“THE Tenant HEREBY COVENANTS with the Landlord and as a separate covenant with the Commissioners as follows:- [ … ] (3) During the said term as often as necessary well and substantially to repair uphold clean and keep in repair the demised premises (including all Landlord’s fixtures thereon and additions thereto) [ … ] (7) (a) In the year 2007 and in every subsequent fifteenth year and in the year immediately preceding the expiration or sooner determination of the said term (howsoever determined) or whenever reasonably required by the Landlord to clean all the outside stonework of the demised premises (b) In the year 1996 and in every subsequent fourth year and in the year immediately preceding the expiration or sooner determination of the said term (howsoever determined) to paint with at least two coats of paint in such colours as shall be approved and such manner as shall be approved or directed by the Landlord all the outside parts of the demised premises previously or usually painted (c) In the year 2000 and in every subsequent eighth year, and in the year immediately preceding the expiration or sooner determination of the said term (howsoever determined) to paint with at least two coats of paint and to paper and polish respectively all the inside parts of the demised premises previously or usually so treated save in relation to the parts of the demised premises coloured green and green hatched black on Drawings Nos GA/-4/Z - GA/09/Z annexed hereto in respect of which the Tenant shall only be required to maintain such insideparts to an appropriate decorative standard (d) To carry out all the work mentioned in sub-clauses (a) (b) and (c) hereof with good quality materials in a workmanlike manner and to the reasonable satisfaction of the Landlord [ … ]”
“2 THE DEMISE In consideration of the rent and the covenants reserved by and contained in this Lease:- 2.1 the Landlord at the request of the Surety DEMISES to the Tenant:- 2.1.1 ALL the Demised Premises; 2.1.2 TOGETHER WITH the rights set out in Part I1 of the Schedule: and 2.1.3 EXCEPT ANDRESERVED to the Landlord as stated in Part III of the Schedule: 2.2 for the term of twenty five years from the 12thday of March 1993 (subject to determination as hereinafter provided) subject to the exceptions and reservations restrictions stipulations covenants rights reservations provisions and other matters contained imposed by or referred to in the Superior Lease; and 2.3 the Tenant PAYING during the Term:- 2.3.1 until the 13th day of April 1995 a peppercorn and thereafter the yearly rent of FIVE MILLION TWENTY FIVE- THOUSAND SEVEN HUNDRED AND EIGHTY EIGHT POUNDS (£5,025,788 ) (subject to the provisions for revision contained in Clause 6)by equal quarterly payments in advance on the usual quarter days in every year clear of all deductions whatsoever the first (or a proportionate part) of such payments in respect of the period commencing on the 14th day of April 1995 and ending on the quarter day next following to be made on the 14th day of April 1995; 2.3.2 as additional rent clear of all deductions whatsoever the monies payable by the Tenant under Clause 3.3 as from the 12th day of March 1993; 2.3.3 as additional rent clear of all deductions whatsoever any Value Added Tax payable in respect of the yearly rent referred to in Clause 2.3.1. 3 TENANT'S COVENANTS THE TENANT COVENANTS with the Landlord as follows:- [ … ] 3.3 Insurance premium and party expenses and service charge [ … ] 3.3.2 To pay to the Landlord the due proportion of the service charge and to observe and perform the Tenant's obligations relating to the service charge and services as set out in Part IV of the Schedule. [ … ] 5 LANDLORD'S COVENANTS THE LANDLORD COVENANTS with the Tenant as follows:- [ … ] 5.3 Services To use all reasonable and diligent endeavours to observe and perform the Landlord's obligations to provide the services and relating to the service charge and services as set out in Part IV of the Schedule hereto in accordance with the principles of good estate management cost effectively and reasonably efficiently. 5.4 Superior Lease obligations The Landlord shall pay the rent reserved by and observe and perform those covenants on the part of the tenant contained in the Superior Lease concerning repair and maintenance of the Demised Premises and (insofar as it affects the Demised Premises) the Building so far as the same are the obligation of the Landlord pursuant to Clause 5.3 and concerning insurance of the Demised Premises and (insofar as it affects the Demised Premises) the Building. [ … ] Schedule Part I Description of the Demised Premises All those premises forming part of the lower basement (levels -4and -3) basement (level -2) lower ground (level -1) ground (level 0) first second third fourth fifth sixth seventh and eighth floors of the Building shown for identification purposes by red edging on Plan Numbers 2-14 and the Basement Mezzanine Area. [ … ] Part IV Service Charge Provisions Section 1 1 Tenant's liability to pay service charge 1.1 The Tenant shall pay to the Landlord by way of additional rent the due proportion (as defined below) of the total cost (including Value Added Tax) ("the service charge") to the Landlord in any service charge period beginning or ending during the Term of the services and expenses specified in this Part of the Schedule and defraying the costs and expenses relating and incidental to such services.
