Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd

Where a commercial lease makes the landlord’s certificate conclusive as to the total cost of specified services and the tenant’s sum payable, the certificate ordinarily determines both the amount incurred and whether the services or expenses fall within the charge. This includes their categorisation under the lease and whether they are excluded costs. The stated exceptions for manifest or mathematical error and fraud apply. A court should not read down the clause merely because it makes the landlord judge its own claim or appears imprudent for the tenant. An expert-determination provision dealing with the tenant’s proportion does not imply that the scope of the charge remains for the court. The appeal was allowed and summary judgment entered for the landlord.

Sara & Hossein Asset Holdings Limited, the landlord, claimed unpaid service charges from Blacks Outdoor Retail Limited under commercial leases dated 2013 and 2018. The leases provided that the landlord’s certificate of the total cost and the sum payable was conclusive, subject to manifest or mathematical error and fraud.

Blacks challenged the charges on the basis that some works and expenses were outside the lease, unnecessary, or otherwise excluded, and brought a counterclaim. A Deputy Master dismissed the landlord’s application for summary judgment. The High Court dismissed the landlord’s appeal, holding that the certificate was conclusive as to the amount of costs incurred but not as to whether those costs fell within the service-charge provisions. The central issue on the second appeal was whether the certificate also conclusively determined the categorisation and contractual scope of the charged services and expenses.

Disposition. Lord Justice David Richards gave the leading judgment. Lord Justices Newey and Arnold agreed. The appeal was allowed, and Sara & Hossein Asset Holdings Limited was held entitled to summary judgment for the service charges claimed. The question whether Blacks’ counterclaim could proceed was not argued in detail; if the parties could not agree, that issue was remitted to the Chancery Division.

1. Construction of the certification clause. The words making the landlord’s certificate conclusive as to the amount of the total cost and the sum payable covered at least the amount of total cost and the tenant’s proportion. The total cost was a single figure comprising both the identification of services and expenses falling within the charge and the costs incurred in providing them. The certificate was therefore conclusive as to both matters, including whether costs were Excluded Costs, subject to manifest or mathematical error and fraud. Separating those elements would require express wording or a necessary implication, neither of which existed.
2. Analogy with authority. The reasoning in Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643, cited with approval in North Shore Ventures Ltd v Anstead Holdings Inc [2011] EWCA Civ 230, [2012] Ch 31, illustrated that certifying an amount necessarily involves deciding which items make up that amount.
3. Context and commercial fairness. The concern that the landlord would be judge in its own cause could not justify departing from the clause’s ordinary meaning. Contractual construction identifies what the parties agreed, not what the court considers preferable, as stated in Arnold v Britton [2015] UKSC 36, [2015] AC 1619. The clause could rationally have been intended to avoid protracted disputes about individual service-charge items. The separate expert-determination provision concerning the tenant’s proportion did not imply that the categorisation of services and expenses was reserved to the court.

• Court of Appeal (Civil Division): Allowed S&H’s second appeal and held that it was entitled to summary judgment for the service charges claimed.
• High Court of Justice, Business and Property Courts: Kelyn Bacon QC, sitting as a Deputy High Court Judge, dismissed S&H’s appeal from the summary judgment ruling.
• Deputy Master Bartlett: Dismissed S&H’s application for summary judgment.