Wigglesworth v Property Holding & Investment Trust plc

Rent Act 1977 — Problems concerning variable rent — Complaint of breach of natural justice rejected — Statutory appeal under Tribunals and Inquiries Act 1971 from decision of rent assessment committee — A tenant’s lease provided for payment of rent plus a further payment of 0.8% of any increase over a 1959 figure of costs of services supplied to the block of flats — Rent officer had determined a non-variable rent of £2,295 per annum inclusive of services — On objection by the tenant, the rent assessment committee, having decided that the variation provisions in the lease were reasonable, determined a rent of £2,350 per annum, to be registered as a variable rent in accordance with section 71(4) of the 1977 Act — The committee did not go into details as to the working out of the variable rent in practice, but the judge took the view that the result of their decision was to enable the landlord to recover a large sum in excess of what the committee intended (an ‘unintended excess of £880’) — It would mean that the rent would be £2,350 plus 0.8% of the difference between the cost of services for the block in 1959 and the current cost, although the figure of £2,350 in fact already reflected the value of the services supplied at the effective date — A landlord would be unlikely to recover this ‘unintended excess’ if he sued — Nevertheless, the committee must have misunderstood or misapplied the law and their determination would be quashed — The complaint about a breach of natural justice was that the committee had taken account of a letter (giving the service figures for 1959) which was not shown to the tenant until after the decision was made — Although this was a breach of the audi alteram partem rule, the judge found that the tenant had not suffered any actual prejudice and held that no breach of natural justice had been established — Case remitted to a different committee for reconsideration of the variable rent question This was a statutory appeal by the tenant under section 13 of the Tribunals and Inquiries Act 1971 from a decision of a rent assessment committee of the London Rent Assessment Panel, concerning the fair rent of a flat at 54 Swan Court, Chelsea Manor Street, London SW3. The appellant tenant was Godfrey Harlow Wigglesworth and the respondent landlords were the Property Holding & Investment Trust Ltd. T Straker (instructed by Waterhouse & Co) appeared on behalf of the appellant; A Layton (instructed by Cameron Markby) represented the respondents. Giving judgment, MCCULLOUGH J said: Mr Godfrey Harlow Wigglesworth appeals to this court under section 13 of the Tribunals and Inquiries Act 1971 against the decision of a rent assessment committee for the registration area of Kensington and Chelsea made on May 16 1983, in relation to a flat at 54 Swan Court, Chelsea Manor Street, London SW3, determining the fair rent of those premises at ‘£2,350 per annum variable’ with effect from that date. Mr Wigglesworth and his late brother were tenants of the flat by virtue of a lease dated September 27 1962. That was a lease for five years at a rent of £550 per annum plus a further rent calculated as follows: 0.80% of any increase in the costs incurred by the landlord in respect of the items of expenditure hereinafter specified for the purpose of the management and of supplying services for the mansion over the costs incurred by the landlord in respect of the same items of expenditure during the twelve months ended on the 31st day of March 1959 (hereinafter called ‘the basic year’). Later in the relevant clause nine items were specified. The term expired on September 27 1967 and the tenants held over. Mr Wigglesworth’s brother died in 1972 and the appellant has been the sole tenant since then. He has enjoyed the protection of the Rent Acts. Prior to 1982 there were at least two statutory determinations of the fair rent of the flat. The amounts registered as the rent on each of these occasions included a fixed sum for services. On December 1 1982, after application by the landlord, the rent officer registered a rent of £2,295 inclusive of services for the flat. Mr Wigglesworth objected to this figure and the matter was referred to the rent assessment committee. The committee sat first on April 14 1983 and heard evidence from Mr Andrew Woodburn, an associate in the firm of Folkard & Hayward, chartered surveyors, who are the landlords’ managing agents. In evidence he expressed the opinion that the tenant’s liability for his proportion of the services should be assessed on a variable basis. He submitted that a fair rent would be £2,450 variable, inclusive of £953 attributable to services, this sum to be variable in accordance with the terms of the lease. During the hearing on April 14 1983 the chairman of the committee