England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		30/04/2013

Mr Justice Mann :

Introduction and background facts

1. This is an appeal by the defendant in these proceedings, Mr Di Marco, against a decision of HH Judge Hand QC given on 20 July 2012 in which he struck out Mr Di Marco's Defences and Counterclaims in two related actions. At the hearing before me Mr Di Marco did not appeal the striking out of his Defence; he only appeals the striking out of his Counterclaim.
2. Mr Di Marco is one of 104 tenants at Morshead Mansions, Maida Vale, London W9. All the tenants hold their flats on long leases. The claimant in these proceedings ("the company") is the freehold owner of the building and is tenant-owned – the tenants each own a share in the company.
3. Each of the leases contains service charge provisions. Under the leases the tenants pay an equal share of the service costs properly incurred by the company as landlord. The landlord, in the normal way, is obliged to manage and maintain the building. There is nothing remarkable about these provisions in the leases and I do not need to set them out.
4. Article 16 of the Articles of Association of the company contains a provision entitling the company to levy charges, with the consent of the members. It reads:

"The Directors may establish and maintain capital reserves, management funds and any form of sinking fund in order to pay or contribute towards all fees, costs and other expenses incurred in the implementation of the Company's objects, may require the Members to contribute towards such reserves or funds, at such time, in such amounts and in such manner as the Members shall approve by ordinary resolution passed in general meeting and may invest and deal in and with such money as not immediately required in such manner as they shall from time to time determine."

5. The company has now arrived at a position in which it raises funds to pay for the management of the building not through the service charge provisions but through the implementation of Article 16. In 2003 and between 2007-2009 it operated a scheme under which it would send out service charge demands and (with the appropriate consent of the members) demands under Article 16 in the same amount, indicating that if a tenant paid the Article 16 demand within a given period of time he or she would not be pursued under the service charge demand. Then in 2010 it dropped the service charge demand and, since then, has funded itself purely through Article 16 demands.
6. Mr Di Marco is not content with this scheme, and is not content with the level of the charges levied through them. He has mounted a number of challenges to them. In 2007 he resisted a claim made in the county court by the company based on an Article 16 demand on the footing that it was an attempt to recover service charges which could be subject to challenge under the Landlord and Tenant Act 1985 ("the 1985 Act"). He succeeded at first instance but his case was rejected by the Court of Appeal on 10^th of December 2008 (Morshead Mansions Ltd v Di Marco [2008] EWCA Civ 1371). The court distinguished between two co-existing relationships – that of landlord and tenant and that of company and member.

"a defence to [a claim in one capacity] is not necessarily available as a defence to the other legally separate claim." (per Mummery LJ at paragraph 30).

Mummery LJ went on:

"31. This appeal is concerned only with the question of law whether Morshead is entitled under Article 16 and pursuant to the resolutions to be paid the money which it claims from Mr Di Marco as a member of the company. The judge did not decide and was not asked to decide whether section 18 applied to Mr Di Marco as a tenant. He was not deciding whether Morshead could avoid altogether the statutory protection which Mr Di Marco might enjoy as tenant if he was sued under the provisions of the lease or if he invoked the terms of the lease and the statutory provisions in his capacity as tenant. Whether Morshead, as landlord, is or was entitled to levy a charge or charges against him, as tenant, in the amount specified in its letter to him dated 21 December 2006 is a separate matter with which we are not concerned on this appeal. Nor are we concerned in these proceedings with any question whether the directors of the company or its managing agents may properly use money raised from Mr Di Marco pursuant to the Article 16 resolutions in payment of the sum is alleged to be due from him as a member, if they are not due from him as a tenant."

7. Mr Di Marco was therefore obliged to pay the demand notwithstanding the provisions of the 1985 Act (to which I will come).

The claims in the actions

8. Morshead then started these two actions, which are two actions with similar contents. The first, action number ICL10203, was a claim by the company for rent (with interest) from 2004 to 2009, and a claim on two Article 16 demands made under resolutions in respect of 2008 and 2009. The second, action number ICL10204, is a similar claim for the 2010 rent and under an Article 16 resolution. The defendant challenged the claims in each action, and counterclaimed, challenging the validity and propriety of using Article 16 to deal with service charge matters and the use of the money raised without complying with the provisions of the 1985 Act which give tenants the right to investigate and challenge service charges.
9. Within these proceedings there was to be a trial of preliminary issues of three questions, but Mr Di Marco and the company agreed the answers to those questions during the course of the trial and they were embodied in an order of Mr Recorder Baldwin QC on 5^th September 2011. The questions, and their answers, were as follows:

(a) Can the Respondent [i.e. the company] expend money collected under Art 16 on provision of services under the lease? Answer – Yes.

(b) Do sections 18-30 of the Landlord and Tenant Act 1985 apply to such expenditure? Answer – No.

(c) Are the funds collected under Art 16 held on trust as service charges, pursuant to s.42 of the Landlord and Tenant Act 1987? Answer – No.

It is the case of the company that these answers, and the previous Court of Appeal decision, mean that there is nothing left to be dealt with in this case, and this formed part of the basis of its striking out application.

10. After Mr Recorder Baldwin had made his order he also made an order for directions. Mr Di Marco sought to amend his Defences and Counterclaims, and directions were made by the Recorder, and subsequently HH Judge Marshall QC, for hearing strike-out and amendment applications. Those were the matters that ended up before HH Judge Hand and on which he ruled. He dealt with both striking out and amendment matters, allowing the former and disallowing the latter. Since the two sets of proceedings and proposed amendments raised similar and related matters, he took the sensible course of treating them as consolidated and considering the points together as if they arose in one action. It was not suggested that that particular course led him into error, and I shall follow the same course.
11. So far as the rent (and interest) claims are concerned, the judge considered the defences and counterclaims and held that they afforded no defence to those claims. He therefore ordered summary judgment in respect of rent and interest. So far as resistance to the Article 16 claim is concerned, he held that the points that Mr Di Marco was raising had already been determined against him by the Court of Appeal or, in one case, in proceedings before the Leasehold Valuation Tribunal ("the Tribunal"), and so again could not form a defence. Therefore he struck out those parts of the Defence.
12. That dealt with the claims of Morshead and with the defences, and there has been no appeal from those determinations. The judge then turned to deal with the counterclaims. He did so by setting out the nature of the counterclaims (or proposed counterclaims) in 10 numbered paragraphs and then gave his reasons as to why none of them were sustainable. Mr Di Marco accepted in his skeleton argument that these were his claims, so I do not need to spend much time in the actual statements of case. I can summarise the judge's summary as follows:

(i) Mr Di Marco sought accounts and summaries of accounts, and inspection, for the years 2002 to 2005, pursuant to sections 21 and 22 of the 1985 Act.

