G&A Gorrara Ltd & ors v Kenilworth Court Block E RTM Company Ltd [2024] UKUT 81 (LC)

04 December 2024

How many preliminary issues can there be in proceedings?

At least four, or so it turned out for G&A Gorrara Ltd, Roberto Gorrara and Paola Gorrara.

In 2022, I represented the leaseholder appellants on their appeal from a decision on two preliminary issues.

This year, I was back in the Upper Tribunal, again representing the appellants, on another appeal against a decision on two further preliminary issues.

In this post, I only propose to address one of those issues: whether the appellants had admitted liability to pay their service charges under s.27A(4), Landlord and Tenant Act 1985.

The FTT found that the leaseholder appellants had admitted liability to pay service charges.

Their appeal against that decision was heard by Judge Cooke, who had also heard the first appeal in 2022.

Section 27A(4) and (5), Landlord and Tenant Act 1985

The Judge Cooke began by reminding herself of the wording of s.27A(4) and (5) of the 1985 Act.

(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.”

She then turned to Cain v LB Islington [2015] UKUT 542 (LC), a decision on admissions that has long exercised me - and not only because I represented Mr Cain on his unsuccessful appeal.

Cain: the principles, reviewed

Mr Cain challenged twelve years of service charges.

The FTT decided that he had admitted the earliest six years because he had paid his service charges without protest.

The FTT therefore decided that it had no power to decide the payability of the service charges for that period.

HHJ Gerald dismissed Mr Cain’s appeal to the Upper Tribunal.

Judge Cooke cited extensively from HHJ Gerald’s decision and identified the statements of principle that it contained:

First, it is said in paragraph 17 [of Cain] 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 [of Cain] also says that section 27A(5) refers only to a single payment, because of the words “only” and “any payment”… 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”.

[HHJ Gerald] went on in paragraph 18 [of Cain] 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.

Cain: a correction

Having reviewed (and tweaked) those principles, Judge Cooke reviewed HHJ Gerald’s decision in Cain.

HHJ Gerald decided that the FTT was entitled to find that Mr Cain had admitted his service charges for the first six years because he had paid them without reservation.

Judge Cooke did not agree.

In her view, in Cain, the FTT had inferred an agreement or admission of the service charges because Mr Cain had paid them and “then left it another six years before challenging the charges, and had the information he needed to raise a challenge in the meantime.”

Therefore, she said:

… 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.

Even so, the FTT is entitled to - dare I say “must”? - consider all of the circumstances of each case. Whilst unqualified payment or payments alone do not meet the requirements of section 27A(4)(a), amongst others, factors that may be relevant to a finding of an admission might be:

• Delay;

• The availability of information.

Judge Cooke observed that:

In view of the facts in Cain it is not realistic to draw from it the proposition that the more faithfully and regularly the leaseholder pays service charges the less opportunity he or she has to seek a determination under section 27A. But insofar as Cain did decide that a series of payments is sufficient without more to indicate agreement I take the view that it was wrongly decided.

G&A Gorrara Ltd’s appeal

Returning to G&A Gorrara Ltd’s appeal, Judge Cooke struggled to establish what the FTT had decided that the company had admitted.

She knew that it had accepted the interim demands because the company expressly stated that its challenge did not relate to those demands.

If the FTT had decided that the company had admitted those demands therefore, that decision was surplus to requirements.

If, on the other hand, the FTT had decided that the company had admitted the final charges, that was wrong, because those final charges (or credits) had not yet been demanded (or credited).

Judge Cooke phrased it this way:

It is not possible to understand, and the FTT has not explained, how agreement that interim charges are payable means agreement also to the final charges based on costs actually incurred. The appellants do not know what costs were incurred for Block E. They cannot be said to have delayed in challenging them because none have yet been demanded.

And with that, she allowed the appeal against the FTT’s finding of an admission.