Lessee of extensive commercial premises alleging failure by landlord to use reasonable endeavours to maintain lifts and air conditioning system – Extent to which diminution in rental value a proper measure of loss sustained
By the terms of a 25-year lease, commencing September 18 1978, of a seven-floor office building in Soho, London W1, at a reviewable rent, the plaintiff landlord covenanted, inter alia, “to use its reasonable endeavours . . . to provide and carry out or procure the provision or carrying out” of certain services specified in two Schedules to the lease. There was a covenant by the defendant tenant to pay, by way of service charge, a percentage of the cost of those services. Sued by the landlord for non-payment of the service charge, the tenant counterclaimed for damages, alleging that the lifts and the air conditioning system had, on an excessive number of occasions, broken down or failed to operate properly. As regards its alleged loss, the tenant pleaded that the premises had been rendered materially less valuable and that such loss of value should be measured by reference to the difference between: (i) the rent that it had agreed to pay, whether original or reviewed (the top figure); and (ii) the rental value of the premises in their actual condition (the bottom figure). The correctness of that measure was disputed by the landlord and by three third parties, who bore contractual responsibilities for the installations in question. The matter fell to be determined by way of preliminary issue, in the course of which counsel for the tenant suggested, as an alternative bottom figure, the rent that would have been agreed if the level of service contractually required had been no higher than the level in fact attained (the reformulation).
Held The tenant’s contentions were acceptable in part.
1.The correct measure was the diminution in value to the tenant of its occupation for the relevant period, evidence of rent payable being admissible (but not conclusive) as to such value had there been no breach: see Hewitt v Rowlands (1924) 93 LJKB 1080, which did not impose any single or universal method of quantifying the difference in value between the premises in their actual state during the relevant period and the condition in which they would have been if the landlord’s covenant had been performed.
2. The rejection in Calabar Properties Ltd v Stitcher [1983] 2 EGLR 46 of rental value as an appropriate measure, did not assist the landlord as the facts of that case (which concerned a non-assignable residential tenancy) were materially different. Nor, in the case of a trading company that remained in occupation, was there anything in the authorities to limit damages to an unexplained global sum for inconvenience: cf Wallace v Manchester City Council [1998] 41 EG 223; Credit Suisse v Beegas Nominees Ltd [1994] 1 EGLR 76.
3. Since the relevant covenant was not a repairing covenant as such, it could not be objected that the tenant had alleged a general devaluation of his interest rather than attributing specific losses to specific instances of equipment malfunction. As evidence of failure to use reasonable endeavours, such instances were relevant as part of a statistical whole rather than for their own sake. However, since there was no assumption as to the period or periods of breach, the court would reject the tenant’s reformulation of the bottom figure as it seemed to require a single level of notional rent to be fixed for the whole of each review period.
4.There could be no objection to adducing expert valuation evidence. Judicial disparagement of such evidence had to be read in the light of the tenancies there under consideration: cf Calabar and Wallace (supra).
Paul Morgan QC and Gary Cowen (instructed by Eversheds) appeared for the plaintiff; Simon Berry QC and Andrew Walker (instructed by Rosling King) appeared for the defendant; Kim Lewison QC (instructed by Masons), Christopher Pymont QC and Nicholas Peacock (instructed by Maxwell Batley) and Gavin Hamilton (instructed by Hammond Suddards) appeared for the three third parties.
Alan Cooklin, barrister
