems to me that the best evidence of fair rent — which will be market rent less scarcity — is to be found in these fair rents of comparable properties. It must surely be the essence of this whole scheme that there should be uniformity, and, no doubt, as the volume of registered fair rents increases in the future, no one will go to market rent less scarcity; they will go to the enormous volume of fair rents which have been registered. That was guidance given to rent assessment committees some 13 years ago. Precisely the same approach was approved by the House of Lords, and I go to the decision in Mason v Skilling [1974] 1 WLR 1437, where Lord Reid said, at p 1439, speaking of section 42: In my view, this section leaves it open to the rent officer or committee to adopt any method or methods of ascertaining a fair rent provided that they do not use any method which is unlawful or unreasonable. The most obvious and direct method is to have regard to registered rents of comparable houses in the area. In the initial stages this method may not be available, but as the number of comparable registered rents increases the more likely it will be that it will lead to a correct result. Of course it must be open to either party to show that those comparable rents have been determined on a wrong basis but until that is shown it must be assumed that rents already determined have been rightly ascertained. Now in this case there has been no attack by the tenants to show that the August rents were determined upon a wrong basis. Of course, it will always be open to a tenant to attack a fair rent by showing that the rent was based on some fundamental misapprehension of the true state of affairs surrounding the particular property. For instance, because a tenant may prepare and present his case incompetently he may fail to draw to the attention of the rent assessment committee some really cogent piece of evidence that ought to affect the determination of the fair rent. Another tenant of a comparable property should not of course be bound by a decision that has been arrived at as a result of an error of that sort. Furthermore, I would not exclude the possibility of a rent assessment committee arriving at a determination which could be shown to be wrong because it had not had the benefit of a particularly significant argument being presented to it. But having said that, in order to give cohesion to the scheme as a whole, unless it can be demonstrated to a rent assessment committee that the rent assessed for a comparable property has been arrived at upon such a fundamental misapprehension, then it is the duty of that rent assessment committee to regard such a previous assessment as a proper assessment of the fair rent and as the best evidence of the rent which would be fair for the property that it has under consideration. Of course all the circumstances would have to be taken into account when deciding the weight to be attached to the rent of a comparable property, but when one is dealing with a purpose-built101 block of flats, with flats of the same layout, one on top of another, very weighty reasons would have to be shown before it would be permissible to depart, certainly to depart substantially, from the fair rent which had very recently been assessed for one of those similar flats. In this case I am driven to the conclusion that the rent assessment committee paid little if any heed at all to the August assessment. They used an entirely different method of arriving at their own assessment. They said they had arrived at their assessment by starting from the fair rent which was assessed for one of these flats by an assessment committee in 1979, and then using their general experience, upgrading that rent until they arrived at the same rent as that assessed by the rent officer. As I see it, that is not using an obvious comparable at all. They make two other points. (1) That they had the evidence in respect of 22 Sussex Mansions, which was not available to the August committee. But in my view it is quite apparent from the way they expressed themselves in their original decision when dealing with 22 Sussex Mansions that they attached very, very little weight to the value of that as a comparable. It was, after all, a different block of flats in a different state of repair. They also pointed out that the flats in St George’s Court, although similar, are not identical; but I think very little weight can be attached to that in the circumstances of this case. I do not lose sight of the fact that any dissimilarity weighed with the rent officer to the extent of £5 only in a total rent of some £2,700. So they were, in this case, given the advantage of a fair rent assessed on a truly comparable flat — a flat which was as comparable as it could reasonably be — and in my view there were no sufficient reasons to enable them virtually to disregard that assessment in their computation of the fair rent. As a matter of history, I should say that the tenants’ application for judicial review, based on the fact that they did not have the advantage of Queen’s Counsel at the hearing in August, failed when it was heard by the Divisional Court. It is not surprising because when one looks closely at the August decision, one sees that all the relevant arguments were placed before the assessment committee by the tenants, and the committee reviewed the evidence and the arguments put forward with the greatest care. The only difference between the arguments presented to the August committee and those presented to the November committee was in fact this: In November, the tenants relied on the evidence of Professor West, and his basis of calculation, but that was entirely rejected by the committee. The only other matter was that the tenants relied upon one flat, 22 Sussex Mansions, in November, but they did not in August. But, as I have already said, the committee clearly attached little if any weight to that. I therefore come to the conclusion that there were no sufficient reasons here for allowing this committee to virtually disregard the fair rent that had been assessed only three months earlier for the same type of flats in the