Paddington Basin Developments Ltd and Others v West End Quay Estate Management Ltd and Another
| Jurisdiction | England & Wales |
| Judge | THE HON MR JUSTICE LEWISON,Mr Justice Lewison |
| Judgment Date | 20 April 2010 |
| Neutral Citation | [2010] EWHC 833 (Ch) |
| Date | 20 April 2010 |
| Court | Chancery Division |
| Docket Number | Case No: HC08C00558 |
[2010] EWHC 833 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: The Hon Mr Justice Lewison
Case No: HC08C00558
Katherine Holland QC (instructed by Speechly Bircham LLP) for the Claimants
Mark Warwick (instructed by Barker Gillette) for the First Defendant
Stuart Hornett (instructed by Cliftons) for the Second Defendant
Hearing dates: 15 th April 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Lewison:
Introduction
Paddington Basin, between Paddington Station and the Westway, has been under development for over twenty years. It consists of a large site, about the size of Soho, containing a variety of different forms of development. This preliminary issue is concerned with three blocks of residential flats called Westcliffe Apartments, Peninsula Apartments and Balmoral Apartments. Between them the three blocks contain 467 flats, each of which has been sold on a long lease. They stand on part of the development called West End Quay. Each of the leases requires the lessee to pay a service charge. Part of the charge is payable to a block management company for services provided to the individual block. The remainder is payable to West End Quay Estate Management Ltd which is described in the lease as the Estate Management Company.
West End Quay Estate Management Ltd is party to an estate management deed dated 5 September 2005 under which it covenants to permit Paddington Basin Management Ltd to enter the West Quay Land in order to provide services to the whole of the Paddington Basin Estate (including West End Quay) and to pay a fair proportion of the cost incurred by Paddington Basin Management Ltd in providing those services. Paddington Basin Management Ltd manages the whole of the Paddington Basin estate, including West End Quay. The issue is this: is the estate management deed a “qualifying long term agreement” for the purposes of the Landlord and Tenant Act 1985 and the Service Charges (Consultation etc) Regulations 2003?
Ms Katherine Holland QC, appearing for Paddington Basin Management Ltd says that it is not. Mr Mark Warwick, appearing for West End Quay Estate Management Ltd, and Mr Stuart Hornett appearing for Mr Alan Sharr, a lessee of one of the flats, as a representative of all lessees, say that it is.
The documents
Having set the scene, I must now describe the documents in a little more detail. On 5 December 1995 British Waterways Board granted a lease of the whole of the Paddington Basin site to Paddington Basin Developments Ltd. The term of the lease was 999 years beginning on 25 March 1995. On 2 August 1996 European Land & Property Developments Ltd agreed with Frogmore Developments Ltd that it would procure the transfer of part of the leasehold interest from Paddington Basin Developments Ltd to Frogmore Developments Ltd. That agreement contained provisions relating to the future provision of services to the contemplated development. Clause 13 said:
“13.1 The Property includes areas of land and the Works include works which, in the context of the Seller's proposals for the comprehensive redevelopment of the Retained Land and adjacent lands are intended (together with parts of the Retained Land and adjacent lands) to be common areas for the use and enjoyment of all persons having resort to the Retained Land and adjacent lands and the Property. The Seller will develop as soon as conveniently may be, within the framework of its proposals for the comprehensive redevelopment, detailed arrangements (“Estate Services”) for the repair maintenance and renewal of all such common areas (“Estate Areas”) for the benefit of all occupiers of the comprehensive development of the Property. The cost of such Estate Services shall be borne on a fair and equitable basis by the occupiers of the comprehensive development inclusive of the Property (“the Estate Service Charge”).
13.2 The Seller currently anticipates that an estate management company will be created in order to provide the Estate Services and that this company will be granted leasehold interests in the Estate Areas. The Buyer will not unreasonably withhold agreement to the form and substance of any arrangement relating to the Estate Services and/or the Estate Areas and/or the Estate Service Charge and will in particular, grant to any such estate management company a lease in such form as may be agreed with the estate management company, the Seller and the Buyer in relation to those parts of the Estate Areas which fall within the Property.”
