[2025] UKUT 115 (LC)

I therefore turn to the remaining arguments within Ground 1, which can conveniently be taken together. The remaining arguments can be summarised as follows. The Contractual Liability Issue was not a pleaded issue, and had not been raised by the Applicants. In raising the Contractual Issue on its own initiative, the FTT exceeded its jurisdiction, embarking on its own inquisitorial process by identifying issues which none of the parties had asked it to resolve. The FTT thereby acted in breach of natural justice, exceeded its jurisdiction and went beyond the proper role of the FTT.

I start by making reference to some of the principal authorities cited by the Appellant’s counsel in support of the remaining arguments within Ground 1.

The first of these cases is the decision of the Tribunal (Judge Gerald) in Birmingham City Council v Keddie [2012] UKUT 323 (LC). The case was concerned with an appeal against a decision of the Leasehold Valuation Tribunal (“the LVT”), as it then was, disallowing recovery of the cost of window replacement and balcony works, on the basis that it was not reasonable to replace the old windows. The appeal arose because the pleaded issue before the LVT had been whether the cost of the window replacement work was reasonable, given the standard of the work. It had not been in dispute that replacement of the windows had been required. The LVT decided however that the appellant landlord, the Council, had not been justified in concluding that the windows required replacement. The landlord appealed against the decision of the LVT, on the basis that there had been a breach of natural justice as a result of the LVT reaching a decision on grounds not raised in the respondent tenants’ application and without giving the landlord the opportunity to make submissions on the question.

There was no objection from the respondent tenants to the appeal being allowed, since they had not argued and did not wish to argue that the windows should not have been replaced. The judge therefore allowed the appeal, on the basis of an agreement between the parties as to what a reasonable sum would be for the relevant works. The judge also however took the opportunity to set out some general principles in relation to the LVT raising issues of its its own motion. As the judge noted, at [13] of his decision:

“13.

It is regrettable that it appears to be a developing practice within some leasehold valuation tribunals to take it upon itself to identify issues which are of no concern to the parties and then reach a decision on issues they have not been asked to which then results in an appeal and all the waste of time and money and attendant general aggravation. It may therefore be helpful to set out the legislative framework and general principles applicable.”

The judge then set out Section 27A and reviewed the procedure for the resolution of disputes in the LVT, both in terms of the application form to be used in service charge disputes and in terms of the use of statements of case in which the parties were required to set out their respective cases. Judge Gerald summarised the position in the following terms, at [17-18] of his decision:

“17.

In this respect, it is important to bear in mind not just that the jurisdiction of the LVT is a creature of statute but that it is also a function of what the applicant and, by his response, the respondent wish the LVT to resolve. It is the jurisdiction and function of the LVT to resolve issues which it is asked to resolve, provided they are within its statutory jurisdiction. It is not the function of the LVT to resolve issues which it has not been asked to resolve, in respect of which it will have no jurisdiction. Neither is it its function to embark upon its own inquisitorial process and identify issues for resolution which neither party has asked it to resolve, and neither does it have the jurisdiction to do so. To do so would be inimical to the party-and-party nature of applications to the LVT and would greatly increase the costs (frequently recoverable from the tenant through the service charge) and difficulties attendant to service charge disputes which by their nature are frequently fractious, involving relatively small sums within a complex matrix of divers items of expenditure.

18.

It follows from the above that the LVT does not have jurisdiction under section 27A “to determine the entire service charge not only the matters in dispute, pleaded or otherwise specifically identified in the Service Charge application” as stated in the Refusal Decision. It is not an inquisitorial tribunal. It is there to resolve issues it is asked to resolve, not uncover ones which do not exist or which the parties are not concerned about.”

The judge accepted that there might be cases in which it was appropriate or necessary for the LVT to raise issues not expressly raised by the parties, but he saw such cases as rare. As the judge commented, at [19-20]:

“19.

That said, there may of course be rare cases in which it is appropriate or necessary for the LVT to raise issues not expressly raised by the parties but which fall within the broad scope of the application in order to properly determine the issues expressly in dispute. But even then, the issues must fall within the scope of the application, not something which arises outside of it. This no doubt is what His Honour Judge Mole QC had in mind when he said in Regent Management Limited v Jones [2012] UKUT 369 (LC), LRX/14/2009 that:

“29.

The LVT is perfectly entitled, as an expert tribunal, to raise matters of its own volition. Indeed it is an honourable part of its function, given that part of the purpose of the legislation is to protect tenants from unreasonable charges and the tenants, who may not be experts, may have no more than a vague and unfocussed feeling that they have been charged too much. But it must do so fairly, so that if it is a new point which the tribunal raise, which the respondent has not mentioned, the applicant must have a fair opportunity to deal with it.”

20.

In those rare cases where an LVT does feel compelled of its own volition to raise an issue not raised by the application or the parties, it must as a matter of natural justice first give both parties an opportunity of making submission and if appropriate adducing further evidence in respect of the new issue before reaching its decision. Failure to do so is not only unfair, but may give the unfortunate impression that the LVT has descended into the fray and adopted a partisan position which may well serve to undermine the confidence of the parties in the impartiality of the LVT.”

