[2024] UKUT 81 (LC)

In order to understand this issue we have to look again at section 27A(4) and (5) of the 1985 Act and at the decision of the Tribunal (HHJ Nigel Gerald) in Cain.

Section 27A(4)(a) and (5) provide:

“(4)

No application under subsection (1) or (3) may be made in respect of a matter which—

(a)

has been agreed or admitted by the tenant,

…

(5)

But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.”

In Cain the applicant applied to the FTT in 2014 to challenge service charges demanded and paid in the years 2002/3 to 2012/13. The FTT found that by paying the charges without protest for the years 2002/3 up to and including 2007/8 the applicant had admitted or agreed the charges and therefore it had no jurisdiction in respect of those years by virtue of section 27A(4), notwithstanding section 27A(5). The decision was appealed to the Tribunal, hence the decision in Cain. In the present appeal Ms Gourlay argued that Cain was not correctly decided, and as will be seen below I agree to some extent; I note that the Tribunal is not bound by its own decisions.

In Cain, the Tribunal upheld the FTT’s decision. HHJ Gerald said this:

“14.

Before considering the facts of this case, it is necessary to consider the meaning and effect of section 27A(5). An agreement or admission may be express, or implied or inferred from the facts and circumstances. In either situation the agreement or admission must be clear, the finding being based upon the objectively ascertained intention of the tenant which may be express or implied or inferred from the conduct of the tenant – usually an act or a series of acts or inaction in the face of specific circumstances or even mere inaction over a long period of time or a combination of the two.

15.

Absent sub-section (5) and depending upon the facts and circumstances, it would be open to the F-tT to imply or infer from the fact of a single payment of a specific sum demanded that the tenant had agreed or admitted that the amount claimed and paid was the amount properly payable, a fortiori where there is a series of payments made without challenge or protest. Part of the reason for this is that people generally do not pay money without protest unless they accept that that which is demanded is properly due and owing, and certainly not regularly over a period of time. Whilst it would generally be inappropriate to make such an implication or inference from a single payment because it could not be said that the conduct of the tenant was sufficiently clear, where there have been repeated payments over a period of time of sums demanded, there may come a time when such an implication or inference is irresistible.

16.

Taking matters one step further, it would be open to the F-tT to make such a finding even where there had been no payment at all but there were other facts and circumstances clearly indicating that the tenant had agreed or admitted the amounts claimed. What is required is some conduct which gives rise to the clear implication or inference that that which is demanded is agreed or admitted by the tenant. The relevant question, therefore, is: are there any facts or circumstances from which it can properly be inferred or implied that the tenant has agreed or admitted the amount of service charge which is now claimed against him?

17.

The effect of sub-section (5), however, is to preclude any such finding “by reason only of [the tenant] having made any payment” (italics supplied). The reference to the making of “any payment”, and “only” such payment, indicates that whilst the making of a single payment on its own, or without more, will never be sufficient to found the finding of agreement or admission, the making of multiple payments even of different amounts necessarily over a period of time (because that is how service charges work) may suffice. Putting it another way, the making of a single payment on its own, or without more, will never be sufficient; there must always be other circumstances from which agreement or admission can be implied or inferred. And those circumstances may be a series of

unqualified payments over a period of time which, depending upon the circumstances, could be quite short, it always being a question of fact and degree in every case.

18.

Looking at the reasoning behind this provision, no doubt the reason why the making of a single payment on its own, or without more, would never suffice is that such will often be insufficiently clear but also, in the peculiar area of landlord and tenant, it is common enough for tenants to pay (even expressly disputed) service charges so as to avoid the risk of forfeiture and preserve their home and the value of their lease. But the reason why a series of unqualified payments may, depending on the circumstances, suffice is because the natural implication or inference from a series of unqualified payments of demanded service charges is that the tenant agrees or admits that which is being demanded. Putting it another way, it would offend commonsense for a tenant who without qualification or protest has been paying a series of demanded service charges over a period of time to be able to turn around and deny that he has ever agreed or admitted to that which he has previously paid without qualification or protest. Self-evidently, the longer the period over which payments have been made the more readily the court or tribunal will be to hold that the tenant has agreed or admitted that which has been demanded and paid. It is the absence of protest or qualification which provides the additional evidence from which agreement or admission can be implied or inferred.”

