Morshead Mansions Ltd v Mr DI Marco
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lady Justice Sharp,Lord Justice Patten |
| Judgment Date | 12 February 2014 |
| Neutral Citation | [2014] EWCA Civ 96 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2013/1718 |
| Date | 12 February 2014 |
[2014] EWCA Civ 96
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
MR JUSTICE MANN
CH20120456
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Patten
Lord Justice Lewison
and
Lady Justice Sharp
Case No: A3/2013/1718
Mr Philip Rainey QC & Mr Edward Hicks (instructed by Payne Hicks Beach) for the Appellant
Mr Mark Tempest (instructed by Bar Pro Bono Unit) for the Respondent
Hearing date: 6 th February 2014
Approved Judgment
Introduction
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. If so required the landlord must comply with the request within one month. Section 22 entitles a tenant who has received such a summary to require the landlord to afford him reasonable facilities for inspecting the documents supporting the summary. The landlord must comply with that request within two months. Failure to comply with these obligations without reasonable excuse is a summary offence punishable with a fine. The question raised by this appeal is whether the tenant is entitled to ask a civil court to grant a mandatory injunction to compel the landlord to comply with those obligations. HH Judge Hand QC answered that question "No"; but on appeal Mann J disagreed and answered it "Yes". His judgment is at [2013] EWHC 1068 (Ch); [2013] L & TR 27.
The landlords now appeal. Their appeal was presented by Mr Philip Rainey QC and Mr Edward Hicks. Mr Mark Tempest, appearing pro bono, presented Mr Di Marco's response.
Sometimes an Act of Parliament makes it clear whether a civil remedy is available in addition to a criminal sanction. For example section 1 of the Protection from Harassment Act 1997 prohibits harassment. Section 2 creates a criminal offence; and section 3 creates a civil remedy. Conversely sections 2 to 8 of the Health and Safety at Work etc Act 1974 impose duties on employers, but section 47 (1) (a) makes it clear that there is no civil liability for breach of those duties. Sometimes, as in the Landlord and Tenant Act 1988, Parliament creates a civil remedy but imposes no criminal sanction. The problem arises where, as here, the sections in question create a criminal offence, but are silent about the availability of a civil remedy. In such cases, as the judge rightly said, the question is one of interpretation of the statute as a whole.
For the reasons that follow I agree with the decision of HH Judge Hand QC and would allow the appeal.
The relevant facts
Mr Di Marco is the lessee of Flat 2 Morshead Mansions in Maida Vale. The lessor is Morshead Mansions Ltd. One of the terms of Mr Di Marco's lease required him to take up and retain a share in the landlord company. So the relationship between Mr Di Marco and Morshead Mansions Ltd is twofold: he is both a tenant of the company and a member of the company.
Under the terms of his lease Mr Di Marco is required to pay a service charge. The Fourth Schedule to the lease contains the relevant procedure. If so required by the landlord Mr Di Marco must pay four quarterly payments in advance and on account of the service charge. As soon as practicable after the end of each accounting year:
"the Landlord shall furnish to the Tenant an account of the Expenses and the Service Charge payable for that Accounting Year such account to be certified by the Landlord's auditors and to contain a summary of the expenses incurred during the Accounting Year to which it relates and the relevant details and figures forming the basis of the Service Charge."
However, in parallel with the lease article 16 of the company's articles of association entitle it to require its members to make contributions to the costs incurred by the company in implementing its objectives. The contribution is to be made:
"… in such amounts and in such manner as the Members shall approve by ordinary resolution passed in general meeting"
In practice the company uses article 16 in order to fund its activities. In a previous round of litigation between these parties this court decided that sums which Mr Di Marco was obliged to pay in his capacity of shareholder rather than in his capacity of tenant were not "service charges" as defined by the Landlord and Tenant Act 1985: Morshead Mansions Ltd v Di Marco [2008] EWCA Civ 1371; [2009] 1 P & CR 23.