(ii) He sought the provision of facilities for the inspection of summaries pursuant to the same statutory provisions.

(iii) He sought an order that the company provide a summary of costs for 2009 in accordance with the statute, with regard to "service charge expenses for the year 2009".

(iv) He sought an order requiring the company to issue service charge demands for 2010.

(v) He sought an order prohibiting the company from spending the Article 16 funds without complying with the provisions of the Act (including section 42).

(vi) He claimed a set-off by reason of matters raised in a previous claim made to the Tribunal in relation to 2003 and 2007 service charges on the footing that the company failed to consult before carrying out major works and had raised unreasonable service charge demands in 2003 in relation to painting over allegedly rotten wood.

(vii) He claimed a declaration to the effect that the company had demanded service charges pursuant to the Act for the years 2003-2009. The actual proposed pleading (it is in a proposed amendment) asks for a declaration that the company "lawfully" demanded service charges – the judge did not include that word in his summary.

(viii) He claimed an order restraining the company from claiming service charges for 2003.

(ix) He made a claim that the company failed to consult before carrying out major works in 2007. As Mr Di Marco pointed out, this is a repetition of a matter raised under head (vi), in the second action. I include it here for the sake of completeness.

(x) He claimed the appointment of a manager by the court.

13. I shall set out the judge's findings in relation to each of those matters in the next section (so far as relevant), where I also deal with the nature and the result of the appeal in relation to them. It will be convenient to take some of them together, in batches, and I shall start by considering the 4 Grounds of Appeal advanced by Mr Di Marco. All the relevant provisions of the relevant legislation are set out in the Appendix to this judgment.

Ground 1 – points (i) to (iii)

14. Mr Di Marco challenges the judge's finding in relation to these matters in paragraph 1 of his Grounds of Appeal. The common theme here is a request for an order that information be provided pursuant to the Act. The judge below considered the statutory provisions and held that on their true construction they did not give rise to a duty which could be enforced in a civil suit because the statute provided for a criminal sanction and because this was not a case where the legislation was for the benefit of a class of individuals. Accordingly Mr Di Marco had not demonstrated that he had a cause of action. In so finding the judge relied on Lonrho Ltd v Shell Petroleum Co Ltd No 2) [1982] AC 173 where Lord Diplock said:

"… where an Act creates an obligation, and enforces the performance in a specified manner … that performance cannot be enforced in any other manner …"

15. He also found that this was not a case where the object of the legislation is the protection of a whole class of individuals, unlike (for example) Health and Safety Regulations.
16. The circumstances in which a statute which might, but does not in terms, create a statutory duty enforceable by individuals have been considered in a large number of cases. A lot of case law has been given over to the subject – one only has to glance in the most cursory fashion at Clerk & Lindsell on Torts, 20^th Edition Chapter 9 to see that. However, the guiding overall principle is to ascertain what the intention of Parliament was, and in Digicel (St Lucia) Ltd v Cable and Wireless plc [2010] EWHC 774 Morgan J distilled a number of principles which have relevance in considering the point. He set them out in an Annex H to his judgment:

"Having reviewed the authorities, when I come to examine the individual statute or the individual regulations in question, I consider that I should address myself to the following principal considerations:

(i) for whose benefit was the statute or the regulations passed?

(ii) if the statute or regulations were passed to benefit public and private interests, which was the primary object?

(iii) for whose benefit was the particular provision enacted?

(iv) if the particular provision was passed to benefit both public and private interests, which was the primary object?

(v) has the duty been expressed in terms which make it suitable for actionability?

(vi) what is the class of persons who might suffer harm as a result of a breach of duty?

(vii) does the expected harm take the form of economic loss or damage to the person or damage to property?

(viii) on what type of person is the duty imposed – is it a public authority or a private entity?

(ix) does the statute or the regulations impose a sanction for breach of duty: the sanction may be a criminal sanction or something else, such as the suspension or revocation of a benefit?

(x) how adequate is the sanction imposed?

(xi) does the statute or the regulations provide a means of enforcement of the duty?

(xii) if so, does the omission to provide for a right to claim damages point to an intention not to allow a claim to damages?

(xiii) do the means of enforcement raise questions of discretion or policy with the result that actionability in the courts would or might proceed on a different basis?

(xiv) how adequate are the means of enforcement?

(xv) overall, having regard to the above and any other relevant matters, what did the legislature intend as regards actionability of a breach of duty?"

(The numbering does not appear in the online report; I have added it to clarify the citation.)

17. The basic question is set out at point (xv); the preceding points are points which assist in answering that basic question.
18. In considering the point the starting point is the statute as a whole; or (in the case of a statute with a variety of provisions in it, like the 1985 Act) those parts of it which relate in some way to the duty imposed.
19. Mr Di Marco challenges the judge's determination on the point. He would maintain that there is a statutory duty which he can enforce, and he seems to do so on this appeal. His grounds of appeal do not put it that way, but it is (as Mr Rainey QC, who appeared for Morshead fairly admitted) implicit in his submissions. That challenge is something that necessarily arises, and Mr Rainey sought to meet it.
20. He did so by saying that the judge was right in his finding of the non-existence of the statutory duty, and like the judge he pointed to the existence of the criminal sanction and the absence of a protected class. He said it was unlikely that Parliament would have intended to create a statutory duty enforceable in the courts when everything else relating to service charges had been assigned to the Tribunal, and the new section 21A, when in force, provides the tenant with another weapon if he does not get the information he is entitled to on request.
21. He also relied on Taber v MacDonald (1998) 31 HLR 73. That was a case of a prosecution under the Act, in the course of which Roch LJ made remarks as to the scope of the duty (it was a duty to produce such receipts and vouchers as the landlord has, not a duty to keep proper records).

