When can reliance be placed on the tribunals own expertise

In a service charge dispute, the First-Tier Tribunal (Property Chamber) will often have to assess whether the cost of a particular service was reasonably incurred. Where the amount is relatively modest, for example cleaning costs, it may be impractical to expect the parties to produce competitive quotes or formal evidence to justify the cost. The FTT, as an expert Tribunal, can of course rely on its own knowledge and experience but how much reliance should be placed on this “expertise” in reaching a determination on reasonableness? This was the question posed in Red Kite Community Housing Ltd v Robertson [2014] UKUT 0134 (LC) where the Upper Tribunal, took the opportunity to give some helpful guidelines on the proper approach.

The dispute related to the reasonableness of the cleaning costs for a block owned by a housing association. The block contained 41 flats but Red Kite managed approximately 6,700 other homes in the area and was concerned that the downward determination by the FTT might set a precedent in relation to its other properties. The lessee, Ms Robertson was not happy with the quality of the cleaning and, following their inspection, the LVT were not overly impressed either.

The charges made for cleaning ranged from £177 in 2008 to £192 in 2011 which the FTT said were “on the low side” and found to be reasonable. In 2011/2012, however, the charge for cleaning increased “dramatically” to £321.14 pa. The landlord said that this was because this sum reflected the true cost rather than the subsidised cost of the cleaning. The FTT found that this sum was not reasonable in amount when compared with the costs charged in the earlier years and using its own “knowledge and experience as an expert Tribunal” it reduced the charges from £321.14 per year to £225 pa for the later years. No analysis of where this substituted figure came from was included in the decision.

There were a number of problems with this finding. The Appellant said it was all very well for the Tribunal to say that the charge was too high but why was it too high? Where had the seemingly arbitrary figure of £225 pa come from? How could Red Kite mend its ways in the future if it didn’t know what it had done wrong?

A similar problem arose in the case of Triplerose Ltd v Bishun and others [2013] UKUT 0257 (LC) where I represented the Appellant. In that case the LVT ignored the actual cost of cleaning altogether on the grounds that the accounts weren’t audited and substituted a figure which was less than half the actual cost based on its own “knowledge and experience”. Again no reasons were given for the drastic reduction and the Upper Tribunal remitted the case for a re-hearing.

Such decisions can leave a landlord with a significant shortfall and no guidance as to how to ensure that future expenditure is deemed reasonable. In both cases it was argued that the LVT/FTT had over-relied on its own knowledge and experience and failed to explain how it had reached the conclusions it did. How and when should the Tribunal employ its own expertise?

The starting point is the case of Arrowdell Ltd v Coniston Court (North) Hove Ltd [2007] RVR 39 where the Upper Tribunal said that while an expert tribunal is free to use its knowledge and experience to test and, if necessary, reject evidence before it, it must nevertheless ensure that (1) its decision is based on the evidence before it (2) that a decision is not made on the basis of evidence not exposed to the parties for comment and (3) it gives its reasons for its decision.

The Upper Tribunal in Red Kite said that ultimately the question of how much reliance should be place on the Tribunal’s own expertise is one of fairness. If the Tribunal receives evidence but decides to reject it because it considers that evidence to be out of line with the norm, then it must decide whether the parties should be informed of its view and given an opportunity to adduce further evidence or comment on it. This would satisfy natural justice.

The Upper Tribunal said that in considering how to achieve fairness and whether or not to seek comments from the parties before applying its knowledge and experience the factors which should be taken into account are:

1. The quality of the evidence before the Tribunal. If the evidence is comprehensive and cogent it is more difficult for the Tribunal to depart from it without first airing its concerns with the parties.
2. The extent of the difference between the evidence presented and the Tribunal’s view. So, for example, if the Tribunal considers that a management fee is excessive and is minded to significantly reduce it, then the obligation to notify the parties of its view would be more onerous than if the reduction was minimal.
3. Whether both parties have produced evidence and/or made representations or only one. Where both are represented, a Tribunal should not make a significant departure from the evidence received without first giving the parties the opportunity to comment. Where there is unevenness between the parties, the Tribunal has to be even more careful and must ensure that in applying its knowledge and experience that it is not acting in any way unfairly.
4. The overriding objective requires cases to be dealt with fairly and justly and, in particular the Tribunal is required to make proportionate decisions having regard to the cost and resources of the parties. Achieving this will often be simply a question of asking the parties their views at the hearing.

This is all sensible advice and, if adhered to should lead to more transparency in the decision making process. In turn this will assist parties to understand why a sum claimed has been deemed to have been unreasonabe sothat landlords can ensure that future sums are properly incurred and tenants know what can be challenged.

Published in the Estates Gazette.