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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Morshead Mansions Ltd v Mactra Properties Ltd  EWCA Civ 492 (03 April 2006)
Cite as:  EWCA Civ 492
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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
HIS HONOUR JUDGE COLLINS CBE
B e f o r e :
LORD JUSTICE LATHAM
LORD JUSTICE LLOYD
|MORSHEAD MANSIONS LTD||CLAIMANT/APPLICANT|
|- v -|
|MACTRA PROPERTIES LTD||DEFENDANT/RESPONDENT|
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
MR G CRAWFORD (instructed by Messrs Wismayers, London, SW19) appeared on behalf of the Respondent
Crown Copyright ©
"Between September and December 1997 Mr David Wismayer acting for this purpose on behalf of the Claimants and Mr Brian O'Boyle, the alter ego of the Defendants, agreed settlement figures between themselves. For present purposes all that is relevant is that the Defendants' share of the disputed service charges in Appendix 1 (referred to as the Discretionary Allowance) was deducted from the gross figure the Defendants would otherwise have been expected to pay. This remained the position under the consent order. The informal agreement between Mr Wismayer and Mr O'Boyle did not mature into a final agreement. One reason is that the Defendants' solicitor had serious reservations about it."
The directors may establish and maintain capital reserves, management funds and any form of sinking fund in order to pay or contribute towards all fees, costs and other expenses incurred in the implementation of the Company's objects, may require the Members to contribute towards such reserves or funds at such time, in such amounts and in such manner as the Members shall approve by ordinary resolution passed in general meeting, and may invest and deal in and with such monies not immediately required in such manner as they shall from time to time determine."
"The rationale is clear and discussed in the judgment of Judge Cooke. The Claimants have no assets but the reversions and the right to claim service charges and ground rents. To the extent that these assets are unrealisable or offset by unusual liabilities, e.g. as in the present case, the costs of litigation, the Claimants risk insolvency. But the tenants need a landlord to manage the building; the major works needed have been very substantial. Their options are limited. Baling the Claimants out to the extent of the funds required is the object of the series of recovery funds and was the option approved by the shareholders in each case. This device successfully bypassed the absence of liability to pay the sums qua tenants and has had the effect of putting the Claimants on a relatively sound basis, to the benefit of all tenants and shareholders."
"All costs which are included in the service charge accounts but which have been disputed in the forfeiture proceedings with Mactra and the former Directors will be set aside so that pro tem, while they will remain due, they will not be demanded as payable. This policy will be applied to every leaseholder (with certain limited exceptions, three in number, which I shall explain later in this Report.) Subject to payment of their outstanding balances, after adjustment, every leaseholder will be in exactly the same position as any other. No leaseholder will be able to complain on any basis of their being treated unfairly either because they are being asked to pay for something that another leaseholder has been forgiven or because they are being asked to pay for something to which they object as being unreasonable.
As at today's date, the best estimate which I have available of the amounts in dispute are set out in Appendix I to this Report and total some £748,259. You will be advised of the amount which you may withhold from the total demanded by the company as service charges. In each case, this will be calculated by reference to the total in dispute and to your service charge percentage and should be about £7,000 for each leaseholder."
"The payment referred to in paragraph 3(a) above shall neither preclude the rights under the leases of the Defendant to a credit in respect of interim charges overpaid in relation to any financial year nor the right of the Claimant to make a balancing service charge in respect of any such period but neither the Defendant nor any successor in title of the Defendant shall hereafter challenge, dispute or otherwise raise any objection with respect to any item referred to in the said annexe on the ground that such item may not have been demanded or credited either at all or validly under and in accordance with the terms of the leases or any of them PROVIDED THAT this paragraph shall not preclude the Defendant's right to dispute any such aforesaid item or head of expenditure (whether estimated or actually incurred) included therein on grounds of reasonableness".
"The terms hereof are to be in full and final satisfaction of the parties' respective claims herein".
"in respect of disputed or unlawful expenditure incurred by MML purportedly as service charges since 1994."
It is alleged to have been exclusive to MPL. Then it is said that MPL was given a credit in that sum against service charges for 1993 to 1999, and that accordingly if any part of the 2000 recovery fund is to make good shortfalls in the service charges for that period, it should be disallowed as against MPL. In the reply and defence to counterclaim, MML dealt with these contentions. It was accepted that there had been a potential dispute as to the reasonableness of incurring the £748,000 odd which had been incurred between 1994 and 1997, and that in September 1997 MML had forborne from claiming a service charge contribution towards that expenditure. It was said that by the consent order MPL was put in the same position as other leaseholders in this respect, paragraph 4 of the schedule being relied on as preserving both MPL's liability and its right to dispute the reasonableness of the expenditure. Thus, this was said not to be exclusive to the defendant. It was denied that the claimant was given a credit against this sum. The claim was under Article 16 so as to enable MML to make good a shortfall arising from its inability to recover expenditure by way of service charge.
"But the consent order was clearly designed, as all agree, to settle the service charge position to date, so far as could be done, and also gave an allowance to the Defendants of £1,000 per flat as damages, even though no damages had been claimed".
"For the purposes of the present case it is sufficient to state the conclusion in the light of all the relevant material and not effectively in dispute between the parties, that the purpose of the consent order was to settle the state of account between the parties as landlord and tenant up until the date of the order, making an allowance of 'damages' to the Defendants as a recognition of the injustice to them in bringing the forfeiture proceedings in the first place which had been publicly acknowledged by Mr Crowther in the 1997 report and lifting what was by then the empty threat of forfeiture".
"On an objective reading, the consent order was intended to deal conclusively with whatever could be dealt with conclusively in the areas which it covered. It would have limited point otherwise. In my judgment clause 7 must be read, in this context, as an unequivocal extinction of the outstanding claim to the [Discretionary Allowance], which by that date was enfeebled almost to the point of extinction in any event".
Order: Appeal dismissed.