[2023] UKUT 208 (LC)

The cleaning contract which Mr Saunders and his advisers saw for the first time when they received the hearing bundle a few days before the hearing was entered into in 2020 and provided for weekly cleaning services in return for a yearly charge. The duration of the contract was stated in clause 5:

“The agreement shall run for a minimum period of 12 months from the date of the commencement of the contract and thereafter shall continue from year to year until determined by either party giving not less than 3 months’ notice in writing expiring on the first or any subsequent anniversary of the commencement of the agreement.”

The only comments made in relation to the charge for cleaning in the schedule prepared in September, were that cleaning was agreed to be a chargeable item but that the amount charged was not reasonable. The schedule also made the point that copies of the invoices had not been provided. It was not until the application for disclosure on 10 November that a request was made for a copy of the contract to ascertain whether it was a qualifying long-term agreement which should have been the subject of consultation. But 10 November was the day before the deadline for Mr Saunders to reply to the landlord’s case, and the first scheduled opportunity he had to comment on any documents which the landlord intended to rely on and which had been disclosed in accordance with the original directions.

It would not have been possible for Mr Saunders to take any specific point about the form of the cleaning contract until he had seen a copy. The procedural judge’s response to the application for disclosure did not engage with that difficulty. It was nothing to the point that the original directions were clear or that time for compliance with them had been extended. The point was that the document eventually provided to the FTT gave rise to an issue which could not have been anticipated (other than speculatively) and which could not, therefore, have been included as part of Mr Saunders’ case in the Schedule. The FTT’s decision did not acknowledge that point or take account of the change of circumstances.

Mr Upton’s answer to that difficulty was that if Mr Saunders wanted to investigate whether any costs arose under a qualifying long term agreement it was incumbent on him to apply for disclosure in good time before he was due to serve his statement of case and schedule of disputed items. That does not seem to me to be a practical solution to the problem, nor an answer to the particular difficulty in this case. An approach to case management which necessitates the making of applications for disclosure, rather than facilitating the orderly preparation of cases by appropriate directions, is liable to put unrepresented parties at a disadvantage and place an unjustified strain on judicial resources. Moreover, the specific problem in this case is that when the relevant document was produced, the FTT refused to entertain argument on it (or rather, as counsel both confirmed, it listened to the argument but then ignored it in its decision).

In my judgment the FTT should not have refused to consider arguments based on the content of a document which was produced for the first time only a few days before the hearing, but whose potential importance had been flagged in good time and which both parties had had sufficient opportunity to prepare to deal with. If it is necessary to treat this as an appeal on a case management issue, which I doubt since the point was fully argued, the decision falls into the category of being obviously wrong. The FTT failed to take into account the fact that Mr Saunders could not have identified the point in his original schedule because he had not then seen the contract. He had identified that he wanted to see the contract to determine if consultation was required on 10 November, within the time allowed for him to reply to the landlord’s case. The FTT appears to have prioritised the importance of each issue being fully identified in the schedule, and not anywhere else, and to have given no weight at all to the need to deal with the case fairly and justly including by avoiding unnecessary formality and seeking flexibility in the proceedings, as rule 3 of the FTT’s procedural rules requires.

It was suggested by Mr Upton that the issue was one of mixed fact and law, and that at the time of the hearing he had not had instructions about whether there had been consultation. As the FTT did not address either the legal or the factual issue which arose, it is not possible to know whether it gave any weight to that suggestion, but the point had been identified in the application made almost a month before the hearing, and instructions could have been taken.

In my judgment, the FTT’s decision did not address the substantive issue and was not one which was open to it in the circumstances, and I therefore allow the appeal on issue 1.

It is convenient to deal straightaway with the question whether the cleaning contract was a long term qualifying agreement such that it ought to have been the subject of prior consultation under section 20.

An agreement is a “qualifying long term agreement” within section 20ZA(2), 1985 Act and subject to the consultation requirements in section 20, if it is “an agreement entered into, by or on behalf of the landlord or a superior landlord, for a term of more than 12 months”. Mr Morris submitted that the contract in this case clearly was a qualifying long term agreement and he referred to the decision of the Court of Appeal in Corvan (Properties) Ltd v Abdel-Mahmoud [2018] EWCA Civ 1102. Mr Morris submitted that the cleaning contract was such an agreement because it was to continue from year to year and could not be brought to an end within 12 months. As there had been no consultation with leaseholders before the contract was entered into, Mr Saunders’ liability to contribute to the cost of cleaning should therefore be limited to £100.

The agreement in Corvan was for the management of a substantial block of flats. The relevant clause in the agreement was as follows:

“The contract period will be for a period of 1 year from the date of signature hereof and will continue thereafter until terminated upon 3 months’ notice by either party.”

The Court of Appeal determined that this form meant that the contract would continue beyond the initial period of one year and was therefore for a term of more than 12 months.

Clause 5 of the cleaning contract in this case is not the same as the Corvan agreement. Crucially, that clause 5 allows the contract to be determined by not less than 3 months’ notice in writing “expiring on the first or any subsequent anniversary of the commencement of the agreement.” Any uncertainty about the meaning of the clause is dispelled by the explicit statement that the 3 months’ notice may expire on the first anniversary of the commencement of the agreement i.e. at the end of the initial period of 12 months.

Mr Morris submitted that clause 5 meant that the earliest time at which the contract could come to an end was the day after the 12 month term began. I do not agree. Where a contract is expressed to run from a certain date that date is generally excluded in computing the period of the contract. A contract entered into on 1 July for a minimum period of a year from the date of the commencement of the contract, will expire on the corresponding date in the following year, 1 July, and not on 30 June. The application of that general principle is confirmed in this case by the remainder of clause 5. If the contract could not be terminated on the first anniversary of its commencement, the reference to that first anniversary would be redundant and the contract would not be for “a minimum period of 12 months”. Since both of those limitations are clear on the face of the agreement it is plain that it is not a qualifying long term agreement.

In Corvan the Court of Appeal approved an earlier decision of the County Court, Paddington Walk Management Limited v Peabody Trust [2010] L&TR 6, that an agreement was not a qualifying long term agreement where it was stated to be “for an initial term of one year from 1 June 2006 and will continue on a year to year basis with the right determination by either party on giving 3 months written notice at any time.” The basis of the County Court’s decision had been that a contract initially for one year and thereafter from year to year subject to a right to terminate on 3 months’ notice was a contract terminable at the end of the initial period and did not entail a commitment for more than 12 months. The cleaning contract in this case is such a contract.

As there was no other challenge to Mr Saunders’ liability to contribute towards the cost of cleaning, I allow the appeal on the procedural ground, but I determine that the relevant cost of cleaning was the sum of £11,728.43 claimed by the landlord.