Triplark Limited v Martin Howard and 55 Ors

A service-charge clause focused on management does not ordinarily authorise recovery of litigation costs. The absence of an express reference to legal costs is not automatically decisive, but the contractual language must clearly bring the expenditure within the clause. Litigation is a step beyond ordinary management and is not ordinarily ancillary to it. Legal advice may be recoverable where the clause clearly permits it and the advice is genuinely general and non-contentious. The construction exercise remains one of ordinary contractual interpretation, applying the documentary, factual and commercial context without any special restrictive rule for service-charge clauses.

Leaseholders applied to the First-tier Tribunal under section 27 A of the Landlord and Tenant Act 1985 for determinations concerning service charges at Northwood Hall. The appeal concerned only the landlord’s attempt to recover £55,492.23 in legal costs under clause 5(11) of the leases.

The First-tier Tribunal held that clause 5(11), which concerned the management of the building, did not permit recovery of legal costs, including routine legal advice. The landlord appealed, arguing that the clause covered general legal advice, advice concerning rent and service-charge recovery, litigation costs, and proceedings against third parties. The central issue was whether those costs fell within the words concerning proper fees, charges, expenses and ancillary costs connected with management.

The appeal was dismissed. The First-tier Tribunal had correctly concluded that none of the disputed legal costs fell within clause 5(11).

1. The clause was to be construed in accordance with the ordinary contractual approach stated in Arnold v Britton [2015] UKSC 36. There was no special rule requiring service-charge clauses to be construed restrictively, although general words should not be extended to expenditure which does not clearly belong within them.
2. The primary focus of clause 5(11) was management of the building. Management was not confined to routine matters, and the clause was not limited to computing and collecting rent. The words concerning ancillary costs were more naturally connected with management as a whole, although their scope was grammatically ambiguous.
3. Those words could not cover litigation. Litigation was not ancillary to management: it was a step beyond management. The clause therefore did not cover proceedings against leaseholders to recover rent or service charges, advice specifically connected with such recovery, or proceedings against third parties. The conclusions in Sella House Ltd v Mears [1989] 21 HLR 14, No. 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2021] EWCA Civ 1119, and Kensquare Limited v Boakye [2021] EWCA Civ 1725 supported that conclusion.
4. The possibility remained that truly general and non-contentious legal advice concerning management could be recoverable under sufficiently clear wording. However, none of the disputed items was shown to fall within that category. The costs arose from the continuing disputes and litigation concerning the building.
5. Clauses 5(12) and 3(7), which expressly contemplated enforcement and solicitors’ costs in particular contexts, indicated that the parties were capable of using clear language when legal costs were intended to be recoverable. That was not conclusive, but reinforced the construction of clause 5(11).

• First-tier Tribunal (Property Chamber): by decision dated 24 May 2024, held that clause 5(11) did not permit recovery of the landlord’s legal costs through the service charge.
• Upper Tribunal (Lands Chamber): dismissed the landlord’s appeal and upheld the First-tier Tribunal’s decision.