UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2012] UKUT 374 (LC)
Case Number: LRX/86/2011

	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – service charges – Landlord and Tenant Act 1985 s20C – Leasehold Valuation Tribunal (Fees) (England) Regulations 2003 Regulation 9

	IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF A LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
BETWEEN	ST JOHN’S WOOD LEASES LIMITED	Appellant
	and
	JOANN O’NEIL	Respondent

Re: Flat 4,
	Athena Court,
	2 Finchley Road,
	London,
	NW8 6DP

	Before: His Honour Judge Gerald and N J Rose FRICS

	Sitting at 43-45 Bedford Square, London WC1B 3AS
on 6-7 September 2012

Cecily Crampin instructed by Butcher Burns LLP for the Appellant
The Respondent in person.

The following cases were referred to in this decision:
Iperion Investments Corporation v Broadwalk House Residents Limited [1995] 2 EGLR 47 
The Tenants of Langford Court (Sherbani) v Doren Limited LRX/37/2000
Schilling v Canary Riverside Development PTE Limited LRX/26/2005
The Church Commissioners v Derdabi [2010] UKUT 380 (LC) LRX/29/2011
Roache v News Group Newspapers Limited [2003] 1 WLR 60
Lucie M v Worcestershire County Council and Evans [2002] EWHC 1292 (admin)
Flannery v Halifax Estate Agencies Ltd [2000] 1WLR 377
English v Emery Reimbold & Strick Limited [2002] 1WLR 2409
South Buckinghamshire DC v Porter (No 2) [2004] 1WLR 1953

DECISION
Introduction
1.	The Appellant is the landlord of the block of 23 flats known as Athena Court, Finchley Road, London. The Respondent is the tenant of one of those flats. On 29th September 2010 she issued an application (the “Application”) for determination of her liability to pay and the reasonableness of the service charges demanded by the Appellant pursuant to sections 19 and 20 of the Landlord and Tenant Act 1985 (“the 1985 Act”).
2.	After a two day hearing on 14th and 15th February 2011 and a site visit on 8th March 2011, the Leasehold Valuation Tribunal (“the LVT”) on 3rd May 2011 issued its decision (the “Decision”). Having dealt with the substantive issues, none of which are challenged, the LVT ordered that the Appellant be disallowed from recovering its costs through the service charge and that it pay the Respondent her £500 court fees.  It said
“81.	The Applicant has also made an application under section 20C of the [1985] Act for an order that the Respondent be disentitled from recovering all or any of the costs it had incurred in responding to this matter. Having carefully considered all of the circumstances of this case, and, in particular, to the fact that the Applicant had, in the course of the hearing, obtained a number of significant concessions from the Respondent and the fact that she had overall succeeded on the majority of the issues, the Tribunal considered it was just and equitable to make an order preventing the Respondent from recovering any of the costs it had incurred in these proceedings.
“82.	For the same reasons, the Tribunal also made an order requiring the Respondent to reimburse the Applicant the total fees of £500 paid by her to have this application issued and heard.”
3.	Although not expressly stated, it is common ground that paragraph 81 was intended to benefit an additional 19 tenants named elsewhere, thereby preventing the Appellant from recovering costs through the service charge from any of those tenants. Reimbursement of the £500 fee was ordered under Regulation 9 of the Leasehold Valuation Tribunal (Fees) (England) Regulations 2003 (“the 2003 Regulations”)
4.	The Appellant sought permission to appeal the section 20C order and the order to pay the Applicant her £500 fees.  The application was refused by the LVT on 22nd June 2011 but permission was granted by the President on 8th September 2011 who ordered that the appeal be by way of review, so that the appeal is to be dealt with solely by reference to the evidence before the LVT. By section 31A(7)(a) of the 1985 Act this Tribunal “may exercise any power available to the leasehold valuation tribunal in relation to the original matter”.