“Notwithstanding Clause 3.1 hereof the Tenant shall be entitled to deduct or set off from the yearly rent reserved by this Lease (and any value added tax on rent) any monies due to the Tenant pursuant to Clause 2.2 of the Deed of Variation dated21/12/2005 and made between (1) The Criterion Isle of Man Unit Trust (2) McKinsey & Company, Inc. United Kingdom and (3) McKinsey & Company, Inc, (plus any value added tax thereon) in the event and to the extent that the Landlord shall have failed to comply with its obligation to pay to the Tenant such monies on the due date.”
“8. The sums demanded by the claimant do not represent a fair proportion of the total costs it has incurred (or might in the future incur) in providing services to the building. [ … ] (2) up to and including the service charge year ended June 2013, the claimant apportioned to the total costs it had incurred in providing services to the building by allocating those costs between six schedules. Each of the tenants in the building contributed a varying percentage of the total costs of each schedule. The defendants believe that those percentages were based upon the internal floor areas of the units occupied by each of the contributing tenants. [ … ] (5) The percentages applied by Orbit to each schedule do not reflect the respective internal floor areas of the units within the building occupied by each contributing tenant. (6) Despite repeated requests, the claimant and its agent have failed or refused to reconsider this method of apportionment but have instead maintained that it reflects a long established practice and is justified on this basis. The claimant has also indicated that it does not consider it necessary, practical or in the interests of good estate management to adopt a more sophisticated or accurate method of apportionment. (7) The claimant is thereby in breach of the requirements imposed by paragraph 2 of the schedule to the lease. (8) In the circumstances the defendants instructed Property Solutions (UK) Ltd (“PSL”) to review the claimant’s method of apportionment and to devise an alternative method which more accurately reflects the provisions of the lease. PSL’s proposed method involves allocating costs between four schedules (whole building, PPM M&E, lifts 1, 2 & 9 and Goods Lift) and then devising percentages for each tenant contributing to those schedules by reference to the actual floor area of each unit. (9) Applying PSL’s methodology to the alleged total costs of providing the services … the demands made by the claimant overcharge the defendants by at least the sums set out in the table below: [total from July 2015 to June 2019:£215,631.72 ]. (10) in the circumstances, the claimant is required to prove that the sums demanded in respect of each service charge year from and including the year ended30 June 2014 at the expiry of the current lease represented due proportion as that term is defined in paragraph 2 of part IV of the schedule to the lease and/or the current lease. …”
“10. For all the reasons set out herein, paragraph 8 is denied. The claimant has only ever demanded from the defendants the due (and hence a fair) portion of the total costs in the relevant service charge periods of the services and expenses specified in sections 2 and 3 of part IV of the schedule to the lease and defraying the costs and expenses relating and incidental thereto. [ … ] 12. As to paragraph 8(2): 12.1. It is admitted that, in relation to the service charge periods ended about June 2003 – June 2013, the claimant’s predecessor in title (as opposed to the claimant) apportioned the total of all service charge costs and expenses across six schedules … [ … ] 12.4. The claimant is unable to admit or deny the defendant’s belief in the final sentence of paragraph 8(2). However, it is admitted that the six schedule apportionment was based upon the internal floor areas of each lettable unit (apart from the theatre, in respect of which an 80% discount was applied by reason of the fact that, apart from a small ground floor ticket office, the entirety of the demised space was (and is) laid out over four basement levels). [ … ] 15. Paragraph 8(5) is denied. The apportionment exercise carried out by Orbit across the two schedules did reflect (and continues to reflect) the internal floor areas of each lettable unit within the building, albeit in the case of schedule two disregarding Lillywhite’s demise. Thus: 15.1. The physical extent of the defendant’s demise represents 54.42% of the total internal floor area of the building. 15.2. Hence, the figure of 54.42% is used in (the new) schedule one (just as it was used in the previous schedule one). 15.3. The figure of 78.23% in (the new) schedule two represents 54.42% of the total internal floor area of the building, disregarding the internal floor area of Lillywhite’s demise, i.e. 54.42% of 69.56%. 