Pursuant to that agreement on 29 December 1997 Paddington Basin Developments Ltd assigned part of its leasehold interest to Frogmore Developments Ltd. That part is what is now known as West End Quay. On 4 May 2000 Frogmore Developments Ltd assigned on to West End Quay Ltd which carried out the development consisting of the three blocks of flats. It has subsequently assigned on to Freehold Managers (Nominees) Ltd. West End Quay Ltd incorporated West End Quay Estate Management Ltd on 30 January 2002. According to its objects clause the purpose for which it was incorporated was:
“To undertake the management and administration of the communal parts including car parking of the development known as West End Quay, Paddington, London W2, the leasehold title to which is currently registered at HM Land Registry under Title No. NGL758149, and to provide such services for the owners and occupants thereof and to carry out such reconstruction, renewal, repairs, maintenance or renovations thereto as may be necessary or desirable.”
Its issued share capital consisted of three shares, each of which was held by the developer, West End Quay Ltd. At the same time West End Quay Ltd incorporated three other companies, each of which was to perform management services for one of the three blocks. Between 2002 and 2004 the long leases of the flats were sold off. As mentioned, West End Quay Estate Management Ltd was a party to each of those leases, in which it was described as the Estate Management Company. So also was that one of the three companies appropriate to the block in question. Clause 3.1.2 of the lease requires the lessee to pay the Estate Management Company a service charge called the Estate Service Charge. The charge is calculated in accordance with clauses I and J of the lease. Clause I deals with the mechanics of accounting, while clause J sets out the items to be included in the accounts. These include the provision by the Estate Management Company of the services in the fifth schedule to the lease. These in turn include such matters as the repair and maintenance of estate common parts, external decoration, maintenance and replacement of security systems; cultivation of garden areas, lighting the estate common parts and so on. However, clause J 4 also enables the estate service charge to include:
“Any payments to be made by the Landlord and/or by the relevant Management Company to the Superior Landlords and/or to the company authority or body which manages and maintains the whole area known as the Paddington Basin of which the Estate forms part whether under the provisions in the Headlease or otherwise including the maintenance of the Basin as set out in the Headlease.”
Paddington Basin Management Ltd was incorporated for the purpose of providing management services for the whole development, including West End Quay. On 5 September 2005 the estate management deed was made. The parties to that deed were (1) Paddington Basin Developments Ltd and European Land & Property Ltd (then known as Paddington Development Corporation Ltd) (2) Paddington Basin Management Ltd and (3) West End Quay Estate Management Ltd. By clause 4 of the deed Paddington Basin Management Ltd covenanted with (among others) West End Quay Estate Management Ltd to provide estate services. These services included the maintenance of the estate common parts, the maintenance of fire and smoke alarms, the lighting of the common parts, the provision of security services and personnel, the maintenance of hard and soft landscaping, the collection and disposal of refuse, the control of traffic and so on. Clause 10.6 entitles Paddington Development Corporation Ltd and Paddington Basin Management Ltd (but not West End Quay Estate Management Ltd) to terminate the agreement by six months notice to expire at the end of a financial year. Clause 11 of the estate management deed provides that it can be terminated by any party by six months notice given at the end of every twenty five year period. Its minimum duration is, therefore, twenty five years.
The first payment due under the estate management deed, which was quantified in the deed itself, exceeded £270,000 per annum. West End Quay Estate Management Ltd paid that and the next few payments; but stopped paying in March 2006. For a number of procedural reasons, which I need not explain, the trial of this preliminary issue has been long delayed. The arrears due under the estate management deed now stand at over £1.1 million.
The preliminary issue
Paddington Basin Developments Ltd and Paddington Basin Management Ltd claim the amounts which they say are due from West End Quay Estate Management Ltd. The defence asserts that it is an implied term of the estate management deed that West End Quay Estate Management Ltd is only liable to pay what is lawfully recoverable from the lessees of the individual flats. It asserts that as regards those lessees West End Quay...
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