Cases - Assethold Ltd v NM Watts and others
Record details
- Name
- Assethold Ltd v NM Watts and others
- Date
- [2014]
- Citation
- UKUT 537(LC)
- Legislation
- Keywords
- Service charges – recoverability – covenants – legal costs
- Summary
-
The appellant landlord appealed against a decision of the Leasehold Valuation Tribunal (LVT) whereby it was prevented from recovering, through the respondent tenants’ service charge provisions, legal costs incurred as a result of a party wall dispute with the owner of neighbouring land.
The appellant had relied on the service charge provision contained in the lease which required the respondents to pay a service charge equal to an agreed percentage of the 'annual expenditure'. Annual expenditure was defined as all costs expenses and outgoings reasonably incurred by the appellant 'in or incidental' to the provision of the services. The services listed in paragraph 1 of the First Schedule included an obligation to maintain and keep in good and substantial repair and condition the boundary wall. Also included was a generalised obligation, under paragraph 6 of the First Schedule, for the appellant to do whatever acts were necessary to preserve the safety and amenity of the building.
In allowing the appeal, the Tribunal held that there were no special rules of construction for service charges. Previous decisions suggesting that there were ought to be properly understood as examples of the application of universal principals of contractual interpretation, Arnold v Britton [2013] EWCA Civ 902 and Francis v Philips [2014] EWCA Civ 1395 applied.
The LVT was correct in its conclusion that the legal expenses incurred by the appellant were not recoverable within Paragraph 1 of the First Schedule to the lease. 'To maintain' and 'to repair' connoted the doing of something to the subject matter of the covenant. To repair involved undertaking work to restore the subject to a former condition from which it had deteriorated. To maintain involved preserving a functional condition by acts of maintenance performed on or to the thing to be maintained. In neither, was the expression apt to describe a process or activity remote from the thing to be repaired or maintained. Repairing or maintaining a building in good and substantial repair and condition could not be done by the provision of legal services at a distance. Further such legal services could not be said to be incidental to repairing or to maintaining that condition.
In the present circumstances, it would be surprising for a landlord to covenant in terms which positively obliged it to commence proceedings against a neighbouring owner, especially where individual lessees were able to individually or collectively pursue their own legal action.
Paragraph 6 of the First Schedule, however, was sufficiently wide to encompass the appellant taking professional advice before deciding what course of action to follow in order to preserve the safety and amenity of the building. The language of that paragraph did not limit its scope to the carrying out of work to the building itself. The ratio in Sella House Ltd v Mears [1989] 1 EGLR 65 and Gilje v Charlegrove Securities [2002] 1 EGLR 41 did not require that language which was clear and deliberately wide in scope be interpreted narrowly in respect of some categories of expenditure. The appellant was therefore entitled, pursuant to paragraph 6 of the First Schedule, to recoup its legal costs through the service charge.