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You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Fencott Ltd v Lyttelton Court RTM Company Ltd [2014] UKUT 27 (LC) (28 January 2014) URL: http://www.bailii.org/uk/cases/UKUT/LC/2014/27.html Cite as: [2014] UKUT 27 (LC) |
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2014] UKUT 27 (LC)
UTLC Case Number: LRX/19/2013
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – right to manage – whether a single RTM company can exercise the right in respect of more than one set of premises – held, it can – ss.72, 73(4) Commonhold and Leasehold Reform Act 2002 – appeal allowed
IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF THE LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
BETWEEN:
FENCOTT LTD Appellant
and
(1) LYTTELTON COURT 1 14-34a RTM COMPANY LTD
(2) LYTTELTON COURT 2 35-48a RTM COMPANY LTD
(3) LYTTELTON COURT 3 49-69a RTM COMPANY LTD
Respondents
Re: Lyttelton Court, Lyttelton Road, London N2 0EB
Before: Martin Rodger QC, Deputy President
Sitting at: 45 Bedford Square, London
WC1B 3AS
on 24 October 2013
Mr Simon Serota of Wallace LLP for the appellant
Mr Philip Rainey QC and Mr Andrew Sheftel, instructed by The Beavis Partnership LLP, for the respondents
The following cases are referred to in this decision:
Assethold Ltd v 15 Yonge Park RTM Co Ltd [2011] UKUT 379 (LC)
Craftrule Ltd v 41-60 Albert Place Mansions (Freehold) Limited [2011] EWCA Civ 185
Dorset Healthcare NHS Trust v MH [2009] UKUT 4 (AAC)
Gala Unity Ltd v Ariadne Road RTM Company Ltd [2011] UKUT 425 (LC); [2012] EWCA Civ 1372
Long Acre Securities v Karet [2004] 2 EGLR 121
Ninety Broomfield Road RTM Company Ltd v Triplerose Ltd [2013] UKUT 606 (LC)
Pineview Ltd v 83 Crampton Street RTM Company Ltd [2013] UKUT 598 (LC)
Introduction
1. In Ninety Broomfield Road RTM Company Ltd v Triplerose Ltd [2013] UKUT 606 (LC) the Tribunal (Judge McGrath, President of the First-tier Tribunal, Property Chamber) decided that the right to manage conferred by Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) may be exercised by a single RTM company in respect of more than one self-contained building.
2. The same issue arises again in this appeal from a decision of the leasehold valuation tribunal for the London Rent Assessment Panel (“the LVT”) given on 17 December 2012. After considering separate applications by the three respondents and a fourth company, each of which sought the right to manage in respect of all or part of the residential estate known as Lyttelton Court, Lyttelton Road, London N2, the LVT decided that an RTM company could not seek or exercise the right to manage in respect of more than one self-contained building.
3. Lyttelton Court comprises three similar blocks of long leasehold flats surrounded by communal gardens. Each of the respondents is an RTM company incorporated in accordance with the 2002 Act with the object of acquiring the right to manage one of those three blocks. The fourth company whose application was before the LVT, Lyttelton Court RTM Company Ltd, (“the Estate Company”) also claimed to be an RTM Company but its objects were to acquire the right to manage the Lyttelton Court estate as a whole, including all three blocks. The appellant, Fencott Ltd, is the owner of the reversionary head-leasehold interest in Lyttelton Court, and was the respondent to each of the four applications.
4. On 15 August 212 each respondent served a claim notice in respect of one of the Lyttelton Court blocks while the Estate Company served a further notice claiming the right to manage Lyttelton Court as a whole. The claim notices served by the respondents were expressed to be subject to and without prejudice to the validity of the Estate Company’s claim notice. It has been a matter of considerable controversy whether an RTM company can validly acquire the right to manage more than one self-contained building, and the course of action taken by the respondents and the Estate Company, acting in concert, was designed to ensure that by one route or another the tenants of Lyttelton Court would acquire the benefits of the right to manage conferred by the 2002 Act.
5. The appellant deployed three arguments before the LVT designed to defeat the claims of all four RTM companies and prolong the management of Lyttelton Court in its own hands. It first argued that there was no reason why the Estate Company should not be an RTM company and that such a company could, in principle, acquire the right to manage more than one block of flats. Secondly, it contended that, because the Estate Company had been incorporated as an RTM company first in time, the respondents were prevented from being RTM companies at all; this, it was suggested, was the effect of section 73(4) of the 2002 Act which precludes more than one company being an RTM company in relation to the same premises. Having disposed of the claims of the respondents, the appellant finally contended that the Estate Company’s claim must also fail on this occasion because, although qualified in principle to acquire the right to manage Lyttelton Court, the Estate Company had not yet made a valid claim. The appellant argued that although the 2002 Act permits a single RTM company to manage more than one building, it does not permit the making of a single claim in relation to more than one building but requires each building to be the subject of a separate claim.
6. The view taken by the LVT was that only a single self-contained building can be “premises” within the scope of section 72(1) of the 2002 Act to which the right to manage provisions can apply. The LVT therefore decided that the Estate Company was not an RTM company at all because the premises of which it sought the right to manage comprised all three blocks at Lyttelton Court. As the Estate Company was not an RTM company it could not acquire the right to manage, but nor could its prior incorporation prevent each of the respondents from acquiring the right to manage the single blocks which were within their separate objects. Thus the LVT determined that the first respondent was entitled to acquire the right to manage Block 1, the second respondent Block 2 and the third respondent Block 3 at Lyttelton Court.
7. The appellant was given permission to appeal by the LVT because there were conflicting decisions of a number of leasehold valuation tribunals on the question whether an RTM company could acquire the right to manage more than one block (Mr Serota, the solicitor for the appellant, was aware of at least sixteen decisions of leasehold valuation tribunals on the issue). The appeal was heard a few days after the Tribunal had heard Ninety Broomfield Road RTM Company Ltd v Triplerose along with two other appeals and a case transferred from the first-tier tribunal, all of which raised the same issue. I indicated to the parties that if the Tribunal gave its decision in the Ninety Broomfield Road cases before I delivered a decision in this appeal (as subsequently happened), I would allow them the opportunity to make further submissions in writing in the light of that decision.