An example of a case where it was decided that the FTT had been entitled to raise a matter which had not been raised by the parties is Admiralty Park Management Company Limited v Olufemi Ojo [2016] UKUT 421 (LC). This was another case involving an appeal in a service charge dispute. The FTT had decided that the tenant was not liable to pay the service charges in dispute, because the services charges had not been calculated in accordance with the method prescribed by the relevant lease. This was an issue which had not been raised by the tenant. Instead, the issue had been raised by the FTT at the outset of the hearing. The landlord appealed against this decision, on the basis that there had been a serious procedural irregularity. The appeal was allowed by the Tribunal (Martin Rodger KC, Deputy Chamber President), but not on the basis that the FTT had been wrong to raise the issue of calculation of the service charges. The appeal was allowed on the basis that the FTT had been wrong to go on to decide this question without allowing the landlord to answer the point. The Deputy President concluded that this had created a procedural unfairness. This was material because the landlord’s argument, which was accepted by the Deputy President, was that if there had been a failure to calculate the service charge in accordance with the provisions of the relevant lease, the tenant was estopped by convention from objecting to the basis on which the landlord had calculated the relevant service charges.

While it was therefore clear that the FTT had been wrong to decide the calculation question without giving the landlord the opportunity to answer the point, the Deputy President was not persuaded that the FTT had not been entitled to raise the question. After making reference to the decision of Judge Mole QC in Regent Management Limited v Jones [2012] UKUT 369 (LC), cited in Keddie, and to Keddie itself, the Deputy President summarised the position in the following terms, at [28-29] of his decision:

“28.

Where an application is made to the FTT for a determination under section 27A of the 1985 Act the overarching question to be addressed is, usually: what sum, if any, is payable as a service charge by leaseholder. In order to answer that question a number of sub-questions or individual issues are likely to have to be addressed, but the tribunal’s most important task is to determine that amount.

29.

Bearing in mind the FTT’s overriding objective of dealing with cases fairly and justly, avoiding unnecessary formality, seeking flexibility and using its expertise effectively, care should be taken by tribunals to avoid adopting an approach which is too narrow, technical or fixated on adherence to procedure for its own sake. This is especially the case where one or more of the parties is unrepresented and where the FTT is likely to be very much better equipped than the parties to identify all of the important issues which need to be considered before the correct sum due from the leaseholder can be identified. An experienced tribunal, guided by the overriding objective, will have no difficulty in distinguishing between a point of significance which the parties may have overlooked, and a point with no real merit which it would be in nobody’s interest to raise for consideration.”

So far as these principles applied on the facts of the case, the Deputy President said this, at [30] in his decision:

“30.

In this case the appellant’s departure from the scheme of accounting required by the lease was so fundamental that it was both proper and inevitable, in my judgment, that the FTT should raise the issue at the hearing. When it appeared to the tribunal that sums had been claimed and included in the service charge which fell outside the scope of the fifth schedule because they related to other buildings, it was undoubtedly entitled to ask for an explanation. The fact that Mr Ojo may not have appreciated that the service charges were being demanded on a different basis from the lease did not require the FTT to shut its eyes to an obvious and potentially fatal irregularity. It was, in any event, part of Mr Ojo’s challenge to the service charges that they included at least one item of expenditure, on the employment of a caretaker, which was not wholly for the benefit of his building or even of his estate. It was within both the broad question which the FTT was required to determine, namely the quantum of Mr Ojo’s liability, and this more specific issue, for it to consider the extent to which the charges were consistent with the contractual scheme.”

I should also make reference to the decision of the Tribunal (Judge Huskinson) in Bucklitsch v Merchant Exchange Management Company Limited [2016] UKUT 527 (LC). The case came before the Tribunal by way of an appeal from the FTT. The question before the Tribunal was whether the FTT had been right in its decision on a new point which had been raised by the appellant tenants, for the first time, at the hearing before the FTT. The new point was whether anything at all was contractually payable by way of service charge, on the basis that the respondent landlord had failed to comply with a condition precedent, in the relevant service charge machinery, to the service charges being payable. The FTT decided that the condition precedent had not been complied with, but that the appellants were prevented, by estoppel or waiver, from taking this point. Judge Huskinson decided that the FTT had not had enough evidence before it to justify a finding of estoppel or waiver, and remitted the case to the FTT so that this issue could be considered further by the FTT.

For present purposes the relevance of the decision lies in the fact that Judge Huskinson rejected the argument that there had been procedural error or unfairness in the FTT allowing the appellants to take the condition precedent point. As Judge Huskinson explained, at [19]:

“19.

In my judgment the F-tT cannot properly be criticised upon this basis in the present case. The question before the F-tT was how much was recoverable by way of service charge for the relevant two years. The appellants had raised for the first time at the hearing the argument that nothing was payable by reason of the failure to comply with a condition precedent regarding (putting it broadly) the audit and certifying of accounts and certifying the amounts of service charge. The F-tT was aware that both parties were appearing without legal representation. The F-tT was also aware that there had been an earlier 2014 decision when this point had not been raised by the appellants. I do not consider that it should be seen as a demonstration of bias for a F-tT to ask for assistance from the parties in circumstances where a point of law in its view potentially arises upon the facts before it, being a point of law of potential importance in the ultimate disposal of the case. I notice the observation in paragraph 22 of the appellants’ written representations dated 13 August 2015 in relation to the first further directions issued by the F-tT. Here reference is made to the fact that the tenant (i.e. the appellants) had not in the 2014 proceedings raised the condition precedent argument. The appellants state:

“… the Tribunal will of course note that the previous Tribunal members (necessarily including at least two experienced property professionals) did not identify the arguments themselves either (something which was within their power to raise of their own initiative in much the same way as this Tribunal has raised this abuse of process issue of its own initiative).”

