Service charges — Contributions from tenants — Remedial works to block of flats — Expenditure on engineering consultancy fees — Scaffolding and other costs — Whether scheme of remedial work “repairs” — Whether expenditure recoverable — Whether holders of trust fund entitled to be indemnified — Appeal by management trust company dismissed
The appellant is the “maintenance trustee” responsible for the repair, decoration and maintenance of a block of flats, Block B, Kingston House South, London SW7; the first respondent is the lessor and the remaining respondents tenants of flats in the building. Each flat is let on a standard 75-year lease with provisions for the recovery of expenditure by the appellant on, inter alia, “repairs”. For the year 1986/87 the appellant sought to recover from the tenants a substantial sum to cover a scheme for remedying defects to the external brick skin to the building; this was known as the “McHallam Scheme A”; it involved the complete replacement of the brick skin and was estimated at £1.9m. Many of the tenants refused to pay.
The tenants commissioned their own consultants, who recommended partial replacement of the brickwork and other work at a cost of about £0.25m. In the event, the two consultants agreed a scheme at an estimated cost of £232,300. Mervyn Davies J ([1988] 2 EGLR 99) held that the appellant’s expenditure on the consultant’s fees in relation to the McHallam Scheme A were irrecoverable, as the scheme would not have been a “repair” within the meaning of the service charge provisions of the leases. He also ruled on the charges for the scaffolding that had remained around the building for several years during the negotiations and proceedings and made no order as to costs. The appellant appealed and the respondents other than the first respondent cross-appealed.
Held The appeal and cross-appeal were dismissed.
1. The McHallam Scheme A did not constitute a repair within the meaning of the leases: there was a substantial difference between the works envisaged by this scheme and the scheme eventually agreed such as to suggest as a question of fact and degree that the more extensive works went beyond repair. The appellants also dropped Scheme A before the commencement of the present proceedings. The reference in the leases to the additional right to recover expenditure on “… such … works as the maintenance trustee shall consider necessary to maintain the building as a block of first class residential flats” was directed not to maintaining the exterior walls of the building but to other improvements within it.
2. It was reasonable to incur engineering consultancy fees and other fees in relation to Scheme A up to the date when its expense was known, but the appellant was not acting within its powers in incurring costs thereafter in promoting that scheme.
3. The appellant was entitled to recover scaffolding fees notwithstanding that there had been a delay due, in part, to the objections of the tenants.
4. Although the appellant was a trustee of the maintenance fund, it was not entitled to its costs in respect of the proceedings in the court below as a matter of discretion or on an indemnity basis from the trust fund. The proceedings had been compromised and the appellant had been promoting a scheme it had no authority to proceed with.
Maurice Price QC and Vivian Chapman (instructed by Rowe & Maw) appeared for the appellant; and Derek Wood QC and Susan Prevezer (instructed by Masons) appeared for the respondents other than the first. The first respondent did not appear and was not represented.
