Service charges — Headlease determined — Underlease continuing under Landlord and Tenant Act 1954 — Headlessor pays service charges to freeholder — Whether headlessor entitled to recover service charges under the underlease — Whether headlessor entitled to recover service charges by principles of reimbursement — Appeal by headlessor allowed
By a lease (“the headlease”) dated October 22 1962 the appellants, Thorn EMI Retail Ltd, held a term of premises in Britannica House, High Street, Waltham Cross, Hertfordshire, to December 24 1983; the plaintiffs at the trial below, Electricity Supply Nominees Ltd, were the owners of the reversion expectant on the term. Under the headlease the appellants covenanted to pay a service charge. By an underlease dated March 17 1975 the respondents, British Telecommunications plc, who were made third party in the action, held a term to December 17 1983. The respondents covenanted to pay a service charge “… to the lessor or the superior lessor …”.
Following the expiration of the headlease, the respondents remained in possession of part of the premises by reason of a continuation tenancy under Part II of the Landlord and Tenant Act 1954. The plaintiffs’ claim for £19,223 as service charges for the period March 26 to December 24 1983 against the appellants was allowed by His Honour Judge Zucker on April 6 1990. However, he disallowed the appellants’ claim for the same sum against the respondents holding that the appellants had no title to sue the respondents directly under the underlease and were not entitled to recover on restitution principles. The appellants appealed.
Held The appeal was allowed.
From the date of the determination of the headlease the plaintiffs were entitled to sue the respondents direct in respect of the covenants in the underlease: see section 65(2) of the 1954 Act. The plaintiffs were also entitled to sue the appellants in respect of the covenants in the headlease. The result is that the plaintiffs were entitled to sue either the appellants or the respondents for the service charges; they sued the appellants and obtained judgment. The appellants had no answer to the plaintiffs’ claim. The payments discharged the respondents’ liability to the plaintiffs; if the plaintiffs’ had sued the respondents direct, they would have had no claim against the appellants. The appellants were entitled to be reimbursed by the respondents under the principle in Moule v Garrett (1872) LR 7 Ex 101 and Exall v Partridge (1799) 8 TR 308.
Michael Barnes QC and Jonathan Brock (instructed by Rowe & Maw) appeared for the appellants, Thorn EMI Retail Ltd; Kim Lewison QC (instructed by the solicitor to British Telecommunications plc) appeared for the respondents. The plaintiffs, Electricity Supply Nominees Ltd, did not appear and were not represented.
