[2023] UKUT 231 (LC)

The appellant has permission to appeal the FTT’s finding that he has paid the service charges in issue in the present proceedings, up to September 2016 in the sum of £957 in January 2017, and has thereby admitted liability. He makes two points: first, that this was an argument that the respondent had not made and that therefore the FTT should not have made it for the respondent, and second that in any event he has not made those payments.

As to the first point, it is clear from the respondent’s statement of case in the FTT that its argument was that the appellant was estopped from raising the quarterly payments point on the basis of the provisions in the lease; there is no argument in that statement of case that the FTT had no jurisdiction because the payments in issue had been made without protest. Mr McHugh told me, on instructions, that his client’s case in the FTT was that the service charges in issue had been paid, but he did not represent the respondent in the FTT and he could not point to anything in the bundle, nor in the FTT’s decision, that indicated that that had been the respondent’s case in the FTT. He did not suggest, and there is nothing in the FTT’s decision to indicate, that the respondent changed its position during the hearing and adopted the Cain v Islington argument. I take the view that the respondent’s instructions to Mr McHugh are incorrect on this point. The FTT rejected the respondent’s own argument but found in its favour on a very different argument that the respondent did not make.

The appellant says that that was unfair since the respondent was represented; the FTT should not have constructed a case for it. In the present circumstances I agree. I have the impression from the decision that perhaps the FTT took the view that it was simply reformulating the respondent’s counsel’s presentation of the facts and achieving the same result; it may be that the FTT did not appreciate the difference between the consequences of the respondent’s argument and the consequences of the finding it made.

More seriously, it appears that there was no evidential basis for that finding. This is Mr Lacy’s second point. He took me to the statement of his service charge account in the bundle, from which it is clear that he has made no payments himself since July 2013. Two substantial charges were debited in October 2013 and March 2014 by his mortgagee, (which he says, and Mr McHugh did not dispute) were for charges for the work to the drive and retaining wall; those charges were then cancelled by the respondent because the work did not at that point proceed (although the money was not returned). After the mortgagee made a payment on 3 March 2014 the account was over £7,000 in credit. Numerous charges were added including one for £15,440.32 in May 2014 which he says, and again Mr McHugh did not dispute, were in respect of the drive and retaining wall works. The only payments recorded in the account before September 2016 were three payments made, Mr Lacy said, by his mother in the sum of £1,025.46 altogether. Whatever the reasons why Mr Lacy’s mother made the payments, it is perfectly obvious from the service charge account that the majority of the sums demands during that period were not paid, whether by Mr Lacy or by anyone else.

Mr McHugh asserted that the sum of -£19,947 in the credit column of Mr Lacy’s service charge account on 24 March 2015 was a payment; but it is a negative sum in a column where payments made are positive numbers, and it is simply the carried-forward sum due from the previous page – the previous page having been produced by the previous managing agents and the new page being the account kept by the present managing agents. Mr McHugh also asserted that entries made on a different copy of the service charge account represented a payment of £19,947.83 on 24 May 2015, but that page appears to be an amalgamation of the two pages just considered. All that is recorded on 24 May 2015 is a credit for £19,947.83 in one column, labelled “B/fwd balance” and debit in the other for the same sum with no overall effect on the sum due, probably again due to the change in managing agents or due to the reproduction on a single page of the two pages produced by the successive managing agents.

The FTT’s finding that Mr Lacy had admitted the sums in issue up to September 2016 has no basis in the evidence and is set aside. I can see no reason why the payment of £957 in January 2017 in isolation should be taken as an admission contrary to the provisions of section 27A(5), and so the FTT’s finding that that payments should be treated as an admission of the service charges it represents is also set aside.

Should I substitute the Tribunal’s own decision in respect of the estoppel argument, on the basis of Mr Lacy’s regular payments of the quarterly charges (not the ones in issue on these proceedings) from the grant of the lease up to the end of 2013? Mr Lacy argued that I should not do so. Estoppel requires clean hands, and the respondent did not have clean hands having tricked him into paying too much; moreover estoppel requires a detriment, and the respondent has benefited from its error by charging him far too much every quarter over the years.

I reject the “clean hands” argument; there is no evidence that the respondent deliberately deceived Mr Lacy, who as an original party to the lease was in as good a position as the respondent to know what it said. And the detriment point does not work in these circumstances. What is argued is an estoppel by convention, where the two parties to a deed have proceeded on a conventional, but untrue, reading of its provisions. No detriment is required for that type of estoppel, although in any event there is an obvious detriment: the respondent in relying upon the appellant’s acceptance of the payment mechanism that it operated has exposed itself to the risk of a decision that the sum was not payable after all.

Accordingly I substitute the Tribunal’s decision that Mr Lacy was estopped from protesting that the charges were not made in accordance with the provisions of the lease insofar as they exceeded £100 per quarter.

That of course does not prevent him from challenging the reasonableness of those charges, and so I turn to the rest of the grounds of appeal.