Cases - Arnold v Britton and others

Record details

Name
Arnold v Britton and others
Date
[2015]
Citation
UKSC 36
Legislation

Commonhold and Leasehold Reform Act 2002

Keywords
Service charges – long leases – increases to the service charge – interpretation
Summary

A holiday park had 99 chalets on its site and 21 of the lessees held 99 year leases which had been granted between 1977 and 1991. Save for some minor variations, each lease contained a covenant by the lessee to pay an annual service charge (clause 3(2)).  Under clause 3(2), the appellant lessees were obliged to pay 'a proportionate part' of the costs of providing the services; namely £90 in the first year, rising by 10% each year thereafter. The appellants argued that clause 3(2) actually meant that they had to pay a fair proportion of the costs of providing the services, up to a maximum of £90 in the first year, that maximum figure rising by 10% each year thereafter.

In dismissing the appeal, Lord Neuberger highlighted 7 factors to consider in respect of statutory interpretation:

  1. Commercial common sense and surrounding circumstances should not be invoked to undervalue the importance of the language of the provision which was to be construed.
  2. The less clear the language used in a contract, the more readily the court can depart from its natural meaning. It does not, however, justify the court in embarking on an exercise of searching for, or constructing, drafting infelicities in order to facilitate a departure from the natural meaning.
  3. Commercial common sense was not to be invoked retrospectively. Commercial common sense was only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date the contract was made.
  4. The purpose of interpretation was to identify what the parties had agreed, not what the court thinks they should have agreed.
  5. When interpreting a contractual provision, one can only take into account facts or circumstances that existed at the time the contract was made, and which were known or reasonably available to both parties.
  6. An event may occur that, the language of the contract suggests, was plainly not contemplated by the parties. If, however, it was clear what the parties would have intended, the court will give effect to that intention.
  7. Service charge clauses were not subject to any special rule of interpretation.