[2004] EWCA Civ 289, 13 February 2004. Appellant company (PHL) had acquired the freehold of a block of flats in poor repair through its subsidiary (PVL). It later gained leasehold interest in 35 flats with the remaining 22 flats owned by other tenants. After PVL was dissolved, defendant (B), a company controlled by the 22 tenants and unconnected with PHL, acquired the block's freehold. County Court proceedings were commenced by B against PHL in respect of service charges' and ground rent arrears. PHL alleged B was in breach of the landlord's repairing covenants and counterclaimed by way of set-off for damages for the block's poor condition. The County Court ruled in favour of B's arrears' claim, dismissing PHL's counterclaim. "Held": appeal dismissed. PHL should be denied equitable relief. The dilapidated state of the block was originally due to neglect by those behind PHL and PHL therefore could not set off a claim for damages for neglect against rent and service charge arrears. PHL's non-payment of service charges was the substantial cause of B's breaches of repairing covenant. Losses accruing to B's inability to meet the repairing covenant were recoverable from PHL and B's claim cancelled out its liability to PHL.