Fallon v Wilson & Ors [2014] UKUT 0300 (LC)

The Upper Tribunal has again found itself considering the issue of Rent Repayment Orders and has provided some further enlightenment on its position after the case of Parker v Waller (which we wrote about here).

Background
Mr Fallon had been convicted of operating a property without an HMO licence and fined a, very modest, £585 with assorted costs and a contribution to the victims fund. Three of his five occupiers then made separate applications to the FTT(PC) (or “futpuc” if you prefer NL’s pronunciation) for RROs and the FTT then made an award to each applicant for 100% of the rent paid in the last 12 months.

Mr Fallon appealed on 9 grounds. The FTT allowed a limited appeal on some but the UT gave a further permission to appeal on all grounds. The UT heard the matter by way of a review with the possibility of returning the matter to the FTT for a rehearing.

The Appeal
The UT lumped the various grounds of appeal together and found for Mr Fallon on 2 bases. First it found that the FTT had failed to exercise its discretion properly or at all and second, in any exercise of its discretion the FTT had failed to determine what payment was reasonable in the circumstances.

Taking the most important issue first. The FTT had mentioned discretion at several points in its decision. However, it then went on to state that it had “no hesitation” in returning the full sums paid to the Applicants. The UT saw this as the FTT applying “the test incorrectly and proceeded on the basis that a repayment of the maximum amount of rent paid should be made unless there were reasons for not doing so”. This was precisely the same error that was fallen into in the case of Parker v Waller and so the decision of the UT is not terribly surprising here although it is vitally important.

All the other issues relate to the precise manner in which the figure should have been assessed and whether the FTT took the appropriate matters into account.

On utility payments the FTT had again not followed Parker v Waller. The FTT had held that utilities that were being paid out of the rent receipts were not deductible before assessing the RRO as they were part of the “usual outgoings and expenditure” that all landlords were subject to. The UT stated that this was incorrect as the seriousness of the situation did not justify a departure from the position set out in Parker.

The FTT had not considered the issue of conduct. They had taken the view that “ignorance of the law is no defence” but this was wrong. The very low fine given by the magistrates (£585 as against a maximum of £20,000) was a clear indication of the lack of seriousness of the offence and this should have been considered as should Mr Fallon’s position as a non-professional landlord who was only letting this single property. The UT mentioned that this had been his family home before the letting, whether this was a relevant factor in conduct or was a separate factor to consider is not clear.

The other conduct issues which the UT drew attention to were the short period of the offence, the relatively good condition of the property, the fact that the tenants had not indicated any dissatisfaction with the property, that two of the tenants had not sought RROs at all, and that the rent was relatively low with all bills being taken from it.

The FTT had also failed to take into account the very low profit margin enjoyed by Mr Fallon.

Finally, the UT again called attention to the double penalty arising from a fine by the magistrates followed by an RRO. This was a factor which had to be considered and which the FTT had again not considered.

For these reasons the RROs were set aside.

Comment
The most important issue that arises from this appeal is one that a number of FTTs have had trouble with. That is where and how do they begin to assess the amount to be paid under an RRO. This case again makes clear that the starting point is not to be “everything paid by the occupiers”. By extension it is also not “zero” or, indeed, any figure in between. The UT here endorsed the statement in Parker v Waller that the FTT “must take an overall view of the circumstances determining what amount would be reasonable”. In other words there is no starting point, it is a fresh consideration to be arrived at having considered the circumstances. I expect that this lesson will still be one that FTTs will find hard to learn (because it is not an easy thing to do!) and it may well lead to further appeals.
The other matters are mainly repeats of Parker as well. However, some further complexion is added to the consideration by the manner in which the UT approached the decision. It is quite clear that the full matrix of facts must be considered. It is also important to consider the seriousness of the offence and the effects on the occupiers along with the profit made by the landlord and, it seems from this decision, the profit motive of the landlord as well.
No doubt further decisions will add more to this picture.