[2025] UKUT 115 (LC)

In dealing with Ground 1 I find it convenient to take first the argument that the Applicants should be taken to have admitted or agreed the contractual validity of the demands for the Payments. Section 27A(4) sets out a variety of circumstances in which an application cannot be made under subsections (1) and (3) of Section 27A for a determination as to the payability of service charges. By paragraph (a) of subsection (4) no application may be made in respect of a matter which has been agreed or admitted by the tenant.

In support of this part of the Appellant’s case I was referred by counsel to the decision of the Tribunal (Judge Elizabeth Cooke) in Thirty One Crescent Grove Ltd v Atherden [2024] UKUT 80 (LC). The case was concerned with an appeal by the landlord (a company) of a house which had been converted into six flats. The flats had been let on long leases and the tenants of the flats were members of the corporate landlord. The respondent to the appeal was the tenant of one of the flats. The appeal was against the decision of the FTT in that case that the landlord could only recover £250 by way of the service charge, in respect of work done to redecorate the stairwell, and that the sum of £600 spent by the respondent on the roof should be shared between the tenants, as part of the service charge.

So far as the work to the stairwell was concerned, the landlord contended that the respondent, Mr Atherden, had agreed to pay his share of the costs of redecorating the stairwell by an exchange of emails with a Mr Bingham, tenant of another flat in the building and an officer of the landlord company. The exchange of emails (Mr Bingham to Mr Atherden and then Mr Atherden in reply) was in the following terms:

“DCP Decorating will start work on the staircase tomorrow morning, using my first-floor flat as a base.

The cost, assuming no extras and the discovery of nothing unexpected, will be £3,980 (no VAT applicable). At Sven’s request, Trade Diamond Paint will be used on the walls.”

“Thank you David, I am really pleased to hear that the decorating is starting tomorrow.

In relation to the paint, you clarified Trade Diamond will be used on the walls, (resulting in an increased cost of £280) I presume you meant all surfaces including the woodwork as per my request?”

At first instance the FTT had decided, on its own initiative, that the landlord’s right of recovery was limited to £250 per flat, because there had been no compliance with the consultation requirements referred to in Section 20 of the 1985 Act. This was not a point which the respondent had raised. In the light of the email exchange, and the failure of the respondent to take the point on Section 20, Judge Cooke concluded that the decision of the FTT to restrict the recovery from the respondent to £250 was wrong and must be set aside. As Judge Cooke explained, at paragraphs 30-32 of the decision:

“30.

Mr Atherden’s email of the 10 May 2021 did not in terms state that he was content with the overall price. But two things are perfectly clear: one is that he was content for the work to go ahead. The other is that when he made an application to the FTT he did not raise a challenge on the basis of consultation under section 20 of the 1985 Act. And I take it from his enthusiasm for the work to go ahead that the absence of formal consultation did not trouble him. There had already been considerable email discussion as to what work was needed and indeed Mr Atherden himself had originally proposed a more extensive programme costing £4,800 (his email of 14 January 2021).

31.

Why the FTT introduced section 20 as an issue I do not know. Obviously when the FTT hears litigants in person it has to assist them, and such litigants will not often know the formal statutory basis of their case. Moreover, the FTT has to determine a great volume of service charge disputes; pragmatic decisions have to be made and for example it is sensible to give directions without a hearing. It is one thing to suggest to the parties in standard directions that consultation might be an issue; but without any indication from Mr Atherden following the directions that consultation actually was an issue for him, it is difficult to see any justification for deciding the application on the papers on a basis that Mr Atherden had not raised.

32.

He had not raised it because, to put it informally, the absence of formal consultation as prescribed by section 20 and the regulations thereunder was not a problem for him; to put it formally it was “a matter” that he had agreed to for the purposes of section 27A(4). The decision that only £250 was payable because of the absence of consultation was therefore made without jurisdiction and is set aside.”

Mr Bates contended that this decision was on all fours with the present case, where the question of the payability of the Payments, both on the basis of the terms of the Occupational Underleases and the demands for the Payments, was raised as a possible issue by the FTT, in the May 2023 Directions and in the September 2023 Directions, and was further raised as a possible issue by Cudweed in its statement of case and revised statement of case. Notwithstanding this, the Applicants did not raise any issue on the payability of the Payments, either in their statement of case or their revised statement of case, but confined themselves to the Reasonableness Issue.

I do not accept that the present case is on all fours with the decision in Atherden. In Atherden there was an email exchange between the respondent, Mr Atherden, and the relevant officer of the appellant landlord, which I have quoted above, in which the respondent clearly approved the relevant work to the stairwell, and its cost.

In the present case the facts are rather different. What I am referring to as the Contractual Liability Issue was not articulated by any of the parties. It was articulated by the FTT, at the Hearing. The question of the contractual liability of the Applicants to make the Payments under the Occupational Underleases was raised in the statements of case, but it was raised by Cudweed and was not raised by way of an argument that there was no such contractual liability. Still less did Cudweed’s articulation of this question correspond to the FTT’s subsequent identification of the Contractual Liability Issue. The same applies to the May 2023 Directions. The issue of contractual liability to make the Payments which was identified as a potential preliminary issue in the May 2023 Directions does not correspond to the Contractual Liability Issue, as subsequently identified by the FTT.

Reviewing the procedural history of the Application, it does not seem to me that there was anything prior to the Hearing which can be relied upon by the Appellant as evidence that the Applicants were either agreeing that they had a contractual liability to pay the sums in dispute or admitting that they had this contractual liability. I do not read the Applicants’ statement of case or revised statement of case as containing an agreement or admission to this effect. The same applies to the Applicants’ skeleton argument for the Hearing. Essentially what the Applicants did, in terms of identification of their case, was to confine their case to the Reasonableness Issue. I do not think that this can be equated, without more, to agreement or admission that, subject to the Reasonableness Issue, they were subject to a contractual liability to make the Payments. On the facts of the present case I do not think that there was any more. Rather, it seems to me that the Applicants simply disregarded, either by accident or design, the question of contractual liability.

In saying this I should make it clear that I am not saying that there cannot be cases where agreement or admission, for the purposes of Section 27A(4), may be implied or inferred from conduct. I also accept that such conduct may include a case where there is an omission to raise a contractual challenge to the payability of a service charge, while raising other challenges to the payability of the relevant service charge. A finding of such an agreement or admission has to be 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. What is important is that the relevant agreement or admission must be clear. On the facts of the present case, and on the basis of the authority cited to me by the Appellant, I do not think that the position is sufficiently clear to give rise to an agreement or admission.

In summary therefore, I conclude that the decision in Atherden can be distinguished and that, on the facts of the present case, it cannot be said that the Applicants or any of them agreed or admitted, within the meaning of Section 27A(4), that, subject to the Reasonableness Issue, they had a contractual liability to make the Payments which were in dispute.