Leon Di Marco v Morshead Mansions Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 30 April 2013 |
| Neutral Citation | [2013] EWHC 1068 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2012/0456 |
| Date | 30 April 2013 |
[2013] EWHC 1068 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Mann
Case No: CH/2012/0456
Mr Di Marco in person as the Appellant
Philip Rainey QC and Edward Hicks (instructed by Payne Hicks Beach) for the Defendant
Hearing date: 30th January 2013
Introduction and background facts
This is an appeal by the defendant in these proceedings, Mr Di Marco, against a decision of HH Judge Hand QC given on 20 July 2012 in which he struck out Mr Di Marco's Defences and Counterclaims in two related actions. At the hearing before me Mr Di Marco did not appeal the striking out of his Defence; he only appeals the striking out of his Counterclaim.
Mr Di Marco is one of 104 tenants at Morshead Mansions, Maida Vale, London W9. All the tenants hold their flats on long leases. The claimant in these proceedings ("the company") is the freehold owner of the building and is tenant-owned — the tenants each own a share in the company.
Each of the leases contains service charge provisions. Under the leases the tenants pay an equal share of the service costs properly incurred by the company as landlord. The landlord, in the normal way, is obliged to manage and maintain the building. There is nothing remarkable about these provisions in the leases and I do not need to set them out.
Article 16 of the Articles of Association of the company contains a provision entitling the company to levy charges, with the consent of the members. It reads:
"The Directors may establish and maintain capital reserves, management funds and any form of sinking fund in order to pay or contribute towards all fees, costs and other expenses incurred in the implementation of the Company's objects, may require the Members to contribute towards such reserves or funds, at such time, in such amounts and in such manner as the Members shall approve by ordinary resolution passed in general meeting and may invest and deal in and with such money as not immediately required in such manner as they shall from time to time determine."
The company has now arrived at a position in which it raises funds to pay for the management of the building not through the service charge provisions but through the implementation of Article 16. In 2003 and between 2007–2009 it operated a scheme under which it would send out service charge demands and (with the appropriate consent of the members) demands under Article 16 in the same amount, indicating that if a tenant paid the Article 16 demand within a given period of time he or she would not be pursued under the service charge demand. Then in 2010 it dropped the service charge demand and, since then, has funded itself purely through Article 16 demands.
Mr Di Marco is not content with this scheme, and is not content with the level of the charges levied through them. He has mounted a number of challenges to them. In 2007 he resisted a claim made in the county court by the company based on an Article 16 demand on the footing that it was an attempt to recover service charges which could be subject to challenge under the Landlord and Tenant Act 1985 ("the 1985 Act"). He succeeded at first instance but his case was rejected by the Court of Appeal on 10 th of December 2008 ( Morshead Mansions Ltd v Di Marco [2008] EWCA Civ 1371). The court distinguished between two co-existing relationships — that of landlord and tenant and that of company and member.
"a defence to [a claim in one capacity] is not necessarily available as a defence to the other legally separate claim." (per Mummery LJ at paragraph 30).
Mummery LJ went on:
"31. This appeal is concerned only with the question of law whether Morshead is entitled under Article 16 and pursuant to the resolutions to be paid the money which it claims from Mr Di Marco as a member of the company. The judge did not decide and was not asked to decide whether section 18 applied to Mr Di Marco as a tenant. He was not deciding whether Morshead could avoid altogether the statutory protection which Mr Di Marco might enjoy as tenant if he was sued under the provisions of the lease or if he invoked the terms of the lease and the statutory provisions in his capacity as tenant. Whether Morshead, as landlord, is or was entitled to levy a charge or charges against him, as tenant, in the amount specified in its letter to him dated 21 December 2006 is a separate matter with which we are not concerned on this appeal. Nor are we concerned in these proceedings with any question whether the directors of the company or its managing agents may properly use money raised from Mr Di Marco pursuant to the Article 16 resolutions in payment of the sum is alleged to be due from him as a member, if they are not due from him as a tenant."
