Success in High Value Commercial Service Charge Dispute: Criterion Buildings Ltd v McKinsey & Company Inc [2021] EWHC 216 (Ch)


His Honour Judge Paul Matthews (sitting as a High Court Judge) has handed down his judgment in Criterion Buildings Ltd v (1) McKinsey & Company Inc (United Kingdom) & (2) McKinsey & Company Inc [2021] EWHC 216 (Ch).

The Claimant landlord sought £2.3 million plus interest in respect of unpaid service charges due under commercial leases of flagship premises at One Jermyn Street. At trial, the claim was disputed on four main bases: (1) whether the Landlord had apportioned the service charges due between the various tenants of the Building in accordance with the Lease; (2) whether the Claimant was entitled to build up and maintain a sinking fund under the Lease; (3) whether works to the Goods Lifts were premature; (4) set off.

The Defendant tenant and guarantor failed on all the points they raised by way of defence and judgment was entered for the Claimant in the full amount claimed.

One of the particularly interesting aspects of the judgment relates to a landlord’s decision-making power when apportioning service charges between tenants. Under the lease in this case, the “due proportion” of the service charge payable by the tenant was “a fair proportion to be determined… by the Landlord…” HHJ Matthews accepted the landlord’s submission that the question of what amounted to a “fair” proportion was one for the landlord not the Court. In other words, fairness in this context is to be assessed by reference to a subjective standard, albeit subject to a rationality requirement and an implied term pursuant to Braganza v BP Shipping Ltd [2015] 1 WLR 1661.

Nicholas Trompeter and Alice Hawker (instructed by Gurpreet Sanghera of Simkins LLP) acted for the successful Claimant.

The full judgment can be found here.

Alice has discussed the case with Estates Gazettes on their ‘On the Case Podcast’ which can be listened to here.