"Section 22 and section 25 are concerned with the wilful and inexcusable failure of a landlord to procure documents which he has. The remedies for the absence of proper receipts and documents are to be found elsewhere." (page 78)

22. Mr Rainey submitted that this passage, in its context, supported the case for saying that the remedies for breaching the duties in sections 21 and 22 were criminal only, and not civil.
23. I have come to a different conclusion to that reached by the judge below. In my view the sections create a duty owed to the tenants in respect of which the tenants have a direct civil enforcement remedy. It seems to me that tenants who have qualifying tenancies are a class of persons who suffer harm if there is a breach. The duties are not owed to the public at large. They are designed to achieve a situation in which that class of persons has certain information which members of that class need in order to be able to check that their interests in paying no more than they should pay are properly respected and given effect to (Morgan J's points (i), (ii) and (iii)). They are the persons who will suffer if there is a breach (Morgan J's point). While the criminal sanctions provide an incentive to comply with the provisions, they are less likely to achieve the intended result (the production of records and information) than injunctive relief which is specifically framed and geared to the provision of the information (Morgan J's points (x) and (xiv)). While there have been prosecutions under section 25 (in the present matter and in Taber, to give two examples) I do not consider it likely that Parliament intended that to be the only enforcement route. Nor does the prospective introduction of the additional sanction of the right to withhold rent support Mr Rainey's case as to Parliament's intention. It is an additional sanction, and no doubt useful in that it provides an additional incentive to keep the matters out of the courts completely, but it does not provide a useful pointer as to which courts the tenant has to go to in order to achieve what the tenant really needs. Taber is concerned with a different point and does not assist, much less bind, in relation to the question before me. In my view Parliament intended the duties to be enforceable in the same manner as other civil duties, that is to say by application to the civil courts. The answers to practically all of Morgan J's questions point that way, in my view.
24. Mr Rainey sought to invoke the prospect of an unintended and undesirable drain on court resources as a result of frequent applications by tenants if they had a right to go to court to get the information, especially bearing in mind the frequent occurrence of service charge disputes. I do not think that this has any real force. First, I doubt if it would open any litigation floodgates. Second, if there were the prospect of such a flood, I doubt if it is the first time that Parliament has introduced legislation without fully anticipating the extent of the litigation that would result. Third, on Mr Rainey's case there is still the right to resort to the courts, because there is the right to bring a prosecution under section 25. He did not explain why that right would be less likely to flood the courts than a civil right. It would only be likely to do so if a criminal prosecution would seem less attractive because it is harder either substantively or procedurally. It might be harder in that the criminal burden has to be fulfilled (though I doubt if that would be determinative in most cases); but if that was to be a barrier to the flood then it would be odd for Parliament to choose it as such (it would involve Parliament thinking that legal remedies were required but none that were too easy because otherwise there will be too many complaining tenants in the courts). If it were suggested that Parliament introduced a criminal sanction only because tenants would be less likely to bring a criminal prosecution than to bring a civil claim, so the litigation would be kept down, ("make them fight in unfamiliar territory, because then they will be less likely to clog up the courts") then that does not seem to me to be a particularly worthy intention to attribute to Parliament. The criminal remedy might be thought to have a useful additional filter in the "without reasonable excuse" requirement, but it seems to me highly likely that a civil court would introduce a similar requirement anyway – if there is a good reason for not producing the documents then an injunction would not be granted.
25. Last, Mr Rainey submitted that depriving the tenant of a civil remedy would not, at the end of the day, be seriously disadvantageous to the tenant, because if the landlord did not provide the information the dispute over the charges would be likely to end up in the Tribunal in the course of which the Tribunal could make orders for the disclosure of information. That seems to me to be an unlikely rationalisation of the absence of the civil remedy contended for by Mr Di Marco. It would be a waste of time and costs if a tenant had to apply to the Tribunal in ignorance of facts which he ought to have been given and which might, when forthcoming, demonstrate that there was no worthwhile dispute after all. It seems to me to be much more rational that the tenant should have an effective means of compelling the production of information which might head off a wider dispute that would otherwise arise.
26. In the circumstances I consider that on the true interpretation of the 1985 Act the tenant has the right to apply to the court for the information which the landlord has to produce under sections 21 and 22. There would be no difficulty in framing injunctions, or enforcing them if necessary. Any difficulties would certainly be no greater than would exist in criminal proceedings and, as I have already observed, the relief would actually be directed at getting to the tenant the information that the tenant required rather than being an indirect means of applying pressure. Accordingly, in my view the judge erred in this part of his reasoning. This basis for striking out part of the counterclaim cannot stand. No alternative basis was propounded before me. I will return to the consequences of that determination at the end of this judgment.
27. For the sake of completeness I should record that in the court below Mr Di Marco advanced an alternative case for being allowed information and access by invoking what he said was an implication from the lease. The judge rejected this case, and in my view he was right to do so. At the appeal hearing before me Mr Di Marco advanced a different implication case, arising from certain circumstances surrounding previous demands. This does not work as creating an implication in the lease, and is not pleaded either. All these claims therefore fail, but since he wins on the statutory duty point that does not matter.

