[2023] UKUT 197 (LC)

This ground of appeal concerns the adequacy of the FTT’s treatment of two specific grounds of defence which had been included in Mr Davies’ statement of case. Its decision dealt only very briefly with the suggestion that there had been an agreement that Mr Davies was not liable for the sum of £616.60 and did not deal at all with his defence that the disputed sum was not payable because it was barred by the Limitation Act 1980.

The FTT simply said that it accepted the evidence of Mr Cleaver that there was no agreement between Mr Davies and anyone at Urang that the disputed sum would be refunded to him. It referred to but did not analyse or discuss the emails in 2015, including in particular the email of 23 June 2015 from Ms McIntosh which appeared specifically to confirm that there had been an agreement of some sort: “As agreed, we refunded you the initial £616.80, we only have to reimburse you once and this has been done.”

The FTT’s reasons for dismissing Mr Davies’ case about the agreement were barely adequate. If it was correct that there had previously been an agreement that Mr Davies’ was entitled to a refund, as the email of 23 June 2015 asserted, two issues would have needed to be considered. First, whether the suggested refund had been made, as Ms McIntosh suggested, or not, as Mr Davies maintained. Secondly, whether the supposed agreement had any effect on the FTT’s jurisdiction to determine the payability of the disputed sum. The FTT did not address the evidence of an agreement in any detail and, in particular, it did not explain how its acceptance of Mr Cleaver’s evidence that no agreement had been reached was consistent with Ms McIntosh’s apparent admission that something had been agreed.

The FTT’s omission to deal sufficiently with the email exchanges could only be a ground for allowing the appeal and remitting the matter for further consideration if it was Mr Davies’ case that the agreement he relied on was contained in those emails, or there was some basis for saying that the emails otherwise supported his case. That makes it necessary to look in a little detail at what his case was.

In Mr Davies’ statement of case of 31 March 2022 he explained that:

“11.5

At the 2014 case management hearing, the claimant agreed, at the suggestion of the presiding judge, to “go away and have a serious think” about whether it was sensible or realistic to continue to claim entitlement to the £616.60, and on that basis [the presiding Judge] removed it from the scope of the 2014 FTT proceedings.

11.6

The claimant later agreed again to credit the £616.60 and confirmed in writing that it had done so.”

It was on the basis of that statement of case that when the FTT gave directions it described Mr Davies’ case as being that “after the case management hearing in the previous tribunal proceedings, the RTM Company had agreed to withdraw its claim for the £616.60”.

The statement of case does not say when the suggested agreement had been made, only that it was after the 2014 case management hearing. Nor does it seem to say that any agreement was made in writing; what was said to have been put in writing was confirmation of the agreement or confirmation of the credit. But in his 30-page witness statement dated 22 April 2022 Mr Davies again repeated that at the Judge’s suggestion in 2014 the claimant had agreed to “go away and have a serious think” about “whether it should give me credit for the £616.60”. He did not repeat the suggestion in paragraph 11.6 of his statement of case that “the claimant later agreed again to credit the £616.60” and he referred to no other conversation or exchange in which any agreement was reached. His witness statement also includes a “timeline of key events” which makes no reference to any agreement. It does not suggest an agreement by email in June 2015 but does include an entry that “[the] claimant falsely claims the £616.60 had already been refunded”. Instead, Mr Davies explained at paragraph 9.2 of his witness statement that as a result of the comments made by the Judge at the case management hearing he had been “relying on the assumption that the claimant would drop its claim for the £616.60”. That statement, and the absence of any affirmative evidence of an agreement made between Mr Davies and anyone else, demonstrates that there was no agreement (other than an agreement with the judge to “go away and think about it”). Mr Davies may have made an assumption, and that assumption may have been fuelled by the reference in Ms McIntosh’s email sent more than a year after the case management hearing to a refund “as agreed”. But Ms McIntosh’s statement was referring to a previous agreement, yet Mr Davies had never made any agreement with her and had only assumed that the claim would be dropped. The one thing his exchanges with Ms McIntosh established without doubt, was that the RTM Company had not dropped its claim for the £616.60.

In his written submissions Mr Ward did not explain how the alleged agreement was supposed to have come about. In his oral submissions he hedged his bets, saying that there had been an agreement at the case management hearing, or if not, by the later exchange of emails. But the former suggestion is contradicted by Mr Davies’ own witness statement, and by the letter he sent to Mr Cleaver the day after the hearing on 13 May 2014 in which he said “As I understand it … the amount you are now claiming … is at most c£616”. The latter suggestion is not supported by the emails themselves.