8. The appellant was represented before me by Mr Simon Serota of Wallace LLP, while the respondents were represented by Mr Philip Rainey QC and Mr Andrew Sheftel. I am grateful to them all for their comprehensive written and oral submissions.
9. The relevant facts on which the LVT based its decision are not contentious and are sufficiently set out above.
The acquisition of the right to manage
10. Chapter 1 of Part 2 of the 2002 Act created a new statutory right to manage certain residential premises obtainable in accordance with the procedures there laid down. The right is a valuable one and the numerous cases which have come before first-tier tribunals and, on appeal, to this Tribunal demonstrate that its acquisition is often strenuously and ingeniously resisted by landlords who wish to retain the benefits of management in their own hands.
11. Sections 71 and 72 of the 2002 Act define the statutory right and identify the premises in respect of which it is exercisable. So far as relevant, they provide as follows:
“71 The right to manage
(1) This Chapter makes provision for the acquisition and exercise of rights in relation to the management of premises to which this Chapter applies by a company which, in accordance with this Chapter, may acquire and exercise those rights (referred to in this Chapter as a RTM company).
(2) The rights are to be acquired and exercised subject to and in accordance with this Chapter and are referred to in this Chapter as the right to manage.
72 Premises to which Chapter applies
(1) This Chapter applies to premises if -
(a) they consist of a self-contained building or part of a building with or without appurtenant property;
(b) they contain two or more flats held by qualifying tenants, and
(c) the total number of flats held by such tenants is not less than two-thirds of the total number of flats contained in the premises.”
12. Subsections (2)-(5) of section 72 provide criteria by which it is to be determined whether premises are a self-contained building or part of a building. Section 72(6) gives effect to Schedule 6 of the 2002 Act, in which premises excepted from the regime of Chapter 1 are identified. Amongst these excepted premises are two categories which require special mention. Paragraph 2 of Schedule 6 provides that:
“Where different persons own the freehold of different parts of premises falling within section 72(1), this Chapter does not apply to the premises if any of those parts is a self-contained part of a building.”
Paragraph 5(1) of Schedule 6 then provides:
“This Chapter does not apply to premises falling within section 72(1) at any time if – (a) the right to manage the premises is at that time exercisable by a RTM company”
13. The essential characteristics of an RTM company are specified in section 73, as follows:
“73 RTM companies
(1) This section specifies what is a RTM company.
(2) A company is a RTM company in relation to premises if –
(a) it is a private company limited by guarantee, and
(b) its memorandum of association states that its object, or one of its objects, is the acquisition and exercise of the right to manage the premises
(3) ……
(4) And a company is not a RTM company in relation to premises if another company is already a RTM company in relation to the premises or to any premises containing or contained in the premises.”
14. The procedure for asserting and challenging a claim to acquire the right to manage is provided for by sections 78 to 89, of which the following are relevant:
“78 Notice inviting participation
(1) Before making a claim to acquire the right to manage any premises, a RTM company must give notice to each person who at the time when the notice is given-
(a) is the qualifying tenant of a flat contained in the premises, but
(b) neither is nor has agreed to become a member of the RTM company.”
“79 Notice of claim to acquire right
(1) A claim to acquire the right to manage any premises is made by giving notice of the claim …
(2) …..
(3) The claim notice must be given by an RTM company which complies with subsection (4) or (5).
(4) If on the relevant date there are only two qualifying tenants of flats contained in the premises, both must be members of the RTM company.
(5) In any other case, the membership of the RTM company must on the relevant date include a number of qualifying tenants of flats contained in the premises which is not less than one-half of the total number of flats so contained.”
“81 Claim notice: supplementary
(1)-(2) ….
(3) Where any premises have been specified in a claim notice, no subsequent claim notice which specifies –
(a) the premises, or
(b) any premises containing or contained in the premises,
may be given so long as the earlier claim notice continues in force.”
Jurisprudence
15. Before the Tribunal’s decision in Ninety Broomfield Road it had not previously had the opportunity to consider the issue which arises once again in this appeal.
16. In Gala Unity Limited v Ariadne Road RTM Company Limited [2011] UKUT 425 (LC) the Tribunal (George Bartlett QC, President) had decided that the respondent, an RTM company whose memorandum of association stated that its objects included the acquisition of the right to manage two blocks of flats, was entitled additionally to acquire the right to manage appurtenant property comprising private access roads, car parking, gardens and the like, the use of which was enjoyed by the owners of flats in the two buildings in common with the owners of adjoining premises over which the right to manage was not claimed. The Tribunal’s decision was later upheld by the Court of Appeal ([2012] EWCA Civ 1372). At no stage in the proceedings was either party legally represented.
17. It was not suggested in Gala Unity that the respondent was prevented from being an RTM company by the scope of its objects clause and no consideration was given to the issue raised in this appeal. The Tribunal did not question the company’s entitlement to acquire the right in relation to both blocks of flats, as is apparent from paragraph 13 of the decision:
“The claim notices identified ‘the premises’ for the purposes of the claim as, in one case ‘the block of flats numbered 14 to 32 Ariadne Road’ and, in the other case, ‘the block of flats numbered 10 to 12 Ariadne Road’. Each of these buildings is undoubtedly self-contained since it is structurally detached (see section 72(2)); and accordingly on the relevant date the RTM company was entitled to acquire the right to manage them.”
18. In the Court of Appeal the acquisition of the right to manage more than one self-contained building was once again un-contentious and passed without adverse comment. Sullivan LJ, who gave the only judgment, said this at paragraph 13:
“Mr McGurk’s wish that his company’s estate should be managed as a whole is understandable, but there can be no doubt that the two blocks of flats are self contained buildings for the purpose of section 72(1)(a). There is no challenge to the President’s factual conclusion, reached after he had carried out a site visit, that the two blocks are structurally detached. The Act defines a self contained building by reference to it being ‘structurally detached’, and there is no justification for imposing Mr McGurk’s further requirement that the structurally detached building must be able to function independently, without the need to make use of any shared facilities such as private access roads, car parking, gardens or other communal areas.”
19. Sullivan LJ was aware of the potential difficulties which might be created by dual management of shared appurtenant property, but did not regard them as insuperable or determinative, as paragraph 20 of his judgment made clear:
20. Gala Unity is therefore a case in which, although the point was not contentious, the Tribunal and the Court of Appeal were apparently untroubled by the acquisition of the right to manage two separate buildings following service of two claim notices by the same RTM company. That was not the procedure adopted in this case by the Estate Company, which instead served a single claim notice relating to the whole of Lyttelton Court (thereby creating a potential loophole in its claim which the appellant has sought to exploit).