Ground (2) – point (vi)

28. This relates to point (vi) referred to above. I can ignore the point about rotten wood because Mr Di Marco disclaimed any appeal about that at the hearing before me. The other point requires some elaboration.
29. At paragraph 55 of his judgment the judge records that Mr Di Marco raised a complaint about major works of redecoration in 2007 whose costs were said to be not reasonably incurred and he complained about a failure of consultation. He found that these complaints were the subject of an application to the Tribunal on 14^th December 2009 in which Mr Di Marco sought a determination of his liability to pay service charges. In a decision dated 29^th March 2010 the tribunal considered the Court of Appeal judgment referred to above and decided that payments made by Mr Di Marco had been made pursuant to Article 16 and that therefore section 20 of the 1985 Act did not apply, that as a result in 2007 no service charge had been demanded and that therefore statutory consultation was not required either. Mr Di Marco sought to appeal this part of the decision to the Upper Tribunal but permission was refused. Judge Hand found that this gave rise to an estoppel, so that Mr Di Marco could not raise the matter again in these proceedings.
30. In ground 2 of Mr Di Marco's Grounds of Appeal Mr Di Marco criticises the judge on the footing that there had been a misrepresentation to the Tribunal, and that the finding was wrong. In his skeleton argument he repeats that a misrepresentation was made to the Tribunal in 2010, so he has a bona fide claim for misrepresentation. In his oral submissions he disputed that the Tribunal had power to decide whether a service charge had been demanded or not, and complained about a misrepresentation made to the Tribunal by Mr Wismayer, the director of Morshead. All this was somewhat confused.
31. Doing my best to disentangle it, the position appears to be as follows. The judge struck out the claim in relation to the 2007 service charges on the basis of the estoppel. He made no reference to a misrepresentation in this context and made no finding about one. His reason for disallowing the proposed amendments (which is what his findings related to) were purely the estoppel reasons. In my view there is no answer to this point, other than that it may be that a more proper basis of dealing with it was as an abuse of process rather than estoppel.
32. What had happened before the Tribunal was this (as recorded in the Tribunal decision itself). On 14^th December 2009 Mr Di Marco had issued two applications in the Tribunal under section 27A of the 1985 Act and section 24 of the Landlord and Tenant Act 1987 to determine his liability to pay service charges in respect of the year 2007 and for the appointment of a manager. I can ignore the latter of those applications. The Tribunal told him that it was minded to dismiss the application of its own motion on the grounds that it was frivolous, vexatious or an abuse of the process of the tribunal, and gave him the opportunity of resisting that at a hearing. The hearing duly took place. Apparently Mr Di Marco declined to make any submissions other than submissions going to the adequacy of the notice given by the Tribunal, though he expressed a willingness to answer questions.
33. The Tribunal came to the conclusion that the applications were vexatious and an abuse and ought not to be proceed further. So far as the question of consultation in respect of the 2007 works is concerned, the Tribunal recorded:

"27. The fourth ground is MML's failure to consult the leaseholders as required by section 20 of the 1985 Act in respect of works to the block carried out in 2007. Mr Wismayer (Morshead's director) said that, pursuant to the judgment of the Court of Appeal, no service charge has been demanded to cover the cost of the works and statutory consultation was not therefore required."

34. The Tribunal then went on to consider other grounds at that point of the decision without apparently indicating what it thought of that suggestion from Mr Wismayer, though it is apparent from paragraph 32 that it thought that there was nothing in it for reasons which it considers it had given in paragraph 27:

"32. As for the application under section 27A of the 1985 Act, the only issue which Mr Di Marco seeks to raise is MML's failure to consult the leaseholders in accordance with section 20 of the 1985 Act in relation to the works carried out to the block in 2007. This is the same allegation as the seventh ground relied on by Mr Di Marco in his preliminary notice under section 22 of the 1987 Act and we consider it to be without substance for the reasons given in paragraph 27 above."

35. Looking back at paragraph 27, it must be implicit in the Tribunal's decision that the reason that the claim fails is because of the Court of Appeal decision (identified above). It is implicit that the Tribunal accepted what Mr Wismayer submitted. What he was apparently saying was that the result of the Court of Appeal decision was that charges that were levied in 2007 were not service charges. On that basis the Tribunal struck out the claim. That is the analysis of Judge Hand in paragraph 57 of his judgment, and I agree with him. He also noted that permission to appeal the Tribunal decision to the Upper Tribunal decision to the Upper Tribunal was refused.
36. That means that there was a decision of a tribunal of competent jurisdiction in relation to a matter within its jurisdiction. I do not accept Mr Di Marco's submission that the tribunal had no power to decide whether what was before it was a service charge or not. That question goes to the root of its jurisdiction. It decided that what it was faced with was not a service charge, and that seems to me to be a final decision capable of giving rise to an estoppel. If it is not technically an estoppel because of the nature of the hearing at which it was reached, and the nature of the Tribunal's decision (to strike out rather than to hear on the merits) then it is nonetheless clear that it would be an abuse of process to allow Mr Di Marco to raise the point again when it has in substance been decided against him.
37. There is therefore no basis for criticising this reason of the judge for not allowing the amendments by which Mr Di Marco sought to resurrect the point. However, as I have indicated, Mr Di Marco sought to complain about a finding against a misrepresentation in this context. For the sake of completeness I shall deal with that too.
38. The judge had in fact dealt with a misrepresentation point earlier in his judgment, at paragraphs 50 and 51. He did indeed find that there was no misrepresentation of the kind alleged. However, those were different misrepresentation claims made in a different context. He found that certain statements allegedly made by Mr Wismayer could not be characterised as representations (and therefore misrepresentations) because they were statements of future intention. He also had difficulty in accepting that certain assurances which were alleged could have actually been made. These are entirely different points from any misrepresentation in relation to the March 2010 hearing before the Tribunal. However, in his Defence, which was repeated in his Counterclaim, Mr Di Marco did complain that Mr Wismayer had misled the Tribunal by stating that no service charge been demanded to cover works carried out in 2007, and in the Counterclaim, under the heading "Fraud and/or misrepresentation" he complained that Morshead had deliberately misled the Tribunal and the court by saying in proceedings that no service charge demand and/or service charges had been made to or claimed from its tenants. He went on to complain that the Tribunal so found in this decision. A claim in misrepresentation was, therefore, something that Mr Di Marco was raising, even though the judge did not deal with it. Since Mr Di Marco raised it before me, and since Morshead's submissions actually deal with it, I shall deal with it shortly.
39. I accept the submissions of Mr Rainey that there is no relevant misrepresentation. It is plain that what Mr Wismayer is recorded as having submitted is that the effect of the Court of Appeal decision was that the demands made in 2007 were not for service charges, because they were made under Article 16. That was not a representation, it was a submission, and it was a submission which the Tribunal accepted. It was also correct. There seems to me to be absolutely nothing in this misrepresentation point and, therefore, in the judge's failure to deal with it (which would seem to me to be entirely understandable bearing in mind the wide-ranging and sometimes difficult to understand approach of Mr Di Marco).
40. This ground of appeal therefore fails.