asked Mr Woodburn if he could provide the cost of providing the services in the basic year to March 31 1959. He told the committee that he did not have the figures himself and he doubted whether his firm would have them because they were not managing agents in 1959. Mr Wigglesworth told the committee that the suggestion of a variable rent took him by surprise and he asked for and secured an adjournment. The hearing was resumed on May 9 1983. No figures for the year ended March 31 1959 were produced and nothing more was said about whether they could be obtained. Mr Wigglesworth gave evidence and made his submissions. He pointed out that the figures for the year ended March 31 1959 had not been produced. He submitted that if a variable rent were fixed for his flat he would not be treated fairly in comparison with tenants of three other flats whose rents were fixed in December 1982 and not made subject to variation. He also submitted that, if the base year ended March 31 1959 were used, the increase in the cost for services would be so large as to be unreasonable. It must have been evident to everyone that the costs in 1959 would have been but a small proportion of today’s costs. After the hearing was concluded the committee inspected the flat and at this time the chairman again expressed a desire to see the 1959 figures. During the afternoon of May 9 1983 Mr Woodburn was telephoned and was asked by someone in the rent assessment committee’s offices if the figures were available. By the next day they were; so on May 10 1983 Mr Woodburn wrote to the panel’s secretary in the following terms: We refer to the reconvened hearing on May 9 1983 in respect of the appeal on the above property. Our client, Property Holding & Investment Trust PLC, have now searched their back files to ascertain the base service charge figure as at March 31 1959 for Swan Court. The figures for the year ended March 1959 were prepared as part of the annual company accounts for that year but we are informed that they were not individually audited. The total service charge figure for the year ended March 31 1959 was £9,980, of which £79.90 (ie 0.8% of the total) was attributable to Flat 54.’ The letter was placed before the committee and they took it into account in reaching their decision of May 16 1983. Mr Wigglesworth was sent a copy of the decision on June 7 1983 and replied the same day saying that it did not indicate the basis upon which the variation was to be calculated. He asked for the position to be clarified by an amplification of the decision. On June 15 1983 the clerk to the committee sent him a copy of the landlords’ agents’ letter of May 10 1983. This was the first Mr Wigglesworth knew that figures for the year ended March 31 1959 had been put before the committee after the conclusion of the hearing. He had therefore not been able to comment on them or cross-examine about them. In a letter dated June 21 1983 he again pointed out that the decision did not explain how the rent was to be varied and he submitted that no effect could therefore be given it. His letter concluded with a request that ‘in the interest of fairness I be given the opportunity of cross-examining Mr Woodburn and making further submissions’. On June 24 1983 the reasons for the decision were sent to Mr Wigglesworth. A telephone call he made on June 27 1983 to the clerk revealed that his letter of June 21 1983 had not been put before the committee and again he suggested that the decision had been premature. He heard no more. 94 Mr Straker, on the appellant’s behalf, submits that the decision should be quashed on two grounds: first, that the rent assessment committee have erred in law in fixing a variable rent; and, second, that the failure to inform Mr Wigglesworth of the letter of May 10 1983 and to give him a chance to meet it amounted to a breach of the rules of natural justice. In relation to his first ground Mr Straker submits that, having regard to the terms of section 71(4) of the Rent Act 1977 and to the terms of the lease of 1962, the rent which has been fixed for the second of the two years for which it will be in force will be some £800 to £900 greater than the committee can have intended and that this demonstrates their failure properly to appreciate the effect of section 71(4) and of the terms of the lease. Mr Layton, for the landlord, submits that the committee made no such error and that there is no built-in addition of £800 to £900. He submits that a proper understanding of the law demonstrates that the committee achieved exactly what it set out to achieve. If, which he denies, the terms of the lease and the relevant provisions of the Rent Act 1977, looked at alone, would lead to the addition of the £800 to £900, he submits that this excess would not be recoverable by the landlord having regard to the provisions of Schedule 19 to the Housing Act 1980 and to the principle referred to in the Court of Appeal in Finchbourne Ltd v Rodrigues [1976] 3 All ER 581. Mr Layton contends that the variation, if any, over £2,350 applicable to the second year of the new registration should be calculated as follows. Assume (as must be so) that the £2,350 consists of a payment for occupation (call this X) and a payment for services etc. The actual cost of services etc in year ended March 31 1959 is known; 0.8% of this sum is £79.90. By the second year of the new rent the actual cost of services in the years ended March 31 1983 and March 31 1984 will be known. 