RTMs, SERVICE CHARGES AND ESTATE MANAGEMENT
APRIL 2015 UPDATE
Cain v London Borough of Islington  UKUT 0117 (LC)
Summary: Where, in proceedings over a disputed service charge which were transferred from the county court to the FTT, the parties reached agreement on the amount of the service charges payable, the FTT did not have jurisdiction to enable it to rule on the meaning of the lease under which the agreed charges are payable.
Facts: The county court transferred the local authority’s claim for unpaid service charges in the sum of £1,060.54 to the FTT. The lessee disputed the charges on four grounds, one of which was the method of apportionment. At the hearing the parties were given time to attempt to agree the amount payable. The parties agreed that the lessee would pay 50% of the service charge amount in issue (50% of £1,060.54). Both parties and the Tribunal considered “all the issues apart from the issue as to the method of apportionment had fallen away.” The Tribunal then went on to determine the apportionment issue in favour of the local authority and granted the lessee permission to appeal. On the appeal, for the first time, the local authority raised the issue of whether the FTT had jurisdiction to determine the apportionment issue once the parties had agreed the amount of service charge payable.
Issue: Did the FTT have jurisdiction to rule on the meaning of the lease under which the agreed charges are payable once the parties had agreed the amount of service charge payable?
Decision on appeal: The Upper Tribunal (Deputy President, Martin Rodger QC) held that the FTT did not have jurisdiction. “An unimpeached compromise represents the end of the dispute or disputes from which it arose. Such issues of fact or law as may have formed the subject matter of the original disputation are buried beneath the surface of the compromise” (see The Law and Practice of Compromise by Sir David Foskett at para 6-01). The question of apportionment was subsidiary to the quantification of the lessee’s service charge and consideration of whether it was reasonable; once those matters had been agreed, the subsidiary issue (apportionment) necessarily fell away too. This was so, even though the parties had not reached any specific agreement on the apportionment issue. Further, there was an agreement of the amount of service charge which is payable for the purposes of s.27A(4). Thereafter, the FTT did not retain any jurisdiction in the transferred proceedings to reach a conclusion on the question of apportionment.
Comment: (1) Although it was not cited, this decision is consistent with the decision in Mehra v Citywest Homes Limited  UKUT 311 (LC). In that case the LVT expressed its determination in terms that the method of apportionment was “fair and reasonable”, rather than determining an amount payable. Accordingly, it was held that the decision was of no effect for the purposes of s.27A. (2) In Cain the Deputy President also commented that, when trying to identify which subsidiary issues ought properly to be treated as being included within the scope of the questions transferred by the county court, it is not appropriate to be “too pedantic”, especially where an order transferring proceedings is couched in general terms (for example, to determine “the reasonableness of the service charges”) and where there is no suggestion that the court intended to reserve for itself any particular question.