21. Gala Unity was considered in some detail by the Tribunal in Ninety Broomfield Road at paragraphs 38 to 45. At paragraph 84 the Tribunal’s conclusion and reasoning were described as being consistent with its approach in Gala Unity, but the Tribunal did not base its reasoning on the earlier decision and certainly did not treated it as determinative of the main issue in those appeals.
22. The questions considered in Ninety Broomfield Road were identified in paragraph 34 of the Tribunal’s decision. The first was the issue of principle, whether an RTM company may seek and acquire the right to manage in respect of more than one self-contained building. The remaining questions assumed an affirmative answer to the issue of principle and went on to consider procedural matters, namely (a) whether separate claim notices were required in respect of each self-contained building, (b) whether each building must have the requisite number of qualifying tenants who are members of the company, and (c) if separate notices in respect of each self-contained building are not required, how is the requisite number of qualifying tenants and members of the company to be identified and counted?
23. In paragraph 81 of the decision in Ninety Broomfield Road, after referring to the Draft Bill and Consultation Paper which had preceded the introduction of the 2002 Act, the Tribunal first identified the purpose of the right to manage legislation as being to grant long leaseholders the right to take over the management of their building without having to prove fault or pay compensation; and to ensure that the procedures should be simple, that the allocation of responsibilities should be clear cut and that the body through which the leaseholders take on management should enjoy all necessary powers. The Tribunal considered that the achievement of those objectives in the context of self-contained buildings which share appurtenant property required that the statutory provisions be given a purposive construction.
24. The Tribunal then approached the issue of principle by focussing on section 72 of the 2002 Act, which identifies “premises to which [the] Chapter applies”. At paragraph 83 of the decision it said this:
“Section 72 describes the premises to which Chapter 1 of Part 2 of the 2002 applies. In my view … the section does not define “premises” for all purposes. The section limits the type of premises to which the right to manage will apply to “a self-contained building or part of a building,” it defines a self-contained building as being “structurally detached” and describes a part of a building as a self-contained part of a building if it constitutes a vertical division of the building and the structure is such that it could be redeveloped independently of the rest of the building. Section 72(1)(a) and 72(2)-(5) make it clear to which premises the right to manage will apply, and importantly to which premises the right to manage will not apply. I regard that distinction as being the purpose of those parts of the section. The section does not limit the number of self-contained buildings or parts of self-contained buildings to which the right will apply. Its purpose, is to define self-containment. I therefore reject the emphasis sought to be placed on the pro-noun “a” on behalf of the freeholders. Whilst it is correct that the section might instead have read “self-contained buildings” this would not have added to the purpose of the section and, in context and in particular for consistency and clarity with section 72(2) the use of the word “a” is not, in my view determinative or of assistance in the consideration of whether the right to manage may be exercised in respect of multiple “premises”.”
25. The Tribunal then considered whether there was any feature of the statutory scheme which militated against the acquisition of the right to manage in respect of more than one self-contained building, but found none. In paragraph 84 the Tribunal agreed with the submission that the definition in section 73(2)(b) of an RTM company as one whose “object, or one of its objects, is the acquisition and exercise of the right to manage the premises” does not, of itself, limit the right to a single set of premises. Nor did the requirements of section 72(2)(b) and (c) regarding the number of flats contained in the premises or the membership threshold of not less than half of the flats in the premises limit the number of premises which could be included, provided the qualifying membership was achieved in each self-contained building (paragraph 85) and “on a block by block basis” (paragraph 88). Practical experience garnered over 10 years suggested that some of the difficulties or abuses relied on in support of the single-block approach were fanciful (paragraph 89).
26. In paragraphs 90 to 93 of the decision the Tribunal considered, in the context of shared appurtenances, an argument based on section 73(4) which stipulates that a company is not an RTM company in relation to premises if another company is already an RTM company in relation to the premises or to any premises containing or contained in the premises. The incidence of shared rights did not prevent premises from being self-contained or eligible for the exercise of the right to manage, and appurtenant property was not required to be identified in a claim notice. In Gala Unity the Court of Appeal had been alive to the practical management issues likely to be generated by extending the right to manage to shared appurtenances but had not regarded them as sufficiently serious to undermine its preferred construction of the Act which permitted them.
27. The Tribunal’s conclusion on the issue of principle in Ninety Broomfield Road was that an RTM company may seek and acquire the right to manage more than one self-contained building. The procedural issues were resolved in paragraph 94. The qualifying conditions must be satisfied in relation to each building. As for the suggested need for separate notices for each self-contained building in respect of which the right to manage was claimed, Judge McGrath said this:
“Initially I had taken the view that it was necessary for an RTM company to serve a separate notice in respect of each set of premises. However, on reflection, I consider that … a single notice will suffice in respect of a number of properties. If a single notice is served, then its content must be sufficiently clear to establish eligibility in respect of each set of premises and must comply with section 80. For that reason, the RTM company may prefer to serve separate notices simply for the sake of clarity.”
28. Since publication of the Tribunal’s decision in Ninety Broomfield Road Mr Rainey QC has taken the opportunity to make further detailed submissions in writing. Mr Serota did not consider further comment from him was necessary, so I take him to adopt the reasoning of the Tribunal in Ninety Broomfield Road in support of the appellant’s case.
The case for the appellant
29. Mr Serota’s submissions for the appellant began by focussing on the practical importance of the achievement of the right to manage on an estate-wide basis. It is commonplace, he pointed out, for residential blocks to share car parks, landscaped areas, estate roads and other appurtenant property. The service charge regimes provided for by the leases of flats in such residential estates assume common management of the shared appurtenant property. Parliament must be taken to have legislated with these typical arrangements in mind, and although the 2002 Act is not as carefully thought out as it might have been, unless the statutory language prohibited the achievement of the right to manage on an estate-wide basis, it should be interpreted as permitting it in order to make the right as effective as possible. Many RTM companies had been established on an estate-wide basis since 2002 (Gala Unity being a notable recent example) and, although the first-tier tribunals had been divided on the issue of principle, significantly more contested estate-wide applications had been permitted than refused; these established arrangements and contracts predicated on them would be disrupted by a decision of the Tribunal prohibiting estate-wide RTM companies. At paragraph 20 of its decision in Gala Unity the Court of Appeal had espoused a pragmatic and purposive interpretation of the Act despite the risk of theoretical difficulties, and the Tribunal should adopt a similar approach.
