Wembley National Stadium Ltd v Wembley (London) Ltd & Ors

A lessee who knows that the reversion has been assigned but continues to treat the former lessor as landlord, while receiving services from it, may be estopped by convention from denying that relationship. The absence of invoices does not necessarily defeat the estoppel.

On construction of the lease, properly incurred in-house staff costs and related management overheads may fall within a broad definition of expenditure. Advance payments may remain payable on account of a contingent service-charge liability, but the lessor must still quantify its claims and cannot perpetuate payments beyond what is due. Qualified declarations may be granted even where particular items remain fact-sensitive.

Wembley National Stadium Ltd acquired the old stadium and a long lease of parking and access rights from Wembley (London) Ltd. Wembley (London) Ltd later transferred the reversion to companies holding it as nominee and trustee for Wembley (London) Ltd, while continuing to provide services.

Wembley National Stadium Ltd disputed liability for service charges, in-house costs and quarterly advance payments. It also challenged declarations made by Sir Andrew Morritt, Chancellor, on 4 April 2007, concerning the effect of the assignment, estoppel by convention, abandonment and the form of the declarations.

The central issue was whether any proposed ground of appeal was arguable.

1. Permission refused. The Court of Appeal found no arguable basis for challenging the Chancellor’s conclusions.
2. Wembley National Stadium Ltd knew of the assignment but continued to treat Wembley (London) Ltd as lessor, and Wembley (London) Ltd continued to provide the services. The factual finding, based on the oral evidence, established an estoppel by convention preventing denial that Wembley (London) Ltd was the lessor to whom service payments were due. The absence of accounts or invoices did not alter that conclusion. The Court therefore did not need to determine the underlying construction issues under the Landlord and Tenant Covenants Act 1995. Hughes LJ agreed, although he noted that the opening words of clause 4 might otherwise have raised an arguable point.
3. Whether in-house staff costs and management overheads were recoverable was a matter of lease construction. The broad definition of expenditure, qualified by the requirement that costs be properly incurred in providing the lessor’s services, was capable of including those items. The authorities cited on service charges did not assist because the issue depended on the wording of this lease.
4. The obligation to make advance payments preceded, and was not dependent upon, preparation of the annual expenditure account. The previous payments could be treated as advance payments despite their label. However, Hughes LJ emphasised that the lessor’s obligation under clause 7.2 to quantify claims remained extant, so the mechanism could not perpetuate liability for sums exceeding the service charge properly due.
5. There was no contractual abandonment of the earlier service-charge claims. Even an indication that a claim would not be pursued could be withdrawn, subject to case-management control and the trial judge’s decision. The abuse-of-process argument based on Henderson v Henderson, as applied in Johnson v Gore Wood & Co [2002] AC 1, therefore disclosed no arguable error.
6. Declarations could properly be granted although they did not resolve every future dispute, because they were qualified by the requirement that expenditure be properly incurred. The discretionary decision to grant them disclosed no ground for appellate interference. Hughes LJ added that the real dispute, concerning quantum, appeared suitable for arbitration.

• Court of Appeal (Civil Division): The renewed application for permission to appeal was refused. [2007] EWCA Civ 1071
• High Court (Chancery Division): Sir Andrew Morritt, Chancellor, gave judgment on 4 April 2007, making declarations concerning the lessor’s status, recoverability of expenditure and advance payments. The citation was not stated in the judgment.