The statutory provisions
5.	Section 20C of the 1985 Act (as amended) so far as relevant provides that:
 “(1)	A tenant may make an application for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before a… leasehold valuation tribunal… are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the application.
“(3)	The court or tribunal to which the application is made may make such order on the application as it considers just and equitable in the circumstances.”
6.	Regulation 9 relating to the reimbursement of fees provides as follows:
“(1)	… in relation to any proceedings in respect of which a fee is payable under these Regulations a tribunal may require any party to the proceedings to reimburse any other party to the proceedings for the whole or part of any fees paid by him in respect of the proceedings.”
Grounds of Appeal
7.	Although expressed in a somewhat more complex and lengthy manner, the gravamen of the appeal is threefold. First, the LVT erred in law in approaching the issue of costs as one which follows the event rather than what is just and equitable in the circumstances. Secondly, that it was wrong to find that the Respondent had obtained a number of significant concessions or had “overall succeeded on the majority of issues”. Thirdly, that the LVT had failed to give any or any sufficient reasons for those findings and the exercise of its discretion in respect of section 20C and also repayment of the £500 LVT costs. 
8.	In so summarising the Appellant’s Grounds of Appeal we intend no discourtesy to the Appellant who has extensively and exhaustively set out its complaints about the Decision in its Statement of Case, Reply and Skeleton Argument or to the Respondent who has comprehensively replied in her Statement of Case and also in her briefer Skeleton Argument. In this decision, we focus upon what appear to us to be the central issues.
Principal arguments 
9.	The Appellant’s principal argument is that no reasonable tribunal could have concluded that the Respondent had obtained a number of significant concessions during the course of the hearing, or that she had overall succeeded on the majority of the issues.  In any event it is unjust and inequitable that it should be deprived of the whole of its costs of dealing with all of the issues raised by the Respondent when they were largely part and parcel of discharging the management function and the Respondent was unsuccessful in respect of many of them.
10.	The Respondent seeks to uphold the reasoning found in the Decision as well as to some extent adding to or supplementing those reasons or providing alternative reasons to support the Decision. One particular point was the Respondent’s submission that much of what was resolved, by determination or agreement, should have been resolved well before the Application thereby justifying the Decision. 
Relevant authorities – section 20C
11.	In Iperion Investments Corporation v Broadwalk House Residents Limited [1995] 2 EGLR 47 (CA)  Peter Gibson LJ referred to section 19 of the 1985 Act (which he said “prevents a landlord from recovering so much of a service charge as consists of costs unreasonably incurred”) and section 20C (“which goes further”) and then said at 49F:
“Thus it is apparent that the court has a discretion to direct that litigation costs be excluded from a service charge, even if the costs have passed the test of section 19 and have been reasonably incurred.  The obvious circumstances which Parliament must be taken to have had in mind in enacting section 20C is a case where the tenant has been successful in litigation against the landlord and yet the costs of the proceedings are within the service charge recoverable from the tenant.” 
And at 49H: 
“To my mind, it is unattractive that a tenant who has been substantially successful in litigation against his landlord and who has been told by the court that not merely need he pay no part of the landlord’s costs, but has had an award of costs in his favour should find himself having to pay any part of the landlord’s costs through the service charge.  In general, in my judgment, the landlord should not ‘get through the back door what has been refused by the front’: Holding & Management Ltd v Property Holding & Investment Trust plc [1989] 1 WLR 1313 at p1324 per Nicholls LJ.” 
12.	In The Tenants of Langford Court (Sherbani) v Doren Limited LRX/37/2000 His Honour Judge Rich Q.C. (sitting as a Member of the Lands Tribunal) set out the principles upon which the discretion under section 20C should be exercised:- 
“28. In my judgement the only principle upon which the discretion should be exercised is to have regard to what is just and equitable in all the circumstances.  The circumstances include the conduct and circumstances of all parties as well as the outcome of the proceedings in which they arise. 
29. I think that it can be derived from [Iperion] that where a court has power to award costs, and exercises such power, it should also exercise its power under s20C, in order to ensure that its decision on costs is not subverted by the effect of the service charge.
30. Where, as in the case of the LVT, there is no power to award costs, there is no automatic expectation of an Order under s.20C in favour of a successful tenant, although a landlord who has behaved improperly or unreasonably cannot normally expect to recover his costs of defending such conduct. 
31. In my judgement the primary consideration that the LVT should keep in mind is that the power to make an order under s.20C should be used only in order to ensure that the right to claim costs as part of the service charge is not used in circumstances that make its use unjust.  Excessive costs unreasonably incurred will not, in any event, be recoverable by reason of s.19 of the Landlord and Tenant Act 1985. Section 20C may provide a short route by which a tribunal which has heard the litigation giving rise to the costs can avoid arguments under s.19, but its purpose is to give an opportunity to ensure fair treatment as between landlord and tenant, in circumstances where even although costs have been reasonably and properly incurred by the landlord, it would be unjust that the tenants or some particular tenant should have to pay them. 
32. Oppressive and, even more, unreasonable behaviour however is not found solely amongst landlords. Section 20C is a power to deprive a landlord of a property right. If the landlord has abused its rights or used them oppressively that is a salutary power, which may be used with justice and equity; but those entrusted with the discretion given by s. 20C should be cautious to ensure that it is not itself turned into an instrument of oppression.” 
13.	In Schilling v Canary Riverside Development PTE Limited LRX/26/2005 His Honour Judge Rich Q.C. said in cases (such as the instant case) where the LVT had not exercised its discretion to order that the landlord pay the tenant’s costs on the basis that it had acted improperly or unreasonably:
“13.	… When therefore I referred in paragraph 30 of my Decision [in Doren] to “a landlord who has behaved unreasonably” I meant more than, for example, its being found that some costs had not been reasonably incurred so as to entitled the tenant to a declaration under section 19 of the Act of 1985. The ratio of the [Doren] Decision is “there is no automatic expectation of an Order under s20C in favour of a successful tenant.”  So far as an unsuccessful tenant is concerned, it requires some unusual circumstances to justify an order under s20C in his favour. 
“14.	… the outcome is to be given weight in considering whether to make an Order and may affect whether the right of recovery should be limited to part only of the costs incurred by the landlord… “the outcome of the proceedings” [is] one of “the circumstances” to which sub-section (3) requires the consideration of what is just and equitable to have regard.  This was said in the context of an application for the appointment of a manager, which meant that the tenants had undoubtedly been successful, in service charge cases, the “outcome” cannot be measured merely by whether the applicant has succeeded in obtaining a reduction.  That would be to make an Order “follow the event”. Weight should be given rather to the degree of success, that is the proportionality between the complaints and the Determination, and to the proportionality of the complaint, that is between any reduction achieved and the total of service charges on the one hand and the costs of the dispute on the other hand”.   
