Upper tribunal rejects second attempt at dumping £355,000 Virgin Active gym debt onto the leaseholders’ service charges at prime London Docklands site
Christodoulou’s Yianis Group also criticised for corporate restructuring to nobble section 24 court appointed management
Christodoulou’s insurance broker Reich, which is Financial Conduct Authority regulated, ordered to disclose spreadsheet showing any commissions baked into premiums following Communities Secretary Michael Gove ordering joint FCA / Competition and Markets Authority probe into spiraling leasehold insurance costs
Judge Martin Rodger QC dismayed by the billionaire freeholder’s ‘extremely unattractive’ approach to tribunal
Monte Carlo-based freeholder John Christodoulou suffered two reverses in his legal war of attrition at Canary Riverside last week and was rebuked by a judge for an “extremely unattractive” approach to tribunal proceedings.
In the upper tribunal of the property chamber on March 3rd and 4th, Mr Christodoulou made a second attempt to dump a £355,000 debt from the Virgin Active gym onto the leaseholders’ service charges. In a “victory for common sense and justice” this failed, according to leaseholders.
Days earlier, the first-tier tribunal was persuaded by Canary Riverside leaseholders to order insurance broker Reich, working for Canary Riverside Estate Management (CREM) and Octagon Overseas Limited – whose beneficial owner is John Christodoulou – to hand over an Excel spreadsheet believed to contain details of any commissions, remuneration or other fees that the flat owners may be paying for.
The success came after two and a half years of leaseholders working the tribunal system to force disclosure of any insurance commissions. Reich Insurance Group, the Manchester based FCA-regulated broker, had until Thursday to comply with the disclosure order.
The upper tribunal and FTT decisions are a blow to John Christodoulou, who has spent nearly 30 days in court wrangling over Canary Riverside in recent years.
Leaseholders claim he is concerned that successes at Canary Riverside may galvanise flat owners at neighbouring West India Quay, another prime site in Canary Wharf, which is still directly under his control. In contrast, Canary Riverside is managed by a section 24 court appointed manager.
In January this year, The Times newspaper reported that the service charges on a three-bed flat at West India Quay had surged by 61% in six years, up to a staggering £26,520 in 2020-21.
Hundreds of thousands of homeowners will be given the power to buy the freehold to their property under plans to phase out the majority of “feudal” leaseholds in England. Ministers are preparing to scrap rules that bar flat owners from buying the freehold to their property if a small part of their building is given over to commercial use, such as shops.
In both hearings John Christodoulou’s approach towards the loss of direct management at Canary Riverside to a section 24 court appointed manager was repeatedly referenced (though his companies managed to claw back control of buildings insurance, citing special conditions of a bank loan, in 2017, the year after leaseholders won court protection for the site).
On March 21, a seven-day hearing has been set aside for Canary Riverside leaseholders to make the case before judges for why they should continue with a court appointed manager for a further three years.
In the upper tribunal, the owner-occupier leaseholders were indirectly assisted by leading landlord and tenant barrister Philip Rainey QC, representing Circus Apartments, which owns 45 flats at the 325-flat site.
Mr Rainey suggested that it would be open to the tribunal to infer that contempt of the process had taken place in that the landlord companies had submitted an appeal on a new point of law that had not been aired in the original case.
In October 2018, Mr Christodoulou’s CREM transferred to Riverside CREM 3 (“RC3”) ownership of the commercial leases and removed Circus, a buy-to-let leaseholder with 999-year leases and zero ground rent, from the residential headlease into RC3’s ownership.
It would take another year for the leaseholders, including Circus, to discover that this manoeuvre had occurred.
Despite the landlord’s solicitors writing to the first-tier tribunal in October 2019 that RC3 was bound by the section 24 management order, at the upper tribunal last week over who picks up the Virgin Active service charge debt – Mr Christodoulou’s companies or the Canary Riverside leaseholders – the landlord’s counsel, Justin Bates, sought to reverse ferret.
Claiming that Urwick v Pickard, a 2019 case concerning section 24 appointment of a manager, should be interpreted as meaning that a management order is no longer binding when the freeholder or landlord against whom it is made sells the property and exits the development.
Mr Rainey countered that internal re-arrangements in Mr Christodoulou’s Yianis Group meant that RC3 is no “innocent white knight purchaser”.
The day before the upper tribunal heard from Daniel Dovar, counsel for the section 24 manager, Sol Unsdorfer of Parkgate Aspen, argue that the various lease assignments that took place in October 2018 was “simply a ledger exercise”, effectively an equivalent shift of assets and liabilities from one Yianis Group company to another.
“There was a group restructuring, it was particularly contentious, the leases were assigned from CREM to Riverside [RC3],” Mr Dovar told the court.