I have considered the case of Birmingham City Council v Keddie [2012] UKUT 323 (LC) but I see nothing in that case justifying an allegation of improper conduct or bias on behalf of the F-tT for raising the potential abuse argument (and subsequently the potential estoppel/waiver argument) in the present case. In Birmingham City Council v Keddie the Leasehold Valuation Tribunal had determined whether or not it was reasonable to replace the old windows – this was a matter of fact which had not been raised by either party. However in the present case the F-tT were faced with a legal argument (namely the condition precedent point) raised for the first time at the hearing. The F-tT were entitled, in circumstances where they were concerned that on the facts as the F-tT perceived them to be there may exist legal reasons why this condition precedent argument could not properly succeed, to ask the parties to address them on these legal arguments.”

It will be noted that the decision in Bucklitsch was very much on its own facts, and concerned a point which, as the judge noted, was a point of law arising on the facts, as the FTT perceived them to be. It should also be noted that, in that case, the parties were appearing without legal representation when the point was raised. In addition to this, the principal focus of the appeal was on whether there had been sufficient evidence before the FTT to justify a finding of estoppel or waiver. The judge’s answer to this question was in the negative, but the case had to be remitted because the judge was not himself in a position to make findings one way or the other on the evidential questions raised by the estoppel/waiver issue.

What I take from these three Tribunal decisions is that there can be circumstances in which it is appropriate for the FTT to raise a point on its own initiative. What the FTT should not do is to proceed to decide such a point without giving the parties and, in particular, the party for whom the point is an adverse point, a fair opportunity to put their cases on the point. In terms of identification of the circumstances in which it is appropriate for the FTT to raise a new point on its own initiative, it seems to me that the FTT should be cautious. While this is not an area where there can be a hard and fast rule, it seems to me that what are required, before the FTT should raise a point of its own initiative, are circumstances of the kind described by the Deputy President in Admiralty Park. In particular, it seems to me that the new point should, as a general rule, fall within “the scope of the application, not something which arises outside of it” (Keddie) or, putting the matter another way, should fall within “the broad question” before the FTT (Admiralty Park).

I should add that, in Keddie, Judge Gerald put matters on the basis that the LVT had no jurisdiction under Section 27A to determine whether it was reasonable to replace the old windows, because this issue had not been raised by the tenants; see paragraph 18 of the decision. It seems to me that some qualification is required to this analysis. In Keddie it seems to me that the LVT did have jurisdiction, under Section 27A, to decide whether replacement of the windows was required or not. This issue clearly fell within the very wide terms of Section 27A. Rather, it seems to me that Judge Gerald’s reference to jurisdiction should be understood as a reference to the question of whether it was permissible for the LVT to consider this question, in circumstances where the question had not been raised by the tenants in the proceedings before the LVT.

My attention was also drawn to the summary, in Woodfall’s Law of Landlord and Tenant, Volume 1, at 7.192.2, of the principles which should apply, in terms of the FTT raising new issues in the context of its jurisdiction under Section 27A. The summary is helpful in drawing together what one can find in Keddie and Admiralty Park, subject to what I have just said concerning jurisdiction:

“The Tribunal’s jurisdiction and function is to resolve issues which it is asked to resolve: it has no jurisdiction to embark on its own inquisitorial process and identify issues which neither party has asked it to resolve. It is entitled to raise new points of law which arise out of the uncontested facts or the evidence which the parties have put before it, but it need not, and it should think very carefully about the consequences for the course of the hearing before doing so. There may be rare cases in which it is necessary or appropriate to raise issues not expressly raised by the parties but which fall within the broad scope of the application in order to properly to determine the issues expressly in dispute: but even then, the issues must fall within the scope of the application. Thus, it was held in one case that the landlord’s departure from the scheme of accounting required by the lease was so fundamental that it was both proper and inevitable that the Tribunal should raise the matter at the hearing: the fact that the tenant may not have appreciated that the service charges were being demanded on a different basis from the lease did not require the Tribunal to shut its eyes to an obvious and potentially fatal irregularity. Where the Tribunal does raise a new issue, it must give both parties an opportunity of making submissions and if appropriate adducing further evidence in respect of the new issue before reaching its decision, and if it fails to do so, its decision may be set aside. 49 A dispute involving contested issues of fact turning on credibility should not be decided without a hearing.”

Turning to decisions of the Court of Appeal, my attention was drawn to 32 St John’s Road (Eastbourne) Management Company Limited v Gell [2021] EWCA Civ 789 [2021] 1 WLR 6094, specifically in the context of the Appellant’s argument that the Applicants should have been confined to the pleaded case in their statements of case. The case involved a claim against a tenant for unpaid service charges. The claim came before a deputy district judge in the County Court who struck out the tenant’s defence and counterclaim, and entered judgment for an amount to be assessed upon the filing of further evidence. The tenant served a new statement, essentially repeating the allegations in his original defence and counterclaim. Following a further hearing, the deputy district judge directed that the question of the reasonableness of the service charges which had been claimed should be transferred to the FTT for determination. An appeal to a circuit judge by the landlord was successful. The circuit judge set aside the transfer to the FTT and ordered that judgment be entered for the landlord in the amount of service charges claimed.

