Cases - London Borough of Hounslow v (1) Waaler
Record details
- Name
- London Borough of Hounslow v (1) Waaler
- Date
- [2017]
- Citation
- EWCA Civ 45
- Legislation
- Keywords
- Service charges – Reasonableness – Improvements – Repairs – Landlord and Tenant Act 1985, s.19(1)(a)
- Summary
-
The appellant local authority landlord appealed against the decision of the Upper Tribunal that the cost of replacing the windows at the respondent’s flat was not 'reasonably incurred' pursuant to s.19(1)(a) of the LTA 1985. The Upper Tribunal held that in deciding whether the costs had been “reasonably incurred” the appellant should have taken into account the length of the leases of the flats, the leaseholders’ views of the works and the financial impact of the works on them.
The appellant contended on appeal that the views of the leaseholders were immaterial and that the focus of any inquiry must be on the appellant’s decision making process. In the context of repair and relying on Wednesbury principles the appellant argued that if the appellant reasonably took the view that the proposed course of action was a reasonable way of dealing with the underlying defects it need not take account of the tenants’ views and costs would have been reasonably incurred.
In dismissing the appeal the Court of Appeal held that where a contract, such as a lease had empowered one party to make discretionary decisions, which imposed financial liability on another, the law would restrict the exercise of that discretion to what was rational. Accordingly a term would be implied to the effect that the decision making process had to be lawful and rational in the public law sense. Further, that the decision was made rationally, in good faith and consistently with its contractual purpose so that the result reached was not so outrageous that that no reasonable decision maker could have reached it Braganza v BP Shipping Ltd [2015] UKSC 17 followed.
Merely applying a rationality test would not give effect to the purpose of s.19 of the 1985 Act. The statutory test was whether the cost of works was reasonably incurred by reference to an objective standard. Part of the context for deciding whether costs had been reasonably incurred was the fact that, in principle, the cost of the works would be borne by the lessees. In the context of repairs, s.19 of the LTA 1985 must have been intended to protect the leaseholder against charges that were contractually unrecoverable otherwise it would serve little purpose.
The function of the tribunal was not simply to review the landlord’s decision making process. The interests of the tenants are to be taken into account in weighing up the relevant factors. Whether costs have been reasonably incurred is not simply a question of process: it is also a question of outcome. Yet, if a landlord has chosen a course of action which leads to a reasonable outcome the costs of pursuing that course of action will have been reasonably incurred, even if there was another cheaper outcome which was also reasonable.
The same legal test applied to all categories of work falling within the scope of the definition of 'service charge' in s.18 of the LTA 1985. Yet, the application of the same legal test did not mean that the legal and factual context applicable to one category of works rather than another could be ignored. There was a real difference between works which the landlord was obliged to carry out on one hand and optional improvement on the other.