UK: England and Wales: more Morshead Mansions litigation

The recent Court of Appeal decision Morshead Mansions Ltd v Di Marco [2008] EWCA Civ 1371 illustrates the interaction between company law principles and property law. The company (Morshead) was formed to manage a block of flats in London (or, to quote from the company's website, "perhaps the premier mansion block in Maida Vale"). The lessees of the flats were shareholders in Morshead, which owned the freehold.

The company's articles of association gave the directors the power to establish reserves and funds, to which members were obliged to contribute in terms decided by an ordinary resolution of the members in general meeting. Under this provision the company claimed over £ 4,000 from Mr Di Marco. Mr Di Marco claimed that this was a service charge within S. 18 of the Landlord and Tenant Act 1985 and therefore subject to statutory limitations. 

The Court of Appeal held that the company was entitled to claim the sum demanded, although it was not required to consider the S. 18 arguments raised by Mr Di Marco. Mummery LJ stated that it was important to remember the important legal distinction between a tenant’s liability to the landlord under a lease and the tenant’s liability qua member of a company. There were two relationships, giving rise to different legal obligations, and a defence to one claim would not necessarily be available as a defence to another legally separate claim.

Notes:

[1] The decision has been noted by the ICLR as part of its WLR(D) service: see here (this summary will be removed should the ICLR report the decision in one of its series of reports). 

[2] There has been much litigation concerning Morshead Mansions, which the trial judge noted in Mactra Properties Ltd. v Morshead Mansions Ltd. [2008] EWHC 2843 (Ch) had been described as "too horrific to record in detail".