14.	In The Church Commissioners v Derdabi [2010] UKUT 380 (LC) LRX/29/2011, when considering the approach to section 20C applications and having cited the authorities already referred to, the following observations were made by His Honour Judge Gerald, sitting as a Judge of the Upper Tribunal:
“18.	In very broad terms, the usual starting point will be to identify and consider what matter or matters are in issue, whether the tenant has succeeded on all or some only of them, whether the tenant has been successful in whole or in part (i.e. was the amount claimed in respect of each issue reduced by the whole amount sought by the tenant or only part of it), whether the whole or only part of the landlord’s costs should be recoverable via the service charge, if only part what the appropriate percentage should be and finally whether there are any other factors or circumstances which should be taken into account. 
“19.	Where the tenant is successful in whole or in part in respect of all or some of the matters in issue, it will usually follow that an order should be made under s20C preventing the landlord from recovering his costs of dealing with the matters on which the tenant has succeeded because it will follow that the landlord’s claim will have been found to have been unreasonable to that extent, and it would be unjust if the tenant had to pay those costs via the service charge.  By parity of reasoning, the landlord should not be prevented from recovering via the service charge his costs of dealing with the unsuccessful parts of the tenant’s claim as that would usually (but not always) be unjust and an unwarranted infringement of his contractual rights.
“20. 	However, whether and if so to what extent such an order should be made may depend on many factors. In some cases, “proportionality” will be material.  If the reduction is but a fraction of that sought by the tenant, it may follow that the landlord should only be prevented from recovering the costs of dealing with that fraction. If the tenant succeeds on only one of three issues, it may be that the landlord should only be prevented from recovering his costs of dealing with the successful issues.  Sometimes these points will make no difference because it has not cost the landlord any more to deal with the unsuccessful elements of the tenant’s claim.  
“21.	In other cases, “conduct” will be relevant: even though the tenant has succeeded and perhaps substantially, has he unnecessarily raised issues with which the landlord has had to deal such that the landlord should not be prevented from recovering any associated costs via the service charge?  There will also be cases where “circumstances” may be relevant – such as the landlord being a resident-owned management company with no resources apart from the service charge income. 
“22.	Where the landlord is to be prevented from recovering part only of his costs via the service charge, it should be expressed as a percentage of the costs recoverable.  The tenant will still of course be able to challenge the reasonableness of the amount of the costs recoverable, but provided the amount is expressed as a percentage it should avoid the need for a detailed assessment or analysis of the costs associated with any particular issue. 
“23.	In determining the percentage, it is not intended that the tribunal conduct some sort of “mini taxation” exercise.  Rather, a robust, broad-brush approach should be adopted based upon the material before the tribunal and taking into account all relevant factors and circumstances including the complexity of the matters in issue and the evidence presented and relied on in respect of them, the time occupied by the tribunal and any other pertinent matters.  It will be a rare case where the appropriate percentage is not clear. It is the tribunal seized with resolving the substantive issues which is best placed to determine all of these matters. “
15.	Ms Crampin criticised paragraphs 18 and 19 of Derdabi submitting that they went too far because they appeared to skew the exercise of the discretion away from what is just and equitable towards one which follows the event, which is inconsistent with the Doren and Schilling decisions with particular emphasis being placed on paragraph 13 of Schilling where His Honour Judge Rich QC said that there must be something unusual in the circumstances to justify a section 20C order, more than a mere finding that some costs had not been reasonably incurred.
16.	In our judgement, those comments of His Honour Judge Rich QC should not be understood as laying down any sort of principle or rule that no section 20C order should be made where the tenant has succeeded only in showing that the service charge or some part or parts of it are unreasonable (whether by reason of being incurred or their amount) unless there is a finding of something more than that of mere unreasonableness. As was made clear in both Doren and Schilling whether such an order should be made depends on the facts and circumstances of the case and ultimately what is just and equitable in those circumstances. 
17.	The only guidance as to the exercise of the section 20C discretion is to apply the statutory test of what is just and equitable in the circumstances. Derdabi was merely intended to give some practical guidance as to how to approach the exercise of the discretion, not to suggest how the discretion should ultimately be exercised not least because every case is fact-specific and there is an infinite variety of factors and circumstances which occur in cases before the LVT. Whilst a simple arithmetical calculation of success may well not give the “correct” answer as to how the section 20C discretion should be exercised, it frequently will although, naturally, the reasons why and the amount by which any service charge expenditure have been disallowed will always be important. 
18.	By way of illustration only, if items of service charge expenditure were disallowed because the landlord was unable to substantiate the charges by adducing evidence that they had been incurred or paid, it would usually follow that the expenditure should not have been charged in the first place or at any rate pursued, so that it would usually be unjust and inequitable for the landlord to recover his costs of pursuing or defending the claim. If they were disallowed or greatly reduced, not due to an absence of evidence that they had been incurred but because the landlord’s evidence as to the reasonableness of the amount charged was most unsatisfactory, it may also be difficult to resist a section 20C application. If the gap between the position of the landlord and tenant is relatively small but the tenant’s evidence is on balance preferred resulting in a small reduction, it may well be less likely that a section 20C order would be made.
Relevant authorities – sufficiency of reasons 
19.	Regulation 18 of the Leasehold Valuation Tribunals (Procedure) (England) Regulations 2003 does not give any guidance about the details of the reasons which must be given for a decision of the LVT.  In Lucie M v Worcestershire County Council and Evans [2002] EWHC 1292 (admin) Lawrence Collins J (as he then was) summarised the position in relation to all tribunals, even though he was dealing with a decision of the Special Educational Needs Tribunal:    