Ground 3 – point (viii)

41. Mr Di Marco sought to amend his counterclaim to seek an order that Morshead:

"may not make a new claim against him for service charges for or in the year 2003 which he has already paid through a claim against him as a shareholder in the claimant by its Recovery Fund 2003 in the amount of at least £900".

He goes on to particularise his claim by reference to assertions made by the company that it would not enforce both service charges and Recovery Fund contributions.

42. The judge described this as a claim for an order prohibiting Morshead from raising any new service charge claim in respect of the year 2003. He recorded the submissions of counsel for Morshead to the effect that Morshead had not made any further claims in respect of 2003 and there was no claim for those moneys before the court. Mr Di Marco is recorded as regarding the remedy of the declaration for 2003 as part and parcel of a general theme that the statutory protection of tenants in relation to service charges could not be circumvented by the Articles of Association device. In paragraph 54 of his judgment the judge found that the point was "moot (i.e. it is purely academic in the sense that the answer to it deals with no live issue in controversy between the parties)" and held that the court would not allow such points to be debated. He therefore refused permission to amend to introduce the point.
43. On this appeal Mr Di Marco disputes the finding that the claim is academic. He accepts that the company has not demanded the money, but has said it has pronounced that it will seek to recover the relevant charge from tenants (presumably including Mr Di Marco) when they sell their flats. He points to a "Global Statement of Account (Debts owed under the lease and under the Articles of Association)" dated 6^th March 2009 which contains a long list of entries relating to Mr Di Marco's flat dating back to 1^st January 2003 and which contains a debit entry for 1^st July 2003 of £1,681.47 entitled "Interim SC 2003 (excludes Reserve Fund)". There are various credit entries in the account, and the balance struck shows Mr Di Marco as owing £23,230.33.
44. Mr Rainey explained to me that what had happened was that Mr Di Marco had not paid the Article 16 demand by a date which would give him relief from the then parallel service charge demand. Technically the company could make a claim for the service charge because he ought to have paid more promptly than he did. He pointed to some evidence from the company's solicitor Mr Spring which was to the following effect:

"At new paragraph 15, the defendant appears to seek to injunct the Claimant from making any claim for unpaid service charge in the year 2003 if he has already paid an equivalent sum under the Article 16 procedure in 2003. Since the Claimant has not brought a claim against the Defendant for any 2003 "service charge", it seems utterly without merit for the Defendant to attempt pre-emptorily to defend an unadvanced claim. Should such a claim ever be brought, then the Defendant has the usual ability to plead his defence;"

45. At the same time, Mr Rainey accepted that the 2003 figure appeared as a figure in the accounts to which I have just referred. He did not expressly disclaim it as a liability of Mr Di Marco, or as a claim which could be made by his client, and said that he did not have instructions to drop any such claim as existed. However, he said that what was being sought was in effect a negative declaration which, on the authorities (including Guaranty Trust Company of New York v Hannay & Company[1915] 2 KB 536) would not normally be allowed, though he accepted that such declarations could be granted if it were useful to do so. His client has not hitherto taken any steps to recover the moneys, the claim to the 2003 moneys is not currently a live issue, and may never become one. Therefore, he says, the point is academic at present and does not justify the unusual remedy of a negative declaration.
46. I am left with the unfortunate impression that this part of this case disguises some undisclosed agenda on the part of both parties. For some reason Mr Di Marco has lit upon the 2003 figures as the focus for part of his complaints. The judge found that he regarded them as part and parcel of his general theme (see above), but it is not pleaded as such. Morshead's attitude seems to be extraordinary. It seems to accept that an equivalent sum of money to the service charge has been received but too late to be able, technically, to satisfy the service charge obligation. It seems to want to keep the potential liability alive (because it declines to acknowledge that it has gone) whilst saying that it might never be claimed. It is implicit in the landlord's attitude that it regards the matter as academic until such time as it chooses to render it real. That is not an appropriate attitude. Since its position seems to be that there is technically a claim, and it declines to abandon it, then the matter is not fully academic. If it is not academic then I do not see why Mr Di Marco should not be entitled to have the point decided – is he liable for these moneys or not? (assuming that is the real question). There are at least two ways of having it decided. One would be to seek an inquiry as to the amounts owing from him to Morshead, in the course of which this point would be decided. Alternatively if this were in fact the only live point then I do not see why it could not be taken by itself, and the only way in which it could be taken would be via a negative declaration. If a debtor wishes to clarify the existence or amount of a debt and has a legitimate interest in doing so, and if the creditor has not commenced proceedings in which the issue can be decided, then an application for a negative declaration ought to be open to the debtor if that is the best way of resolving the point.
47. In the present case there is a potential dispute which the company could remove by indicating that it has no claim for the service charges if equivalent moneys have been paid. It has not done so, and before me clearly declined to do so. If the amount is in fact never to be claimed then the company could say so and remove the dispute. It has not said that. There is therefore a dispute which is not purely academic. It may be that Mr Di Marco has deliberately, and for tactical reasons, chosen to pick a fight on this point, but Morshead has allowed him to do so by declining to indicate that there will be no claim, or even to indicate the future circumstances in which its present non-combative attitude might change. In those circumstances I do not see why Mr Di Marco cannot have his point litigated, via a claim for a negative declaration (which is a more appropriate description of what he really wants than an injunction to restrain the bringing of a claim).
48. However, it does not follow that the appeal should be allowed to the extent of simply allowing the survival of the proposed paragraph 15 in its present form. I am not satisfied that, as it stands, it really encapsulates or pleads properly what the basis of the claim is. If Mr Di Marco wishes to maintain that claim in these proceedings he will have to particularise it better so that the landlord and the court can see clearly how it is said that the claim has been paid. I would propose to hear further argument on this on or after the handing down of this judgment.
49. It follows that to this extent too the appeal will be allowed.