30. Turning to the statutory language itself, Mr Serota submitted that there is nothing in the right to manage provision which limits the activities of an RTM company to the management of a single self-contained building. As the Tribunal subsequently accepted in Ninety Broomfield Road, the function of section 72 was to define the premises in respect of which the right to manage would be available, and not to limit the number of such premises which could be managed by a single RTM company. Nor does the definition of an RTM company in section 73 present any problem. If a company’s articles of association identify one of its objects as the acquisition of the right to manage in relation to Block A, it does not satisfy the description in section 73(2) any less completely because another of its objects is identified as the acquisition of the same right in relation to Block B. Such a company will be an RTM company in relation to both Block A and Block B. The provisions in relation to membership in section 74 and the making of claims in sections 78 to 89 apply equally well to claims to acquire the right to manage a number of self-contained buildings.
31. Mr Serota pointed out that for each alleged anomaly or absurdity which the estate-wide approach to the right to manage might throw up (a number of which had been identified by the LVT in its decision), a similar anomaly could be suggested as the consequence of the single-building approach.
32. Mr Serota made two further submissions which I did not find convincing and which I can deal with at this stage.
33. First, he took the definition of “premises” in section 72 (“a self-contained building or part of a building with or without appurtenant property”) as requiring that appurtenant property should itself be treated for all purposes as an integral part of the premises referred to. This, he submitted, created a category of premises which would be denied the right to participate in the management of its appurtenant property, unless an estate-wide RTM company was permitted to exist. That category would consist of any self-contained building which shared appurtenances with another self-contained building in respect of which an RTM company had already been incorporated. That was because section 73(4) provides that a company cannot be an RTM company in relation to premises if another company is already an RTM company in relation to those premises or premises containing or contained in those premises. I do not accept that approach. Premises are within the Chapter if they consist of a self contained building or part of a building, whether or not they also have appurtenant property. As the Tribunal held in Gala Unity (at paragraph 14) it is not necessary for a claim notice to specify the appurtenant property which is enjoyed with the self-contained building, and buildings with shared appurtenances are within the scope of the right to manage. As Mr Rainey submitted, it is preferable in my view to regard the appurtenant property as just that - appurtenant – rather than as part of the premises themselves. The right to manage extends to all appurtenant property because it is appurtenant to the premises in respect of which the right to manage is acquired. I therefore do not accept that section 73(4) prevents more than one RTM company existing in relation to several self-contained buildings which share appurtenances or that only one such company may include the management of the appurtenant property as one of its objects.
34. Secondly, Mr Serota advanced an alternative submission that the expression “self-contained building” in section 72(1) could be extended to include “self-contained buildings” so that the premises referred to in the objects clause of a company’s articles of association could include premises comprising more than one self-contained building. He supported this submission by referring to Long Acre Securities v Karet [2004] 2 EGLR 121 (a decision of Mr Geoffrey Vos QC, sitting as a Deputy Judge of the Chancery Division in proceedings concerning the tenants’ right of first refusal under Part 1 of the Landlord and Tenant Act 1987) and Craftrule Ltd v 41-60 Albert Place Mansions (Freehold) Ltd [2011] EWCA Civ 185 (a decision of the Court of Appeal on the application of the collective enfranchisement provisions of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”) to two contiguous self-contained parts of a residential building). Each of these cases dealt with a different factual situation in connection with different legislation and I do not find either of them helpful in addressing the issue in this appeal. I consider that sections 72, 74 and 78 the 2002 Act adopt a block by block approach to the conditions for the acquisition of the right to manage and that these provide a sufficient contra-indication to preclude the extension of the expression “self-contained building” to include the plural.
The case for the respondents
35. For the respondents Mr Rainey agreed with Mr Serota that the 2002 Act was imperfect, describing it as “not fit for purpose”, and suggested that one of its deficiencies was its failure to cater for an estate-wide right to manage. Just as Parliament had failed in the 1993 Act to provide for an estate-wide right of collective enfranchisement, so it had failed in the 2002 Act (which had taken the 1993 Act as its model) to design a right to manage regime permitting more than one self-contained building per RTM company.
36. Mr Rainey submitted that the right to manage provisions were intended to dovetail with and ought therefore to be construed consistently with the “right to enfranchise” provisions of the 1993 Act (in particular sections 4A-C) which had been introduced by amendments contained in Chapter 2 of Part 2 of the 2002 Act and which allowed the incorporation of RTE (right to enfranchise) companies. The premises in respect of which an RTE company could exist were necessarily limited to a single self-contained building, and an RTM company should be subject to the same limitation. When the 2002 Act was introduced it had been anticipated that a single company could be both an RTM and RTE company companies, a possibility referred to specifically in section 4B(1) of the 1993 Act. The reference in section 73(2) to “one of its objects” being “the acquisition and exercise of the right to manage the premises”, was therefore to accommodate the possibility that another of its objects might be the enfranchisement of the same premises, rather than to permit the acquisition of the right to manage other premises. In the event the RTE provisions were found to be so ineptly constructed that they have never been brought into force, but this did not detract from the assistance they provided in construing the 2002 Act as a whole.
37. Mr Rainey submitted that the premises to which reference was made throughout the relevant provisions of the 2002 Act were generally the same premises i.e. a single self-contained building as described in section 72. He acknowledged that this was not the case in section 73(4) and (5) which referred to premises “containing or contained in” other premises, but submitted that generally a single block limit on the acquisition of the right to manage avoided difficulties of interpretation and application of the provisions. The Act proceeds through a series of steps beginning with the formulation of the objects of the RTM company which defines its potential membership, identifies those who must receive a notice of invitation to participate, informs the content of the claim notice and leads to the right to manage being achieved, all in respect of the same single self-contained building. Once the right to manage had been achieved, section 72(6) and paragraph 5 of Schedule 6 operate to prevent the statutory procedures from being implemented again in respect of the premises by providing that the Chapter does not apply to premises falling within section 72(1) at any time “if the right to manage the premises is at that time exercisable by an RTM company.” This structure does not sit well, Mr Rainey submitted, with the extension of the right to manage to multiple buildings.