The tenant appealed to the Court of Appeal. The appeal was dismissed, essentially on the basis that, in a claim for unpaid service charges, the court would adjudicate on the question of whether the service charges were reasonable if, and only if, a defence to that effect had been pleaded by the tenant. The facts of this case are somewhat different to the present case, but for present purposes the case is principally relevant as a reiteration of the general rule that a litigant should not be permitted to raise issues without pleading them. In Gell, the tenant had not put the reasonableness of the service charges in issue in his original defence. So far as the assessment of the service charges was concerned, there was nothing raised by the tenant which constituted a viable argument for the reduction of the amount claimed. The position was not one where any conceivable defence to the service charges was open to the tenant. Nor was the situation one where it was open to the deputy district judge, on the facts of the case and in the absence of any pleaded case on reasonableness, to transfer the case to the FTT for a determination of the reasonableness of the service charges.

Subsequent to the hearing of the appeal my attention was also drawn to a more recent decision of the Court of Appeal which addresses the question of whether it is appropriate for tribunals to raise questions on their own initiative. This was the authority, mentioned at the outset of this decision, on which I gave the parties the opportunity to make further submissions. Moustache v Chelsea and Westminster Hospital NHS Foundation Trust [2025] EWCA Civ 185 was an employment case. Before the Employment Tribunal (“the ET”) the parties had agreed a written list of issues for resolution at the final hearing of the employee’s claims. The ET addressed and decided those issues. It dismissed all the listed claims. The Employment Appeal Tribunal decided that the ET should have identified and determined a further claim which was not on the agreed list. The employer appealed to the Court of Appeal against this decision. The appeal was allowed. For the reasons set out in his judgment, with which Elisabeth Laing LJ and Dingemans LJ agreed, Warby LJ concluded that the agreed list of issues included all the claims which, on an objective basis, the employee had put forward in her statements of case. As such, the ET had been entitled to proceed on the basis there was no other claim for it to consider. There was nothing in the employee’s statements of case nor was there any other circumstance which placed it under a duty to do otherwise.

It will be noted that the question in Moustache was not the same as the question in the present case. In Moustache the question was whether the ET had been under a duty to identify and determine the further claim which did not appear on the agreed list of issues. In the present case the question, so far as Ground 1 is concerned, is whether the FTT was entitled to raise an unpleaded issue. It seems to me however that the case is relevant to this appeal. I say this because Warby LJ, in his judgment, set out some useful general guidance on the role of the ET in identifying and determining issues in proceedings. It seems to me that this guidance is also applicable to proceedings in the FTT.

In the relevant part of his judgment, starting at [32], Warby LJ commenced by identifying four general points. At [33] and the first part of [34], Warby LJ identified the first two of these points in the following terms:

“33.

First, proceedings in the ET are adversarial. The range of claims that may be brought and the range of substantive or procedural answers that may be raised to those claims are defined by law, principally by statute. In any given case the primary onus lies on the parties to identify, within those ranges, which claims they wish to bring and which answers they wish to advance.

34.

Secondly, the issues raised by the parties are those which emerge clearly from an objective analysis of their statements of case. Identification of the issues does not involve reference to other documents which do not have the status of pleadings and come later. Nor should the process be a complex or difficult one.”

The third point was concerned with the duty of the ET to decide those issues which emerge from an objective analysis of the statements of case. The fourth point, which seems to me to be of most relevance in the present case, is stated in the following terms, at [37]:

“37.

Fourthly, however, the ET’s role is arbitral not inquisitorial or investigative. It must perform its functions impartially, fairly and justly, in accordance with the overriding objective, the law, and the evidence in the case. It may consider it appropriate to explore the scope of a party’s case by way of clarification. That may, in particular, be considered appropriate in the case of an unrepresented party. Whether to do so is however a matter of judgment and discretion which will rarely qualify as an error of law such that the EAT can interfere. The ET has no general duty to take pro-active steps to prompt some expansion or modification of the case advanced by a party where that might be to their advantage. These propositions emerge clearly from a series of decisions of this court and the EAT.”

Also relevant is the following statement of principles, from an earlier employment case, quoted by Warby LJ at [38]:

“38.

We have been referred to the decisions of this court in Mensah (above) at [28] and [36] and Muschett v HM Prison Service [2010] EWCA Civ 25, [2010] IRLR 451 [31]. I do not consider it necessary to review those two cases in further detail. That was done in Drysdale v Department of Transport [2014] EWCA Civ 1083, [2014] IRLR 892 where the court subjected the relevant authorities to a detailed analysis from which Barling J (with whom Arden and Christopher Clarke LJJ agreed) derived the following general principles:

(1)

It is a long-established and obviously desirable practice of courts generally, and employment tribunals in particular, that they will provide such assistance to litigants as may be appropriate in the formulation and presentation of their case.

(2)

What level of assistance or intervention is “appropriate” depends upon the circumstances of each particular case.

(3)

Such circumstances are too numerous to list exhaustively, but are likely to include: whether the litigant is representing himself or is represented; if represented, whether the representative is legally qualified or not; and in any case, the apparent level of competence and understanding of the litigant and/or his representative.

(4)

The appropriate level of assistance or intervention is constrained by the overriding requirement that the tribunal must at all times be, and be seen to be, impartial as between the parties, and that injustice to either side must be avoided.

(5)

The determination of the appropriate level of assistance or intervention is properly a matter for the judgment of the tribunal hearing the case, and the creation of rigid obligations or rules of law in this regard is to be avoided, as much will depend on the tribunal’s assessment and “feel” for what is fair in all the circumstances of the specific case.

(6)

There is, therefore, a wide margin of appreciation available to a tribunal in assessing such matters, and an appeal court will not normally interfere with the tribunal’s exercise of its judgment in the absence of an act or omission on the part of the tribunal which no reasonable tribunal, properly directing itself on the basis of the overriding objective, would have done/omitted to do, and which amounts to unfair treatment of a litigant.”

