Corvan (Properties) Ltd v Abdel-Mahmoud
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lindblom,Lord Justice McFarlane,Lady Justice Rafferty |
| Judgment Date | 15 May 2018 |
| Neutral Citation | [2018] EWCA Civ 1102 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 May 2018 |
| Docket Number | Case No: C3/2017/2385/LATRF |
[2018] EWCA Civ 1102
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Upper Tribunal (Lands Chamber)
Martin Rodger QC, Deputy Chamber President
LRX/147/2016, [2017] UKUT 228 (LC);
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Rafferty
Lord Justice McFarlane
and
Lord Justice Lindblom
Case No: C3/2017/2385/LATRF
Mr Jonathan Seitler QC and James Sandham (instructed by Northover Limited) for the Appellant
Philip Rainey QC and Nicola Muir (instructed by Direct Access) for the Respondent
Hearing dates: Wednesday 25 April 2018
Judgment Approved
The single issue raised in the present appeal is whether an agreement between freeholder and property management company constitutes an agreement for more than twelve months, and therefore falls within the meaning of ‘qualifying long term agreement’ in section 20ZA(2) of the Landlord and Tenant Act 1985 [“The 1985 Act”]. The appeal therefore turns on (i) the correct construction and meaning of the relevant clause (clause 5) of the agreement, and (ii) the scope of section 20ZA(2) of the Act.
The underlying proceedings in the First-tier Tribunal (Property Chamber) [“FTT”] concern a claim for £24,420.83 of unpaid service charges for the period 25 March 2010 to 24 June 2014. That total included, inter alia, a contribution towards the fees of managing agents. So far as is relevant for this appeal, the FTT on 29 June 2016 disallowed part of the charges on the grounds that the management agreement was a qualifying long term agreement to which the consultation requirements of Section 20 of the 1985 Act applied and had not been observed.
On 2 June 2017 The Upper Tribunal (Lands Chamber) [“UT”] (Deputy President Martin Rodger QC) dismissed the landlord's appeal on the question of whether the agreement was a qualifying long term agreement. Permission to appeal to this court was granted on 24 October 2017 by Hickinbottom LJ.
Background
The Appellant is the freehold proprietor and landlord of Clive Court (“the Building”) in Maida Vale, a substantial residential block managed by its appointed agents Moreland Estate Management Limited (and previously by True Associates Ltd.). It contends the words of the contract do not result in the agreement being for a term of more than 12 months, and thus do not fall within the meaning of section 20ZA(2) of the 1985 Act.
The Respondent occupies flat 500 at Clive Court, under a long lease granted by the appellant's predecessor in 1988 and which the respondent acquired in 2000. As the Upper Tribunal put it, the lease includes “conventionally drafted service charge provisions which require the respondent to contribute towards expenses incurred by the appellant in the provision of services…”. She contends the contract is for a term of more than 12 months, and is therefore a qualifying long term agreement for the purposes of section 20ZA(2) of the 1985 Act – with the result that there was a consultation requirement (with all 154 leaseholders). It is agreed there was no consultation. The failure to consult means the leaseholders' contributions to the costs of those appointments were subject to a statutory cap of £100 per annum (pursuant to section 20 of the 1985 Act, and regulation 4(1) of The Service Charges (Consultation Requirements) (England) Regulations 2003 (SI/2003/1987)), unless the consultation agreements have been dispensed with under section 20ZA(1) of the 1985 Act.
Clive Court was formerly managed on behalf of the appellant by True Associates Ltd under a management agreement entered into on 17 December 2008. Responsibility for management was later assumed by Moreland Estate Property Management Limited on the same terms.
The relevant clause (clause 5) in the 17 December 2008 agreement reads as follows:
“The contract period will be for a period of one year from the date of signature hereof and will continue thereafter until terminated upon three months' notice by either party”.
The Legal Context
Section 20ZA(2) of the 1985 Act defines a “qualifying long term agreement” as:
“an agreement entered into, by or on behalf of the landlord or a superior landlord, for a term of more than twelve months”.