0.8% of each of these sums can then be calculated. Mr Wigglesworth’s liability in the second year will then be X plus 0.8% of the costs for the year ended March 31 1983, minus 0.8% of the costs for the year ended March 31 1959 (which figure obtained by subtraction he calls Y), plus 0.8% of the difference between the costs for the year ended March 31 1983 and the year ended March 31 1984 (which he calls Z). In other words Mr Wigglesworth pays X plus Y plus Z. A less complex way of expressing this would, it seems to me, be to say that his liability will be X plus 0.8% of the costs for the year ended 1984 less 0.8% for the costs for the year ended 1959. But, however, the result is expressed, the rent due cannot be calculated without knowing (a) the costs for the year ended 1959, (b) the costs for the year ending 1984 and (c) either X or the costs for the year ended 1983. This last-mentioned figure would enable X to be calculated. The first point which strikes me about Mr Layton’s submission — and I am sure that it will have struck Mr Wigglesworth — is that if this is how the variation is to be calculated it is certainly not apparent from a reading of the document or documents where one would expect to find it, namely the register and the lease. The register is silent on the method of calculation. The lease does refer to 0.8% of the annual costs; it does refer to costs for the year ended March 31 1959, and it does refer to costs for the particular year under consideration. However, it contains no reference to X nor any express reference to the costs for the year ended 1983. The method of calculation referred to in the lease simply involves taking the difference between the figure for the year ended 1959 and the figure for the year in question and multiplying by 0.8%. So, if Mr Layton’s construction is to hold good, it involves importing a term which is to be found neither in the lease nor in the register. Mr Layton submits that it is to be found in the Act. Of necessity the Rent Acts override the contractual terms agreed between landlord and tenant in every case where a rent officer or rent assessment committee fixes the rent. Whether or not such a rent is fixed, the relationship between a landlord and a statutory tenant is governed by the Acts together with the terms of the lease. Where there is inconsistency, the Acts, naturally, prevail: see section 3(1) of the Rent Act 1977. So far so good, but, submits Mr Straker, there is nothing in the Acts which provide Mr Layton with the missing terms which he needs. Mr Straker, too, relies on section 3(1). He relies also on the terms of section 71 and in particular on section 71(4). Section 71(1) provides: The amount to be registered as the rent of any dwelling-house shall include any sums payable by the tenant to the landlord for the use of furniture or for services, whether or not those sums are separate from the sums payable for the occupation of the dwelling-house or are payable under separate agreements. Subsection (4) reads: Where, under a regulated tenancy, the sums payable by the tenant to the landlord include any sums varying according to the cost from time to time of — (a) any services provided by the landlord or a superior landlord, or (b) any works of maintenance or repair carried out by the landlord or a superior landlord, the amount to be registered under this Part of this Act as rent may, if the rent officer is satisfied or, as the case may be, the rent assessment committee are satisfied, that the terms as to the variation are reasonable, be entered as an amount variable in accordance with those terms. The ‘terms’ referred to in section 71(4) must, Mr Straker submits, be the terms about variation which are to be found in the lease, and these make the base year the year ended March 31 1959. One assumes, of course, that the lease did not expire after five years and is still operative, but there is nothing to suggest that the costs in the year ended March 31 1983 are relevant for any purpose other than to determine the increase in rent to be paid in that particular year. There is nothing in the lease to suggest that they are also to be used to calculate X. Mr Layton’s answer to this