16. As to paragraph 8(6): 16.1. From time to time since 2015, the defendants have requested the claimant to justify the method of apportionment described in paragraph 14 above. The claimant has repeatedly and fully complied with these requests. 16.2. It is denied that the claimant has refused to reconsider the method of apportionment. … 17. Paragraph 8(7) is denied. The claimant has not acted in breach of the requirements imposed by paragraph 2 of section 1 of part four of the lease, either as alleged or at all … 18. As to paragraph 8(8): 18.1. It is admitted that the defendants instructed PSL to review the claimant’s method of apportionment and to devise an alternative method. 18.2. It is admitted that PSL’s proposed alternative methodology is as described by the defendants. 18.3. It is denied that this proposed alternative methodology: (i) “more accurately” reflects the provisions of the lease; or (ii) if implemented, would result in the first defendant paying the due (or an otherwise fair) proportion of the service charge under the lease. 19. As to paragraph 8(9): 19.1. It is denied that the claimant has overcharged the defendants in respect of any service charge (or any item comprised in it), either as alleged or at all. [ … ] 20. As to the first sentence of paragraph 8(10): 20.1. It is denied (in so far as the same is alleged) that the claimant has the legal burden of proving that the (or any of the) sums demanded and claimed herein represent the “due proportion” of the service charges for the relevant service charge periods. 20.2. Without prejudice to the foregoing, the sums demanded and claimed herein represent precisely that. [ … ]”
“4. As regards paragraph 12 the defendants are unable to admit or deny, as stated in paragraph 12.4, whether any discount was applied to the theatre, the amount of that discount or why the claimant and/its predecessor in title decided to apply that discount and the claimant is required to prove the same. [ … ] 6. As regards paragraph 15, no admissions are made as to whether the percentage of the service charge costs apportioned to the defendant in the two schedules accurately reflects the internal floor areas of the parts of the building demised to the defendants. … The claimant is accordingly required to prove (i) which measurements of the internal floor areas of the lettable units and the building it relied upon in calculating the percentage is set out in paragraph 15 and (ii) that those measurements are accurate. … 7. As to paragraph 16, (1) It is denied, as stated in paragraph 16.1 that the claimant has properly justified the method of apportionment applied before the commencement of these proceedings … (2) The defendants are unable to admit or deny whether, as stated in paragraph 16.2, the claimant has been willing to listen to and take account of any and all legitimate concerns which the defendants might have regarding the building … 8. As regards paragraph 17: (1) it is denied, as stated in paragraph 17.1, that the facts and matters set out in paragraph 14 demonstrate that the claimant’s predecessor in title, whether via Orbit or otherwise, properly took into account the use made by, and the benefit received from, the services and expenses by each tenant of a lettable unit in determining the proportion of the service charge to demand from the defendants; (2) As regards paragraph 17.3, the claimant has failed to explain how it has arrived at the range of percentages specified therein and the defendants cannot, therefore, plead further thereto. … 9. As to paragraph 18 PSL’s proposed method of apportionment is fair and accurate whereas the claimant’s is not because PSL’s method (i) uses accurate measurements for the internal floor areas; and (ii) by adopting four schedules instead of two takes proper account of the extent to which the tenants of each of the Lettable Units benefits from the services. 10. As to paragraph 19, the figures set out in the table at paragraph 8(9) of the amended defence have been calculated by re-apportioning the service charge costs and expenditure identified in the service charge accounts for each year in question between the four schedules proposed by PSL … 11. As to paragraph 20, the claimant asserts that the defendants are liable to pay the sums set out in the particulars of claim which are said to represent service charges due under the lease. In the circumstances the claimant does bear the legal burden of proving that the sums claimed represent a due proportion of the total cost to the claimant (or its successor) of the services and expenses specified in sections 2 and 4 of part IV of the schedule and defraying the costs and expenses relating and incidental to such services.”
