[2024] UKUT 205 (LC)

Fecha: 16-Jul-2024

The FTT’s decision

The FTT’s decision

10.

The FTT set out the costs claimed and the relevant provisions of the lease, and referred to the principles of contractual construction set out in Arnold v Britton [2015] UKSC 36 and in particular to Lord Neuberger’s judgment at paragraph 15 where he said that the court must identify the intention of the parties by reference to:

“"what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", ... And it does so by focussing on the meaning of the relevant words … in their documentary, factual and commercial context. That meaning has to be assessed in the light of

(i)

the natural and ordinary meaning of the clause,

(ii)

any other relevant provisions of the lease,

(iii)

the overall purpose of the clause and the lease,

(iv)

the facts and circumstances known or assumed by the parties at

the time that the document was executed, and

(v)

commercial common sense, but

(vi)

disregarding subjective evidence of any party’s intentions."

11.

The FTT the referred to Sella House Ltd v Mears (1988) 21 HLR 147 and said:

“41.

…in Sella, the Court of Appeal were considering the payability of service charges arising from legal fees and pointed out that the lease did not contain any specific mention of lawyers, proceedings or legal costs. They held that liability would require a clause in clear and unambiguous terms.

42.

Clause 5(4)(g)(i) is clear. This particular clause does not create obligations rather than specify the means by which obligations spelled out elsewhere may be achieved.

43.

Paragraph 1 of the Fifth Schedule refers to “any other costs and expenses reasonably and properly incurred in connection with the Building”. Taken in isolation, these words could cover anything and everything but they must be read in context. When creating the contract, the parties sought to identify their respective liabilities. All certainty would disappear with an interpretation of these words which was too wide, giving rise to unknown future liabilities of unknown size. The Tribunal has concluded that the lease in this case has the same issue as that in Sella – the absence of any specific mention of lawyers, proceedings or legal costs suggests that the general words of paragraph 1 of the Fifth Schedule are not meant to be read as covering such matters.

44.

Therefore, the service charges arising from the bills for legal fees are not payable.”

12.

The FTT’s decision on this point was understandably brief, because the hearing and written decision were for the most part concerned with much larger amounts charged for work done to the building and with the provisions of the Building Safety Act 2022. For the reasons explained below I agree with the FTT about the outcome, but for the appellant the ability to recover legal costs from leaseholders is an important issue that may well recur in the future and so I take the opportunity to explain it in more detail.