38. Nor, Mr Rainey pointed out, would the possibility of an estate-wide right to manage sit well with the exclusionary provision in paragraph 2 of Schedule 6 to the 2002 Act. Under the heading “buildings with self contained parts in different ownership” this provides that where the freehold of different parts of premises falling within section 72(1) is owned by different persons, Chapter 1 does not apply to the premises if any of those parts is a self-contained part of a building. The object of this provision would appear to be to require that the right to manage be exercised in such a situation in relation to the smallest structure satisfying the description in section 72(1), presumably to prevent avoidance or abuse and to reduce the occasions when a single RTM company has to engage with more than one landlord. (A very similar provision is found in section 4(3A) of the 1993 Act and was relied on by the Court of Appeal in Craftrule as indicating that, where the freehold of a building was in single ownership, there was no requirement that only the smallest possible self-contained part could be the subject of a collective enfranchisement claim). There is no provision in the 2002 Act requiring that where the freeholds of separate self-contained buildings are owned by different persons, those buildings may not be managed by a single RTM company. That omission is generally inconsistent with the statutory objective, discernable from paragraph 2 of Schedule 6, that an RTM company should manage the property of a single landlord only.
39. Mr Rainey identified what he said was a further problem with the membership of an estate-wide RTM company. The prescribed articles of association of an RTM company require that members of the company be qualifying tenants (or a landlord) of a flat in the premises referred to in the company’s objects. Thus, where an estate-wide RTM company was incorporated, all of the qualifying tenants would be entitled to be members and all would be entitled to vote on each resolution to serve a notice claiming to acquire the right to manage in respect of each individual block. In some cases the qualifying tenants might be associated companies of the landlord itself, and they might be sufficiently numerous to out-vote the members who were tenants of a single block. If they found their aspirations for self-management thwarted in that way such tenants would be prevented from establishing a single block RTM company by section 73(4). The tenants of a single block could, he submitted, be “locked out” of achieving the right to manage in respect of their own block simply by the formation by others of an estate-wide RTM company.
40. Mr Rainey also suggested that if an estate-wide right to manage is recognised it may not always be obvious that an RTM company already exists in relation to premises in respect of which a new company is sought to be incorporated. The tenants of one block may not appreciate that an estate-wide RTM company has already been formed, or those seeking to form an estate-wide company may not appreciate that one block on the estate already has its own. Mr Serota responded to this suggested difficulty by pointing out that under rule 79A of the Land Registration Rules 2003 an RTM company may procure an appropriate entry in the proprietorship register of a registered estate recording the fact that it has acquired the right to manage premises comprised in that estate. For my part I am inclined to regard this risk as a wrinkle which makes no difference to the proper interpretation of the statutory provisions; the same theoretical difficulty could be encountered where more than one RTM company was sought to be incorporated in relation to the same block, or in relation to self-contained parts of the same block.
41. Mr Rainey described the difficulties which he identified as structural problems, as distinct from mere anomalies or practical difficulties, and submitted that they demonstrated that the 2002 Act was intended to limit the right to manage to a single self-contained building per RTM company.
42. Mr Rainey invited me not to follow the Tribunal’s decision in Ninety Broomfield Road. While sympathetic to the general point that the 2002 Act should be given a purposive construction he criticised the Tribunal for its reliance on the draft bill and consultation paper as indicating the purpose of the legislation. I agree with Mr Rainey’s submission that the purpose should first be sought in the legislation itself and neither party referred to additional parliamentary material in the course of their submission to me. Nonetheless, I find nothing in paragraph 81 of the Tribunal’s decision in Ninety Broomfield Road concerning the purpose of the 2002 Act as derived from the consultation paper which cannot also be found by considering the legislation itself without regard to other material; in Pineview Ltd v 83 Crampton Street RTM Company Ltd [2013] UKUT 598 (LC) at paragraph 70 the Tribunal identified a similar statutory policy “to minimise complexity and uncertainty in the achievement of RTM” by reference only to the scheme of the 2002 Act itself.
43. Mr Rainey adopted the submissions based on the consultation paper made to the Tribunal in Ninety Broomfield Road and recorded at paragraphs 61 to 63 of its decision and suggested that the draftsman had foreseen difficulties and invited solutions to them to enable an estate-wide right to manage to be permitted, but that none had been incorporated in the 2002 Act. In Mr Rainey’s submission
“The effect of the decision in Ninety Broomfield Road if correct, is that these problems are introduced into the law but without solution: there is no limit to the reach of global RTM and no control at all over how many properties can be swept up or what (if any) link is required between them.”
44. The greatest dangers, Mr Rainey submitted, were first that the existence of an estate-wide RTM company would prevent the tenants of individual blocks from forming their own block-specific RTM company because of the suggested effect of section 73(4), and, secondly, that the entitlement of the tenants of a self-contained building to manage their own affairs would be unduly diluted by their participation in an estate-wide RTM company with the risk of smaller blocks being outvoted by larger, and of corporate tenants controlled by the landlord being able to exercise influence.
45. The outcome of the appeal should therefore be its dismissal, Mr Rainey argued. The LVT had been right to hold that an RTM company could not have as its object, or one of its objects, the management of more than one self-contained building. As a result, the Estate Company was not an RTM company at all, as it did not satisfy the description in section 73(2). Since the Estate Company was not an RTM company in relation to any of the blocks at Lyttelton Court, section 73(4) was not an impediment to each of the respondents being a properly constituted RTM company in relation to the particular block referred to in its objects.
An alternative case for the respondents
46. Mr Rainey developed an alternative argument in order to escape the suggested effect of section 73(4) in the event that the Tribunal accepted that an estate-wide RTM company was permissible. It will be remembered that it was an important principle of Mr Serota’s plan to deny the right to manage to both the respondents and the Estate RTM Company that the very existence of an estate-wide RTM company meant that no other company could thereafter be an RTM company in relation to any part of the estate. That was accepted by the LVT as being the result of section 73(4) of the 2002 Act, which provides that a company is not an RTM company in relation to premises if another company is already an RTM company in relation to the premises or to any premises containing or contained in the premises. Mr Rainey’s alternative submission was that on the true construction of section 73(4) the existence of a global RTM company would not prevent a block company from also being an RTM company.