“During argument on the issue of garden maintenance, it was indicated that registrars of county courts and those practising in this field were finding difficulty in dealing with the burden of proof when considering applications for declarations under the Housing Acts. Having examined those statutory provisions, we can find no reason for suggesting that there is any presumption for or against a finding of reasonableness of standard or of costs. The court will reach its conclusion on the whole of the evidence. If the normal rules of pleadings are met, there should be no difficulty. The landlord in making his claims for maintenance contributions will no doubt succeed, unless a defence is served saying that the standard or the costs are unreasonable. The tenant in such a pleading will need to specify the item complained of and the general nature - but not the evidence - of his case. No doubt discovery will need to be ordered at an early stage, but there should be no problem in each side knowing the case it has to meet, providing that the court maintains a firm hold over its procedures. If the tenant gives evidence establishing a prima facie case, then it will be for the landlord to meet those allegations and ultimately the court will reach its decisions. The question of a reasonable charge arises in claims for a quantum meruit, and the courts over the years have not been hampered by problems about the burden of proof.”
“28. Much has changed since the Court of Appeal’s decision in Yorkbrook v Batten but one important principle remains applicable, namely that it is for the party disputing the reasonableness of sums claimed to establish a prima facie case. Where, as in this case, the sums claimed do not appear unreasonable and there is only very limited evidence that the same services could have been provided more cheaply, the FTT is not required to adopt a sceptical approach. In this case it might quite reasonably have taken the view that Mr Adam had failed to establish any ground for thinking the sums claimed had not been incurred or were not reasonable, which would have left only the question whether any item of expenditure was outside the charging provisions.”
“Parliament, when enacting safety legislation, has various choices open to it. It may impose an absolute duty to take precautions, or to produce a condition of safety, or it may impose a qualified duty. In this subsection of the Factories Act it has imposed a qualified duty—there is no dispute about this, only as to the nature of the qualification. When a qualified duty is imposed, again there are alternatives. The qualification may be made an integral part of the definition: or the duty may be stated in unqualified terms followed by a proviso, exemption or exception which, if satisfied or demonstrated, takes the case out of the section. In either case—and I shall return to this point—there is a qualification of the duty. Each of these types of legislation can be exemplified: each has its appropriate terminology. I shall not repeat the examples given by my noble and learned friend, Lord Reid. Our task must be to ascertain which choice has been made and, if we find that language appropriate to one alternative has been used, we should not readily be persuaded that the real intention was in favour of the other. These are well-known tools, and Parliament's selection should be assumed to be deliberate and intelligent. The language used in section 29 (1) of the Factories Act, 1961, has been acutely analysed in the Inner House. Their Lordships, unanimously af firming the Lord Ordinary, found that the qualification of reasonable practicability is ‘woven into the verb.’ I find this analysis convincing and I shall not expand the argument.”
