Gilje v Charlegrove Securities Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE ETHERTON |
| Judgment Date | 13 May 2003 |
| Neutral Citation | [2003] EWHC 1284 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2003/APP/30 |
| Date | 13 May 2003 |
[2003] EWHC 1284 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
The Strand
London WC2A 2LL
Mr Justice Etherton
Case No: CH/2003/APP/30
CH/2003/APP/187
MR T DUTTON (Instructed by Messrs Milton McIntosh) appeared on behalf of the Claimants
MS A EILLEDGE (Instructed by Messrs Elliotts) appeared on behalf of the Defendant
Tuesday 13th May 2003
Introduction
The claimants in these proceedings are tenants of flats at 27 Lennox Gardens, London, SW1 ("the Building"). The first defendant is the landlord, and the second defendant is the first defendant's agent with responsibility for demanding and receiving service charge contributions from the tenants.
This is an appeal from an order of Master Price of 12 th December 2002 on a preliminary issue by which he declared that:
"Section 20B of the Landlord and Tenant Act 1985 does not prevent the defendants from charging expenditure by way of service charges in the years of account ended 25 th March 1998 and 25 th March 1999 notwithstanding that this expenditure was incurred more than 18 months prior to the final preparation of the final accounts and demands in respect of those years of account but only insofar as such expenditure was covered by amounts collected by the defendants by way of advance service charges pursuant to the Claimants' leases."
Background facts
The Building comprises six flats, of which five are let on long leases ("the leases"), the sixth being retained for use by a resident caretaker. The leases are in similar form.
Each of the leases requires the lessee to contribute towards the cost of providing certain services, as follows. Each lessee's contribution is expressed as a percentage of the service charge expenditure. The contribution is to be made in two ways, that is to say by payments on account of service charges during the relevant financial year and by a balancing payment at the end of each financial year.
The claimants, between them, hold four of the five long leases and contribute 78.5% of the total service charge expenditure, the balance being payable by the lessee of the fifth flat.
The defendants, as I have said, are the claimants' landlord, the first defendant, and Mr Richard Newman, the second defendant, who, as the first defendant's agent, corresponds with the claimants in respect of the provision of services and service charges, demands service charge contributions from the lessees of the flats within the building and accepts those contributions.
There has been previous litigation between the claimants and the first defendant in relation to service charges.
The present dispute between the parties turns on four matters: the making of an allegedly inappropriate demand for payment on account of service charges for the year of account ending in 2002; adjusting the account between the parties so as to reflect the consequences of decisions in the Leasehold Valuation Tribunal, the Central London County Court and the Court of Appeal; an issue arising under section 20B of the Landlord and Tenant Act 1985 ("the Act"); and a disagreement on the pleadings as to the amount the claimants have paid to the defendants on account of service charges.
The issue
The issue before me concerns the third disputed matter which I have mentioned above. It arises in the following way. Each of the claimants' leases contains covenants by the tenant:
"4…(2) To pay to the Lessor in each year a sum equal to [a specified percentage] of
(i) all monies expended by the Lessor in carrying out all or any of the works and providing the services and management administration called for under clause 5.4 hereof [that is, the Lessor's covenant to maintain, repair and decorate]
(ii) the insurance premium for the insurance policy covering the Building in accordance with the Lessor's covenant herein contained and
(iii) such a sum as the Lessor shall reasonably require for the purpose of setting up an adequate reserve fund to pay for any intended substantial works which are not annually required to be done The liability of the Lessee shall be discharged in the following manner that is to say:
(a) By the payment on account in each year of such a reasonable sum as the Lessor shall require such sum to be paid in advance by quarterly payments on the days herein before provided for the payment of rent the first payment to be made at the time hereinbefore provided for the first payment of rent and to be a proportionate calculated from the date hereof
(b) In the event of the moneys expended by the Lessor as aforesaid in any year exceeding the aforesaid payment on account the balance shall be paid by the Lessee within twenty-one days after receiving a demand for the same The Lessor will procure that the Lessor's managing agents shall within three months at the end of each year issue a certificate and account as to the amount expended by the Lessor in such year as herein before provided and such certificate shall be conclusive and binding on the Lessor and the Lessee".
In respect of the accounting periods ending on 25 th March 1999 and 25 th March 2000, the first defendant gave notice requiring payments on account in respect of those years based on anticipated expenditure for the period in question. Projected budgets for those years were supplied to the claimants on about 17 th March 1998 and 10 th March 1999 respectively. Accounts for the years ending 1999 and 2000 were not supplied until the beginning of October 2001.
Those accounts showed that the amounts expended by the first defendant for the two years in question and claimed by way of service charge were less than the interim quarterly service charge demands for those years.
The claimants claim that by virtue of section 20B of the Act the first defendant is not entitled to recover by way of service charge any expenditure in those accounts, such expenditure having been incurred more than 18 months previously.
The statutory provisions
The relevant statutory provisions in the Act are as follows:
"Meaning of "service charge" and "relevant costs"
18. (1) In the following provisions of this Act "service charge" means an amount payable by a tenant of a dwelling as part of or in addition to the rent –
(a) which is payable, directly or indirectly, for services, repairs,
maintenance or insurance or the landlord's costs of management, and
(b) the whole or part of which varies or may vary according to the
relevant costs.
(2) The relevant costs are the costs or estimated costs incurred or to be
incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.
(3) For this purpose –
(a) "costs" includes overheads, and
(b) costs are relevant costs in relation to a service charge whether
they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period.
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