Dennis Phillips and Royna Goddard (suing on behalf of themselves and other owners of 97 Holiday Chalets at Point Curlew, St Merryn, Padstow, Cornwall) v Martin Francis and Another
| Jurisdiction | England & Wales |
| Judge | THE CHANCELLOR OF THE HIGH COURT,The Chancellor |
| Judgment Date | 21 December 2012 |
| Neutral Citation | [2012] EWHC 3650 (Ch) |
| Court | Chancery Division |
| Date | 21 December 2012 |
| Docket Number | Case No: CH/2012/0515 |
[2012] EWHC 3650 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Chancellor of The High Court
Case No: CH/2012/0515
Christopher Stoner QC and Rawdon Crozier (instructed by Fursdon Knapper) for the Appellants
Jonathan Seitler QC and Jonathan Chew (instructed by Foot Anstey) for the Respondents
Hearing date: 11 December 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Chancellor The Chancellor
Introduction
Point Curlew is a 25 acre holiday site ("the Site") at St Merryn, Cornwall. It was created in the 1970s on part of a disused WWII Airbase. It comprises in excess of 150 chalets let on 999 year leases, 11 lodges and a number of other buildings, including an amenity centre. On 22nd April 2008 the freehold of the Site was conveyed by the former owner, St Merryn Holiday Estate Management Co Ltd to the defendants, Mr and Mrs Francis ("the Lessors"). At a meeting of the chalet owners held on 3rd May 2008, as confirmed in a letter to them dated 15th May 2008, the Lessors indicated their intention to bring the Site up to a first class standard from which they might all benefit. Further meetings and letters to the like effect followed in October and November 2008. On 10th January 2009 the Lessors adopted a Design and Access Statement in support of a planning application for the improvement of the Site.
Whilst the plans for the improvement of the Site may have been welcomed by the lessees of the chalets, the increase in the service charges payable under their leases was not. The last service charge before the sale of the Site to the Lessors was £1,478 for each chalet. The first after the sale to the Lessors was a demand dated 29th December 2008 for £3,117.47 for each chalet on account for the year 2009. On 5th February 2009 this action was commenced by a Part 8 claim issued in the Queen's Bench Division, Truro District Registry by the claimants suing on behalf of themselves and the lessees of 97 other chalets on the Site ("the Lessees"). They sought various declarations as to the true construction of the service charge provisions contained in the leases of the chalets. In addition they applied for injunctions to restrain the Lessors from forfeiting any of the chalet leases for non-payment of the service charges.
The claim came before HH Judge Griggs in March 2010 on a preliminary issue to determine whether the restrictions on the recovery of service charges imposed by ss.18–30 of the Landlord and Tenant Act 1985, as amended by the Commonhold and Leasehold Reform Act 2002, applied to the leases of the chalets. For the reasons given in his judgment dated 24th March 2010 he concluded that the chalets were "dwellings" within the meaning of that word as defined in s.38 of the Landlord and Tenant Act 1985 with the consequence that the restrictions did apply. In the light of that decision the claim was transferred to the Truro County Court and the particulars of claim substantially amended to reflect the provisions of the Act.
On 22nd January 2010 accountants, C.V.Ross & Co Ltd, certified the amount recoverable from the Lessees by way of service charge for the period 22nd April to 31st December 2008 and the 12 months ended 31st December 2009 to be £269,933.49 and £583,542.87 respectively. The latter certificate indicated that the costs included both £95,000 as wages for the Lessors and £27,787.76 as a 5% management charge. The claim came before HH Judge Cotter sitting in the Truro County Court on three days in February and three days in April. In addition he received written submissions dated 12th and 19th May 2011. The judge handed down a very substantial judgment in October 2011 in which he dealt with all the issues then capable of being decided and adjourned the rest to a further hearing to be fixed. The order reflecting his decisions was drawn up on 19th March 2012. I should refer to the two parts of it which the claimants now seek to appeal. They are:
(1)
"(5) That on the construction of Schedule 3 clause 8 of the leases:-
(i) the lessor is entitled to charge and recover the reasonable costs (net of VAT) of agents for the management of the estate.
