The Court of Appeal in Mostyn House Estate Management Company Ltd v Youde and others [2022] EWCA Civ 929; [2022] PLSCS 112 has sounded a note of caution when the court is asked to exercise its discretion to grant declarations that are general in nature and widely worded.
Mostyn House Estate Management Company Ltd sought a declaration that it was entitled to maintain the structure and exterior of two listed buildings which formed part of the former Mostyn House School. As part of the declaration sought, the company claimed that the costs of any maintenance works could be charged to the first respondent freeholders, whose properties formed part of the development, under a rent charge contained in their transfers.
At trial, the freeholders argued that by virtue of the mirror terms contained in their transfers and the leaseholders’ leases the primary maintenance obligations fell on the freeholders, leaseholders and their respective management companies, who were the second and third respondents. It was only the management companies who had the right to recoup the costs of any such maintenance against the freeholders and leaseholders. Although the company had a residual right to carry out maintenance work in certain circumstances and recover the costs of the same against the freeholders and leaseholders, this was not an absolute entitlement as set out in the terms of the declaration sought. The trial judge agreed and in so doing he had regard to the terms of the leases when construing the transfers.
On appeal, the company argued that the trial judge had erred in having regard to the terms of the leases when construing the transfers. The leases did not form part of the admissible background because they had not been entered into or registered at the Land Registry when the earliest transfers were executed. Further, the trial judge had erred in law in finding that in so far as the transfers were to be interpreted without reference to those leases, they did not entitle the company to the declaration sought.
The Court of Appeal determined that the trial judge had erred in finding that the leases formed part of the admissible background for the purposes of construing the transfers. Based on the trial judge’s findings of fact, the first transfer was executed before any of the leases were granted. It ran contrary to the established principles of contractual interpretation that one could only take into account facts and circumstances that existed at the time the contract was made, and which were known or reasonably available to both parties.
The appeal was nevertheless dismissed. The Court of Appeal found that the trial judge had not exclusively relied on the terms of the leases as a means of construing the transfers. His conclusions were based on wider considerations. The trial judge had correctly found that the transfers created a hierarchy of responsibilities for the repairs. The company only acquired those responsibilities if they were not met by the respondents. In such circumstances the company was not entitled to the declaration sought.
Additionally, the Court of Appeal found that the terms of the declaration sought were general in nature and widely worded. The terms of the declaration did not relate to any particular repairs or circumstances in which expenditure on repairs may arise. A court in such circumstances should be cautious in granting such a declaration.
Elizabeth Dwomoh is a barrister at Lamb Chambers