“The true distinction is between those cases where the mode of ascertaining the price is an essential term of the contract, and those cases where the mode of ascertainment, although indicated in the contract, is subsidiary and nonessential.”
“41. I accept Mr Seitler’s submission that the lease does not require as a precondition of liability to pay the Estimated Service Charge that the estimate must have been prepared by reference to a budget which follows strictly the categories of expenditure listed as Service Expenditure in the Ninth Schedule and excludes from consideration any other items. The sum itself is in the discretion of the Management Company. If the Company considers that the budget it has prepared for its own activities in the forthcoming year is a suitable approximation of its likely expenditure on service charge items in the same period, I can see no reason to interpret the lease as requiring some process of stripping out items of expenditure which may not fall strictly within Service Expenditure. 42. There was no allegation in this case of bad faith or deliberate overcharging by the Management Company and the FTT made a point of stating that nobody had “acted in an untoward manner”
“The certificate shall contain a summary of the lessor’s said expenses and outgoings incurred by the lessor during the lessor’s financial year to which it relates together with a summary of the relevant details and figures forming the basis of the service charge and other charges hereinbefore covenanted to be paid and the certificate … shall be conclusive evidence.”
“The expression ‘the expenses and outgoings incurred by the lessor’ as hereinbefore used shall be deemed to include not only those expenses, outgoings and other expenditure hereinbefore described which have been actually disbursed, incurred or made by the lessor during the year in question but also such reasonable part of all such expenses, outgoings and other expenditure hereinbefore described which are of a periodically recurring nature (whether recurring by regular or irregular periods) whenever disbursed, incurred or made and whether prior to the commencement of the said term or otherwise including a sum or sums of money by way of reasonable provision for anticipated expenditure in respect thereof as the lessor or its accountants or managing agents (as the case may be) may in their discretion allocate to the year in question as being fair and reasonable in the circumstances and relates pro rata to the demised premises”
“A Sinking Fund should have been established many years ago to deal with all of the major works which are now so urgently required at the Building; regrettably, for some reason that we are not aware of, this was never done. Consequently, when the major BMS and other works were required a few years ago, large charges needed to be incorporated into the budgets for 2010 and 2011 to provide funds to cover these costs. However, when the budget was prepared for 2012 and 2013, in error, no such provision was included in the works still remaining to be carried out in the immediate future. When we initially submitted the accounts for 2012 and 2013, we attempted to rectify this by incorporating provisions for a further£1M to be raised (£500K in each year) but these charges were subsequently rejected by Lilywhites on the grounds that they had not been included within the budgets. The Landlord agreed to remove those provisions for that reason and agreement was reached with Lilywhites for the accounts to be revised and to push those provisions forward into 2014 and 2015; and this is what we have done. Upon receipt of the balancing charges for 2014 from your client, we will then be in funds to carry out those items scheduled within the 20 year PPM for this service charge year and the same will apply for subsequent years. Once the initial major works are completed over the next few years, a proper Sinking Fund will be put in place to cover the long-term requirements and those advance funds will be properly held in a separate, interest-bearing account, and accounted for annually to the tenants.”
“As previously stated, the service charge with holdings applied referred to the Reserve/Sinking fund(s) and not the underlying service charge. If our client is to make any contribution towards either type of fund, they must be satisfied that the funds are being administered in accordance with the Lease and principles of good estate management. Please will you therefore be of assistance with the following points: 1) Please clearly specify what types of fund are being administered and what works fall under each type. a. A fund has been defined as a Reserve in all certificates up to June 2013 and as a Sinking fund thereafter. 2) Please clearly specify the purpose of the fund/basis of sums collected. a. We understand the 20 year plan in some way supports the sums demanded. However the timing and amounts demanded do not appear to coincide with the plan. b. It remains unclear which items within the 20 year plan are outstanding/intended. 3) Confirm the projected dates for expenditure of sums collected. a. The lease provisions do not state that any fund relates to works beyond term. It follows, particularly in respect of the Reserve fund (but not exclusively), that the sums relate to projected expenditure during the term. 4. The accounting and administration of the fund(s) need to be agreed. a. Confirm the funds are now held in a separate, interest-bearing account (as required by the Lease). b. Arrange for the funds to be held in trust to the occupiers that contribute towards it. c. There is a need to validate McKinsey’s contribution towards each item in terms of apportionment (historical and ongoing).”