is that the implication derives from section 71(1) which, leaving out the immaterial words, reads: ‘The amount to be registered . . . shall include any sums payable . . . for services’. Mr Layton, therefore, submits the rent of £2,350 determined by the committee must include a services element. I agree. However, he is still short of a term which enables him, or anyone trying to divine the effect of the rent assessment committee’s determination, to say that the services element is to be taken as the appropriate proportion of the sums reasonably spent by the landlord on such items in the year ended March 31 1983. Had Mr Layton been able to demonstrate that the reasons given by the committee should be taken as part of their determination he might have been at least a step further along the road but, rightly in my opinion, he did not make this submission. Mr Layton’s argument, in my judgment, derives no assistance from Schedule 19 to the Housing Act 1980, which is concerned, as McNeill J pointed out in Firstcross Ltd v Teasdale (1982) 265 EG 305 at p 313, [1983] 1 EGLR 87, with the assessment of the variable contribution, that is with its quantification. The references in that Schedule to sums ‘reasonably’ incurred cannot be used as a basis upon which Mr Layton can import a term into the present relationship between these parties merely because it would be reasonable to do so. Nor, for the same reasons, do I think he is assisted by the references to ‘fair and reasonable costs’ in Finchbourne Ltd v Rodrigues. Since there are references to ‘business efficacy’ and to Liverpool City Council v Irwin [1976] QB 319 in Finchbourne Ltd v Rodrigues, I should add that Mr Layton did not argue that the missing terms should be implied on either of these bases. Again I think he was right not to do so. These are the reasons why I reject the construction for which Mr Layton contends. What, then, is the effect of the rent assessment committee’s determination?  If, as I think is right, one starts with the lease and modifies it only in so far as the Act and the committee’s determination require, what rent will be payable, if a variation is called for, in the year ending March 31 1985?  During the earlier part of the argument I thought that the answer must be £2,350 plus 0.8% of the difference between the costs for the year ended March 31 1959 and the costs for the year ending March 31 1985. This, it will be seen, would result in the landlord being able to recover some £800 to £900 more than the committee can have intended. The point is best illustrated by example. I take round figures. Total costs for the year ended 1959: £10,000, 0.8% of which is £80. Total costs for the year ended 1983: £120,000, 0.8% of which is £960. Total costs for year ending 1984: £140,000, 0.8% of which is £1,120. Assume the year ending 1984 to be the first year of the new rent. In the year ending 1984 the rent due would, as I interpret the lease, be £2,350 plus the difference between £1,120 and £80, ie £1,040. Yet, one presumes, the rent assessment committee only intended that it should rise by the difference between £1,120 and £960, that is £160. Thus there is what I take to be an unintended excess of £880. However, I have little doubt that if the landlord sought to recover a rent of £2,350 plus £1,040 for the year ending 1985, it would fail. My present opinion is that section 71(1) of the Act would enable the judge to say that this cannot be the effect of the committee’s determination. I think he would probably hold that the variability95 provision was too obscure in meaning to have any effect and that he would simply hold that only the £2,350 was recoverable. It follows from what I have said that the rent assessment committee misunderstood or misapplied the relevant law and that their determination must be quashed. The matter must go back for redetermination before a differently constituted panel. The correct approach is to consider the terms as to variability which are to be found in the lease. If the result which the committee wish to achieve can be effected by grafting their determination on to these terms, all well and good. Terms inconsistent with their determination will, of course, be overridden. It is as if they were notionally crossed out. But what the rent assessment committee cannot do is to write additional terms into the lease. In Firstcross Ltd v Teasdale McNeill J in effect held that the terms of the relevant lease were such that a variable rent could be fixed. However, those terms differed from the terms of Mr Wigglesworth’s lease. If, as I believe may be the case (and I emphasise the word ‘may’, because I express no concluded opinion about that), it proves impossible for the committee to determine a variable rent without controverting the principle which I have endeavoured to explain, then they