The judge then looked at the facts of the case, and noted that some at least of the charges Mr Cain was challenging were matters that he could easily have found out about during the years that passed before he applied to the FTT. He only had to look out of his window to see whether the garden was being maintained, for example. So it was not as if he had no idea that there was anything wrong. The judge continued:

“25.

The question is whether there are any facts and circumstances from which the F-tT could properly have found that the appellant had agreed or admitted the service charge items in respect of the 2001/02 to 2006/07 period he now seeks to challenge. In my judgment, the F-tT was entitled to so find based purely upon the series of payment in respect of the demanded service charge throughout this six year period, and subsequently, without reservation, qualification or other challenge or protest. That of itself is sufficient. The is, however, reinforced by the sheer length of time which has elapsed before challenge was first made – between eight years in respect of the 2006/07 service charge and 12 years for the 2001/02 service charge. Whilst distinctions can be made between the nature of the different service charge items being challenged, the F-tT is entitled to look at matters in the round and find that where there has been substantial delay in making any challenges to the items now in dispute, and most if not all of which have long-since been paid, that the tenant has agreed or admitted the amounts claimed which, after all, have long-since lain dormant without challenge.”

Within the paragraphs quoted above are a number of statements of principle, and it is useful to tease them out to see exactly what is being said.

First, it is said in paragraph 17 that the effect of section 27A(5) is that a single payment can never amount to agreement within section 27A(4). That is obviously correct.

Second, however, paragraph 17 also says that section 27A(5) refers only to a single payment, because of the words “only” and “any payment”. Mr Walsh supported that interpretation. Ms Gourlay argued that that is not right, and I agree. I think it is obvious that the word “only” in section 27A(5) means “absent any other circumstances”. And I do not think the words “any payment” mean “any single payment” or “any one payment”.

The judge went on in paragraph 18 to say “a series of unqualified payments may, depending on the circumstances, suffice” and that is obviously correct. A series of unqualified payments only does not indicate agreement, but it may do so, depending on the circumstances. Imagine a tenant who has paid the service charge without protest for twenty years until 2020. In 2022 she discovers - and could not have known before - that the heating system has not been serviced since 2015, despite the fact that the landlord has paid for the annual servicing and the service charge includes a sum in respect of that payment. She is of course entitled to challenge the charge, because she did not know and could not have found out about the problem.

The point of section 27A(4) is that payment alone does not convey enough information to enable the inference of agreement; it all depends. In circumstances where the tenant delayed before challenging the charge or charges, and had the information during that time to raise a challenge, then the payments in those circumstances may indicate agreement.

That is exactly what happened in Cain. I respectfully disagree with HHJ Gerald’s analysis at his paragraph 25 that:

“the F-tT was entitled to [find agreement] based purely upon the series of payment in respect of the demanded service charge throughout this six year period, and subsequently, without reservation, qualification or other challenge or protest. That of itself is sufficient.”

That is not what the FTT did. What made it possible to infer agreement from a series of payments from 202/3 to 2007/8 was that the applicant had then left it another six years before challenging the charges, and had the information he needed to raise a challenge in the meantime.

To summarise, insofar as the Tribunal in Cain decided that a series of payments made without protest may, absent any other factors, indicate admission or agreement pursuant to section 27A(4), I take the view that that is a misconstruction of section 27A(5). The effect of section 27A(5) is not limited to single payments.

However, it is clearly correct that, as the judge put it at paragraph 25 of Cain,

“the F-tT is entitled to look at matters in the round and find that where there has been substantial delay in making any challenges to the items now in dispute, and most if not all of which have long-since been paid, that the tenant has agreed or admitted the amounts claimed which, after all, have long-since lain dormant without challenge”.

Delay is not the only relevant factor. The availability of information may be another. But unqualified payment or payments alone do not meet the requirements of section 27A(4)(a), as is clear when one thinks through practical possibilities and as section 27A(5) expressly provides.

With that in mind I turn to the FTT’s decision in this case.