 “10.	The principles applicable to challenges of the Tribunal’s decision are not unique to this Tribunal, but since several cases in relation to its decisions were cited I summarise their effect.  First, proper and adequate reasons must be given, so that they are intelligible and deal with the substantial points that have been raised, and the reasons should deal, in short form, with the substantial issues raised in order that the parties can understand why the decision has been reached: S v Special Educational Needs Tribunal and the City of Westminster [1996] ELR 102 at 112; The Queen on the application of B v  Vale of Glamorgan CBC [2001] ELR 529, 536: Crean v  Somerset CC [2002] ELR 152, 164 to 165.  Secondly, and as a result of the first principle, the absence of reasons to explain why a case was rejected may make the decision appear irrational: Crean at 167. Thirdly, where reasons are inadequate, it is not normally appropriate that the reasons should be amplified on the appeal to the High Court: Oxfordshire CC v GB [2002] ELR 8, at 11 (C.A.).   
11.	Fourthly, a decision must be sufficiently specific and clear as to leave no room for doubt as to what has been has been decided: London Borough of Bromley v Special Educational Needs Tribunal [1999] ELR 260, 297 (C.A.)…”.   
20.	Those principles are broadly consistent with the three authorities considering the nature and extent of the duty of the judge to give reasons to which we were referred.  In Flannery v Halifax Estate Agencies Limited [2000] 1 WLR 377 the Court of Appeal said at 381G to 382C:
“We make the following general comments on the duty to give reasons.
(1)	The duty is a function of due process, and therefore of justice.   Its rationale has two principal aspects.  The first is that fairness surely requires that the parties especially the losing party should be left in no doubt why they have won or lost.  This is especially so since without reasons the losing party will not know (as was said in Ex parte Dave) whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case.   The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.
(2)	The first of these aspects implies that want of reasons may be a good self-standing ground of appeal. Where because no reasons are given it is impossible to tell whether the judge has gone wrong on the law or the facts, the losing party would be altogether deprived of his chance of an appeal unless the court entertains an appeal based on the lack of reasons itself.
(3)	The extent of the duty, or rather the reach of what is required to fulfil it, depends on the subject matter.  Where there is a straightforward factual dispute whose resolution depends simply on which witness is telling the truth about events which he claims to recall, it is likely to be enough for the judge (having no doubt summarised the evidence) to indicate simply that he believes X rather than Y; indeed there may be nothing else to say.  But where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other.  This is likely to apply particularly in litigation where as here there is disputed expert evidence; but it is not necessarily limited to such cases.
(4)	This is not to suggest that there is one rule for cases concerning the witnesses’ truthfulness or recall of events, and another for cases where the issue depends on reasoning or analysis (with experts or otherwise).  The rule is the same: the judge must explain why he has reached his decision.  The question is always, what is required of the judge to do so; and that will differ from case to case.   Transparency should be the watchword.”
21.	As was put by Lord Phillips MR (as he then was) in English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409: 
“We would put the matter at its simplest by saying that justice will not be done if it is not apparent to the parties why one has won and the other has lost”.   
In South Buckinghamshire DC v Porter (No 2) [2004] 1 WLR 1953 in the House of Lords,  Lord Brown of Eaton-under-Heywood considering the adequacy of reasons for a planning decision, said at paragraph 36:
“The reasons for a decision must be intelligible and they must be adequate.   They must enable the reader to understand why the matter was decided as it was and what conclusions were reached on the “principal important controversial issues”, disclosing how any issue of law or fact was resolved.   Reasons can be briefly stated, the degree of particularity required depending entirely on the nature of the issues falling for decision.  The reasoning must not give rise to a substantial doubt as to whether the decision-maker erred in law, for example by misunderstanding some relevant policy or some other important matter or by failing to reach a rational decision on relevant grounds. But such adverse inference will not readily be drawn.  The reasons need refer only to the main issues in the dispute, not to every material consideration.  Decision letters must be read in a straightforward manner, recognising that they are addressed to parties well aware of the issues involved and the arguments advanced…”.
Proceedings before the LVT
Introduction
22.	Before considering the section 20C and Regulation 9 orders it is first necessary to summarise the background to the Application, the Application itself and the subsequent procedure and then the issues before the LVT and how and why they were determined in the way in which they were.
Background to dispute
23.	The broad background to the Application appears to be that Athena Court had in some respects been poorly managed before the appointment of new managing agents Rennie & Partners in November 2009 such that the Respondent was not satisfied that certain items of service charge had been reasonably incurred in the years prior to their appointment. There was also a dispute concerning the penthouse flat situated on the seventh and eighth floors of Athena Court which had been extended over the roof, with the result that it was the Respondent’s view that its service charge contribution of 6.82% should be increased and her (and other tenants’) service charge contribution of 4.5% should be reduced. The Respondent was also concerned as to the scope and cost of proposed external and internal major works to be paid on account for the service charge year ending 30th June 2011 and their apportionment between the penthouse and the remainder of the building and their recoverability through the service charge.
The Application as originally drawn
24.	The Application as issued was confined to challenging the reasonableness of certain items of expenditure in three service charge years ending 30th June 2007, 2008 and 2009, no specific complaints being advanced in respect of 2010, and also as to the reasonableness of the scope and costs of the external and internal major works to be levied as part of the 30th June 2011 service charge.  
25.	On 9th November 2010, there was a pre trial review at which various directions were made (“the PTR”). The order recorded that both parties wished to consider mediation and ordered that should they wish to take advantage of the LVT’s mediation scheme they should inform the LVT by 15th December 2010. Neither party took advantage of this order, and there has been no attempt to mediate.
Widening the ambit of the Application 
26.	In November 2010, after the PTR, the Respondent sought permission of the LVT to enlarge the matters in issue to include challenging the reasonableness of certain items of expenditure in the four service charge years ending 30th June 2003, 2004, 2005 and 2006 and also for variation of the service charge contributions paid following the penthouse roof extension. The LVT responded on 26th November 2010 that this would have to be determined at the substantive hearing, which is what the Respondent elected to do rather than issue a new application. 
27.	The Respondent then served her Statement of Case setting out her case in respect of (a) variation of the service charge contributions following the penthouse extension and also her challenges to the reasonableness of the historic expenditure for (b) the four service charge years ended 2003, 2004, 2005 and 2006 and also (c) the three years ended 2007, 2008 and 2009 as well as the prospective expenditure for the (d) internal and (e) external major works to be collected on account for the service charge year ended 2011. There were therefore five issues on which the Respondent sought the determination of the LVT, only three of which ((c), (d) and (e)) had been raised in the Application as issued. 
