In Sara and Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2020] EWCA Civ 1521, the Court of Appeal considered the question of what was encompassed by a certificate as to the total costs recoverable by way of service charges.
The appeal related to the construction of a service charges clause in a commercial lease. The clause provided that a landlord’s certificate of the service charge payable by a tenant was conclusive. At first instance, the clause had been found conclusive as to the calculation of the cost of providing services, but not as to the broader question of whether services provided fell within the scope of services for which the landlord could charge a tenant.
The relevant clause of the lease provided that the tenant was to pay the service charge “calculated and payable […] in accordance with Schedule 6”.
Schedule 6 provided:
Other parts of Schedule 6 set out the services and expenses for which the landlord was entitled to charge.
A dispute arose between the landlord and tenant, inter alia, as to whether some of the works claimed had been unnecessary, as to whether some of the works were not within the meaning of repairing covenants, and as to whether the works had progressed with reasonable speed.
The Court of Appeal found that the natural meaning of paragraph 3 of Schedule 6 (above) was that the two elements in determining the service charge (i.e: i) the identification of the services and expenses properly falling within the service charge; and ii) the total costs incurred in respect of those services and expenses) could not be separated in relation to the certificate of service charge costs. The wording of paragraph 3 rendered the certificate conclusive as regards the single figure of the total cost. That necessarily involved both elements which made up the single figure. Without express words to distinguish between the two categories, there was no basis for finding a distinction within paragraph 3.
Citing an analogous point in Dobbs v National Bank of Australasia Ltd (1935) 53
CLR 643, David Richards LJ noted that the manifest objective of such a certification clause is to “provide a ready means of establishing the existence and amount of [a] debt and avoiding an inquiry upon legal evidence into the debits going to make up the indebtedness”.
Whilst David Richards LJ recognised a concern that this construction would make the landlord the judge in his own cause, the court maintained that “it is not the function of contractual construction to save a party from an imprudent term”. It was trite law that the court’s role is to identify what the parties have agreed, and not what the court thinks that they should have agreed.
Conclusion
The starting point for analysing the effect of a service charge certificate will always be to start with the wording of the individual lease in question. The straightforward approach of the courts will be to construe the meaning of a lease in accordance with the natural meaning of its words. In doing so, the courts recognise that there is value in the certainty of certification clauses, even where they might put one party at a commercial disadvantage.
The report of the National Audit on Group-Based Child Sexual Exploitation and Abuse (“grooming gangs”) was published on 16th June. The Government confirmed the same day that action would be taken on each of the Audit’s 12 recommendations through introduction of legislation, police operations to…
This week Sarah Prager KC joins forces with Rebecca Huxford of Stewarts to bring news of a jurisdictional challenge in which (perhaps somewhat unusually) practical and logistical factors were placed front and centre. Practical and Logistical Factors in Challenges to Jurisdiction The High Court of…
On 21 May 2025, Mrs Justice Theis handed down a series of judgments, decided over several months from July 2024 to May 2025, in care proceedings concerning siblings who were the subject of physical and emotional abuse perpetrated by their parents. One parent was a…
Deka Chambers: 5 Norwich Street, London EC4A 1DR