same block, and it seems to me that if committees are entitled, for reasons to which very little weight can be attached, to disregard the assessments of previous committees in circumstances such as these, it is going to lead to the greatest of uncertainty, to an unending number of appeals and to unfairness between tenants in the same block who will, with substantially similar properties, have significantly different rents assessed as the fair rent. It will lead to all the uncertainty which Lord Parker foresaw in 1971. Accordingly, for these reasons, I agree with the learned judge that the committee misdirected themselves on this occasion, and this matter should be reheard by another committee. I would dismiss this appeal. Agreeing, SLADE LJ said: At the risk of a little recapitulation, I will add a few words of my own. Mr Patten, on behalf of the respondents, accepted, rightly in my view, that when a rent assessment committee is faced with a number of different comparables, it is entitled, in the propert exercise of its discretion, to decide what relative weight to attach to each of them. However, what went wrong in the present case in my opinion was this: the determination of a rent assessment committee given in August 1981 in respect of similar flats in the same block only three and a half months before the hearing of the rent assessment committee on November 20 1981 afforded, at least prima facie, the best guide to the level of rents to be determined for the subject flats: (See Tormes Property Co Ltd v Landau [1971] 1 QB 267, per Lord Parker CJ, with whom Cooke and Fisher JJ agreed). Mr Renny’s evidence and his submissions to the committee in November were largely based on the August decision. Despite Mr Brown’s persuasive submissions to the contrary, I think it is clear that the committee, in reaching its decision in November 1981, heavily discounted the importance which it might otherwise have attached to Mr Renny’s submissions and to the August decision, and thought it right to go behind the latter decision because of the matters referred to in para 7 of its decision, which reads as follows: The committee also had reservations about accepting Mr Renny’s conclusions drawn from particular comparisons because with one exception they were derived from the August decision. The evidence before that committee was not tested to the extent it might have been had the tenants been properly represented. Moreover, the members of that committee did not have the benefit of the submissions put to the present committee on behalf of the tenants, which, although not accepted in full, as can be evidenced by the committee’s determinations, did to some extent influence their consideration of the general level of fair rents for the subject flats. That paragraph, to my mind, is of crucial importance in the present case, because it illustrates that the factors referred to in that paragraph clearly coloured the whole of the committee’s approach to the present case. In my opinion, they were not entitled to take these factors into account, so as to conclude that the comparable rents had not been correctly ascertained in August. No doubt, as Lord Reid has said in Mason v Skilling [1974] 1 WLR 1437 at p 1439: . . . it must be open to either party to show that those comparable rents have been determined on a wrong basis but until that is shown it must be assumed that rents already determined have been rightly ascertained. However, the tenants, at the hearing in November, did not attempt to show that the rents assessed in August had been assessed on an incorrect basis. If para 7 of the decision were to be read as a statement of reasons for concluding that the comparable rents had been determined in August on the wrong basis, those reasons would, in my opinion, be quite inadequate. As Lord Parker pointed out in the Tormes case at p 267: ‘. . . it must surely be the essence of this whole scheme that there should be uniformity . . .’  For my part, I think the whole objective of uniformity would be seriously jeopardised if rent assessment committees were to regard themselves as free to disregard, or heavily discount, rents of truly comparable properties very recently ascertained simply because of information given to them as to the nature or quality of the representation of one or other of the parties at the previous hearing. I might add that in the present case the August rent assessment committee stated in express terms that it had applied its own knowledge and experience to the matters in hand and, on the information available to us, I am far from satisfied that anything went wrong at that hearing at all. In my judgment the learned judge was right in concluding, as he did at p 5G of his judgment, that the committee in November ‘fell, no doubt unconsciously, into the error of going behind the August 1981 determinations and treating them, although they did not use these words, as unfair’. For these reasons, and for the further reasons given by Griffiths LJ, I, too, would dismiss this appeal. Also agreeing, BROWNE-WILKINSON LJ said: Although my views have varied from time to time during the hearing of this appeal, at the end of the day I am satisfied that the appeal should be dismissed for the reasons given by Griffiths LJ. My views are strictly confined to the facts of this case where, as my lord stressed, we are dealing with flats of the same type in the same block. For my part I do not think it is desirable to seek to lay down any wider principles as to when it is legitimate for one committee to distinguish the decision of another committee as to the fair rent charged for a comparable property. It seems to me that circumstances may vary too widely for there to be any general principle. But I am satisfied that a tribunal must accept a rent which has been fixed as the fair rent of a truly comparable property (in circumstances where the properties in question are virtually identical) as being the best evidence of the fair rent of the subject flat. That was not the approach of the committee in this case, and for the reasons given by Griffiths LJ, I would dismiss this appeal. The appeal was dismissed with costs.