Ground 4 – point (x) – the appointment of a manager

50. The fourth ground of appeal relates to the judge's refusal to appoint a manager. Mr Di Marco's proposed amendments invited the court to exercise what they describe as the court's jurisdiction to appoint a manager under section 21(6) of the Landlord and Tenant Act 1987. It is pleaded that a prior application for a manager had been made to the Tribunal but the Tribunal was misled into not granting one. Therefore Mr Di Marco seeks to invoke the jurisdiction of the court.
51. The judge refused to allow this amendment on the footing that the court plainly had no jurisdiction in the light of the wording of the provision relied on because that provision excluded it. Only the Tribunal could appoint a manager, and the section did not have the effect contended for by Mr Di Marco. Mr Di Marco sought to submit that since, as he accepted, the Tribunal could not longer consider the point (because it had considered it and declined to appoint) the exclusion in section 21(6) no longer applied and the County Court could exercise its normal jurisdiction to appoint receivers and managers. Those submissions were rejected. The judge indicated that other objections relied on by Morshead would not have justified disallowing the amendment, but the amendment failed for the reason given.
52. Mr Di Marco challenges that decision on this appeal. I find that his appeal fails. The judge was right for the reasons that he gave. Section 21 of the 1987 Act gives the Tribunal jurisdiction to appoint a manager. Subsection (6) excludes any court's power to appoint a manager in circumstances in which an application could be made to the Tribunal. That gives the Tribunal exclusive jurisdiction in relation to cases within the statute. The circumstances in which it can appoint are set out in section 24. So far as the proposed amendment sets out grounds for appointing a receiver they demonstrate the appointment would (if made) be one within section 24. Accordingly the only body that can appoint a receiver if those grounds are made out is the Tribunal. The court has no jurisdiction. If the Tribunal has ruled on those matters and decided not to appoint, then (subject to an appeal) that is an end of the matter. That ruling does not open up the possibility of the court appointing merely on the basis that the Tribunal has not done so. The purpose of subsection 21(6) is not to open up the possibility of applying to the court when a tenant has applied and failed on the merits. It is, in substance, to confine the appointment of a manager to the Tribunal in cases where the circumstances relied on, if established, would bring the matter within section 24.
53. In Stylli v Haberton Properties Ltd [2002] EWHC 394 (Ch) Ferris J came to the same conclusion as to the exclusive jurisdiction of the Tribunal. It follows from my own reasoning that I respectfully agree with him.
54. This ground of appeal therefore fails.

Miscellaneous matters

55. That deals with the issues raised in the grounds of appeal. However, one or two other matters appeared in Mr Di Marco's skeleton argument, and I should deal with them.
56. His skeleton argument refers to a claim for a declaration that Morshead had demanded service charges pursuant to the 1985 Act for the years 2003 to 2009. Such a claim appears in the proposed paragraph 14 of his proposed amended Counterclaim and is identified in the judge's point (vii). The judge did not deal with this point in terms but apparently considered that it was wrapped up with the other claims requiring the provision of information. He said:

"The failure to allow inspection of the Summary of Costs is subsidiary to the substantial question as to whether there is a duty to provide such a Summary. This is of the same substance as the order sought requiring the Claimant to issue service charge demands for 2010, the order seeking a declaration, in effect, the Claimant has demanded service charges between the years 2003 and 2009 and the order prohibiting the Claimant from spending the Article 16 Funds without following the statutory regime. They are all different facets of the proposition advanced by Mr Di Marco before me that Mr Wismayer, on behalf of the Claimant, has now dropped all pretence of allowing tenants to invoke the statutory regime. Mr Wismayer's earlier statements to the LVT, described by the Defendant as 'binding', that service charges would be issued have now been abandoned and replaced in 2010 by the issue of only a demand pursuant to the Article 16 resolution thus heralding 'the end of service charges as we know them' (see paragraph 14 of the draft amended Defence and Counterclaim …)."

57. He then went on to repeat his finding that there was no directly enforceable statutory duty to provide the service charge details or to consult, and that no duty to consult arose out of an implied term in the lease or out of alleged representations. He held that the assurances relied on did not give rise to any duty to issue service charge demands or to prevent Morshead from using the money collected under the Article 16 regime without complying with the terms of the statutory regime. He then found (in essence) that the agreed answer to the preliminary question about the application of moneys prevented argument about that (paragraph 52) and said:

"Equally I cannot see how if there is no cause of action to which the remedies sought could attach there can be any scope for declaratory relief."

And he ended this section of his judgment by saying:

"In my judgment there is no cause of action to which any order of this court could attach." (paragraph 53)

58. It seems, therefore, that he was rejecting the claim for declaratory relief in paragraph 14 of the draft amended Counterclaim on that footing, and treated it as at one with the claims for information about service charges.
59. In his skeleton argument Mr Di Marco said that the declaration was:

"required for any further action before the Leasehold Valuation Tribunal, in order to prevent the claimant from representing that no service charges have been made for these three years as it had done in the claim made by the defendant in 2009."

60. The draft pleading says that this part of the action:

"is purely precautionary in nature as the claimant has already given binding undertakings to the Leasehold Valuation Tribunal that it would make such service charge demands, and has accounted for them in statutory service charge statements for years 2003-2008, and has also admitted that it has done so by [a chairman's report]."