Finally, I should record the helpful threefold classification, identified by Mr Bates in his submissions, of the circumstances in which the issues to be determined by the FTT may go beyond the pleaded issues. The first category of cases concerns rent assessment cases, where the procedure is not conducted upon a party and party basis; see the decision of the Deputy Chamber President (Martin Rodger KC) in Peabody Trust v Welstead [2024] UKUT] 41 (LC) at [46]-[48]. The second category of cases concerns cases where there is a legislative requirement to take a particular matter into account, whether or not it has been pleaded; see by way of example the identification of this category by Edis LJ in his judgment in Gell at [66]. The third category of cases concerns those cases where it is appropriate, applying the principles to be derived from the cases cited to me in this appeal, for the FTT to permit a point to be taken which is not pleaded. The first and second categories are not engaged in the present case. It is the third category with which Ground 1 is concerned.

I therefore turn to apply the principles which emerge from the above authorities, and from the remainder of the relevant authorities cited to me in this appeal, to the facts of the present case.

The starting point is to identify the decision against which the Appellant is appealing. This is important because Mr Bates, in his submissions, referred to the Hearing below as “a trial”. This was, as I understand the position, true in the case of the Reasonableness Issue. It was not true in the case of the Contractual Liability Issue. I will need to come back to the preliminary views expressed by the FTT on the Contractual Liability Issue later in this decision. In terms of formal decisions however, all that the FTT actually decided was that the Contractual Liability Issue should be brought into the Application and should be adjourned, pursuant to the Interim Decision Directions, for determination at a later hearing.

What follows from this is that the FTT did not go wrong in this case by formally deciding an issue, which it had raised, without giving the parties the opportunity to address that issue. It is clear that tribunals and courts should not do this. In the present case the parties, namely the Applicants and the Appellant, have been given the opportunity to address the Contractual Liability Issue, by reason of the decision of the FTT to adjourn the Contractual Liability Issue and issue the Interim Decision Directions.

This in turn means that the Appellant must demonstrate, in the present case, that the FTT was wrong to allow the Contractual Liability Issue into the Application. There are different ways in which this can be put. It can be said that the FTT should never have raised the Contractual Liability Issue at all. It can be said that the FTT, having raised the Contractual Liability Issue, should have acceded to Ms Traynor’s argument that it should not be allowed into the Application. Whichever way the case is put, the essential task for the Appellant is the same; namely to demonstrate that the FTT was wrong to allow the Contractual Liability Issue to be brought into the Application.

It seems to me that this is not necessarily an easy task. In deciding whether it was appropriate to raise the Contractual Liability Issue, the FTT was required to exercise its judgment and discretion; see the judgment of Warby LJ in Moustache at [38] and see the discussion of this question in Keddie and Admiralty Park. In my view, for the appeal to succeed on Ground 1, it is not sufficient for me to disagree with the decision of the FTT to allow the Contractual Liability Issue into the Application. It seems to me that I have to be persuaded that the decision was one which no FTT, properly directing itself and in the exercise of its discretion and judgment, could have made.

The relevant circumstances of the present case are striking. I start with the statements of case in the Application. They have two important features.

First, the Applicants’ statement of case and revised statement of case did not raise the Contractual Liability Issue, or for that matter any issue of contractual liability to make the Payments. The Applicants’ challenge, in relation to the disputed Payments, was confined to complaints of poor service and lack of information. This was confirmed by their counsel’s skeleton argument for the Hearing, paragraph 36 of which I quote:

“36.

The Applicants apply to the Tribunal pursuant to section 27A(1)(c) of the LTA Act 1985 for a declaration that the services charges applied between November 2019 and March 2023 are not payable in the sums claimed on the basis (a) they have not been reasonably incurred pursuant to section 19(1)(a) of the LTA Act 1985 and/or (b) that the services provided were not of a reasonable standard pursuant to s19(1)(b) of the LTA Act 1985.”

Second, the issue of contractual liability which was raised in the statements of case was not the Contractual Liability Issue. In its original statement of case Cudweed noted that the Occupational Underleases contained no conventional service charge provisions and raised the possibility of an issue as to what right of recovery existed under clause 3.3 of the Occupational Underleases. In its revised statement of case, as I have explained earlier in this decision, Cudweed made less of this possible issue, which reflected the fact that no point on contractual liability to make Payments had been taken by the Applicants. The issue of contractual liability to pay which Cudweed floated in its statements of case was not the Contractual Liability Issue. The Contractual Liability Issue, as identified in the Interim Decision, is not concerned with whether Payments can be recovered in reliance upon clause 3.3 of the Occupational Underleases, but rather with the question of whether the Appellant has operated correctly the contractual machinery of clause 3.3.3, by only demanding Payments in respect of sums which had fallen due for payment under the Headleases. This is well-illustrated by Ms Traynor’s skeleton argument for the Hearing, which did deal with the possibility that an issue of contractual liability to make the Payments might be raised. The possibility which Ms Traynor was dealing was however the possibility of Cudweed reviving the issue, which it had floated in its original statement of case, of there being no right of recovery, in respect of sums paid by way of the Service Charges, under clause 3.3 of the Occupational Underleases. Ms Traynor’s skeleton argument made no reference to the Contractual Liability Issue, because no one had taken the point.