Mr Di Marco was therefore obliged to pay the demand notwithstanding the provisions of the 1985 Act (to which I will come).
The claims in the actions
Morshead then started these two actions, which are two actions with similar contents. The first, action number ICL10203, was a claim by the company for rent (with interest) from 2004 to 2009, and a claim on two Article 16 demands made under resolutions in respect of 2008 and 2009. The second, action number ICL10204, is a similar claim for the 2010 rent and under an Article 16 resolution. The defendant challenged the claims in each action, and counterclaimed, challenging the validity and propriety of using Article 16 to deal with service charge matters and the use of the money raised without complying with the provisions of the 1985 Act which give tenants the right to investigate and challenge service charges.
Within these proceedings there was to be a trial of preliminary issues of three questions, but Mr Di Marco and the company agreed the answers to those questions during the course of the trial and they were embodied in an order of Mr Recorder Baldwin QC on 5 th September 2011. The questions, and their answers, were as follows:
(a) Can the Respondent [i.e. the company] expend money collected under Art 16 on provision of services under the lease? Answer — Yes.
(b) Do sections 18–30 of the Landlord and Tenant Act 1985 apply to such expenditure? Answer — No.
(c) Are the funds collected under Art 16 held on trust as service charges, pursuant to s.42 of the Landlord and Tenant Act 1987? Answer — No.
It is the case of the company that these answers, and the previous Court of Appeal decision, mean that there is nothing left to be dealt with in this case, and this formed part of the basis of its striking out application.
After Mr Recorder Baldwin had made his order he also made an order for directions. Mr Di Marco sought to amend his Defences and Counterclaims, and directions were made by the Recorder, and subsequently HH Judge Marshall QC, for hearing strike-out and amendment applications. Those were the matters that ended up before HH Judge Hand and on which he ruled. He dealt with both striking out and amendment matters, allowing the former and disallowing the latter. Since the two sets of proceedings and proposed amendments raised similar and related matters, he took the sensible course of treating them as consolidated and considering the points together as if they arose in one action. It was not suggested that that particular course led him into error, and I shall follow the same course.
So far as the rent (and interest) claims are concerned, the judge considered the defences and counterclaims and held that they afforded no defence to those claims. He therefore ordered summary judgment in respect of rent and interest. So far as resistance to the Article 16 claim is concerned, he held that the points that Mr Di Marco was raising had already been determined against him by the Court of Appeal or, in one case, in proceedings before the Leasehold Valuation Tribunal ("the Tribunal"), and so again could not form a defence. Therefore he struck out those parts of the Defence.
That dealt with the claims of Morshead and with the defences, and there has been no appeal from those determinations. The judge then turned to deal with the counterclaims. He did so by setting out the nature of the counterclaims (or proposed counterclaims) in 10 numbered paragraphs and then gave his reasons as to why none of them were sustainable. Mr Di Marco accepted in his skeleton argument that these were his claims, so I do not need to spend much time in the actual statements of case. I can summarise the judge's summary as follows:
(i) Mr Di Marco sought accounts and summaries of accounts, and inspection, for the years 2002 to 2005, pursuant to sections 21 and 22 of the 1985 Act.
(ii) He sought the provision of facilities for the inspection of summaries pursuant to the same statutory provisions.
(iii) He sought an order that the company provide a summary of costs for 2009 in accordance with the statute, with regard to "service charge expenses for the year 2009".
(iv) He sought an order requiring the company to issue service charge demands for 2010.
(v) He sought an order prohibiting the company from spending the Article 16 funds without complying with the provisions of the Act (including section 42).
(vi) He claimed a set-off by reason of matters raised in a previous claim made to the Tribunal in relation to 2003 and 2007 service charges on the footing that the company failed to consult before carrying out major works and had raised unreasonable service charge demands in 2003 in relation to painting over allegedly rotten wood.
(vii) He claimed a declaration to the effect that the company had demanded service charges pursuant to the Act for the years 2003–2009. The actual proposed pleading (it is in a proposed amendment) asks for a declaration that the company "lawfully" demanded service...
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