Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice David Richards,Lord Justice Newey,Lord Justice Arnold |
| Judgment Date | 13 November 2020 |
| Neutral Citation | [2020] EWCA Civ 1521 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 November 2020 |
| Docket Number | Case No: A3/2020/0803 |
[2020] EWCA Civ 1521
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST (Ch D)
KELYN BACON QC (sitting as a Deputy Judge of the High Court)
CH-2019-000345
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice David Richards
Lord Justice Newey
and
Lord Justice Arnold
Case No: A3/2020/0803
Richard Fowler (instructed by Pinsent Masons LLP) for the Appellant
Morayo Fagborun Bennett and Usman Roohani (instructed by Gateley plc) for the Respondent
Hearing dates: 28 July 2020
Approved Judgment
This second appeal concerns the construction of a provision in a commercial lease under which the landlord's certificate of the total cost of services provided under the lease, and the service charge payable by the tenant, is conclusive in the absence of manifest or mathematical error or fraud. The courts below held that the certificate was conclusive as to the cost incurred in providing the services but not as to whether such services fell within the scope of services for which the landlord was entitled to charge under the lease. The landlord appeals with permission granted by Lewison LJ.
From 2012, the respondent Blacks Outdoor Retail Limited (Blacks) was the tenant of retail premises located at Chicago Buildings, Whitechapel and Stanley Street, Liverpool L1 6DS, the previous owner of the Blacks business having been the tenant since 2005. Other parts of Chicago Buildings were let to different tenants.
The appeal concerns two leases. The first was dated 15 May 2013, made between IVG Institutional Funds GmbH as landlord and Blacks as tenant, with a term of 10 years but with a break clause after 5 years (the 2013 lease). The freehold reversion was assigned to the appellant Sara & Hossein Asset Holdings Limited (S&H) in December 2016. Blacks exercised its rights under the break clause and entered into a further lease dated 23 April 2018 (the 2018 lease), with S&H as landlord, for a term of one year ending on 15 May 2019. Blacks vacated the premises at the expiry of the 2018 lease.
So far as the terms of the leases relevant to this appeal are concerned, the 2018 lease incorporated by reference the terms contained in the 2013 lease.
The relevant terms of the 2013 lease were as follows. Clause 2.3(d) provided for the payment by the tenant of “the Service Charge calculated and payable at the times and in accordance with Schedule 6”. By clause 3.1(a), the tenant covenanted “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)”. It is no longer in dispute that this provision applies to all sums due under the lease, including the service charge.
The relevant provisions of schedule 6 were:
“1. There shall be calculated by the Landlord as soon as practicable after the 31 st day of December in each year the total reasonable and proper cost to the Landlord during the calendar year ending on such 31 st day of December of the services and expenses specified in Part II of this Schedule (excluding costs and expenses met by the insurers under the policy of insurance effected by the Landlord hereinbefore mentioned)
2. The further rent payable by the Tenant shall be a sum equal to a fair and reasonable proportion of such total cost of the service [sic] and expenses specified in Part II of this Schedule and in the event of the Term commencing or determining during the course of the calendar year in question a corresponding proportion of such sum
3. 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
6. The contribution payable by the Tenant of the total costs of the services and expenses incurred by the Landlord hereunder shall be the proportion which the net internal area of the Demised Premises bears to the net internal area of the aggregate of all areas of the Building which are let or intend to be let and any dispute between the parties as to the proportion shall be determined by Expert Determination”
The services and expenses for which the landlord was entitled to charge were set out in part IIA and part IIB respectively of schedule 6. The tenant was not required to pay service charges in respect of “Excluded Costs” which were defined in paragraph 10 of schedule 6.
The term “Expert Determination” used in paragraph 6 was defined in clause 1 of the 2013 lease, as involving determination “by an expert who shall be an independent valuer”, to be appointed by the President of the Royal Institution of Chartered Surveyors in the absence of agreement by the parties.
On 14 January 2019, S&H's appointed surveyors served a service charge certificate for the year ended 30 September 2018 pursuant to paragraph 3 of schedule 6, certifying that over £400,000 was due. This was a very substantially larger sum than in previous years, the figure for 2016–17 having been some £55,000.
In April 2019, S&H issued proceedings, claiming (following a correction) a sum of £407,842.77 in respect of unpaid service charges for the years 2017–18 and 2018–19. In respect of the latter year, the amount claimed when the claim was issued was on account of the service charge, but subsequently a certificate was issued for that year.
Blacks served a defence and counterclaim, helpfully summarised by Kelyn Bacon QC (now Bacon J), sitting as a Deputy High Court Judge, in her judgment on the first appeal at [11]:
“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.”
S&H issued an application for summary judgment, contending that, by virtue of paragraph 3 of schedule 6, the certificates were conclusive and precluded reliance by way of defence on any of the matters pleaded by Blacks. S&H further contended that Blacks was precluded by clause 3.1(a) from withholding payment on the grounds of the matters pleaded in the counterclaim. Blacks did not allege that there had been any mathematical or manifest error or fraud in the certificates.
The application was dismissed by Deputy Master Bartlett, who held that paragraph...
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Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd
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