In my judgment therefore, although inadequately explained, the FTT’s conclusion that there had never been an agreement that the 2013 payment would be reimbursed or that the 2014-15 service charge would be reduced by an equal credit was correct. Whatever Ms McIntosh thought had been agreed, the only conclusion that could have been reached on the way Mr Davies put his case was that she was simply mistaken. Mr Davies did not suggest he had reached agreement with Ms McIntosh or Mr Cleaver (whose evidence, in any event, the FTT accepted).

There is one final short point on this aspect of the case. It was not suggested that the RTM Company had allowed Mr Davies to assume that it had dropped the claim for £616 and was estopped from pursuing it. Nor could it have been. His own email of 14 May 2014 shows that at that time Mr Davies understood the proceedings still included the disputed sum; Ms McIntosh’s email of 23 June 2015 made clear that any credit she mistakenly thought had been agreed did not affect the claim for 2014-15. Nothing which occurred after those dates was relied on as creating any different impression.

The limitation period applicable to a claim for arrears of rent is six years from the date on which the arrears became due (section 19, Limitation Act 1980). Unlike other forms of debt, a payment of part of the rent due at any time does not extend the limitation period for claiming the remainder (section 29(6), 1980 Act).

By clause 2 of Mr Davies’ Lease the service charges payable under the Twelfth Schedule were reserved as rent. The right to recover those charges by proceedings would therefore expire six years after the payment became due if no proceedings had been brought by that time.

The RTM Company commenced these proceedings by issuing a claim form in the County Court on 13 May 2021 attaching a statement of account showing, as the opening balance, the sum of £1,279.02 which had been issued on 15 May 2014. The first payment from Mr Davies was the sum paid on 31 May 2015 which left the £616.60 which Mr Davies had withheld because he claimed a credit. On the face of it, time for the recovery of that disputed sum began to run on 15 May 2014 and expired in May 2020. The claim commenced on 13 May 2021would therefore have been too late.

Mr Davies did not plead a limitation point in his defence to the County Court claim, because he said the sums claimed were unclear, but he did so in the statement of case of 31 March 2022 which he was directed to file by the FTT.

The RTM Company was not directed to plead a reply to Mr Davies’ statement of case and it did not do so. Nor was the point dealt with in Mr Cleaver’s witness statement made on 22 April 2022, except inferentially in a passage in which he explained that payments received from tenants were allocated to the oldest liability first.

The FTT simply did not refer to the limitation issue in its decision, but it was necessary for it to do so in order to determine how much was payable by Mr Davies.

Miss Gourlay took two points in her written argument on behalf of the RTM Company. The first was that there was no limitation defence to be raised because Mr Davies had paid the demand for £616.60. But that was true only of the demand for that sum issued on 26 February 2013, when it represented the interim service charge for the period 1 October 2012 to 31 March 2013. Mr Davies did indeed pay that sum, under protest. But the sum of £616.60 claimed in these proceedings is the unpaid part of the estimated service charges of £1,279.02 for the year 2014-15 which was first demanded on 15 May 2014, and which was found by the FTT to be payable in its decision of 17 October 2014. That sum has never been paid because Mr Davies has (wrongly) maintained his entitlement to set-off the earlier payment of the same amount.

Miss Gourlay’s second point was that the RTM Company had been entitled to appropriate payments received from Mr Davies to the earliest debt on his account. Relying on Mr Cleaver’s witness statement she suggested that payments made by Mr Davies had indeed been appropriated in that way. But that suggested appropriation is not apparent from the statement of account itself and there is nothing to indicate that it was ever communicated to Mr Davies while he was making his payments. No appropriation was pleaded and it seems first to have been mentioned in Mr Cleaver’s witness statement, but that was made after the limitation period had expired and after Mr Davies himself had begun to rely on the limitation defence, and was therefore too late for any effective appropriation. In any event, Mr Davies had made it clear in May 2015 that he considered himself entitled to deduct his payment of 26 February 2013 from the amount demanded in May 2014 and he maintained that position consistently thereafter. In my judgment that was sufficient to prevent the RTM Company from appropriating subsequent payments received from Mr Davies to cover the outstanding portion of the May 2014. It is not necessary that a debtor should appropriate a payment expressly, and it is enough if an intention to discharge one debt rather than another can be clearly inferred from the facts and circumstances known to both parties (see Chitty on Contracts (34th Edn) at 24-059, and Khandanpour v Chambers [2019] EWCA Civ 570 at [25]). Objectively, each of Mr Davies’ payments was tendered on the basis of the claimed credit, and when Urang next received a payment after 31 May 2015 (which was in November 2017) it knew that Mr Davies made it on the basis that the May 2014 demand had already been satisfied. It was not entitled to appropriate the receipt inconsistently with that appreciation.

I am therefore satisfied that the RTM Company’s entitlement to bring proceedings against Mr Davies for the unpaid service charge of £616.60 expired in May 2020, before the commencement of proceedings. In determining the amount payable the FTT should therefore have omitted that sum.