Service charges — Central heating — Sum payable may be increased proportionately if cost of fuel increases — Ambiguous provisions — Proper sums recoverable — Appeal by landlord dismissed
The appellant, Fairzone Ltd, is the owner of a building at 249-289 Cricklewood Broadway, London NW2, let in units under a number of leases. So far as was material, the relevant parts of the leases were in similar form. The appellants covenanting to repair and maintain the central heating installation, the lessees contributing a fair proportion of the expenses incurred calculated in accordance with the ratio of the floor areas of each unit to the total lettable floor areas in the building. By clause 2(ii)(b) of each lease, the respective lessees covenanted to pay “a fair proportion (being not less in any event than the rate of one shilling and threepence per square foot on the floor area of the … demised premises) of the costs of supplying central heating … Provided that the sum payable may be increased proportionately at any time … if the cost of fuel for supplying such heating shall at any time exceed the cost thereof at the date of this lease …”. The appellants contended that they are entitled to calculate the sums payable on the basis that the proviso to clause 2(ii)(b) permits them to increase the minimum sum (1s 3d) payable by a fraction of which the numerator is the unit cost of heating oil averaged over a year and the denominator is the unit cost of heating oil at the date specified in the proviso. Morritt J, in giving judgment (May 5 1989), decided in favour of a construction that reimbursed the appellants their actual costs and against the construction supported by the appellants. They had submitted that the calculation of the effect of specifying the sum of 1s 3d showed that, by operating the proviso to the clause, a profit was always intended.
Held The appeal was dismissed.
The appellant landlords were only entitled to charge in respect of the supply of central heating a fair proportion of the cost of fuel for supplying central heating to the respective demised premises (calculated by reference to floor areas) but subject to the minimum charge of 1s 3d. Although a profit might arise where the fuel costs fell below the minimum charge, the proviso could not be construed as intending a profit in other circumstances.
Stanley Brodie QC and Michael Nield (instructed by Clintons) appeared for the appellants; and Alastair Norris (instructed by Fremont & Co) appeared for the respondents.
