Cases - Geyfords Limited v Ms L O’Sullivan and Others

Record details

Name

Geyfords Limited v Ms L O’Sullivan and Others

Date

[2015]

Citation

UKUT 683 (LC)

Keywords

Service charges – interpretation – recovery of costs in County Court proceedings and LVT through the service charge provisions in the lease

Summary

In issue was whether the language of the service charge provision in the lease permitted the landlord to recover expenditure which it had incurred in contesting proceedings against five residential leaseholders. The relevant clause entitled the landlord to recoup, through the service charge payable by the leaseholders, its expenses incurred 'in and about the maintenance and proper and convenient management and running of the Development'. At first instance the First-tier Tribunal held that the language of the provision was not apt to permit the appellant landlord to add sums totaling just over £54,000 to the service charges payable by the respondent leaseholders.

The words 'proper and convenient management and running', used in the context of a mixed residential and commercial building, were not words which had a precise meaning which either clearly included or excluded the activity of litigating over the collection or quantification of sums to repair the building. 'Management' may sometimes include obtaining professional advice, including legal advice, and may, in some circumstances, include litigation. Yet, proceedings to enforce the obligation of an individual leaseholder to make a payment to the landlord did not necessarily fall within the scope of 'management and running'. As stated by Taylor LJ in Sella House Ltd v Mears [1989] 1 EGLR 65, a clause in 'in clear and unambiguous terms' would be required before he would be persuaded that the parties had intended that a tenant who paid his rent and service charges would be obliged to subsidise the landlord’s costs of proceedings against his fellow tenants who were defaulters. Sella House illustrated the improbability that parties to a lease would regard general words as sufficient to express an intention that any shortfall in the landlord’s costs of litigation between them should be a charge on the whole body of leaseholders.

Any absence of clarity in payment obligations in the lease, in addition to rent, was an orthodox aid to identifying the boundaries of payment obligations generally, including service charge obligations (Francis v Phillips [2014] EWCA Civ 1395 approved). As Lord Neuberger stated in Arnold v Britton [2015] UKSC 36, approving the dicta of Rix LJ in McHale v Earl Cadogan [2010] EWCA Civ 14 the 'court should not bring within the general words of a service charge clause anything that does not clearly belong there'.

In the present case, the language of the service charge provisions were less clear than to be expected if the cost of proceedings against defaulting leaseholders had been intended to be recovered as costs and expenses of 'proper and convenient management and running of the Development'. It was improbable in the present case that the parties to the lease would have intended the costs incurred in litigation between the lessors and the lessees to be signified by inclusion in a residual 'all other (if any)' category.

Appeal dismissed.