47. Mr Rainey submitted that the Tribunal had been correct in paragraphs 90 to 94 of Ninety Broomfield Road to accept that more than one RTM company could exercise the right to manage in respect of appurtenant property if that property was appurtenant to the self-contained building. This was because the “appurtenant property” enjoyed with a self-contained building or part of a building does not itself form part of the “premises” for the purpose of qualification under section 72 or disqualification under section 73(4). Premises, as he put it, refers to bricks and mortar and not to appurtenances, hence a number of blocks, each with its own RTM company, may exercise management functions over shared appurtenances.
48. The key to section 73(4), Mr Rainey submitted, was to appreciate that the “premises” referred to could only be identified by referring to the objects clause of the RTM company. An estate RTM company’s objects would never specify exactly the same premises as those of a block RTM company. It followed that the estate RTM company’s objects would not specify premises which were “contained in” the premises specified by a block RTM company; nor, on an ordinary use of language, would one say that a single self-contained building was “contained in” three separate self-contained buildings (especially when it is remembered that appurtenant property should be left out of consideration at this stage).
49. Section 73(4) was intended to deal with problems over self-contained parts of a building and to avoid several RTM companies existing in relation to overlapping parts. Thus, where a large building comprises several self contained parts and the tenants of one of those parts form an RTM company restricted to that part, no other RTM company can be formed which includes that part; that would be an attempt to establish an RTM company for premises “containing” the premises of an existing RTM company, which is prohibited. If an RTM company exists for the whole building, none of its self contained parts (each of which would be “contained in” the premises of the original RTM company) can themselves establish their own separate RTM company. Mr Rainey submitted that the obvious problems which would be created if more than one RTM company could lay claim to the management of the same part of a single building had nothing to do with the case of an estate RTM company exercising management over different buildings.
50. In any event, Mr Rainey pointed out, section 81(3) prevents the giving of a claim notice where premises have already been specified in an earlier claim notice which continues in force, while paragraph 5 of Schedule 6 causes Chapter 1 no longer to apply to premises at any time while the right to manage is exercisable (or within four years of it ceasing to be exercisable). These provisions prevent competing claims to acquire the right to manage from being asserted, and prevent two RTM companies from simultaneously exercising the right to manage the same premises. The existence of these protections against the chaotic consequences of duplicate management of the same premises by different RTM companies should, he submitted, encourage a more purposive approach to the construction of section 73(4). The correct approach, he suggested, was not to treat section 73(4) as disqualifying a block RTM company from existing for a separate self-contained building, simply because another, estate-wide, RTM company had included that building amongst the premises listed in its objects clause.
Discussion
51. In its very recent decision in Ninety Broomfield Road the Tribunal has decided the issue of principle which lies at the heart of this appeal by ruling in favour of the existence of estate RTM companies. That decision no doubt came as a considerable relief to the numerous RTM companies which have been established on an estate-wide basis. The parties are aware of at least 16 previous decisions in which leasehold valuation tribunals have confirmed the acquisition of the right to manage multiple self-contained buildings (the earliest which I was shown was a decision in September 2005 in which Mr Serota and Mr Rainey also featured). No doubt many other such applications have been resolved by agreement as, until relatively recently, the tide of opinion in first tier tribunals flowed strongly (though not unanimously) in favour of the estate-wide approach.
53. There are many good reasons why an estate-wide right to manage is desirable, and many estates where it is necessary to enable the right to manage to be enjoyed at all, or at least to be enjoyed effectively. Where otherwise separate self-contained buildings receive services through inseparable communal installations, or where truly self-contained buildings share appurtenances (such as car parks, gardens or access roads), effective self-management is likely to require that control be vested in a single body. Not only is the prospect of dual management between an RTM company and the estate freeholder “not a happy one” (as Sullivan LJ described it in the Court of Appeal in Gala Unity) but the potential for discord, duplication of effort and wasted expenditure where multiple single block RTM companies must collaborate is almost as daunting. Parliament must have intended the 2002 Act to transfer management control to tenants effectively (as is obvious from its contents, without the need to refer to other sources). The decision of the Tribunal in Ninety Broomfield Road therefore provided a simple, pragmatic and attractive solution to an important problem.
54. As I am now asked to depart from that decision, it is appropriate that I begin by reminding myself once again of the proper approach when such a submission is made.
55. Before the abolition of the Lands Tribunal on 1 June 2009 and the transfer of its functions to the Lands Chamber of the Upper Tribunal (a superior court of record under section 3 of the Tribunals, Courts and Enforcement Act 2007) it was well established that the Lands Tribunal was not bound to follow its own previous decisions. West Midland Baptist (Trust) Association v Birmingham Corporation [1968] 2 QB 188 was an appeal from the Lands Tribunal to the Court of Appeal on a reference to determine compensation for compulsory purchase in which the Lands Tribunal had considered itself bound by a previous decision of its own. At page 210 D Salmon LJ said:
“No doubt previous decisions of the tribunal on points of law should be treated by the tribunal with great respect and considered as persuasive authority, even when made by a layman. But they should never be treated as binding. It is important that such decisions should be most carefully scrutinised and if necessary rejected, particularly in cases such as the present which raise points of law of outstanding importance with far reaching consequences.”
56. Since its creation in 2009 the Tribunal has adopted the same approach (see, for example, Assethold Ltd v 15 Yonge Park RTM Co Ltd [2011] UKUT 379 (LC) (Judge Walden-Smith). The same practice is adopted in other chambers of the Upper Tribunal. In Dorset Healthcare NHS Trust v MH [2009] UKUT 4 (AAC) a three judge panel of the Administrative Appeals Chamber provided guidance which is equally applicable to the Lands Chamber and which included the following at paragraph 38(3):
“A single judge in the interests of judicial comity and to avoid confusion on questions of legal principle normally follows the decisions of other single judges. It is recognised however that a slavish adherence to this could lead to the perpetuation of error and he is not bound to do so.”
57. A decision of the Tribunal on an issue of law is therefore of considerable persuasive authority, and it is to be expected that I will follow it, unless I am satisfied that it is wrong.
