[2024] UKUT 80 (LC)

It will be apparent from what I have said so far that Mr Atherden paid £600 for some work to the roof and wants to be reimbursed through the service charge. The FTT agreed with him that that amount is payable as a service charge by all the leaseholders subject to his paying his share.

Permission to appeal has been granted on the ground:

“That the FTT made an error of law in requiring the cost of the roof works, incurred by Mr Atherden, to be treated as a service charge and apportioned between the leaseholders, because it was not a “cost incurred by or on behalf of the landlord” as required by section 18(2) of the Landlord and Tenant Act 1985.”

I have not seen the service charge in the lease but I assume that it requires the leaseholder to reimburse the landlord’s expenditure, rather than the expenditure of another leaseholder. The decision that one leaseholder’s expenditure is to be reimbursed, in effect by the others is therefore surprising without further explanation.

On reviewing the email correspondence which was before the FTT and is now in the appeal bundle I find that in the summer of 2021 there was some discussion between the five leaseholders about what needed to be done to deal with a leaky gutter. Mr Atherden and Mr Anderson wanted the parapet gutter to be re-surfaced with Ultraflex, and Mr Atherden shared a quotation for £600 on 9 August 2021. On 31 August 2021 Mr Bingham emailed the leaseholders to say that he was not convinced that would be effective. He had been up on the roof and did not think there was water ingress from the parapet gutter. He thought that the culprit was a join in the gutter and suggested painting it over with Ultraflex or a similar polyurethane-based filler. He said:

“If there is a majority view that we should go ahead with the £600 option, fine – it won’t do any damage, but I think it is major overkill.”

It is worth pausing for a moment to consider who is talking to whom. The responsibility for repairs to the structure and exterior rests with the landlord. This is – to put it in formal terms – a discussion between the members of the landlord about how to fulfil its responsibility for repair and maintenance. No-one has a controlling shareholding. So any disagreement has to be resolved by majority, whether that is at a meeting convened formally under the Companies Acts, or an email conversation, or a chat in the garden.

Obviously, the landlord can decide to authorise one of the leaseholders to get work done, for which the landlord then takes responsibility. And it was open to the landlord – by a decision of its shareholders whether unanimous or not – to authorise Mr Atherden to commission and pay for the £600 job. Equally obviously, a unilateral decision to get work done without the company’s agreement is not a decision of the landlord and does not fall to be reimbursed as part of the service charge.

What happened next was that Mr Bingham went up on the roof and “painted a coat of Evercryl (One Coat, Instant Waterproof Roof Covering) along the bottom surface of the whole of the parapet gutter”, as he reported to the other leaseholders in an email of 6 September. That cost £23.17. On 22 September Mr Bingham emailed the other leaseholders to say had been surprised to find a contractor on the roof applying Ultraflex to the area he had sealed with Evercryl. Mr Atherden, with the agreement of Mr Anderson, had engaged contractors to do the £600 job and paid for it.

There was then a dispute as to whether that £600 had been authorised. Mr Atherden claimed, in the email correspondence that followed, that since he and Mr Anderson supported his plan, Mr Bingham opposed it, and no-one else expressed support of either plan, he had a 2:1 majority. Mr Bingham’s response was that he held two shares and therefore had two votes making it 2:2.

A limited company may take decisions by simple majority of individuals on a show of hands, or it may count votes on the basis of shareholdings. There is no need in the present case to go into the companies legislation to decide what was the right way to count the votes in this case because the crucial point is that the silence of the other two individual shareholders – Mr Nicholas Bingham and Ms Emma Bowman – did not give Mr Atherden a majority. Two out of five individual shareholders, or two out six shares, supported the plan. Whether the others agreed, disagreed, or had no view, or deliberately decided not to express a view is not known. Email silence does not equate to a formal abstention.

This was not a formal meeting of the company, where a vote was called for and abstentions recorded. This was an email discussion; if Mr Atherden seeks to rely on such a discussion to demonstrate majority support for his plan he has to show that the two who did not express a view were actually abstaining. In the absence of enquiry to check their position, their silence does not convey any information and in the circumstances of the email conversation as I have described it was more likely to indicate absence of support for Mr Atherden’s more expensive plan.

There was therefore no decision of the landlord in favour of spending the £600. The FTT said that there had been discussion, which is correct, and that there “was support” for Mr Atherden’s plan – and there was, but only by one other shareholder. It was therefore not expenditure of the landlord and was not chargeable as a service charge. The FTT’s decision was irrational and is set aside, and the Tribunal substitutes its own decision that the £600 cannot be reimbursed as part of the service charge.