Keith Vernon Gell v 32 St John's Road (Eastbourne) Management Company Ltd

JurisdictionEngland & Wales
JudgeLewison LJ,Arnold LJ,Lord Justice Edis
Judgment Date24 May 2021
Neutral Citation[2021] EWCA Civ 789
Date24 May 2021
Docket NumberCase No: B2/2020/1403
CourtCourt of Appeal (Civil Division)

[2021] EWCA Civ 789

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE COUNTY COURT AT BRIGHTON

His Honour Judge Simpkiss

C15YP298

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

THE RT HON Lord Justice Lewison

THE RT HON Lord Justice Arnold

and

THE RT HON Lord Justice Edis

Case No: B2/2020/1403

Between:
Keith Vernon Gell
Appellant
and
32 St John's Road (Eastbourne) Management Company Limited
Respondent

James E. Petts (instructed by Weil, Gotshal & Manges (London) LLP) for the Appellant

Ryan S. Kohli (instructed by KDL Law) for the Respondent

Hearing dates: 12 May 2021

Approved Judgment

Lord Justice Edis

Introduction

1

This is an appeal against a decision of His Honour Judge Simpkiss on 21 August 2019 when he allowed an appeal against an order made by Deputy District Judge Thompson made on 26 February 2019. I shall call the claimant/respondent “the landlord” and the defendant/appellant “Mr. Gell”. Mr. Gell is the leaseholder of one of seven flats which resulted from the conversion of an old building into flats many years ago.

2

It is right to begin this judgment with an acknowledgement that Mr. Gell is now represented by solicitors and counsel acting under the pro bono schemes operated by both branches of the profession in this jurisdiction. Mr. Gell represented himself before the Deputy District Judge and the Circuit Judge, and there is a letter from his General Practitioner which says that he suffers from conditions which cause memory loss and extreme fatigue. One of the doctor's suggestions is that Mr. Gell should be assisted by lawyers and the court is grateful to Mr. Petts, and to his instructing solicitors and to Baker & McKenzie who also provided some pro bono assistance to Mr. Gell at an earlier stage in the preparation of this appeal.

3

According to the claim form, the claim in this case is for “service charges, interest and costs arising under a lease to which both parties are subject”. The sum claimed is £78,901.54, which, again according to the claim form, is made up of three elements, namely (1) unpaid service charges of £73,163.98, (2) interest “at the lease rate of 4% above base rate” of £3,529.56, and (3) legal costs of £2,208, including VAT claimed under a provision in the 1963 lease which had not been varied. The third part of that claim has not been pursued and the landlord has recovered costs under costs orders made in the proceedings.

4

This is the second action brought by the landlord against Mr. Gell for maintenance charges arising under the lease. He lost the first action, for service charges due prior to 25 March 2013, and eventually satisfied the judgment entered against him.

5

The maintenance charges in this case cover a period going back to 25 March 2013, and the proceedings were issued in 2016. The arrangement at the flats is a familiar one, whereby the leases require the tenants to contribute to the upkeep of the building, which is managed for their mutual benefit by a management company, the landlord, which appoints agents to carry out its functions. In this instance the landlord is the freeholder and the shares in it are held by the leaseholders in its building, one of whom is Mr. Gell. It instructs Carlton Property Management as its agent in the management of the property. The anticipated cost of maintenance in 2015 and 2016 was very high, because major works were believed to be necessary. If one of the flats fails to pay, and the dispute is not resolved promptly, that may have a significant effect on the other tenants and, probably, on the market value of their leasehold interests. It is unfortunate that over four years after the issue of proceedings the case has not been resolved. That is particularly true when Mr. Gell's defence was struck out in August 2017, and a default judgment entered against him for an amount to be assessed.