will have to determine a rent which contains a fixed service element. I am glad to reach the conclusion that the law requires me to quash this determination. The law of landlord and tenant in general and the fixing of rents in particular may be complicated, but it would be a matter for regret if rent officers and rent assessment committees could not always make determinations which were comprehensible when read in conjunction with the relevant lease. Landlords and tenants are surely entitled to that. I turn to the natural justice point. The rent assessment committee clearly took into account the letter from the landlords’ agents dated May 10 1983. The decision was taken on May 16 1983, before Mr Wigglesworth had been shown that letter or had its terms drawn to his attention. So he had no opportunity to make representations about it or to consider whether he wished the committee to reconvene so that he might cross-examine. In this there was a clear breach of the principle that a party must be given notice of material which is put before the decision-making body and has the right to be heard on it. Whether or not the decision should be quashed in consequence depends on whether Mr Wigglesworth was prejudiced by this omission or whether there is a real possibility that he was so prejudiced. I must therefore consider whether it can realistically be said that a decision more favourable to Mr Wigglesworth might have been made had he been shown the letter of May 10 1983 in time. I can readily accept that Mr Wigglesworth might have wanted to ask questions about it, that he might have asked the committee to reconvene, that his request might have been granted and that he might have been given the opportunity to cross-examine and make further submissions, but I have difficulty in finding any question the answer to which might have led the committee to make a decision more favourable to him. For 1959 there was simply a total figure. There was no breakdown. There was no indication of the items included and the relevant amounts had not been individually audited. These are all matters to which Mr Wigglesworth could have drawn attention had he been given the chance. None of these points were referred to specifically in the reasons. However, had these points been made, I have no doubt at all that the committee would still have thought it right to take the figures given in that letter as correct, and I see no real possibility that any question asked by Mr Wigglesworth might have procured an answer which would have persuaded them to the contrary. Mr Straker makes a further complaint. He says that, in the light of the figures given in that letter, Mr Wigglesworth might have been able to persuade the committee that it was either impracticable or impossible in law to fix the new rent by reference to the 1959 figures, that it was therefore impracticable or impossible in law to fix it by reference to the terms of the lease, and that it was therefore impracticable or impossible in law to fix a variable rent at all. Mr Straker points out that at the hearing on May 9 1983 no 1959 figures were available. Therefore, he says, Mr Wigglesworth did not have to make submissions about the use to which they could properly be put. His submissions were directed to the evidence before the committee and therefore assumed that no such figures were forthcoming. I have considered this submission with care, but I am not able to accept it. It is clear from paragraph 3(b) of the committee’s reasons that Mr Wigglesworth did have in mind the effect of grafting the variable rent on to the terms of the 1962 lease, and it is equally clear that he made submissions about it. I am not persuaded that there is any real risk that he was deprived of any further argument which he might have advanced had he known that the committee had been given the figures. In my judgment no breach of natural justice has been shown. Mr Layton raised a further point about delay. However, I am not prepared to deprive Mr Wigglesworth of relief merely because the notice of motion was not served and the appeal entered within 28 days of June 5 1983, which was the date he received the committee’s decision. He sensibly tried to persuade the committee to deal with the complaint which he made without having to resort to an application to this court. On June 27 1983 he wrote to them again to this effect. They did not reply. His notice of motion is dated July 21 1983, only 24 days after he sent this letter. In so far as he requires leave to dispense with the time-limits specified in the rules I grant it. Accordingly, the committee’s determination, as I have said, must be quashed and the matter must go back for reconsideration before a differently constituted committee. The respondents were ordered to pay the appellant’s costs. Leave to appeal was refused.