58. The crux of the Tribunal’s decision in Ninety Broomfield Road is that the purpose of section 72 of the 2002 Act is to identify premises to which the right to manage provisions apply; it does not operate to limit the number of such premises, each satisfying the description in section 72(1), which may be managed by a single RTM company. As Mr Serota submitted it is therefore immaterial to the issue in this appeal that the expression “a self-contained building” cannot, in context, be read additionally as including “self-contained buildings”. Once a building or part of a building can be shown to satisfy the qualifying conditions in section 72(1) it constitutes premises to which the Chapter applies and the right to manage is capable of being exercised in relation to it (and appurtenant property which goes with it) by an appropriately constituted RTM company.
59. This approach seems to me also to be reflected in paragraph 13 of the Tribunal’s decision in Gala Unity, when it said “each of these buildings is undoubtedly self-contained since it is structurally detached (see section 72(2)); and accordingly on the relevant date the RTM company was entitled to acquire the right to manage them.”
60. I do not consider that the exercise undertaken by Mr Rainey of tracing the statutory procedure back to “the fundamental first step” of incorporation (as he described it) suggests a different answer to the problem. It is quite true that the answer to the question – is a company an RTM company in relation to Block A – is found by looking at its articles of association to see if its object, or one of its objects, is the acquisition and exercise of the right to manage Block A. But the fact that another of its objects is the acquisition and exercise of the right to manage Block B and C does not, as a matter of language or structure, prevent it from being an RTM company in relation to Block A.
61. Since the clear language of the Act appears to permit estate-wide RTM companies, and certainly does not suggest that they are impermissible, it is necessary to consider whether the consequences of recognising them would be so absurd or unpalatable as to demand a different approach.
62. The suggested inconsistency with the operation of the collective enfranchisement provisions of the 1993 Act is worthy of careful consideration. Sections 4A-4C, 12A and Schedule 8 of the 1993 Act would have made the RTE company the single permissible vehicle by which the right of collective enfranchisement by tenants of flats could be exercised. Those provisions were much criticised and have never been brought into force, but the fact that the RTE company was stillborn does not extinguish such light as it may be able to shed on the character of the RTM company, its statutory sibling.
63. It is apparent from section 122 of the 2002 Act, which contains the new section 4B(1)(b) of the 1993 Act, that it was intended that an RTE company might also be an RTM company; for that reason it might be thought convenient if the scope of the siblings’ objects were capable always of relating to the same premises. Mr Serota did not directly challenge the suggestion that an RTE company was intended only to be capable of exercising the right to enfranchise in relation to a single self-contained building and that estate-wide enfranchisement through a single RTE company was not permissible. He suggested simply that the RTE provisions were concerned with a different subject matter and could not provide assistance in this case.
64. Although I agree that consistency between the entitlement of an RTM company to manage premises and of an RTE company to enfranchise them may well have been intended, there are two reasons why I find this aspect of the debate of little assistance. First, it seems to me to widen rather than to answer the central question, and to require close examination of the redundant RTE provisions to ascertain whether they really do prohibit estate-wide enfranchisement by restricting the scope of an RTE company’s interests to a single block. Since section 4A of the 1993 Act (not in force) is in substantially the same terms as section 72 of the 2002 Act, and since the concept of an estate-wide RTE company is not obviously absurd, that examination is unlikely to provide a clearer answer than can be arrived at by concentrating exclusively on the 2002 Act. Secondly, even if an RTE company would have been restricted in its objects to the enfranchisement of a single block, that need not inevitably require that an RTM company is subject to the same restriction. It may simply mean that, in the original statutory scheme, tenants who wished to use the right to manage as a springboard to enfranchisement would have had to form a single block RTM/RTE company, or if they wished to create an estate wide RTM company, would have needed to incorporate separate RTE companies, each with a narrower focus, when they wished to enfranchise.
65. Nor do I consider that the suggested dilution of the rights of tenants of a self-contained building is problematic. As the Tribunal held in Ninety Broomfield Road (at paragraph 94) the qualifying criteria must be satisfied in relation to each self-contained building in respect of which an estate RTM company seeks to acquire the right to manage. It follows that the suggested dilution of the freedom to manage would be the consequence of the voluntary decision of a majority of the tenants in each self-contained building to become members of an estate RTM company. The object of the right to manage is to confer collective autonomy on tenants, and to make them sovereign in decision-making about their own homes. It is not inimical to that principle that tenants on estates such as Lyttelton Court or Ariadne Road, who see it as being in their common interest to pool their sovereignty and exercise the right to manage on a wider collective basis, should be permitted to do so by forming or participating in an estate RTM company.
66. I also find quite unconvincing the spectre of RTM companies being dominated by tenants who are associated companies of the landlord, or who are otherwise controlled or influenced by the landlord. In an estate wide RTM company it is not impossible that tenants whose interests are closely aligned with the landlord may form a majority, and may be able to outvote the less numerous tenants who nonetheless represent a majority in a particular block. The Act contains no exclusion of such tenants from membership of an RTM company and I do not regard a connection with the landlord as a reason to deprive a tenant of the opportunity to participate in the right to manage. If an associated company of the landlord has a substantial economic interest in the management of premises, by reason of its ownership of a flat in the building, why should it be prevented from exercising such influence? I agree with Judge McGrath that many of the scenarios relied on as illustrating anomalies in the operation of the 2002 Act on an estate-wide basis are either fanciful or so extreme as not to shed light on the statutory intention.
67. There is one aspect of the argument on which I have greater sympathy for the respondents, and greater concern over the approach taken by the Tribunal in Ninety Broomfield Road. That is Mr Rainey’s suggestion that the decision of others to form an estate RTM company will have the effect of barring the tenants of single blocks from exercising the right to manage their own self-contained buildings. Where such an estate RTM company adopts as one of its objects the acquisition of the right to manage a particular block, it is said that the effect of section 73(4) is that no other company can be an RTM company in relation to that block. That is so whether the tenants of the block participated in the formation of the estate RTM company or not, and whether they wish to exercise the right to manage on a collective basis or would prefer to have their own single-block company. It is also said to be the case even where the estate RTM company has not yet sought to achieve the right to manage any part of the estate, or even where it has made an unsuccessful application or cannot command the necessary majority in a particular block. It is necessary to consider carefully whether that is indeed the effect of section 73(4) and, if it is, whether it is a state of affairs which so undermines the purpose of the statute as to demand that an alternative answer be given to the question of principle.