In 2003 and between 2007 and 2009 the company operated a dual system. It would send out both demands for service charge payable under the lease and also a demand for contributions levied under article 16. If the tenant paid the demand made under article 16 that would be treated as satisfying the demand for service charges under the lease. Since 2010 it has only used article 16 demands.
Mr Di Marco's claim
Mr Di Marco claims:
"Order to require the claimant to provide the tenants with accounts for 2002 and Summaries of Costs for years 2003, 2004 and 2005 and to comply with the relevant part of the Landlord and Tenant Act 1985"
"Order to require the Claimant to provide the defendant with facilities to inspect accounts receipts and other documents supporting the Claimant's summary of costs for 2007 pursuant to section 22 of the Landlord and Tenant Act 1985"
"Order to require the claimant to provide the defendant and all the other tenants with a Summary of Costs for year 2009 and to comply with the relevant parts of the Landlord and Tenant Act 1985
"In the alternative the defendant requests an order that the claimant shall substantially comply with the terms of sections 21 and 22 of the Landlord and Tenant Act 1985 with regard to its service charge expenses for year 2009."
The statutory landscape
The regulation of residential service charges has not been a legislative backwater. Regulation was first introduced by the Housing Finance Act 1972. Section 90 of that Act contained an obligation to provide a summary of costs in terms similar to those now found in section 21 of the Landlord and Tenant Act 1985. The Housing Finance Act 1972 was soon amended by the Housing Act 1974 which introduced a limitation on the recoverability of service charges; and then replaced by section 136 of and Schedule 19 to the Housing Act 1980, which made some changes to what had been section 90 of the 1972 Act. Those provisions were re-enacted in the Landlord and Tenant Act 1985, which has itself been amended by Part V of the Landlord and Tenant Act 1987, Part III of the Housing Act 1996, Part 2 of Commonhold and Leasehold Reform Act 2002 and the Housing and Regeneration Act 2008. Parliament has not been short of opportunities to create remedies for tenants.
The Landlord and Tenant Act 1985 was, at its inception, a consolidating Act. It is notable for a variety of legislative techniques, some of which quite clearly create obligations that have consequences in the civil law.
Section 3 of the Act imposes on a landlord a duty to inform the tenant of a change of landlord not later than the next rent day or, if that is within two months of the change, at the end of that period of two months. Section 3 (3) provides that failure to comply with that duty is a criminal offence. Section 3 (3A) spells out the consequences on the parties' civil rights and obligation. In short the outgoing landlord remains liable to the tenant for any breach of obligation under the tenancy (even if it takes place after the change of landlord) until such time as the tenant is notified of the change.
Section 8 of the Act employs a different technique. It is concerned with fitness for human habitation of houses. The technique that the draftsman has used in this section is to imply a condition of the tenancy that the house is fit for human habitation at the beginning of the tenancy, and an undertaking by the landlord to keep it fit for human habitation during the tenancy. Since these obligations take effect as deemed contractual provisions, it is clear that a civil remedy exists for their breach.
Likewise section 11 of the Act concerns repairing obligations in short leases. The technique this time is to imply a covenant by the landlord to keep certain parts of the dwelling in repair. Again, since these obligations take effect as implied covenants, it is plain that they give rise to civil remedies. Moreover section 17 of the Act deals in terms with the remedy of specific performance of repairing covenants.
Even in those sections of the Act which relate to service charges, there are some provisions that make it clear when a failure to comply with a statutory duty has civil consequences. Section 21B (introduced by the Commonhold and Leasehold Reform Act 2002) requires a demand for service charges to contain prescribed information about the tenant's rights and obligations. Section 21B (3) entitles a tenant to withhold service charges if that statutory duty is not complied with. Information is prescribed by the Service Charges (Summary of Rights and Obligations, and Transitional Provision) (England) Regulations 2007.
There are other statutory provisions which also deal with service charges. Most importantly, section 19 of the Landlord and Tenant Act 1985 limits the recovery of service charges to costs reasonably incurred, and where the costs relate to the carrying out of works or the provision of services, only if the works or services are carried out to a reasonable standard. This section makes it clear that it interferes with contractual rights and obligations...
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