Holding and Management Ltd v Property Holding and Investment Trust Plc
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE NICHOLLS,LORD JUSTICE FARQUHARSON,LORD JUSTICE LLOYD |
| Judgment Date | 27 July 1989 |
| Judgment citation (vLex) | [1989] EWCA Civ J0727-4 |
| Docket Number | 89/0754 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 July 1989 |
[1989] EWCA Civ J0727-4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR. JUSTICE MERVYN DAVIES)
Royal Courts of Justice.
Lord Justice Lloyd
Lord Justice Nicholls
and
Lord Justice Farquharson
89/0754
CHF 1198/88
MR. M. PRICE Q.C. and MR. V. CHAPMAN (instructed by Messrs. Rowe & Maw, London EC4) appeared on behalf of the Appellant.
MR. D. WOOD Q.C. and MISS S. PREVEZER (instructed by Messrs. Masons, London EC4) appeared on behalf of the Respondents.
This is an appeal by the plaintiff and a cross-appeal by the defendants from an order of Mervyn Davies J. made on 16th November 1987.
Nos. 40 to 90 Kingston House South, Ennismore Gardens, London S.W.7. comprise a block of 47 residential flats, plus one staff flat. Each of the 47 flats is let on a standard form lease for 75 years from March 1972. The first defendant is the lessor. Defendants 2 to 47 are the tenants. The plaintiff, referred to in the documents as "the maintenance trustee", is charged with responsibility for the repair, decoration and maintenance of the property out of money provided for this purpose by the tenants through maintenance contributions. Periodically each tenant has to pay to the plaintiff a stated percentage of the total annual maintenance provision for the building. This appeal concerns certain costs and expenses sought to be recovered by the plaintiff from the tenants under this maintenance contribution scheme.
Outline of the dispute
In barest outline the matters now in issue arose as follows. The property is a 12-storey structure constructed of reinforced concrete with a brickwork cladding. In early 1985 some slip bricks over windows in the upper floors fell off. The plaintiff obtained advice from two firms of consulting engineers, McHallam and Partners, and Bylander Waddell Partnership. In November McHallam recommended a scheme of remedial works to which Bylander agreed in principle. That scheme, with an extension advised in January 1986, was costed at sums in excess of film. The tenants were told that for the year 1986/87 their maintenance contributions would be of the order of £27,000 to £40,000, depending on the size of the flats. Two-thirds or more of this sum was attributable solely to the remedial work advised by McHallam. At the end of May 1986 demands for payment of this enlarged maintenance contribution were made.
Not all the tenants were prepared to pay. Eventually, on 8th May 1987, the plaintiff commenced these proceedings, by way of originating summons. As finally amended, the summons sought relief under 18 heads. The principal questions raised concerned whether or not certain items of expenditure, already incurred or proposed to be incurred, by the plaintiff, fell within the maintenance provisions in the residents' leases. In the event, several paragraphs of the originating summons were stood over, and on the third day of the hearing the parties reached agreement on the principal issue. But the agreement did not dispose of all the points. The judge was concerned to decide two matters: (1) under paragraph 13, whether the plaintiff was entitled to discharge out of the maintenance fund certain scaffolding fees, engineers' fees, legal fees and disbursements and (2) costs. On (1), he allowed all the scaffolding costs, and some, but not all, the engineers' fees and the legal fees and disbursements. On (2), he made no order as to the costs of the proceedings, and he directed that the plaintiff was not at liberty to recoup its costs out of the maintenance fund. It is from that decision that the plaintiff has appealed. The tenants have cross-appealed.
The leases
The 47 flats were let at a premium and subject to payment of a modest ground rental. The parties to the standard form lease of each flat were the lessor, the tenant in question and the plaintiff. Recital (c) was to the effect that the parties had agreed that the lessor should grant and the tenant should accept a lease of one of the flats and that "the maintenance trustee should accept the trusts hereinafter set forth upon the terms hereinafter contained"• By clause 2 the lessor demised the flat to the tenant. The demise included the internal plastered coverings of the walls and ceilings bounding the flat and the doors and windows, but did not include any of the main timbers and joists of the building. By clause 3 the tenant convenanted with the lessor and with the plaintiff to perform certain common form tenant's obligations, such as to pay rent and rates. Clause 4 contained further covenants by the tenant with the plaintiff and with the lessor. Under clause 4(A) the tenant was, in short, obliged to pay to the plaintiff his due proportion (in most cases, 2% or 2.1%) of the aggregate annual maintenance provision for the whole of the building for each maintenance period of 12 months ending on 31st March. Calculation of the annual maintenance provision was to be made as provided in part III of the 4th schedule. I need refer only to a part of paragraph 2.