Moving on from the statements of case, this was not a case where the Applicants were litigants in person. They had solicitors acting for them, when their statements of case were prepared. They had counsel acting for them at the Hearing. At the hearing of the appeal, Dr Hakobyan and Ms Labruzzo argued that they had been badly served by their solicitors. I took their point to be that Jobsons should have identified the Contractual Liability Issue as an issue to be raised, and failed to do so. This however is not a satisfactory answer to the point that the Applicants were legally represented. I am in no position to judge whether Jobsons were at fault in their advice to the Applicants. There has been no waiver of the privilege in the advice given by Jobsons, or for that matter by Ms Whitehouse. In these circumstances, it would be quite wrong for me to make assumptions on the question of whether the Applicants’ lawyers were at fault. The relevant point is that the Applicants were legally represented, both when the statements of case were prepared and at the Hearing. In my view I must proceed on the assumption that the Applicants were appropriately advised and represented in the preparation of the statements of case and at the Hearing. If that assumption is wrong, and I am in no position to find that it is wrong, that is a matter between the Applicants and their legal advisers.

Coming to the Hearing itself, it seems to me that it had a number of unusual features. The dispute which the parties brought to the Hearing, for resolution, was the Reasonableness Issue. It is an unfortunate commentary on the present case that although the FTT heard the evidence and argument on the Reasonableness Issue, it has so far not issued its decision on the Reasonableness Issue. The reason for this, as I understand the position, is that the decision of the FTT on the Reasonableness Issue would be rendered academic or largely academic, if the Contractual Liability Issue should be resolved in favour of the Applicants. This seems to me an unacceptable state of affairs. The issue which the parties brought to the FTT for resolution and which the FTT has a duty to resolve, namely the Reasonableness Issue, remains unresolved because the FTT has itself raised an issue, namely the Contractual Liability Issue, which none of the parties brought or intended to bring to the FTT for resolution.

As Warby LJ explained in Moustache, at [37], the role of the ET is arbitral, not inquisitorial or investigative. The ET “may consider it appropriate to explore the scope of a party’s case by way of clarification”, particularly in the case of an unrepresented party. As I have said, I regard this guidance as equally applicable to the FTT. The language used by Warby LJ seems to me to be significant. The relevant tribunal may consider it appropriate to explore the scope of a party’s case. This language does not contemplate the relevant tribunal raising a new point which lies outside the scope of a party’s case. It seems to me that this is consistent with the decision of the Deputy President in Admiralty Park, which I have also quoted above. For ease of reference, I repeat the guidance given by the Deputy President in paragraph 28 of his decision in Admiralty Park:

“28.

Where an application is made to the FTT for a determination under section 27A of the 1985 Act the overarching question to be addressed is, usually: what sum, if any, is payable as a service charge by leaseholder. In order to answer that question a number of sub-questions or individual issues are likely to have to be addressed, but the tribunal’s most important task is to determine that amount.”

In my view the direction in which the FTT took the Hearing, by raising the Contractual Liability Issue cannot properly be described as an exploration of the Applicants’ case. The Applicants’ case was concerned with the Reasonableness Issue. The FTT raised an entirely separate issue, which was whether there was a contractual liability to pay against the demands made of the Applicants. It seems to me that this issue lay well outside the scope of the Applicants’ case. It was an entirely new point.

This is borne out by the terms of the Interim Decision and the Interim Decision Directions. Given the adversarial nature of the proceedings before the FTT, it was for the Applicants to take the point on the Contractual Liability Issue. In this context the terms of the Interim Decision are instructive. At Paragraph 32, the FTT recorded the position of Ms Whitehouse in the following terms:

“32.

On the morning of the second day, we heard detailed submissions from Ms Traynor on why we should not consider the issue of liability to pay. Ms Whitehouse indicated that the Applicants wished to take this point. We made a brief ruling stating that we would require the First Respondent to address this issue. We agreed to put our reasons in writing. In the afternoon, we concluded our consideration of the reasonableness of the service charges challenged in the Scott Schedule.”

At Paragraph 54, in recording the argument on the second day of the Hearing on the question of whether the Contractual Liability Issue should be brought into Application, the FTT recorded the position of Ms Whitehouse in the following terms, at Paragraph 54:

“54.

In response, Ms Whitehouse stated that the Applicants wanted the Tribunal to consider the issue of reasonableness to pay. She had only been instructed some two weeks previously and had not drafted the Statement of Case. She was handicapped by the manner in which the case had been prepared by the previous solicitor. The Tribunal was not impressed by Ms Traynor’s response to these submissions, namely that their remedy lay in a negligence claim against their former solicitor.”

The position of Ms Whitehouse does appear therefore to have been somewhat equivocal. I stress that this is no criticism of Ms Whitehouse. It seems clear that she, in common with Ms Traynor and (I assume) Mr Allison, was taken by surprise by the FTT raising the Contractual Liability Issue. Dr Hakobyan and Ms Labruzzo did assure me, at the hearing of the appeal, that it had been made clear to the FTT that the Applicants wished to take the point on the Contractual Liability Issue. This was reiterated by Dr Hakobyan in her further written submission. I also note that Judge Latham, in his Response Note, states that Ms Whitehouse did say, on the second day of the Hearing, that the Applicants wished to take the point on “payability”, which I take to be a reference to the Contractual Liability Issue. The position is also confirmed by what is recorded in Paragraph 32. I therefore accept that the Applicants did communicate to the FTT, at the Hearing, that they wished to take up the Contractual Liability Issue.

