[2023] UKUT 197 (LC)

Mr Davies paid the first interim service charge of £616.60 demanded by Urang for the period 1 October 2012 to 31 March 2013. The FTT was clearly right that the County Court decision did not extinguish Mr Davies’ service charge liability for that period. There was no question of his liability being extinguished because he had already satisfied it by promptly paying the sum demanded.

In his grounds of appeal Mr Davies took issue with the FTT’s suggestion that its 2014 determination that the RTM Company was properly constituted and had acquired the right to manage was sufficient retrospectively to validate all service charge demands served on him, including the one for the sum of £616.60. Whatever precisely the FTT may have meant by that statement, the general effect of its decision was to reject Mr Davies’ argument that he was entitled to a credit for the sum he had paid on 5 March 2013 making it available to set off against his liability for the estimated charge demanded on 25 March 2015 and reducing that liability by £616.60.

In his argument in support of the appeal Mr Ward submitted that the dismissal of the 2013 County Court claim meant that the sums claimed in those proceedings were rendered irrecoverable and the RTM Company was prevented from bringing a new claim in respect of them. Neither of those propositions is in doubt. The FTT had accepted them at the case management hearing on 13 May 2014 when the procedural judge determined that the payability of sums included in the 2013 County Court claim could not be considered in the new proceedings. But neither of those propositions assist Mr Davies in the appeal, because the sum of £616.60 which the 2022 FTT found to be due had not been claimed in the 2013 proceedings but instead represented part of the estimated charge for 2014-15.

Mr Ward next focused on the 2014 FTT proceedings. The FTT had struck out those parts of the 2014 claim which overlapped with the claim dismissed by the County Court, but it had left open the RTM Company’s right to pursue a determination of the payability of “any other service charges (not claimed in the County Court proceedings …) and said to be due from [Mr Davies]”. Mr Ward suggested that the RTM Company had therefore had the opportunity to seek a determination as to the payability of the estimated charge of £616.60 for October 2012 to March 2013 which Mr Davies had paid. Because it had not done so, but had abandoned any investigation into the earlier years, it could not later assert that that sum had been payable; instead it must be taken to have agreed that it had not been payable. The RTM Company was therefore required to give credit for the sum which had been paid against Mr Davies’ liability for 2014-15.

I do not accept Mr Ward’s argument.

First, because the March 2013 payment of £616.60 was not part of the 2013 County Court proceedings, the dismissal of those proceedings had no effect on the state of account between the parties in respect of the period covered by the payment. In particular, it did not give Mr Davies a right to reimbursement of the money paid on account. The lease provides for reimbursement or credit where the sum paid on account is greater than the leaseholder’s proportion of the final expenditure, but nothing in the County Court decision required that balance to be struck on the false assumption that no expenditure had been incurred. I was not shown a final account (and it may be that none has ever been prepared) but it has never been suggested that the RTM Company did not incur the expenditure it had estimated. The County Court did not determine that the RTM Company was not entitled to collect any service charges, only that it had failed to prove that it had a right to collect the estimated service charges which Mr Davies had not paid. Mr Davies simply read too much into the 2013 dismissal of the claim, and his long-held belief that he was entitled to a credit for sums already paid is and has always been without any foundation.

Secondly, by the time they came to be determined, the 2014 FTT proceedings were only about the estimated charges for 2014-15. There was no need for the RTM Company to introduce the payability of the £616.60 paid in March 2013 because it had already received that sum. On the contrary, it was for Mr Davies to raise the 2013 charge if he wished to establish that it had not been payable and should be treated as available as a credit, but he did not do so. Nor did he suggest that the sum payable for 2014-15 should be reduced by the £616.60 he had already paid for the earlier year. Instead he explained to the FTT that he did not question the validity of the 2014-15 estimated service charges other than on the basis that the RTM Company was not properly constituted.

For each of these reasons there is no procedural obstacle to the RTM Company maintaining its claim for the sum of £616.60 which Mr Davies withheld for the year 2014-15.