68. The effect of section 73(4) seems to me to be clear. A company is not an RTM company in relation to premises if another company is already an RTM company in relation to the same premises “or any premises containing or contained in the premises”. The mischief which the statute seeks to avoid is that of different RTM companies having overlapping responsibility for the same premises.
69. Section 81(3) (to which Mr Rainey referred in his alternative argument) seems to me to have a different purpose, namely the simplification of the statutory procedure by preventing concurrent claims to acquire the right to manage (which might be made by the same RTM company when, for example, there was doubt over the validity of a previous claim). There is a greater overlap between section 73(4) and paragraph 5(1)(a) of Schedule 6 to which reference was also made and which causes Chapter 1 no longer to apply to premises at any time while the right to manage is already exercisable in respect of them. It is not at all clear why it should have been thought appropriate to make that provision, since section 73(4) would appear to preclude the existence of a competitor in any event, and the avoidance of a further claim brought by an RTM company which has already achieved the right seems rather far fetched. Nonetheless, neither of these provisions seems to me to provide any convincing support for Mr Rainey’s alternative argument. I am satisfied that that alternative argument involves a step too far in suggesting that a single self-contained building on an estate is not “contained in” the estate as a whole, or contained in that part of the estate which comprises self-contained buildings, and I reject it.
70. In Ninety Broomfield Road the Tribunal considered the effect of section 73(4) in relation to shared appurtenances and found that more than one RTM company could exercise the right over the same shared property (paragraph 92) and that the sub-section did not prevent a single RTM company from exercising the right over a number of premises falling within the definition in section 72 (paragraph 93). The Tribunal does not appear to have been asked to consider the situation illustrated by the facts of this case, where an estate RTM company is first formed, before being followed by a number of individual block RTM companies. I am satisfied that, as Mr Serota argued, and as Mr Rainey’s primary approach accepted, the effect of section 73(4) is that the prior incorporation of a properly constituted estate-wide RTM company does prevent any other company (whose objects would otherwise make it an RTM company in relation to a self-contained building forming part of the estate) from being an RTM company.
71. I am also satisfied that Mr Rainey is correct in anticipating that the tenants of an individual block might find themselves prevented from forming a single-block RTM company by the prior incorporation of an estate RTM company which includes as one of its objects the acquisition of the right to manage their block. That seems to me to be the effect of section 73(4) and the consequence of the Act placing no restriction on the formation of RTM companies generally. No doubt if a company was formed whose objects were claimed to be the acquisition of the right to manage, but whose true purpose was the prevention of others from acquiring the right to manage, some route would be found, if necessary, to prevent it from frustrating the purpose of the 2002 Act. If estate RTM companies can exist a more realistic problem may be that different groups of tenants may have different ambitions for management. Section 73(4) would appear to give the first RTM company which adopts its objects the whip hand over any rival company which seeks to manage premises containing or contained in the premises described in its articles of association. There would be no obligation on the reluctant tenants of a single block to become members of an estate RTM company, and they could therefore prevent it from acquiring the right to manage their own block, but they would remain powerless to achieve that right for themselves.
72. Standing back, however, it becomes clear that the disability inflicted on the tenants of a single block by the prior formation of an estate RTM company is little different from the disability inflicted on the tenants of a self-contained part of a building who find that an RTM company has been formed whose objects are the acquisition of the right to manage the whole of the building. Such tenants might have preferred to form their own company to manage their self-contained part of the building, and absent the prior formation of their more ambitious rival, they would have been entitled to do so by reason of section 72(1)(a) which makes a self-contained part of a building premises to which the provisions apply. But section 73(4) would prevent such tenants from achieving their aspiration, and could lead to them being locked out of the right to manage. The only difference between the two situations is that the tenants of a self-contained part of a larger building might find that their unwelcome neighbours, if sufficiently numerous to constitute a majority of the flats in the building as a whole, were able to acquire the right to manage the whole. That does not seem to me to be such a distinction as to enable it to be said that the risk of tenants being locked out is absent from the statutory scheme if the right to manage is taken to extend only to single self-contained buildings, but present if estate-wide RTM companies are permitted. The risk is present in both cases.
73. I am therefore not persuaded that the operation of section 73(4) is a sufficient problem to suggest that the Tribunal reached the wrong conclusion in Ninety Broomfield Road. I am also very far from convinced that the decision is wrong for any of the other reasons suggested by Mr Rainey, and I therefore intend to follow it.
Conclusions and consequences
74. I am satisfied that the LVT was mistaken in its conclusion that the Estate Company could not be an RTM company because its objects were the acquisition of the right to manage an estate comprising three self-contained buildings. No other reason was suggested why the Estate Company was not validly constituted. Having rejected Mr Rainey’s alternative argument on the effect of section 73(4), it follows that the respondents are not RTM companies in relation to the separate blocks at Lyttelton Court; they cannot be, because at the time of their incorporation there was already in existence an RTM company, the Estate Company, whose objects included the acquisition of the right to manage the several blocks referred to in each of the respondent’s articles of association. For that reason the LVT’s decision must be set aside, and a determination substituted that the respondents were not entitled to acquire the right to manage their separate blocks.
75. That leaves only the question of the effect of the claim notice given by the Estate Company. Mr Serota argued before the LVT that it was impermissible for a single claim notice to seek the right to manage more than one self-contained building. Nonetheless in Ninety Broomfield Road the Tribunal ruled, at paragraph 94, that “a single notice will suffice in respect of a number of properties”. Although I have not had the benefit of argument on the point, that is a conclusion with which I respectfully agree, at least in principle (I say nothing of the particular notice considered by the LVT which it has not been necessary for me to consider in this appeal). There has, however, been no appeal by the Estate Company against the LVT’s decision, so even if I was in a position to reach a final conclusion in relation to the Estate Company’s claim notice, I therefore have no jurisdiction in this appeal to substitute an alternative determination that the Estate Company was entitled to acquire the right to manage following the service of its claim notice.
76. It follows that the only conclusion I can reach is that while the appeal is allowed and the LVT’s decision is set aside, management of Lyttelton Court remains vested in the appellant, for the time being at least.
Martin Rodger QC, Deputy President 28 January 2014
Addendum on Costs