This does not however alter the fact that the Applicants seem to have had only a very limited role at the Hearing, in relation to the Contractual Liability Issue. The Contractual Liability Issue was raised by the FTT. It is clear from the terms of the Interim Decision that the argument in favour of the Applicants, in relation to the Contractual Liability Issue, came from the FTT, not the Applicants. The impression created, both by the terms of the Interim Decision and by the notes of the Hearing, is that the argument over the Contractual Liability Issue was an argument between the FTT, on the one side, and the Appellant, represented by Ms Traynor, on the other side. All this is confirmed by the terms of the Interim Decision Directions. What is notable about the Interim Decision Directions is that the Appellant was required to go first with its statement of case. It is also notable that this statement of case was not to be confined to the Contractual Liability Issue. In terms of the requirements imposed by the FTT, in relation to this statement of case, the Appellant was effectively required to produce a set of Particulars of Claim, pleading a contractual claim for the disputed Payments and answering the case articulated by the FTT on the Contractual Liability Issue.

Putting the matter more simply the FTT, by the Interim Decision and the Interim Decision Directions, effectively converted an application by the Applicants under Section 27A, challenging the reasonableness of the Payments, into a contractual claim by the Appellant for the recovery of the Payments. This was not an exploration of the Applicants’ case, but the conversion of that case into a different dispute, within which the Appellant, the First Respondent to the Application, was effectively put into the position of applicant. The facts of the present case are not on all fours with Gell, but it does seem to me that there are similarities to be found between what happened in the present case, and the decision of the deputy district judge in Gell to send the dispute off to the FTT for the determination of a question, namely the reasonableness of the relevant service charges in that case, which no one had raised.

In saying this, I do not overlook that the Contractual Liability Issue arose out of the demands made by the Appellants for the disputed Payments. The May 2023 Directions did require the production of those demands, and they were not produced. Mr Bates also, very properly, drew my attention to the fact, which I have already noted, that the Applicants had complained in their statements of case of the lack of information from Cudweed and the Appellant in relation to the Service Charges and the Payments. It seems to me however that this brings out the striking feature of this case which I have just identified. The Applicants, who were represented, were content to confine their case at the Hearing to the Reasonableness Issue. They did not, as they might have done, seek the enforcement of the direction for production of the demands. Instead, the FTT took the initiative for itself, required production of the demands and, on the basis of the demands, put the case for the Applicants on the Contractual Liability Issue.

The way in which the Contractual Liability Issue came to be raised brings out another point which seems to me to be significant. The Contractual Liability Issue was not, or at least was not necessarily a point of law, which simply required the FTT to hear argument from the parties. The Contractual Liability Issue depended upon an analysis of the demands made for the relevant Service Charges/Payments. Beyond this, as Mr Bates pointed out in his submissions, the Appellant might seek to argue that the Applicants were prevented by their past conduct from disputing the contractual validity of the relevant demands for Payments. The Appellant might, by way of example, seek to argue that the Applicants were estopped by convention from challenging the contractual validity of the relevant demands. An argument of this kind succeeded before the Tribunal in Admiralty Park, where the Deputy President concluded that the tenant was in fact estopped by convention from taking the point that the relevant service charges had been demanded during the relevant period in a manner inconsistent with the accounting provisions of the lease. An argument of this kind in the present case, in response to the Contractual Liability Issue, would require factual investigation.

One other feature of the Hearing which justifies express mention is that the FTT took a very different attitude to the raising of new points in its consideration of the Reasonableness Issue. In the course of hearing the Reasonableness Issue the FTT took a strict line, in terms of the Applicants seeking to introduce new evidence or raise new issues. This is recorded in Counsels’ Note, and is confirmed in Mr Parkinson’s Response Note. I have no doubt that the FTT was right to take a firm line in this respect. It does however serve to bring out the contrast with the attitude shown by the FTT to the Contractual Liability Issue.

In their submissions in response to Mr Bates’ submissions, and in the skeleton argument in response to the appeal prepared by Dr Hakobyan, both Dr Hakobayan and Ms Labruzzo addressed me clearly and cogently. It was however obvious that their submissions were really directed to the pleaded complaints of the Applicants in relation to the Reasonableness Issue. Both complained that they had been badly served by their lawyers, but I have already dealt with this argument. Both made complaints about excessive demands for Payments and the alleged absence of information provided by the Appellant and Cudweed. It seemed to me however that all this would have fallen to be ventilated and, I am sure, was ventilated in the trial of the Reasonableness Issue which took place at the Hearing. Both also stated their strong belief, of which I take due account, that the Hearing had been fair.

Both Dr Hakobyan and Ms Labruzzo made the point that the demands for the Payments/Service Charges were only produced at the Hearing, when their production had been required by the May 2023 Directions. This is a fair point. Directions of the FTT should be complied with, not ignored. Nevertheless, and as I have already commented, the failure of any party in the Application to raise this matter, until it was raised by the FTT at the Hearing, serves to bring out the point that none of the parties were wishing to rely on the demands, in relation to an argument that there was no contractual liability to make the Payments. This was because no such argument had been raised in the Application.

Returning to the specific grounds of appeal which I am considering in this part of this decision, and drawing together all of the above analysis, I reach the following conclusions.

As I have noted, the Contractual Liability Issue was not pleaded in the statements of case. It was not raised by the Applicants in their pleaded case, either in their original statement of case or in their revised statement of case. Nor was it raised in the statements of case of Cudweed or the Appellant. It seems to me that this factor alone does not necessarily mean that the FTT was wrong to raise the Contractual Liability Issue. More is required to justify the conclusion that the FTT was wrong to do so.