28.	The Appellant duly responded to all five issues, and the Respondent then amalgamated both parties’ Statements and her own Reply to the Appellant’s Statement into a single composite document with all relevant documents exhibited to each section of it which was produced to the LVT in a bundle filling one lever arch file (“the Composite Statement”). Precisely how the parties’ positions developed is unclear as that is all that was before the LVT and is before us: the original Application and other documents in response are not before us, nor were they before the LVT.
The hearing before the LVT
29.	The parties therefore attended the hearing on 14th and 15th February 2011 having prepared for all five issues to be determined or at any rate for rulings to be made as to whether the new issues would be determined. The Respondent represented herself. The Appellant was represented by its building surveyor Mr Sautschak and property manager Ms Suant, both of Rennie & Partners, and also by a director of the Appellant company. 
30.	The LVT ruled that it had no jurisdiction to determine the (a) variation to service charge percentages and would not deal with (b) the reasonableness of the four service charge years 2003, 2004, 2005 and 2006 because they did not form part of the original Application. The challenges to the (d) internal major works were not pursued as the Respondent had adduced no evidence in relation thereto. That left two remaining issues for resolution, the reasonableness of the (c) 2007, 2008 and 2009 expenditure and of the (e) external major works, which is what the bulk of the nineteen page Decision deals with. 
The Decision – external major works
31.	There were four categories of challenge to the external major works raised by the Respondent which are dealt with in nine pages of the Decision comprising paragraphs 13 to 59.  First, the Respondent said that the costs of the external works were either the responsibility of the penthouse lessee because they were works to the penthouse itself or fell within its repairing covenants (essentially a question of interpretation of the various leases) or they were over-specified and therefore too high. The Appellant adopted a broadly neutral stance in respect of the interpretation of the leases but did put forward arguments in relation to some of the other matters. In broad terms, the LVT accepted the Respondent’s interpretation of the leases and found that of the twelve items falling within this category, she had made out five of them which should be disallowed in total. In respect of one or two matters the LVT also accepted the Respondent’s case that they had been over-specified and therefore reduced the amount claimed. Of the £109,070 claimed for these items, the Respondent challenged £45,718 but succeeded in respect of £10,863. 
32.	Secondly, the Respondent said that the £5,946 works planned to the tank roof were over specified and therefore unreasonable. The LVT rejected the Respondent’s case and accepted the Appellant’s although noting a minor agreement to apportion by the Appellant. Thirdly, the Respondent challenged a further ten items totalling £107,645 each of which the Appellant responded to in varying amounts of detail, sometimes retendering for the works much of which the Respondent did not accept in her Reply. However, before the LVT she agreed virtually all of these sums albeit sometimes in slightly different amounts, £100,680 ultimately being allowed and £6,965 being reduced by agreement.  Fourthly, the Respondent said £17,451 of planned roof repairs were caused by the negligence of the penthouse lessee and also challenged £15,994 of other roof works. The first was not proceeded with, or “withdrawn” as described by the LVT, at least in part because the LVT has no jurisdiction to determine issues of negligence. The second was not proceeded with, or “withdrawn” as described by the LVT, presumably because the Respondent accepted the Appellant’s explanation in their Statement of Case.  
33.	We have summarised these matters in Schedule A hereto (“Schedule A”): noting that it is merely a summary which of necessity loses some of the nuances contained in the Decision and the Composite Statement. It is merely intended as a “ready reckoner” to see the extent to which the Respondent was successful, the reasons for success being summarised above but detailed in the Decision when understood in the context of the evidence before the LVT, principally the Composite Statement.
The Decision – challenges to the 2007, 2008 and 2009 service charges
34.	The Respondent challenged expenditure in service charge years 2007, 2008 and 2009 on the basis either that there was no evidence that certain sums claimed had been incurred or that their amount was unreasonable because the works had not been done properly. The Appellant by and large was unable to challenge these allegations because it had been unable to obtain the underlying invoices or other evidence (if it ever existed) from the previous managing agents. Perhaps unsurprisingly, the Respondent succeeded in respect of the vast majority of the items challenged, albeit that she did concede one or two items as did the Appellant who was successful on one or two issues. The findings of the LVT occupy five pages of the Decision, paragraphs 60 to 80, and are summarised in Schedule B hereto (“Schedule B”), again with the caveat already mentioned. 
Discussion and decision – section 20C
35.	In our judgment, there are three principal reasons why the Decision should be set aside. First, it is not possible to understand why the LVT found that the Respondent had “overall succeeded”. Sometimes the reasons for a finding will be readily apparent and naturally flow from the preceding findings of an LVT, for example, where the LVT has accepted the overwhelming majority (whether by number or value) of the tenant’s challenges to the landlord’s service charge claims for reasons connoting unreasonableness. This is not one of those cases. What precedes paragraph 81 of the Decision are a complex of findings the upshot of which is that of the five issues on which the Respondent sought the determination of the LVT, only two were proceeded with and of those two she was only partially successful with respect to the external works and was significantly more successful with respect to the challenges to the 2007, 2008 and 2009 service charges. The LVT does not explain why it found the Respondent to have “overall succeeded” so that that finding in our judgment is of itself irrational (Lucie M (supra)) and it is in any event impossible to know how and why it reached the decision it did (Flannery (supra)). 
36.	Secondly, it follows from what is said in the previous paragraph that there is no material which could reasonably or properly support a finding that the Respondent had “overall succeeded”. We are conscious that matters may appear differently to the first instance tribunal hearing an application. However in this case the Respondent for whatever reasons did not proceed with three of the issues she wished to pursue, in respect of which all parties attended ready and prepared to deal with those substantive issues. Of the two issues which were heard, the Respondent can not be said to have succeeded in respect of even the majority of them as is clear from the summary already given and from the summaries, with all their attendant caveats, appearing in Schedules A and B hereto. 