61. It goes on to particularise the claim by alleging that the Tribunal was misled by a statement that no service charge demands had been made so that Morshead could tell the Tribunal that its failure to comply with section 20 of the Act was not covered and that service charges could not be declared to be unreasonably incurred. Mr Di Marco actually pleads that that was the finding of the Tribunal, and on an appeal.
62. While the judge was undoubtedly right insofar as he said that this claim for a declaration was part of Mr Di Marco's long-running dispute about the manner in which the service charges for the property have been dealt with, I do not think that he was right to say that the claim for the declaration failed because there was no cause of action under the statute. I have found that the judge's conclusion about the cause of action was in fact wrong. However, even so, that sort of cause of action is not the apparent basis of the claim for a declaration. The cause of action under the statute is a cause of action which, if it succeeds in court, might result in orders for the production of documents and other information. The claim for the declaration is apparently different, and does not depend on that (or probably any) cause of action. It ostensibly seeks a declaration as to the legal status of certain documents, or as to the legal state of affairs arising out of dealings between Morshead and the tenants. That does not necessarily require a cause of action as such.
63. It does, however require some form of justification in pleaded fact and in the context of a pleaded dispute between the parties. Without the necessary facts being properly pleaded the court and the opposing party cannot see what facts are said to make the declaration correct as a matter of fact and law, and what facts are said to justify its being granted in the particular case.
64. Mr Di Marco did not address any oral submissions to this claim for a declaration and he did not technically appeal its being struck out, but in case it matters I should record that in my view it is clear enough that even though it might not fail for the reasons given by Judge Hand, it cannot stand because it is inadequately pleaded. It is not apparent from the draft pleading why it is required. The skeleton argument and the pleading suggest different justifications. In fact, the pleading goes further and imports the seeds of its own destruction. It suggests that the question of whether there were relevant service demands has been decided by the Tribunal, at least in relation to 2007, so Mr Di Marco is (on that basis) trying to resurrect issues on which he is estopped, or which it would be an abuse of process to raise in the county court.
65. Accordingly this point raised in the skeleton (but not in the Grounds of Appeal) fails.
66. In his skeleton argument Mr Rainey dealt with another argument which he perceived might be raised in Mr Di Marco's skeleton argument, albeit again not referred to in the Notice of Appeal and, this time, not pleaded either. It is a complicated matter and since it has not been raised clearly in any particular form, and since it is not pleaded, I shall not deal with it.

Conclusion

67. It follows that this appeal succeeds to a limited extent:

(a) Mr Di Marco's claims for information under the 1985 Act ought not to have been struck out on the footing that there was no statutory tort, or statutory cause of action. Since that is the only basis on which the judge struck them out, and no other basis on which it is said that the claims ought to fail, those claims ought to be reinstated. It may be that there all sorts of answers to them, but they do not fail for the reasons given by the judge. I shall hear the parties as to what further directions need to be made as a result of this conclusion.

(b) Mr Di Marco's claim for a declaration as to the 2003 debt does not fall to be struck out for the reasons given by the judge. Again, there may be reasons why that claim will fail, but they were not the subject of this appeal and this claim may fall to be resurrected but subject to possible re-pleading, as I have indicated above. I reach this conclusion with some misgivings, because it seemed to me that the making of the claim, and the resistance to acknowledging that there is no claim, were stances that were adopted for tactical and posturing reasons rather than reasons going simply to whether money might technically be owing or not. However, it is not for me to go into those tactical stances (or at least not at the stage of considering the appeal and writing this judgment) and it suffices for me to say that the claim ought not to have been struck out for the reasons alleged and the reasons given. Again, I will hear the parties as to what directions should usefully follow this finding.

Appendix Landlord and Tenant Act 1985 c. 70 Service Charges

18.- Meaning of "service charge" and "relevant costs".

(1) In the following provisions of this Act "service charge" means an amount payable by a tenant of a [dwelling] as part of or in addition to the rent –

(a) which is payable, directly or indirectly, for services, repairs, maintenance [improvements] or insurance or the landlord's costs of management, and

(b) the whole or part of which varies or may vary according to the relevant costs.

(2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.

(3) For these purposes –

(a) "costs" includes overheads, and

(b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period.

19.- Limitation of service charges: reasonableness.

(1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period –

(a) only to the extent that they are reasonably incurred, and

(b) where they are incurred on the provisions of services or the carrying out of works, only if the services or works are of a reasonable standard;

(2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise.

[…]

[…]

[

(5) If a person takes any proceedings in the High Court in pursuance of any of the provisions of this Act relating to service charges and he could have taken those proceedings in the county court, he shall not be entitled to recover any costs.

20 Limitation of service charges: consultation requirements

(1) Where this section applies to any qualifying works or qualifying long term agreement, the relevant contributions of tenants are limited in accordance with subsection (6) or (7) (or both) unless the consultation requirements have been either-

(a) complied with in relation to the works or agreement, or

(b) dispensed with in relation to the works or agreement by (or an appeal from) a leasehold valuation tribunal.

(2) In this section "relevant contribution", in relation to a tenant and any works or agreement, is the amount which he may be required under the terms of his lease to contribute (by the payment of service charges) to relevant costs incurred on carrying out the works or under the agreement.

(3) This section applies to qualifying works if relevant costs incurred on carrying out the works exceed an appropriate amount.

20ZA Consultation requirements: supplementary

(1) Where an application is made to a leasehold valuation tribunal for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works or qualifying long term agreement, the tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements.

21.- Request for summary of relevant costs.

(1) A tenant may require the landlord in writing to supply him with a written summary of the costs incurred-

(a) if the relevant accounts are made up for periods of twelve months, in the last such period ending not later than the date of the request, or

(b) if the accounts are not so made up, in the period of twelve months ending with the date of the request.

and which are relevant costs in relation to the service charges payable or demanded as payable in that or any other period.

(2) If [the tenant is represented by a recognised tenants' association and he] consents, the request may be made by the secretary of the association instead of by the tenant and may then be for the supply or the summary to the Secretary.

(3) A request is duly served on the landlord if it is served on-

(a) an agent of the landlord named as such in the rent book or similar document, or

(b) the person who receives the rent on behalf of the landlord;

and a person on whom a request is so served shall forward it as soon as may be to the landlord.

(4) The landlord shall comply with the request within one month of the request or within six months of the end of the period referred to in subsection (1)(a) or (b) whichever is the later.

(5) The summary shall [state whether any of the costs relate to works in respect of which a grant has been or is to be paid under [section 523 of the Housing Act 1985 (assistance for provision of separate service pipe for water supply) or any provision of Part I of the Housing Grants, Construction and Regeneration Act 1996 (grants, &c. for renewal of private sector housing) or any corresponding earlier enactment] and] set out the costs in a way showing [how they have been or will be reflected in demands for service charges and, in addition, shall summarise each of the following items, namely-]

21A Withholding of service charges

[

(1) A tenant may withhold payment of a service charge if-

(a) the landlord has not provided him with information or a report-

(i) at the time at which, or

(ii) (as the case may be) by the time which,

He is required to provide it by virtue of section 21, or

(b) the form or content of information or a report which the landlord has provided him with by virtue of that section (at any time) does not conform exactly or substantially with the requirements prescribed by regulations under that section.