"2. The Annual Maintenance Provision shall consist of:
(a) A sum comprising:
(i) the expenditure estimated as likely to be incurred in the Maintenance Year by the Maintenance Trustee for the purposes mentioned in the Fifth Schedule, together with
"(ii) an appropriate amount as a reserve for or towards those of the matters mentioned in the Fifth Schedule as are likely to give rise to expenditure after such Maintenance Year being matters which are likely to arise either only once during the then unexpired term of this Lease or at intervals of more than one year during such unexpired term or under Clause 4(B) including (without prejudice to the generality of the foregoing) such matters as the painting of the common parts and the exterior of the Building the repair of the structure thereof the repair of drains and the overhaul renewal and modernisation of any plant or machinery (the said amount to be computed in such manner as to ensure as far as is reasonably foreseeable that the Maintenance Provision shall not unduly fluctuate from year to year)…
(b) The remuneration of the Maintenance Trustee which shall be an amount equal to 2.35 per cent of the sum calculated in accordance with paragraph (a) hereof…"
Paragraph 3 provided for the correction of overpayments, or underpayments, by making maintenance adjustments after the end of each relevant year. These adjustments were then to be credited against or added to the next instalment of maintenance contributions payable by the residents.
Clause 5(A) of the lease provided for the trusts of the maintenance fund, in these terms:
"The Maintenance Trustee shall retain out of the sums received by it in respect of the annual maintenance provision aforesaid and the maintenance adjustment its remuneration…and shall pay the balance into a bank having the status of a trust corporation in an account named 'the 40–90 Kingston House South Maintenance Fund' and shall hold such balance (hereinafter called 'the Maintenance Fund' which expression includes the assets in the hands of the Maintenance Trustee for the time being representing such fund and the income thereof) upon trust (subject to the provisions of sub-clause (B) hereof) to apply the same until the Perpetuity Date for the purposes specified in the Fifth Schedule and subject thereto upon the trust set forth in sub-clause (C) hereof…"
The ultimate trust of the maintenance fund, as set out in clause 5(C) was, in short, that upon the perpetuity date (viz, 24th March 2047) the maintenance fund was to stand charged with payment to the lessor of the amount required to put the building, other than the flats, in good repair and subject to that upon trust for the then tenants of the building. By clause 5(D) the lessor was empowered to remove and replace the maintenance trustee, but it could not appoint itself or any of its subsidiary companies as maintenance trustee.
I turn next to the fifth schedule, which set out the purposes for which the maintenance fund was to be applied. The schedule contained 24 paragraphs. They cover the usual matters, such as employing a chartered surveyor to manage the building, keeping the lifts in good repair and working order, providing hot water and central heating, employing staff, and insuring the building. The paragraphs of direct importance are paragraphs 2 and 23. Paragraph 2 was concerned with decoration and repair of the structure. I can extract the material words:
"…to keep the interior and exterior walls and ceilings and floors of the Building and the whole of the structure roof balconies foundations and main drains and boundary walls and fences of the Building (but excluding such parts thereof as are included in the Flat by virtue of the definition contained in Part I of the First Schedule and also the corresponding parts of all other flats in the Building) in good repair and condition."
Paragraph 23 reads as follows:
"To carry out all repairs to any other part of the Building for which the Maintenance Trustee may be liable and to provide and supply such other services for the benefit of the Tenant and the other tenants of flats in the Building and to carry out such other repairs and such improvements works and additions and to defray such other costs (including the modernisation or replacement of plant and machinery) as the Maintenance Trustee shall consider necessary to maintain the Building as a block of first class residential flats or otherwise desirable in...
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