37.	Thirdly, by exercising its discretion on the basis that the Respondent had “overall succeeded” it betrayed an approach to the exercise of discretion as one in which costs automatically follow the event without providing any explanation or analysis for the reasons behind its finding or why in this case it was just and equitable that costs should follow the event. As already noted, in some cases it may well follow and be sufficiently clear from the preceding findings that the tenant has overall succeeded, and why, such that the exercise of the section 20C discretion will be clear. That can not be said in this case. Where a landlord has been put to the cost of attending and preparing for a hearing for three (of five) issues which are not proceeded with, there would have to be compelling reasons to justify a section 20C order in respect of those costs which would require clear and cogent explanation by the LVT, otherwise the jurisdiction would be being used as an instrument of oppression by tenant not landlord. It appears that the LVT did not even consider this aspect of the matter before it. 
38.	Those reasons are in our judgment sufficient to require that the section 20C order and repayment of the £500 orders be set aside. It is therefore not necessary for us to consider the plethora of other points raised by the Appellant as grounds for setting aside those orders, save to say that it will be clear from the reasoning behind our exercise of the discretion which follows below that the LVT erred in failing to properly consider and analyse the relative degrees of and reasons for “success”. The question is to be considered afresh by this Tribunal by way of review, to be based solely upon the evidence before the LVT, it of course not necessarily following that this Tribunal will reach a different conclusion.  In the circumstances of this case, however, we find that it is just and equitable that 10% of the costs of the Appellant are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the Respondent or any of the other 19 tenants referred to above. Our reasons are as follows. 
39.	The starting point is to identify and consider what matters were in issue, the extent to which the Respondent succeeded and why. In this case, this includes not only those matters raised in the Application but also those which the Respondent sought to raise, because the Appellant had to and in fact did deal with all such issues. With regard to the three issues not pursued at hearing, in our judgment it is wrong in principle to deprive the Appellant of its related costs unless there is some good reason making it just and equitable to do otherwise. The Respondent has, in our judgment, failed to advance any so that the Appellant is to be treated as having been wholly successful in respect of all three issues for the purpose of deciding how to exercise the section 20C discretion. Specifically, we reject the Respondent’s argument that as a layman she did not understand that the LVT had no jurisdiction to vary the penthouse service charge contributions or the procedural requirement that claims form part of an application and not be tacked on later: it is incumbent upon an applicant to familiarise him or herself with jurisdictional and procedural rules. If a landlord is put to costs of dealing with ultimately aborted issues it should not, save in the most exceptional of circumstances, be prevented from recovering those costs through the service charge, otherwise the tenant can raise issues with impunity. We reject the Respondent’s argument that the costs of dealing with the penthouse variation issue and her challenges to the 2003 to 2006 service charges should be dismissed as being de minimis: it is clear from the documentation before the LVT that the Appellant did spend at least a modest amount of time in responding to these two items. 
40.	We also reject the Respondent’s argument that she did not proceed with her challenges to the costs of the internal works because the Appellant agreed to postpone their recovery until the 2013 service charge year. Not only does this go behind the LVT’s Decision that she did not proceed due to lack of evidence, but ignores the fact that the Respondent still had to spend time and money dealing with her challenges. Had that agreement not been reached she would have been unable to proceed with her challenges before the LVT as she had adduced no evidence in support of her challenges. It would be unreasonable, and unjust, if the Appellant were prevented from recovering its costs of dealing with her challenges or queries relating to the internal major works. 
41.	We now turn to the external major works. Undoubtedly, these involved the bulk of the evidence, hearing time and therefore preparation. Whether these issues are considered numerically by items challenged or by amount, it is plain that it is the Appellant who overwhelmingly succeeded. The Respondent challenged a total of twenty-six items claimed in varying amounts and for varying reasons but succeeded in respect of only seven by LVT order and ten by agreement; of the £256,106 claimed, the Respondent challenged £186,808+ but succeeded in getting only £10,863 disallowed by the LVT and a further £6,965 reduced by agreement by the Appellant: we refer to Schedule A which breaks down the Decision but organised to reflect the four categories referred to above. 
42.	Within those bald, and broad, figures are some important points. First, the first twelve items were  principally (but not solely) matters of interpretation of the penthouse lease itself in the context of the other leases in order to determine whether the works were to the demise or the retained land and whether part of the penthouse tenant’s repairing covenant or the landlord’s. Those arguments were won by the Respondent. The Appellant submitted that it should not be prevented from recovering its costs as these issues nonetheless had to be resolved. That argument might hold sway if the landlord had itself initiated the application or at any rate sought the ruling of the LVT between competing interpretations of the various leases which would then be binding on all lessees. That was not so in this case. As the LVT recorded, the Appellant adopted a neutral stance in the face of only one possible construction being advanced, namely, that being propounded by the Respondent. Whilst the Appellant had to consider those arguments, there is no reason we can see why it should not have conceded the arguments well before the hearing which would have avoided some of the costs. When put in the balance of weighing countervailing factors affecting exercise of the section 20C discretion, this should count against the Appellant. 
43.	Secondly, in respect of some of the items, the Respondent successfully challenged the scope, not the need to effect, repair work. There was no suggestion by the LVT that the Appellant should not have scoped the work as it did or was otherwise being unreasonable or unrealistic or in some way bumping up the scope of the works or their costs to more than what was reasonably required to do an adequate or reasonable job. In some respects, such as the fire escapes, the Appellant provided alternative scopes of work.  We accept Ms Crampin’s submission that it does not flow from the fact that the LVT opted for a cheaper option or narrowed the scope of the works that the Appellant should not be able to recover its costs. Rather, it demonstrates that the management of a residential building is an art not a science where there will frequently be more than one means of resolution, and a landlord should not ordinarily be penalised because it has put forward different options or the scope of the work has been narrowed or altered. There may of course be some instances where the landlord should be penalised, but this is not one of those cases. This should therefore not count against the Appellant. 