]

(2) The maximum amount which the tenant may withhold is an amount equal to the aggregate of-

(a) the service charges paid by him in the [period to which the information or report] concerned would or does relate, and

(b) amounts standing to the tenant's credit in relation to the service charges at the beginning of that period.

(4) If, on an application made by the landlord to a leasehold valuation tribunal, the tribunal determines that the landlord has a reasonable excuse for a failure giving rise to the right of a tenant to withhold an amount under this section, the tenant may not withhold the amount after the determination is made.

22.- Request to inspect supporting accounts &c.

(1) This section applies where a tenant, or the secretary of a recognised tenants' association, has obtained such a summary as is referred to in section 21(1) (summary of relevant costs), whether in pursuance of that section or otherwise.

(2) The tenant or the secretary with the consent of the tenant, may within six months of obtaining the summary require the landlord in writing to afford him reasonable facilities-

(a) for inspecting the accounts, receipts and other documents supporting the summary, and

(b) for taking copies or extracts from them.

(4) The landlord shall make such facilities available to the tenant or secretary for a period of two months beginning not later than one month after the request is made.

(5) The landlord shall-

(a) where such facilities are for the inspection of any documents, make them so available free of charge;

(b) where such facilities are for the taking of copies or extracts, be entitled to make them so available on payment of such reasonable charge as he may determine.

23.- Request relating to information held by superior landlord.

(1) If a request under section 21 (request for summary of relevant costs) relates in whole or in part to relevant costs incurred by or on behalf of a supervisor landlord, and the landlord to whom the request is made is not in possession of the relevant information-

(a) he shall in turn make a written request for the relevant information to the person who is his landlord (and so on, if that person is not himself the superior landlord),

(b) the superior landlord shall comply with that request within a reasonable time, and

(c) the immediate landlord shall then comply with the tenant's or secretary's request, or that part of which relates to the relevant costs incurred by or on behalf of the superior landlord, within the time allowed by section 21 or such further time, if any, as is reasonable in the circumstances.

(2) If a request under section 22 (request for facilities to inspect supporting accounts, &c.) relates to a summary of costs incurred by or on behalf of a superior landlord-

(a) the landlord to whom the request is made shall forthwith inform the tenant or secretary of that fact and of the name and address of the superior landlord, and

(b) section22 shall then apply to the superior landlord as it applies to the immediate landlord.

24 Appointment of manager by [a leasehold valuation tribunal]

(1) [A leasehold valuation tribunal] may, on an application for an order under this section, by order (whether interlocutory or final) appoint a manager to carry out in relation to any premises to which this Part applies-

(a) such functions in connection with the management of the premises, or

(b) such functions of a receiver,

or both, as [the tribunal] thinks fit.

(2) [A leasehold valuation tribunal] may only make an order under this section in the following circumstances, namely –

(a) where [the tribunal] is satisfied –

(i) that [any relevant person] either is in breach of any obligation owed by him to the tenant under his tenancy and relating to the management of the premises in question or any part of them or 9in the case of an obligation dependent on notice) would be in breach of any such obligation but for the fact that it has not been reasonably practicable for the tenant to give him the appropriate notice, and

(ii) …

(iii) that it is just and convenient to make the order in all the circumstances of the case;

[(ab) where [the tribunal] is satisfied—

(i) that unreasonable service charges have been made, or are proposed or likely to be made, and

(ii) that it is just and convenient to make the order in all the circumstances of the case;

[(aba) where the tribunal is satisfied-

(i) that unreasonable variable administration charges have been made, or are proposed or likely to be made, and

(ii) that it is just and convenient to make the order in all the circumstances of the case;]

[(abb) where the tribunal is satisfied-

(i) that there has been a failure to comply with a duty imposed by or by virtue of section 42 or 42A of this Act, and

(ii) that it is just and convenient to make the order in all the circumstances of the case;]

(ac) where [the tribunal] is satisfied-

(i) that [any relevant person] has failed to comply with any relevant provision of a code of practice approved by the Secretary of State under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993 (codes of management practice), and

(ii) that it is just and convenient to make the order in all the circumstances of the case;]

(b) where [the tribunal] is satisfied that other circumstances exist which make it just and convenient for the order to be made.

25.- Failure to comply with s.21, 22 or 23 an offence.

(1) It is a summary offence for a person to fail, without reasonable excuse, to perform a duty imposed on him by section 21, 22 or 23.

(2) A person committing such an offence is liable on conviction to a fine not exceeding level 4 on the standard scale.

27A Liability to pay service charges: jurisdiction

(1) An application may be made to a leasehold valuation tribunal for a determination whether a service charge is payable and, if it is, as to-

(a) the person by whom it is payable,

(b) the person to whom it is payable,

(c) the amount which is payable,

(d) the date at or by which it is payable, and

(e) the manner in which it is payable.

(2) Subsection (1) applies whether or not any payment has been made.

(3) An application may also be made to a leasehold valuation tribunal for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description, a service charge would be payable for the costs and, if it would, as to-

(a) the person by whom it is payable,

(b) the person to whom it is payable,

(c) the amount which is payable,

(d) the date at or by which it is payable, and

(e) the manner in which it is payable.

(7) The jurisdiction conferred on a leasehold valuation tribunal in respect of any matter by virtue of this section is in addition to any jurisdiction of a court in respect of the matter.[…]

Landlord and Tenant Act 1987 c.31

21.- Tenant's right to apply to court for appointment of manager.

(1) The tenant of a flat contained in any premises to which this Part applies may, subject to the following provisions of this Part, apply to [a leasehold valuation tribunal] for an order under section 24 appointing a manager to act in relation to those premises.

(6) An application to the court for it to exercise in relation to any premises [any jurisdiction] to appoint a receiver or manager shall not be made by a tenant (in his capacity as such) in any circumstances in which an application could be made by him for an order under section 24 appointing a manger to act in relation to those premises.