Daejan Investments Ltd v Benson & Ors

The financial consequences of granting or refusing dispensation under section 20ZA of the Landlord and Tenant Act 1985 are not a relevant consideration; the statutory discretion focuses on the integrity of the consultation process and whether non‑compliance has caused significant prejudice to tenants. Curtailment of the required consultation will, unless de minimis, normally amount to substantial prejudice justifying refusal of dispensation.

The appellant landlord appealed under section 13 of the Tribunals, Courts and Enforcement Act 2007 from the Upper Tribunal (Lands Chamber)'s dismissal of its appeal against Leasehold Valuation Tribunal decisions that the landlord had breached the Service Charges (Consultation Requirements) (England) Regulations 2003 and that dispensation under section 20ZA of the Landlord and Tenant Act 1985 was not reasonable. The principal issues were (i) whether the financial consequences of refusing dispensation are relevant, (ii) whether the nature of the landlord is a relevant factor, and (iii) the proper approach to proving prejudice caused by failure to comply with the consultation regulations. The Court of Appeal considered the statutory scheme, the LT's approach and earlier authorities and dismissed the appeal, holding that financial consequences are irrelevant, the landlord's nature may be contextually relevant, and curtailment of consultation caused significant prejudice.

(1) Disposition. The appeals are dismissed. The Lands Tribunal and Leasehold Valuation Tribunal did not err in law in their approach to the consultation requirements and to dispensation under section 20ZA of the Landlord and Tenant Act 1985. (Gross LJ with whom Pitchford LJ and Sedley LJ agreed.)

(2) Statutory focus and construction. Section 20ZA confers power to dispense with the consultation requirements, not to alter or mitigate the statutory consequences of non‑compliance (para.61). The statutory scheme aims to protect tenants by ensuring a substantive consultation process; the consequential financial effects of refusing dispensation are an intrinsic part of the scheme and are, in general, irrelevant to the exercise of the dispensing discretion (paras.59–65).

(3) Financial consequences. The Court rejects the landlord's submission that the magnitude of the sums involved (or financial hardship to the landlord) is a relevant consideration in deciding whether it is reasonable to dispense with consultation (paras.48–66). Examples where dispensation may nonetheless be reasonable include emergency works, a single-available specialist contractor, or a minor procedural breach causing no prejudice (para.63).

(4) Nature of the landlord. The character of the landlord is a contextual factor: tribunals may appropriately take a more rigorous approach to non‑compliance by corporate or local authority landlords than in cases of lessee‑owned landlords, where informal or extra‑statutory consultation and the fact that tenants are effectively spending their own money may alter the balance (paras.66–67). The LT's references to the nature of the landlord were contextual and not erroneous.

(5) Prejudice. Significant prejudice to tenants is central to the exercise of the dispensatory discretion. Curtailment of the consultation process is a serious failing and, absent de minimis impact or demonstrable lack of prejudice, will normally amount to significant prejudice justifying refusal of dispensation. Where consultation has been curtailed so as to remove tenants' opportunity to make informed observations, the tribunal may treat the loss of that opportunity itself as amounting to significant prejudice (paras.72–75).

(6) Application to the facts. On the facts, the LVT and LT were entitled to conclude that Daejan had materially failed to comply with the Stage 2 requirements of the Consultation Regulations and that consultation had been curtailed; the loss of the opportunity to examine all priced estimates and to make representations caused significant prejudice to the leaseholders. The offers made by the landlord (a deduction) did not remedy the prejudice (paras.29–36; 73; 76(i)).

(7) Remedy and order. The Court dismissed the appeal and upheld the decision below refusing dispensation, with costs consequences left to the normal course (para.77).

• Upper Tribunal (Lands Chamber) / Lands Tribunal: Appeal from Leasehold Valuation Tribunal dismissed (LT decision dated 27 November 2009) (reasons summarised in the judgment).
• Court of Appeal (Civil Division): Appeal dismissed ([2011] EWCA Civ 38; judgment 28 January 2011) – affirmed the LT and LVT approaches on construction and on the question of prejudice.