(ii) recovery of such costs is not confined to a "management charge of five per centum (5%) of the total cost of the items referred to in this Schedule", and such 5% charge is therefore recoverable on all items of expenditure properly recoverable under Schedule 3 paragraphs 1 to 7."
(2)
"(10) Save for the items declared in paragraph 6 above to not be recoverable under the lease provisions in any event (removal and dispersal of earth banks; and construction of office/shop and launderette/staff buildings), no items for which service charge is claimed relating to expenditure in 2008 and 2009 amounts or amount, individually or cumulatively, to a single set of "qualifying works" for the purposes of sections 20 and 20ZA of the Landlord and Tenant Act 1985."
The judge refused permission to appeal.
The Lessees issued their appellants' notice on 16th April 2012. They contend that each of the declarations to which I have referred is wrong in law and seek permission to appeal. Their application came before Morgan J on 1st October 2012. He directed that the application for permission to appeal should be listed for hearing by a judge in court with the appeal to follow if leave were granted. I have heard full argument from both parties and will consider the application in conjunction with the appeal. There are two issues, namely management charges and qualifying works. The first is a question of construction of the leases. The second raises issues in relation to the meaning and effect of the scheme relating to service charges imposed by Landlord and Tenant Act 1985 as amended by the Commonhold and Leasehold Reform Act 2002. I will deal with them in that order, but, first, it is necessary to set out the terms of the leases.
The Leases
The parties have identified various forms of lease of a chalet used over the years by which to grant 999 year terms. Fortunately there are no material differences. I will take as the standard lease that dated 21st January 1983 and made between Wardles Leisure Estates (St Merryn) Ltd (1) and Jeanette Curson (2). In recital (1) "the Estate" is defined as the Site. In consideration of £5,000 the relevant chalet is demised unto the lessee for a term of 999 years from 25th December 1975 at an annual rent of £10.
The lessee's covenants are set out in clause 2. In sub-clause (o) the lessee agrees not to use the chalet on or between 2nd January and 28th February in each year. So far as relevant sub-clause (q) is in the following terms:
"Pay to the Lessor by way of additional rent the service rent hereinafter defined in Clause 4 within fourteen days of written demand after the accounting date as hereinafter defined in each and every year of the term PROVIDED ALWAYS that the tenant shall pay to the Lessor on each of the accounting dates in every year during the term such sum or sums as the Lessor may reasonably require on account of the said service charge and any such payment to be credited to the tenant against payment of the services as certified to be due from it (as hereinafter provided) by the certificate issued next after the making of such demand and in default of such payment by the Lessee…"
Clause 3 contains the lessors' covenants. By paragraph (b) the lessor covenants:
"To carry out and provide the services as set out and numbered 1–7 in Schedule 3 hereto unless prevented from so doing by
(i) act of God
(ii) force majeure
(iii) strikes lock-outs or trade disputes
(iv) civil commotion"
Clause 4 contains the obligation to pay the service charge. So far as material it provides:
"The service rent hereinbefore covenanted to be paid by the Lessee shall be a fair and equitable proportion determined from time to time by the Lessor and such sum shall be ascertained by a certificate given by the Lessor or its managing agents and certified by them to be the aggregate of the sums actually expended on the liabilities incurred by the Lessor in any period ending on the thirty first day of December or such other date as the Lessor may in its discretion determine (hereinafter called "the accounting date") during the term hereby created in connection with the management and maintenance of the Estate and the provisions of such services as herein described and in particular without limiting the generality of the foregoing shall include the cost of the matters referred to in the Schedule 3 hereto."
There follows in clause 4 a provision dealing with the binding nature of such a certificate to which are appended three provisos. The third is as follows:
"(iii) As soon as practicable after the accounting date in each year throughout the term the Lessor will submit to the Lessee a statement certified by the Lessor's agent to show the computation of the said sums expended and the liabilities incurred (hereinafter called "the annual service cost") for the preceding year and the Lessee shall be entitled within fourteen days of receipt of such statement to inspect the vouchers and receipts of all items included in such statement."
Schedule 3 not only specifies the subject matter of the lessor's covenant in clause 3(b) but also the costs making up the service charge provided for in clause 4. That schedule provides:
"SCHEDULE 3
1. To pay all rates and...
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