Supreme Court Finds Service Charge Certificate Not Conclusive On Liability (Sara & Hossein Asset Holdings Ltd (a Company Incorporated In The Brit-ish Virgin Islands) V Blacks Outdoor Retail Ltd)

• Law Firm: Gatehouse Chambers
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Real Estate, Landlord & Tenant - Leases
• Author: Mr Ashley Allen
• Published date: 27 January 2023

The Supreme Court has handed down its decision in Sara & Hossein Asset Holdings Ltd (a company incorporated in the British Virgin Islands) v Blacks Outdoor Retail Ltd [2023] UKSC 2. In a majority judgment given by Lord Hamblen, the Supreme Court dismissed appeal of Blacks Outdoor Retail Ltd (Blacks) against the grant of summary judgment, but noted that this does not preclude the possibility of Blacks pursuing a counterclaim in the High Court for the underlying liability for disputed service charge payments. Morayo Fagborun Bennett and Brie Stevens-Hoare KC, barristers at Gatehouse Chambers, and Usman Roohani, barrister at 4 New Square, appeared on behalf of the Appellant and provide comment on the judgment.

Sara & Hossein Asset Holdings Ltd (a company incorporated in the British Virgin Islands) v Blacks Outdoor Retail Ltd [2023] UKSC 2

Comment

Morayo Fagborun Bennett, Brie Stevens-Hoare KC and Usman Roohani (4 New Square)

This important case cuts across property, commercial and other disputes concerned with certification and conclusiveness clauses. The clause in this commercial lease, requiring a tenant to pay service charge as certified by its landlord, is one in common form. The Supreme Court rejected the startling conclusion reached by the Court of Appeal, whereby a tenant, once a certificate as to its liability had been provided by the landlord, would never be able to argue that the landlord had incorrectly included an expressly 'excluded cost', say, for improvements or works arising from the landlord's own negligence.

The decision provides much needed clarity on the interplay between the set-off provisions and certification provisions commonly found within leases and other commercial agreements. Crucially, it also clarifies the scope of the manifest error exception, often found within such agreements. The decision will be welcomed by those acting for tenants and will hopefully result in parties avoiding costly litigation, as some appropriate balance has been restored.

As now permitted by the Supreme Court, Blacks intends to pursue a counterclaim challenging (and thereby seeking to recover) the service charge that it has paid, on various grounds including (i) that certain works were not repair works within the meaning of the relevant repairing covenants, (ii) that the cost of certain works was increased by past failures on the part of the landlord to keep the premises in good repair in breach of the landlord's covenants and (iii) that certain costs...