Case No. UKUT-282-(LC)-UTLC-Case-Number:-LC-2022-117

22.As I noted above there were two issues before the FTT, and I do not need to say anything about the validity of the service charge demands because that finding is not appealed. As to the reasonableness of the cost on which the charges were, and would be, based, the respondents’ case was both that it was wholly unnecessary and that it was carried out incompetently. As to competence, again I need not say anything else because the FTT’s finding is not appealed. The issue is purely whether the cost was reasonably incurred. 23.The respondents’ case before the FTT and on appeal was that the Hydrock report was flawed and gave the wrong advice. The FTT heard evidence about the Hydrock report both from Mr Sun, one of its authors, and from Mr Evans of the Safety Consulting Partnership Limited. It concluded:“75.The tribunal has concluded that the authors of the Hydrock Report have dramatically overstated the risk of fire at the Property, in stating that the risk is “intolerable”, because among other things they have (a) overstated the risk of fire spreading through cavities in the external walls, essentially through simply assuming that there would be breaches of the walls allowing fire ingress, when breaches did not exist except in the riser cupboard; (b) made assumptions as to the combustibility of insulation which had not been tested; (c) treated regulations applicable to buildings over 18m in height as if they directly applied to a building under 18m; and (d) misapplied the risk matrix, apparently from a desire to bring home to Eagerstates the need to carry out repair works. That report was therefore wrong in its conclusions as to risk and so as to necessary steps. 76.Our conclusion is supported by the significant number of other reports which concluded, in circumstances not materially different to the Hydrock Report, that there was a low risk of fire through the external walls. Neither the recommendation of a waking watch, nor the recommendation of an interim alarm system can therefore be supported as reasonable. Furthermore, given that Mr Sun himself accepted that the risk could be substantially reduced by repairing the riser cupboard, these could not in any event be reasonable interim recommendations where the problem could be resolved permanently so much more cheaply.”24.To explain point (d): Hydrock’s risk ratings were derived from their assessments of the risk of fire and the harm that would be caused by a fire. The “intolerable” rating was supposed to be given only where the risk of fire was “high” and the consequential harm “extreme”, but the report assessed the risk of fire as “medium” and the harm “extreme”. Mr Sun said that he nevertheless signed off the “intolerable” risk rating because “they had felt they needed to emphasise to the client the need to do something urgent. They had therefore increased the overall stated risk level to “intolerable”, even though this did not follow the matrix.”25.So the report was flawed and overstated the risk, and there is no appeal from that finding of fact. The FTT then went on to assess whether, in light of that, the cost of the waking watch had been reasonably incurred:“78.Following the decision of the Court of Appeal in Waaler v. Hounslow London Borough Council [2017] EWCA Civ 45, whether costs have been “reasonably incurred” is to be determined by reference to an objective standard of reasonableness, not by the lower standard of rationality. The focus of the enquiry is not simply a question of the reasonableness of the landlord’s decision-making process, but also one of outcome. Where there was more than one reasonable course of action, the landlord did not have to choose the cheapest, and there is a margin of appreciation to be allowed to the landlord in choosing. The Court of Appeal approved the decision in Forcelux Ltd v Sweetman [2001] 2 EGLR 173 which had treated this as a two-stage process: first, whether the landlord’s process was reasonable and second whether the amount actually charged, i.e. the outcome, was reasonable. 79.The tribunal considers that Mr Granby’s submission [for the landlord] that it is sufficient if Assethold acted reasonably in relying on the Hydrock Report to institute – and continue for many months - the waking watch, only addresses the first part of the Waaler test, and not the second. 80.As to the first part of this test, the tribunal considers that Assethold acted reasonably in obtaining the EWA from Hydrock, a reputable company for these purposes. However, when Assethold/Eagerstates received a report from Hydrock whose conclusions were radically different from the earlier Hydrock Report and from other reports of which it was aware, conclusions which its own surveyors JMC queried, the most sensible response would have been to instruct a second opinion from another fire safety expert. Mr Gurvits offered this to the tenants, but only on the basis that they paid for such a second report, and when they would not do so, he refused to arrange for Assethold to obtain such a further report. In failing to instruct a second report itself, the tribunal concludes that Assethold probably failed to act reasonably. 81.As to the second part of this test, in any event the outcome must also be reasonable. Since the tribunal has concluded that the Hydrock Report was incorrect and its recommendations were not in fact objectively justifiable, it follows that the outcome, i.e. incurring the costs of a waking watch which was recommended by that report, was not reasonable. The tribunal accepts the submission of Mr Bromilow that those costs were unnecessary, and that unnecessary costs will not have been reasonably incurred. This is not a case where the landlord has selected one of a range of reasonable outcomes; rather it has opted for an outcome which was unnecessary because it was based on flawed advice.”26.On appeal, Mr Loveday says that the FTT applied the wrong test, and that when the right test is applied – alternatively, even if the FTT was right about the test – the cost was reasonably incurred.