“1) Please clearly specify what types of fund are being administered and what works fall under each type. a. A fund has been defined as a Reserve in all certificates up to June 2013 and as a Sinking fund thereafter. Under the strict interpretation of RICS definitions, it is not a Sinking Fund….merely Reserves to cover essential major works in the forthcoming year to enable those works to be carried out in accordance with the timetable laid down in the 20 year PMP.2) Please clearly specify the purpose of the fund/basis of sums collected. a. We understand the 20 year plan in some way supports the sums demanded. However the timing and amounts demanded do not appear to coincide with the plan. The sums reserved in the accounts for 2014 and Budget for 2015 are exactly the amounts required to meet the costs planned under the PMP for the ensuing service charge year. b. It remains unclear which items within the 20 year plan are outstanding/intended. The PMP clearly shows which items are planned for each service charge year… what do you find “unclear?”3) Confirm the projected dates for expenditure of sums collected. a. The lease provisions do not state that any fund relates to works beyond term. It follows, particularly in respect of the Reserve fund (but not exclusively), that the sums relate to projected expenditure during the term. Your client is not being charged for any works that are to be carried out beyond the term of their lease. 4. The accounting and administration of the fund(s) need to be agreed. a. Confirm the funds are now held in a separate, interest-bearing account (as required by the Lease). I can confirm that upon receipt of the funds from your client, they will be placed in a separate interest-bearing account, albeit they will not be there for long……your client’s continued delay in settling their liabilities under their Lease is seriously delaying these urgent works. b. Arrange for the funds to be held in trust to the occupiers that contribute towards it. All service charge funds, whether general costs or major works, are held in trust for the occupiers. c. There is a need to validate McKinsey’s contribution towards each item in terms of apportionment (historical and ongoing). Already covered above.”
“39. … Taking 2014 as an example, C was perfectly entitled to include£65k and£535k in the estimated service charge costs for the y/e 30.6.2015, when the money was intended to be spent. In that case, D1 would have had to contribute to those costs by way of advance payments over year 2. But if C did not then do the works, the end of year service charge statement would have excluded the works and D1 would have received a credit or repayment for the on account payments. C was not entitled to allocate the costs to the previous s/c year and call them ‘sinking fund provision’ and so get around the provisions for on account payments and balancing payments/credits in the Lease. 40. C could have established a sinking fund, or a reserve fund, or both. In that case, C would need to have estimated future costs it considered would be incurred – not costs for the current service charge year, but future costs. It would then have needed to divide those costs over the period until it was likely that they would be expended, and claim an equal contribution each year to those anticipated future costs. The service charge accounts would need to have provided sufficient information to ensure that D1 understood what the estimated future costs were and how the annual contribution to them was calculated.”
“(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. (2) If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness. (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. (4) If the reason for the witness’s absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”
“As the lifts are demonstrably at the end of life and in generally poor condition, to encompass as far as possible, countering obsolescence and upgrading to modern safety and accessible standards, we recommend a major modernisation (or complete renewal) of the installations to encompass renewal of the drive gear, bidirectional safety gear, controllers, wiring, entrances, door operators, passenger interfaces and a full bespoke car reline. These works should be scheduled without delay…”
“3.1.3. Notwithstanding clause 3.1.1 hereof the Tenant shall be entitled to deduct or set off from the yearly rent reserved by this Lease … any monies due to the Tenant pursuant to clause 2.2 of [the deed of variation] in the event and to the extent that the Landlord shall have failed to comply with its obligation to pay the Tenant such monies on the due date”