A summary of the facts

6

Mr. Gell lives at flat 3, 32 St John's Road, Eastbourne. He occupies it under a lease which was granted on 4 May 2001 by means of a deed of surrender and lease which had the effect of varying an earlier lease, dating back to 1963. It contains a provision for the payment by Mr. Gell of 22.5% of the total “maintenance charge” payable by the tenants of all the flats in the building to the landlord. The Particulars of Claim asserted that the claim was for service charge “of £73,163.98 as shown in the attached statement”. The attached statement sets out a claim in that sum which is for the balance due on a running account which includes the transactions which settled the balance due following the first action. Stripping out the elements relating to the old liability, which cancel each other out in the account, most of the items on the statement are for service charges and administration charges in unremarkable sums. The unusual element was four debits for the period September 2015-September 2016 as follows:-

20-10-15

Service charges- Flat 3; 29 Sept 2015–24 Mar 2016

£4,449.72

20-10-15

Major works: 29 Sept 2015–24 Mar 2016

£30,145.50

25-2-16

Service charges- Flat 3; 25 Mar 2016–28 Sept 2016

£4,449.72

25-2-16

Major works: 25 Mar 2016–28 Sept 2016

£30,145.50

Total Billed for 12 months to 28 September 2016

£69,190.44

7

These sums mostly relate to major works which are said to be necessary to maintain the building and concern, among other things, the fire escape and the roof and include concerns about asbestos. The sums claimed are based on an assessment of the necessary works and their cost by a building surveyor who is a shareholder in Carlton, the managing agents. The works have not been carried out, and the claim is a prospective one to raise funds for the work. At their completion, there will be an adjustment to reflect their actual cost. This is an appropriate procedure under the lease, and the expected cost is split into two half-yearly invoices, again as required by the lease. It is these two invoices which caused the majority of the argument before the Deputy District Judge.

8

Mr. Gell served a defence to the claim on 14 December 2016 which admits that he signed the 2001 deed but denies that it is binding because he claims that the other party obtained his signature by duress and acted in bad faith. He also maintains that he should not have to pay more than the sum which the DWP has agreed to pay for the service charges as part of his sickness benefit. That sum is £44.81 per week, which the landlord has refused to accept. He also asserts that he is not bound by the terms of the 2001 deed if they are different from those of the 1963 lease, which must be because of his fraud claim.

9

Interspersed with those contentions, the following is found (omitting the parts just summarised):-

“4.2 I admit clause 3(1) to pay service charge, except that I deny that I should pay service charges in advance and of an amount purely based on the estimates of the managing agent. ….As my service charge is 22.5% of the total service charge payable, the total service charge received by Carlton [if he pays £44.81 per week] is over £10,300 a year which I believe should be more than enough to maintain a 7 flat block.

The clause in the agreement of 1 May 2001 states: “the maintenance charge shall be paid half yearly on the 25 March and 29 September in every year and these interim payments shall be such sums as the Landlord or his agent shall estimate to be required to enable the Landlord to comply with his covenants under the terms of the lease including the cost of employing Managing Agents.”

This clause, if enforced, would imply the landlord can engage a managing agent to charge the defendant any amount of money for major works without having to provide contractor's quotes, estimates or invoices; or surveyors' reports stating why such works are necessary. The landlord has done just that by attempting to charge me £60,291 for major works without sending me any proof of the contractor's costs in terms of quotes of estimates or that the work is necessary in the form of surveyor's reports.”

10

Paragraph 5.2 of the defence says:-

“I admit I am liable for service charges and ground rent totalling £44.81 a week. This is the amount the DWP consider reasonable given the information I received from Carlton and then passed on to the DWP. I am sick with mild cognitive impairment at present and am in receipt of sickness benefit. I have applied to the DWP for help in paying the service charges the landlord claims, but understandably, the DWP will not pay service charges that are unsupported by evidence in the form of contractor's invoices. I have asked the landlord for evidence that the service charge claims are reasonably incurred under the Landlord and Tenant Act, and the landlord has not sent me the information I need.”

11

The counterclaim contained two paragraphs. Paragraph 1 complains that he is not liable for an invoice which the landlord has accepted he is not liable to pay. He apparently seeks an explanation of why the landlord has decided not to pursue the invoice. It is not clear what cause of action might result in such a remedy. The second paragraph is more relevant for present purposes. It says:-

“I counterclaim that the landlord is in breach of s21 and 22 of the Landlord and Tenant Act by not sending me information regarding service charges and service charge requests.”

12

Section 20 of the Landlord and Tenant Act 1985 and the Service Charges (Consultation Requirements) (England) Regulations 2003 made under that Act impose requirements for consultation and limit recovery if they are not complied with. Sections 21 and 22 were described by Lewison LJ in Di Marco v Morshead Mansions Ltd [2014] EWCA Civ 96 at [1] as follows:-

Section 21 of the Landlord and Tenant Act 1985 entitles a tenant to require his landlord to supply him with a written summary of costs which will form part of a service charge....

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