Francis & Anor v Phillips & Anor & Ors
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
- LORD JUSTICE KITCHIN
Areas of Law
- Property and Real Estate Law
- Contract Law
- Civil Procedure
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
The case involves the legality of increased service charges at a holiday site after ownership changed hands in 2008. Key issues revolved around whether management wages and charges were appropriately included in the service charges and the definition of 'qualifying works' under the Landlord and Tenant Act 1985. The court ruled in favor of the sets approach for determining qualifying works and prevented double recovery on management charges, contrasting with prior case law interpretations. This decision impacts numerous residential landlords and tenants regarding how service charges should be calculated and justified.
Judgment
Master of the Rolls:
Point Curlew is a 25 acre holiday site (“the Site”) at St Merryn, Cornwall which was created in the 1970s on part of a disused WWII airbase. It comprises in excess of 150 chalets which are let on 999 year leases, 11 lodges and a number of other buildings including an amenity centre (“the Amenity Centre”). On 22 April 2008, the freehold of the Site was conveyed by the former owner, St Mervyn Holiday Estate Management Co Ltd, to the defendants (“the lessors”). The last service charge before the sale of the Site to the lessors was £1478 for each chalet. The first after the sale to the lessors was a demand dated 29 December 2008 for £3117.47 for each chalet on account of the year 2009.
On 5 February 2009, the claimants issued these proceedings on behalf of themselves and the lessees of 97 other chalets on the Site (“the lessees”). They sought various declarations as to their liability to pay the service charges claimed by the lessors.
On 22 January 2010, accountants CV Ross & Co Ltd certified the amount recoverable from the lessees by way of service charge for the period 22 April to 31 December 2008 and the 12 months ended 31 December 2009 as £269,933.49 and £583,542.87 respectively. The latter certificate included £95,000 in respect of wages purportedly paid to the lessors by Francis Leisure Limited (“the company”) which was the management company wholly owned and controlled by them, and £27,787.76 as a 5% management charge.
The claim came before HH Judge Cotter QC sitting in the Truro County Court. He handed down a very substantial judgment in October 2011 in which he dealt with a number of issues relating to the service charges demanded by the lessors for the years 2008 and 2009. The lessees appealed to the High Court on two main points. The first concerned the true construction of clauses 6 and 8 of schedule 3 of the leases and whether the lessors were entitled to include in the service charges for 2008 and 2009 £95,000 wages for themselves for managing the Site in addition to a management charge of 5%. The second was whether the judge had correctly construed the phrase “qualifying works” in the Landlord and Tenant Act 1985 (“the 1985 Act”). Section 20 of the 1985 Act limits the recovery of the cost of qualifying works by a landlord from residential tenants by means of a service charge unless he complies with a prescribed consultation process or obtains a dispensation from doing so from the appropriate tribunal. The secon