Warrior Quay Management Company Ltd & Anor v Joachim

Factual and Procedural Background

This opinion concerns an appeal from a decision of the Leasehold Valuation Tribunal (LVT) for the Northern Rent Assessment Panel regarding service charges payable under leases at a residential development known as Warrior Quay, located in The City. The Appellants, including Company A as Management Company and Company B as Lessor, appealed the LVT's decision which arose from applications made by multiple Respondents, who are leaseholders of flats within the development.

The LVT had determined that the Appellants failed to comply with certain lease obligations, particularly relating to certification of service charges and consultation requirements under the Landlord and Tenant Act 1985 (the 1985 Act). As a result, the LVT ordered restitutionary payments to the Respondents for overpaid service charges. The Appellants appealed to the Lands Tribunal, which conducted a review limited to legal issues and did not re-hear factual findings.

Legal Issues Presented

1. Whether the absence of certificates from auditors or accountants as required by the leases precludes the Appellants from demanding any service charge payments.
2. Whether the Management Company and Lessor were entitled to unilaterally vary the service charge percentages specified in the leases.
3. Whether the management of the properties was satisfactory and whether the management charges were justified.
4. Whether the consultation requirements under section 20 of the Landlord and Tenant Act 1985 were complied with in relation to major works carried out in 2004 and if not, whether dispensation from those requirements should be granted.
5. Whether leaseholders could require installation of UPVC windows and refuse access for painting works.
6. Whether the LVT had jurisdiction to order restitutionary payments of overpaid service charges to leaseholders.

Arguments of the Parties

Appellants' Arguments

• The provision of a certificate from auditors or accountants is a condition precedent only to the final balancing payment of the service charge, not to the obligation to pay on-account sums.
• The Appellants only demanded on-account payments, which were properly payable, and did not demand final balancing charges.
• The leases should not be construed to mean that failure to provide the certificates results in the service charge payable being zero for the year.
• Failure to provide certificates prevents obtaining balancing charges but does not entitle leaseholders to immediate repayment of on-account sums.
• If a tenant seeks finality by applying under section 27A of the 1985 Act, the LVT has power to determine the amount payable even without certificates, potentially resulting in a lesser amount than the Appellants might claim.
• The LVT lacks jurisdiction to order restitutionary payments to leaseholders for overpaid sums, as the leases provide for credit against future payments, not repayment.
• The Appellants contended that service charges should be calculated according to the lease terms without unilateral variation, rejecting departures sought by the Respondents.
• The Appellants argued the LVT erred by not considering whether to grant dispensation from consultation requirements under section 20ZA of the 1985 Act.
• The Appellants submitted that late disclosure of documents should have been considered by the LVT to better calculate service charges for earlier years.

Respondents' Arguments

• The LVT was correct to conclude that failure to provide the required certificates meant no service charges were payable and that overpayments must be repaid.
• The Respondents maintained that they had not agreed to the service charge amounts by paying on-account sums without protest.
• The Respondents argued that consultation requirements were not complied with and dispensation should not be granted.
• The Respondents sought to uphold the LVT’s orders for restitutionary payments and the findings on other issues such as management standards and consultation failures.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by accepting the factual findings of the LVT, which included failures by the Appellants to comply with lease provisions requiring certification of service charges by auditors or accountants. However, the court disagreed with the LVT’s legal conclusion that absence of such certificates meant no service charges were payable at all. It held that the leases distinguish between on-account payments and final balancing sums, with certification being a condition precedent only to the latter.

The court reasoned that while failure to provide certificates prevents demanding final balancing charges, it does not negate the obligation to pay on-account sums. It also emphasized that the Management Company cannot benefit from its own breach by indefinitely deferring final accounting. The statutory mechanism under section 27A of the 1985 Act allows tenants to seek a binding determination of payable service charges even without certificates, with the tribunal’s decision serving as a practical substitute.

Regarding restitutionary payments, the court found that the leases provide for crediting overpayments against future charges rather than repayment. Furthermore, the LVT lacked jurisdiction to order repayment to tenants, as its powers under section 27A do not extend to restitutionary orders.

On the issue of unilateral variation of service charge percentages, the court endorsed the LVT’s finding that such variation was invalid absent auditor or accountant certification or leaseholder agreement. The service charges must be calculated strictly according to the lease terms.

Concerning consultation requirements under section 20, the court identified the LVT’s failure to consider whether dispensation could be granted as an error. The court reviewed the matter and concluded that dispensation should not be granted due to the Appellants’ non-compliance and the nature of the works involved.

The court also upheld the LVT’s refusal to admit late-disclosed documents, considering the procedural fairness and evidential quality, and found no error in the LVT’s extrapolation of service charge calculations for earlier years.

Finally, the court addressed the Appellants’ procedural objections regarding party joinder and arguments on agreement by conduct, rejecting them based on the evidence and prior rulings.

Holding and Implications

The court’s final decision was as follows:

• The Appellants’ appeal is allowed in part: The LVT erred in concluding that no service charges were payable due to absence of certification. Service charges remain payable, subject to the amounts determined by the LVT under section 27A.
• The LVT’s order for restitutionary repayment to Respondents is overturned: Overpayments must be credited against future service charges in accordance with lease terms, not repaid.
• The LVT’s findings on other issues, including invalid unilateral variation of service charge percentages and poor management, are upheld.
• The court itself decided that dispensation from consultation requirements should not be granted.

Implications of this decision include reaffirmation of the distinction between on-account payments and final balancing sums in lease service charge provisions, clarification of the scope of LVT jurisdiction under section 27A, and the importance of compliance with statutory consultation procedures. No new precedent was established beyond the application of existing statutory and lease principles. The decision emphasizes the need for leaseholders and management companies to resolve discrepancies in lease terms through formal variation processes and to maintain proper accounting and consultation practices to avoid disputes.