Factual and Procedural Background
The conclusions of the UT were essentially these:
“24. Although… the contract period is expressly stated to be for a period of one year, clause 5 does not stop there, but goes on to provide that the same contract period is “to continue thereafter”. The period of 12 months therefore represents only the start of the contract period. The critical question is whether the contract period can be brought to an end on the expiry of that initial period of 12 months or whether it must be allowed to continue for some further period, even if only for a single day.
…
26. … [T]he agreement is intended to continue until after the end of the initial period of one year: it “will continue thereafter.” That continuation, for whatever further period, is not conditional upon the absence of notice: it is a continuation “until terminated” not “unless terminated”. … [T]he notice may not bring the agreement to an end until a period of continuation after the end of the 12 months has first commenced. On that construction the agreement was for a period of at least a year and a day, and was therefore for a term of more than 12 months.
…
28. Nor is there any room for implying a term that the agreement may be terminated at the end of the initial 12 months by notice of reasonable duration. … That would be inconsistent with the intention that the agreement was to continue after that date, and in any event would be a surprising term for the parties to have left unexpressed in a clause dealing explicitly with duration and termination by notice.”
There are essentially two issues that fall to be determined:
a) The correct construction of the contractual provision (clause 5), and whether it results in a term exceeding 12 months; and
b) The correct interpretation of the statutory provision, in particular whether the “term” referred to in section 20ZA concerns a minimum, or a certain fixed maximum term.
The Appeal
For the appellants, Mr Jonathan Seitler Q.C. submitted that to insist, as the UT had done, that the clause resulted in the terms being a year plus one day, or a minimum of 15 months was to do violence to the terms of the agreement. He submitted that although the clause is a single unity, it has two distinct elements. The first concerns the length of the term, the second is about termination. The expression “contract period” could not be overlooked by placing excessive emphasis on the word “will”. In respect of the word “will” in the clause, he submitted it is a soft, and not strong or directive, “will”. In other words, it should not be construed so as to mean “shall”. Furthermore, because this clause was clearly overly condensed drafting, it requires the implication of two words in order to give proper effect to the intention that the term be for 12 months and no longer. The modification which Mr Seitler suggested was the insertion of “unless terminated” after the “and” – such that the agreement would read:
“The contract period will be for a period of one year from the date of signature hereof and unless terminated will continue thereafter until terminated upon three months' notice by either party”. (proposed addition italicised)
In the alternative that those words are not implied, Mr Seitler submitted the court should avoid the rigidity adopted by the UT in respect of the word “until”. Instead, the court should read “until” as being equivalent in meaning to “unless”, with the result that the contract did not mandate continuation beyond 1 year. Nonetheless, he argued notice could be given within the first year, but effect could not be given to termination until midnight at the end of the first year, with the result that the term of the contract was exactly, and no more than, one year – subject, effectively, to an option to extend if a decision was made by the landlord not to give notice.
In respect of the policy underlying the 12 month stipulation in section 20ZA(2), Mr Seitler submitted the consultation requirement was an extra, and not the only protection for the tenant in respect of service charges. The heart of the provisions, and the protection of the tenant, is section 19(1), which limits relevant costs incurred by landlord to only those which are reasonable.
As to the second issue, Mr Seitler argued that although the point need not be decided, a five year agreement with a right to terminate at any time would still be a qualifying long term agreement. In ascertaining what constitutes the “term” referred to in section 20ZA(2), the pragmatic and correct answer must be the contract period as expressed – after all, this is the only certainty so far as duration is concerned. In the present case, the contract specified the period to be one year.
Mr Seitler relied on the reasoning in Paddington Walk Management Ltd v Peabody Trust [2010] L & TR 6, which was a decision of HHJ Hazel Marshall QC sitting in the Central London County Court. The relevant clause in the service agreement entered into on 1 June 2006 was in these terms:
‘for an initial term of one year from 1 June 2006 and will continue on a year-to-year basis with the right to termination by either party on giving three month's written notice at any time.’
HHJ Marshall considered the terms of the clause in the context of section 20ZA and held:
‘48. In my judgment an agreement for a year certain and then from year-to-year to continue subject to not being terminated is not “an agreement for a term of more than 12 months” (emphasis added by HHJ Marshall) within the meaning of this part of the statute. I reach...
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