Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd
| Jurisdiction | England & Wales |
| Judge | Kelyn Bacon |
| Judgment Date | 19 May 2020 |
| Neutral Citation | [2020] EWHC 1263 (Ch) |
| Docket Number | Claim No: CH-2019-000345 |
| Date | 19 May 2020 |
| Court | Chancery Division |
[2020] EWHC 1263 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST (Ch D)
Royal Courts of Justice, Rolls Building
Fetter Lane, London EC4A 1NL
Kelyn Bacon QC
(sitting as a Deputy Judge of the High Court)
Claim No: CH-2019-000345
Richard Fowler (instructed by Pinsent Masons LLP) for the Claimant
Morayo Fagborun Bennett (instructed by Gateley Plc) for the Defendant
Hearing date: 18 May 2020
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.
Kelyn Bacon QC
Kelyn Bacon QC (sitting as a Deputy Judge of the High Court):
Introduction
This is an appeal against a judgment of Deputy Master Bartlett on 9 December 2019, refusing to grant a money judgment on an application for summary judgment by the Sara & Hossein Asset Holdings Limited (“S&H”), the landlord of commercial premises in Liverpool, against its former tenant Blacks Outdoor Retail Limited (“Blacks”). The central question in the appeal is whether a clause in a lease that makes the landlord's certification of the amount of a service charge conclusive, absent manifest or mathematical error or fraud, is to be interpreted as excluding any defence that the tenant might put forward to the effect that the sums so certified did not properly form part of the service charge and were therefore not lawfully due under the lease.
At the conclusion of the hearing I indicated that I rejected the appeal. These are the reasons for that decision.
Factual background
The premises in question are retail commercial premises at Chicago Buildings, Whitechapel and Stanley Street, Liverpool. The landlord S&H is a property investment company; Blacks is a large retail chain selling outdoor and leisure clothing and goods. Blacks originally occupied the premises under a lease entered into in 2013 with IVG Institutional Funds GmbH. S&H was the successor in title of IVG from December 2016. The 2013 lease was for a term of 10 years with a break option after five years which Blacks exercised. Having done so, however, Blacks then entered into a lease for a further one-year term from May 2018 to May 2019. The lease was not renewed thereafter.
The 2018 lease provided that it was granted on the same terms as the 2013 lease, save as varied by the 2018 lease. Both leases provided for the payment of a main rental charge, plus further charges which included, in particular, a service charge. Regarding the service charge, Schedule 6 to the 2013 lease provided that the service charge should be calculated as a “fair and reasonable proportion” of the total cost of the services and expenses specified in the Schedule. Blacks was required to pay to S&H quarterly sums on account, which were calculated on the basis of written estimates of the service charge that would be due during that year. At the end of each service charge year, S&H was required to provide a certificate of the service charge actually due from Blacks for the year, as stipulated in paragraph 3 of Part I of Schedule 6 (referred to in these proceedings as the “Certification Provision”) as follows:
“The Landlord shall on each occasion furnish to the Tenant as soon as practicable after such total cost and the sum payable by the Tenant shall have been ascertained a certificate as to the amount of the total cost and the sum payable by the Tenant and in the absence of manifest or mathematical error or fraud such certificate shall be conclusive.”
There was then a mechanism for a balancing payment to be made from Blacks to S&H or from S&H to Blacks, to reflect any difference between the sums payable on account and the sum certified as being payable by Blacks.
In the event of a dispute as to the proportion of the total costs of the services and expenses that were payable by Blacks, paragraph 6 of Schedule 6 provided for the dispute to be determined by “expert determination”. The definitions in clause 1.1 provided that the expert in this case was to be an independent valuer, who in the absence of agreement was to be chosen by the President of the Royal Institution of Chartered Surveyors or their deputy, and the expert was required to give both parties an opportunity to make representations and counter-representations before determining the matter. There was, however, no provision in the Schedule for a similar expert determination in relation to the various costs and expenses that made up the total amount in relation to which that proportion was to be calculated.
A further relevant provision is clause 3.1(a) of the 2013 lease (referred to as the “No Set-Off Provision”), under which Blacks covenanted:
“To pay the yearly rent reserved by this Lease at the times and in the manner required under clause 2.3 and not to exercise or seek to exercise any right or claim to withhold rent or any right or claim to legal or equitable set-off or counterclaim (save as required by law).”
The service charges due under the 2013 and 2018 leases were certified by the landlord's surveyor. By the time of the hearing before the Deputy Master, certificates had been provided for the year 2017–18 but not for the year 2018–19. Since the appeal was filed certificates have been provided for the year 2018–19.
The reason for the present dispute was that Blacks paid the main rent due under the leases, and certain other charges, but did not pay the service charges for 2017–18 and 2018–19. Between October 2016 and September 2017 S&H had charged Blacks a service charge of around £55,000; the following year S&H sought to charge Blacks over £400,000, in circumstances where S&H knew that Blacks would be terminating the lease in May 2019. Blacks' objection was that these service charges were excessive and were not properly due under the lease, for the reasons set out below.
S&H's claim
Following a letter of claim, in relation to which no response was received, S&H issued proceedings on 11 April 2019, about a month before the expiry of the lease, claiming the sum of £413,695.28 plus interest. This was subsequently corrected to £407,842.77 plus interest (but including VAT). With that correction, the entirety or virtually the entirety of the sum claimed represented unpaid service charges for the years 2017–18 and 2018–19.
Blacks served a Defence and Counterclaim on 14 May 2019, mounting a number of challenges to the sums claimed. Some of those were characterised as challenges to the charges themselves. These included complaints that some of the works were unnecessary or were not repair works within the meaning of the relevant repairing covenants, and that the cost of the work was increased by past failures to keep the premises in good repair. In addition, Blacks alleged various breaches that were relied on by way of set-off or counterclaim, including some of the same matters giving rise to its challenges to liability, as well as additional complaints such as failure to progress the works with reasonable speed and failure to remove scaffolding promptly when the works were completed.
On 28 May 2019 S&H issued an application for summary judgment, which was heard by the Deputy Master on 20 August 2019. S&H's central contentions, as the Deputy Master recorded, rested on two propositions: first, that the certificates issued in relation to the service charges were conclusive pursuant to the Certification Provision; and secondly that even if any counterclaim could be made in relation to the service charges (or the works done that were the subject of those charges), that counterclaim could not be set off against the claim, by virtue of the No Set-Off Provision.
The judgment under appeal
In his judgment of 9 December 2019, the Deputy Master agreed with S&H that the no Set-Off Provision applied not only to the main rental charge but also to the service charges. Accordingly, in so far as Blacks' objections were properly characterised as counterclaims, rather than defences to liability for the service charges, they could not be set-off against the claims. That was the case for, among other things, the claim that the cost of the repairs was excessive due to historic failures to keep the premises in good repair.
The Deputy Master considered, however, that Blacks' challenges to whether certain works fell within S&H's repairing...
To continue reading
Request your trial
-
Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd
...clause and his decision was upheld on appeal by Kelyn Bacon QC (now Bacon J), sitting as a Deputy High Court judge (“the judge”) [2020] EWHC 1263 (Ch); [2020] L & TR 30. The Court of Appeal [2020] EWCA Civ 1521; [2021] 2 P & CR 18 allowed the appeal and held in favour of S&H's case. Black......