In the present case however it seems to me that there is more. As I have explained above, the circumstances of the present case are striking. For the reasons which I have set out, it seems to me that the Contractual Liability Issue lay well outside the scope of the Applicants’ case. When the FTT raised the Contractual Liability Issue, they were not raising a matter which lay within the broad scope of the Applicants’ case, such as Judge Gerald had in mind in Keddie; see the decision at [19] as quoted above. Nor do I see the present case as one where the FTT, if had not raised the Contractual Liability Issue, was being required to shut its eyes to an obvious and potentially fatal irregularity; such as the Deputy President had in mind in Admiralty Park; see the decision at [30] as quoted above. Instead, what happened was the FTT, on its own initiative, formulated and advanced a new case on behalf of the Applicants.

Applying, in particular, the guidance given in Moustache to the present case, it seems to me that the FTT, in raising the Contractual Liability Issue, stepped outside its arbitral role and effectively took on an inquisitorial or investigative role. As Warby LJ explained in Moustache, at [37], the ET has no general duty to take pro-active steps to prompt some expansion or modification of the case advanced by a party where that might be to their advantage. It seems to me clear, from what was said in Moustache, that the circumstances in which it is appropriate for a tribunal to take pro-active steps to prompt some expansion or modification of the case advanced by a party are also limited, and do not extend to the circumstances of the present case.

As I have explained above, it seems to me that the bar is set high in relation to Ground 1. In my view it is not sufficient that I disagree with the decision of the FTT to raise the Contractual Liability Issue. I have to be satisfied that the decision was one which no FTT, properly directing itself and in the exercise of its discretion and judgment, could have made.

In the particular circumstances of this case, and for the reasons which I have set out, I am satisfied that the decision of the FTT to raise the Contractual Liability Issue, was not only wrong, but was a decision which no FTT, properly directing itself and in the exercise of its discretion and judgment, could have made. In my view the FTT should either not have raised the Contractual Liability Issue at all or, having raised the Contractual Liability Issue, should have accepted the argument of Ms Traynor that it was not appropriate to allow the Contractual Liability Issue to be brought into the Application.

I should add one further point to this conclusion, for the avoidance of any doubt in this respect. The Appellant contended, as part of its argument in support of Ground 1, that the FTT exceeded its jurisdiction. In case the point matters, I do not think that this is strictly correct. As Mr Bates accepted, the FTT did have jurisdiction, under Section 27A, to consider questions of contractual liability. As such, it seems to me that the problem in the present case was not lack of jurisdiction to deal with the Contractual Liability Issue. Rather, the problem was that it was not appropriate to raise the Contractual Liability Issue or to allow the Contractual Liability Issue into the Application, as the FTT should have recognised.

I therefore conclude that the appeal succeeds on Ground 1. The FTT was wrong to decide that there should be an adjournment for the purposes of the determination of the Contractual Liability Issue and was wrong to decide that the Interim Decision Directions should be given. In making these decisions the FTT went wrong as a matter of law, within the meaning of Section 12(1) of the Tribunals, Courts and Enforcement Act 2007. The FTT should not have raised the Contractual Liability Issue at all. Alternatively, having raised the Contractual Liability Issue, the FTT should have decided that it was not appropriate to allow the Contractual Liability Issue into the Application.

By virtue of Section 12(2)(a) I have a discretion to set aside the decision of the FTT to adjourn the Contractual Liability Issue on the Interim Decision Directions. In my view this decision cannot stand and must be set aside. I must then decide either to remit the case to the FTT with directions for its reconsideration or re-make the decision. In the present case it seems to me that I should re-make the decision of the FTT as a decision that the Applicants are not permitted to pursue a case on the Contractual Liability Issue in the Application. The case should also be remitted to the FTT with a direction to the FTT to issue its decision on the Reasonableness Issue and deal with any other consequential matters arising from its decision on the Reasonableness Issue.

For the sake of completeness, I should mention one other question which I canvassed with the parties in argument, and which gave me some pause for thought in reaching the above conclusions. The question was the impact, upon the ability of the Applicants to argue in the future that they have no contractual liability to make Payments under the Occupational Leases, of a decision that the Applicants were not entitled to put their case on the Contractual Liability Issue in the Application. Mr Bates helpfully confirmed to me that a decision to exclude the Applicants from putting a case on the Contractual Liability Issue in the Application would mean that it was not open to them to run this case in relation to the period which was in dispute in the Application. By reference to the application notice this would mean the period from November 2019 to March 2023. Mr Bates accepted that this decision would not formally preclude the Applicants from pursuing a case on the Contractual Liability Issue in relation to future years. Mr Bates did qualify this position by raising the possibility that the Appellant might argue, in the future, that the Applicants should not be permitted to raise the Contractual Liability Issue on what he referred to as a Henderson v Henderson basis. I took this to be a reference to an argument by the Appellant that the Applicants should not be permitted to pursue a case on the Contractual Liability Issue, in relation to future years, because such a case could and should have been pursued in the Application. While I did not understand Mr Bates to concede the position, he did candidly accept that such an argument by the Appellant might be an uphill struggle. It seems to me that I should not be making any decision or indicating any views on arguments which might or might not be raised in relation to future years. The relevant point is that my decision does seem to me to have the effect that the Applicants are not now permitted to pursue a case on the Contractual Liability Issue in the Application, in relation to the years which are in issue in the Application. That is an inevitable consequence of my reasoning set out above. In my view it is not a matter which undermines my reasoning or supports a different decision.