Cadogan & Anor v 27/29 Sloane Gardens Ltd & Anor

Permission to appeal from a specialist tribunal is governed by the ordinary test where the statutory second-appeal regime does not apply. The applicant must show a real prospect of success or another compelling reason for the appeal to be heard. Lease construction depends on the wording of the documents read together. An obligation to provide a caretaker’s accommodation rent-free does not, without more, prohibit recovery from underlessees of a contribution equivalent to the market rent of that accommodation. A service-charge definition extending beyond expenditure and expressly including a market-rent equivalent for rent-free accommodation can authorise that recovery.

The appellants were the freeholders. The second respondent held an intermediate lease and had underlet flats to the nominee purchaser, 27/29 Sloane Gardens Limited. The Leasehold Valuation Tribunal held that the service-charge provisions permitted recovery from the underlessees of a sum equivalent to the market rent of the caretaker’s flat. The Lands Tribunal, in a decision given on 7 April 2006, upheld that conclusion.

The appellants renewed an application for permission to appeal. The central issues were whether the underlease authorised recovery of the notional market rent and whether that recovery was inconsistent with the headlease’s requirement that the caretaker occupy the flat rent-free.

1. Permission to appeal. The Court of Appeal refused permission. Although the appeal from the Lands Tribunal was, in a sense, a second appeal, section 55 of the Access to Justice Act 1999 did not apply because the appeal was not from the County Court or High Court. The ordinary permission test therefore applied: a real prospect of success or some other compelling reason why the appeal should be heard. Neither requirement was satisfied.
2. Headlease. Clause XII(c) required the headlessee to provide a full-time caretaker who would occupy the caretaker’s flat rent-free as a licensee on a service basis. Clause XIX(d) regulated underlettings and required proportionate contribution covenants. Read together, those clauses did not prohibit the headlessee from recovering a contribution towards the market rent foregone in respect of the caretaker’s flat. The headlease formed part of the context for construing the underlease, but it did not make the relevant underlease provision inconsistent with the headlease.
3. Underlease. The Fifth Schedule, paragraph 1(1), defined service-charge expenditure broadly. It covered the total expenditure under the underlease and all other costs, expenses, outgoings and matters connected with the building. Paragraph 1(1)(iv) expressly included an annual sum equivalent to the market rent of accommodation provided rent-free. That wording could not sensibly be explained by a hypothetical later variation of the headlease removing the rent-free obligation. The proper construction entitled the headlessee to recover the notional market rent through the service charge.
4. Earlier decisions. Decisions concerning differently worded leases were of limited assistance beyond their general propositions. The wording considered in McHale differed materially. There was consequently no real prospect of success and no other compelling reason for the appeal to be heard. Permission to appeal was refused.

• Court of Appeal (Civil Division): On 26 September 2006, refused the renewed application for permission to appeal.
• Lands Tribunal: His Honour Michael Rich QC upheld the Leasehold Valuation Tribunal’s conclusion that the underlease authorised recovery of the caretaker’s accommodation cost by service charge.
• Leasehold Valuation Tribunal: Held that the headlessee could recover from the underlessees a sum equivalent to the market rent of the caretaker’s flat.