44.	Thirdly, in respect of ten items, the Respondent originally challenged the items but at trial agreed to the sums claimed or relatively modest reductions, sometimes because she accepted a full and proper explanation from or further information provided by the Appellant not previously given, sometimes because the landlord had re-tendered and sometimes because there was an informal arrangement or concessions as to future apportionment or such like. The Respondent submitted in respect of these, and some other, items that they all should have been sorted out well before the hearing. That may be so in some cases but in our judgment that can not be said in this case. Had the Appellant taken those steps before issuance of the Application it would have been properly entitled to recover its costs via the service charge: faced with queries or challenges, a reasonable landlord acting reasonably will respond by explanation, provision of further information or sometimes retendering. The fact that it took those steps, or some of them, after the Application was issued has not caused any duplication or escalation in costs. 
45.	Indeed, it appears from the Compilation Statement that much of what has passed between landlord and tenant is what one might well expect as part of the normal to-ing and fro-ing and give-and-take between landlord (by managing agent) and tenant. Whilst it is preferable for such to be conducted prior to issuance of an application, the fact that it is done afterwards has not altered costs and in this case has most likely served to focus the parties’ minds on the real issues. Many of the issues relating to the external major works were, so far as we can tell, raised for the first time within the Application so that it can not sensibly be said that the Respondent should have dealt with them before. In those circumstances, it would in our judgment be quite wrong to deprive the landlord of its costs. Otherwise the landlord is put in an impossible position of having to deal responsibly with challenges properly made by tenants yet unable to recover the costs of dealing with same if the tenant accepts the landlord’s response. That in our judgment would result in an oppressive use of the section 20C jurisdiction unless of course there are factors (all absent here) to suggest that the landlord has in some way behaved improperly. This therefore should not count against the Appellant. 
46.	Fourthly, the £17,451 challenged in respect of the roof terrace was based upon an allegation that those works were necessitated by negligent workmanship by the penthouse tenant’s workmen so were his responsibility. This was withdrawn because, the Respondent accepts, the LVT has no jurisdiction to deal with such allegation. Albeit a relatively minor matter in the overall scheme of the Application, what it does is demonstrate that there would inevitably have been a hearing before the LVT because, along with other issues already mentioned, the Respondent wanted to pursue them. It is unreal, for reasons already stated in respect the Respondent’s failure to familiarise herself with the jurisdictional and procedural rules pertaining to the LVT, for the Respondent to dismiss this as being of no consequence. Self-evidently, this can not count against the Appellant. Fifthly, the £15,994 challenged in respect of the rotunda roof was not pursued before the LVT. Again, this should not count against the Appellant. 
47.	We now turn to the 2007 to 2009 service charge challenges, the Respondent can properly be described as having been successful in reducing the £31,421 claimed by almost 50% to £16,169: see Schedule B. She succeeded principally because the Appellant was unable to produce evidence to substantiate that the works had been done or were reasonably necessary or because they were not recoverable under the service charge provisions of the leases, albeit in respect of some items the Appellant did concede eight of the items challenged and the Respondent conceded that five were recoverable, the LVT having to determine one against her. 
48.	In respect of those items where the Appellant simply did not have the proof to establish that the money had been expended or reasonably incurred, in our judgment it can not properly be said that the Appellant has acted reasonably. Put bluntly: in this case since the Appellant can not prove that it has spent money or incurred costs reasonably or at all which it seeks to recover via the service charge, it would be unjust and inequitable for it to then claim its costs of failing to recover them as that aspect of the hearing was pointless. It is not, in our view, an answer for a landlord (as here) to justify its failure to prove expenditure by an inability to get the documentation or proof from the previous managing agents. It is the ultimate responsibility of the landlord to maintain sufficient documentation and employ reasonably competent managing agents to maintain records for tenants to inspect. Neither, in this case, do we think it reasonable of the Appellant to have sought recovery of items which the LVT found clearly did not fall within the service charge provisions. This should therefore count against the Appellant. It must, however, be borne firmly in mind that even had the Appellant not contested those items which it should not have, there would still have been a hearing, as is evident from the fact that it was only at the hearing that the Respondent conceded five of her challenges and the LVT decided against her in respect of one of them. It is not an answer for the Respondent to say that had the parties been acting reasonably some accommodation would have been reached without resort to the LVT because it was not, and the LVT’s order for mediation was not taken up by either party.
49.	The final question is how we reach the figure of 10%. The Respondent was successful in   approximately 15% of the total amounts she challenged (£33,080 of the total challenged of £224,175). However, a neat scientific or arithmetical calculation is not possible in this case because whichever way the figures are calculated they would not give adequate weight to the underlying reasons as to why and how the Appellant and Respondent were successful in respect of the various different categories. It does not reflect the three items not pursued. Neither does it reflect that the bulk of the success (£15,252 against £31,421 challenged) was achieved in relation to challenges to the 2007 to 2009 service charges, when compared with the relatively modest success (£17,828 against £192,754 challenged) which consumed the vast bulk of the evidence, preparation and court time. Nor does it reflect that items totalling £134,125 of the £192,754 of external works challenged were agreed or withdrawn or an accommodation was reached. Nor that there would have to have been a hearing in any event. But it would in our judgment be equally wrong to ignore the fact that in respect of the penthouse and 2007-2009 service charge challenges the Appellant acted unreasonably. Taking all of those factors into account, the view we have reached is that 10% is the appropriate percentage of the Appellant’s costs which it should be prevented from recovering via the service charge pursuant to section 20C.
Decision – Regulation 9
50.	In our judgment the Appellant should not be ordered to reimburse the Respondent her £500 fee because she was only partially successful and it is inevitable that she would have issued the Application and incurred the tribunal fees in any event. In this respect, we have ignored the issues which were not part of the Application as originally drawn as being irrelevant to the issuance fee. However, in respect of the other issues, the internal major works were not pursued and she achieved only limited success in respect of the external works. This conclusion is not altered by the fact that she was overwhelmingly successful in respect of the 2007-09 service charge challenges. 
Section 20C – the costs of the appeal
51.	Given that the appeal has been successful, it would be unjust and inequitable for the Appellant to be barred from recovering its costs of the appeal via the service charge. We therefore refuse the Respondent’s application for a section 20C order. That said, the Respondent did accept that if the appeal were even partially successful it would be inappropriate for a section 20C order to be made as such would have been justified and therefore the associated costs reasonably incurred. 
Dated: 26 October 2012