Mr Bates attempted to argue that “a transfer of value” had taken place at Canary Riverside, and reeled off a series of valuations of titles held by RC3 on the Land Registry: assets of £30 million, £3 million and £15 million were mentioned.
Addressing Mr Bates, Judge Martin Rodger QC asked: “All the Land Registry documents say is that the Land Registry was told that the transfer was for value. Is there evidence to show it was for value?”
“There is no evidence to suggest we misled the Land Registry,” countered Mr Bates.
The judge replied:
“So you can’t provide evidence that it was for value?” [i.e. that a real transaction had taken place.]
Mr Bates said that he couldn’t provide further evidence than the publicly available Land Registry data.
Mr Bates received another mauling from the judge when he argued that it was not within the tribunal’s power to determine Mr Rainey’s point that contempt may have occurred and that, in any case, no formal application had been made against his clients for contempt of court proceedings.
A testy Judge Rodger replied:
“I think I can find that the process by which you, or your client, have approached the tribunal is contemptuous.
“You have agreed with the tribunal on the basis that you are bound [to the section 24 management order], you conducted proceedings on the basis that you are bound, and now you come back and say ‘tee-hee’, we are not bound. That is contemptuous?”
Mr Bates said: “Well, it’s certainly not a case of ‘tee-hee’.”
The judge responded:
“Perhaps it is case of ‘tee-hee’ and that you will spin this out for another year. It is not you saying tee-hee, but your client’s attitude is contemptuous?”
“We don’t need to go as far as that,” said Mr Bates.
Judge Rodger replied:
“I am not pre-judging any decision that there has been contempt of the tribunal.
“It is almost impossible not to see that your client’s approach to the tribunal has been extremely unattractive. It is impossible not to regard your client’s approach to proceedings as not an attitude of someone with respect for the tribunal.”
Mr Bates conceded that he “would take the first part that is it ‘unattractive’ ”, but said he would not accept “the second part of that”.
He claimed, referring to the section 24 management order:
“It is simply not right that we have sought to frustrate the order … We have succeeded in obtaining variations to the management order at the FTT. We win some cases, we lose some cases. Hard fought litigation is not the same as frustrating the order.”
In the House of Lords on February 28, the Bishop of St Albans Dr Alan Smith used parliamentary privilege to highlight the perceived zest for litigation of Mr Christodoulou’s Yianis Group and its controversial leasehold practices:
“This is the same freeholder which, when challenged by the residents at a different development at Canary Riverside, lost a ruling brought forward by the residents and was forced to replace the managing agent. The court ruled that the freeholder failed to maintain the estate and did not adequately prove expenses and service charges. As The [Sunday] Times reported, it even charged a 100% mark-up on repairs to leaky windows to a repair company. At the time of reporting, the freeholder then attempted to chip away at the court-imposed manager’s power, costing the leaseholders £1 million in legal fees over 22 proceedings. The freeholder’s intentions here, I believe, speak for themselves.”
In April 2019, The Sunday Times reported that Mr Christodoulou had “tried to chip away at the manager’s powers, costing leaseholders £1m in legal fees in 22 proceedings. Last month, the manager [Alan Coates], who says in court papers that he has had stress-related heart failure, asked a tribunal to discharge him.”
A quarter of all homes sold in England are leasehold, yet until recently it was something that dusty solicitors mumbled about, and would-be buyers vaguely considered. Today, the feudal system that still governs our flats and estates is probably the most contentious issue in property.It was ignited
Representing the residents’ association, barrister Jonathan Upton told the tribunal on the last day of the hearing referring to the section 24 management order:
“Sir, this is a landlord or group of companies that, at every conceivable opportunity, has sought to frustrate the order … They pore over every single word [in the rulings] and twist it.”
Mr Upton then rattled through a list of Mr Christodoulou’s legal actions at Canary Riverside, ending with:
“They have threatened to commit Mr Coates to prison.”
Mr Coates, the former section 24 manager who legally quit the estate in October 2019, has been caught up in a drawn out, highly personalised and extremely costly legal battle over a supposed conspiracy against Yianis Group companies.
In March next year, the High Court will preside over a 12-day hearing to deal with “disclosure and conspiracy to acquire the property under the legislation”.
Mr Christodoulou alleges Mr Coates, now retired, was in cahoots with the residential leaseholders to compulsorily buy him out.
Mr Coates strenuously denies the charge and, according to a July 2021 High Court ruling, believes “CREM [a Yianis Group company] is pursuing a personal vendetta against him and that CREM’s ‘conduct is oppressive, abusive, and improper’.”
Legal costs for Alan Coates’ insurers are estimated at £1 million and Yianis Group’s is understood to amount to at least £2 million.