| LANDLORD AND TENANT — Lease — Service charge — Residential tenants members of lessor company — Company resolving to seek contributions from members towards recovery fund — Whether service charge — Whether attempt to claim unreasonable amount by way of service charge— Landlord and Tenant Act 1985 (c 70), s 18
Morshead Mansions Ltd v Di Marco [2008] EWCA Civ 1371; [2008] WLR (D) 384
CA: Mummery, Wall and Toulson LJJ: 10 December 2008
There was a distinction between the liability of a tenant to pay a service charge to the landlord under the terms of a lease, which was limited by s 18 of the Landlord and Tenant Act 1985, and the liability of the members of a company landlord, in which all the tenants were shareholders, to the company under separate contracts made in and pursuant to the articles of association, to establish and recover contributions to a recovery fund.
The Court of Appeal so stated when allowing the appeal of the claimant, Morshead Mansions Ltd, from the decision of Recorder Mitchell QC in the Central London Civil Justice Centre dated 22 January 2008 holding that a resolution of the claimant passed pursuant to the company’s article of association to establish a recovery fund of £400,000, such sum to be payable by the members pro rata to their shareholdings in two equal instalments on 1 January and 1 April 2007 intended to secure the company's ability to ensure payment of the sums required to finance anticipated expenditure in the service charge funds in 2007, was valid, but it was not enforceable as service charge within the meaning of s 18 of the 1985 Act.
The 1985 Act required the parties to undergo prior consultations before the amount has been agreed and restricted the amount in the form of service charge. The claimant claimed £4,000 from the defendant, Leon Di Marco, by way of two instalments of £2,000 each. Mr Di Marco contended, and the recorder held, that the landlord company’s claim constituted an unlawful attempt to circumvent the restrictions imposed by s 18 of the 1985 Act.
MUMMERY LJ said that the tenant's contentions, which were forcefully made, paid insufficient regard to the crucial legal distinction between the liability of a tenant to the landlord under a lease containing service charge provisions, and the liability of the member of a company, in which all the tenants were shareholders, to the company under separate contracts made in and pursuant to the articles of association to establish and recover contributions to a Recovery Fund. The two kinds of legal relationship could coexist between the same parties, but they were different relationships incurred in different capacities and they gave rise to different enforceable legal obligations. A defence to one of the claims was not necessarily available as a defence to the other legally separate claim. This appeal was concerned only with the question of law whether the landlord was entitled under art 16 of the articles and pursuant to the resolutions to be paid the money which it claimed from the defendant as a member of the company. The judge did not decide and was not asked to decide whether s 18 of the Landlord and Tenant Act 1985 applied to the defendant as a tenant. He was not deciding whether the claimant company could avoid altogether the statutory protection which the defendant might enjoy as tenant if he were 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 the claimant, as landlord, was entitled to levy a charge or charges against him, as tenant, in the amount specified in its letter to him was a separate matter with which the court was not concerned on this appeal. Nor were their Lordships concerned with any question whether the directors of the company or its managing agents might properly use money raised from the defendant pursuant to the art 16 resolutions in payment of the sums alleged to be due from him as a member, if they were not due from him as a tenant. Although the judge was right on the first point of principle in respect of art 16, he was wrong to dismiss the company’s contract claim pursuant to that article. The company was entitled, pursuant to the resolutions, to the money (including interest) claimed from defendant as a member of the company.
WALL and TOULSON LJJ agreed. |