His Honour Judge Gerald

N J Rose FRICS

SCHEDULE A – external major works

Sums alleged to be the responsibility of the penthouse lessee:
	Amount claimed	Amount challenged	Amount allowed	
Prelims	18,200	2,093	18,200	
Scaffolding	33,580	3,862	33,580	
Security gates	280	280	*0	
Penthouse extension roof	4,420	4,420	*0	
Tank houses	3,400	3,400	3,400	
Tank room access	4,790	4,790	4,790	
Fire escape	15,192	1,899	*13,293	
Roof terrace access door	400	400	*0	
Painted metalwork	720	720	*570	
Painted fire escape	7,228	3,154	*3,874	
Joinery varnished	860	700	*500	
Contingency	20,000	20,000	20,000	
Totals:	109,070	45,718	98,207	
* denotes Respondent successful. £1,899 represent 1/8th of the amounts challenged (top floor of 8 storey block). £4,074 represents result of Respondent’s successful challenged £7,288 as over-specification but the LVT allowed the Appellant’s alternative option but apportioned by 1/8th. Within the £20,000 contingency, supervision was to be apportioned.

Overspecified (but small apportionment agreed):
Tank roof	5,946	Unstated	5,946	
Totals:	5,946	Unstated	5,946	

Sums originally challenged but agreed by Respondent at trial:  
Satellite dishes	15,600	15,600	10,638	
Concrete repairs	10,000	10,000	9,400	
Roof cables and ligntning conductor	2,340	2,340	2,340	
Overhaul of windows	4,778	4,778	3,375	
External lighting – general	2,300	2,300	2,300	
External lighting – rear landing	5,760	5,760	5,760	
External door lights	350	350	350	
External entrance lights	930	930	930	
External car park lights 	923	923	923	
Painted woodwork	1,664	1,664	1,664	
Provisionals	63,000	63,000	63,000	
Totals:	107,645	107,645	100,680	

Withdrawn by Respondent at trial
Roof terrace roof	17,451	17,451	17,451	
Rotunda roof	15,994	15,994	15,994	
Totals:	33,445	33,445	33,445	

Grand totals:	256,106	186,808+	238,278	
Plus unstated:		192,754		

SCHEDULE B – 2007 to 2009 service charges

* denotes LVT recording that agreed by Appellant
** denotes LVT recording that agreed by Respondent

	Amount claimed	Amount challenged	Amount allowed 	
Unbloc drain contract 	4,303	4,303	0	
Other drain repairs	4,376	4,376	*0	
Management fees	16,227	Unstated	14,604	
Legal costs (2008)	690	690	*0	
Legal costs (2007)	470	470	*0	
Legal costs (2008)	605	605	0	
Lift repairs (2008)	1,057	1,057	0	
Cleaning (2009)	716	716	*0	
	115	115	**115	
	610	610	195	
Repairs (2009)	128	128	*0	
	218	218	**218	
	86	86	**86	
	139	139	*0	
	217	217	**217	
Survey fees	734	734	**734	
	431	431	*0	
Lift repairs (2009)	299	299	*0	
Totals:	31,421	15,194	16,169	
Plus unstated		31,421