Landlord and tenant — Breach of landlords’ repairing covenant — Whether exception clause excluded landlords’ liability — Whether tenants entitled to damages for loss of profits
plaintiffs, Connaught Restaurants Ltd, are the lessees of the Connaught Rooms
in Great Queen Street, London WC2 — By an underlease dated December 7 1983 the
plaintiffs let to the defendants, Indoor Leisure Ltd, part of the basement of
the rooms for a term from October 18 1983 until February 7 1996, for use as a
private snooker club — By reason of the ingress of water into the basement,
which continued up to the trial of the action, the defendants declined to pay
rent and the plaintiffs began three actions claiming forfeiture of the
underlease, arrears of rent and certain liquidated financial relief — The three
actions were consolidated and in the consolidated action the defendants
counterclaimed for damages for damage caused to the demised premises and to the
defendants’ business by the ingress of water and sewage, alleging breach of
covenant for quiet enjoyment, nuisance, trespass and negligence — The
defendants claimed to be entitled to set off against the plaintiffs’ monetary
claims the damages counterclaimed — Subject to the claim to set-off, the
defendants admitted the plaintiffs’ monetary claims apart from a claim to
interest — At the trial the plaintiffs admitted liability for the ingress of
water and sewage and accepted that the defendants had a good claim in respect
of each of the causes of action subject to three issues: (1) by the terms of the
underlease the plaintiffs were relieved from liability to pay any damages in
respect of the admitted breaches; (2) certain issues were taken in respect of
physical damage alleged to the premises; and (3) the counterclaim for loss of
profits were contested — It was also alleged that the defendants ought to have
mitigated their loss by accepting an offer by the plaintiffs to do certain work
in October 1990 — The underlease provided that the landlord was not to be
responsible ‘. . . (save as and to the extent hereinbefore expressly provided)
. . . for any . . . damage . . . or financial or consequential loss . . . to .
. . property or goods sustained on or by reason of the condition of the
premises’
with interest; judgment for the defendants on the counterclaim for £435,760.12,
together with interest; — The exclusion clause did not apply to exclude the
landlords’ covenant for quiet enjoyment by reason of the words ‘hereinbefore
expressly provided’ — Further, even without these words it would be difficult
to construe the exclusion clause as intended by the parties to exclude
liability for an obligation expressly undertaken by the terms of the lease —
There was nothing in the circumstances of this case or in the terms of the
underlease to justify reading the general words of the exclusion clause as
excluding liability for the admitted negligence of the plaintiffs — Apart from
two small items, there was no physical damage to property or goods on the premises
only to the premises — There had been substantial ingress of water since
November 1987 up to the trial — The defendants’ refusal to accept the
plaintiffs’ offer
the work proposed — Damages to the fabric of the demised premises were
determined at £102,256.12, in respect of which VAT should not be added, because
the defendants must be registered for VAT purposes and could recover any VAT
they pay on making good the damage which would be recoverable, either by
deduction from VAT collected, or claimed direct from Customs & Excise — The
defendants were also entitled to damages for lost profits determined by
comparing the actual receipts of each year from 1988 and comparing them with
the base year, 1987, and applying to the result an agreed multiplier of 84% to
find the lost profits — These amounted to £218,500, to which should be added a
further eight months’ loss of profits to July 1992 of £78,975 and an agreed
figure for relaunch expenses in the sum of £17,100; a further sum of £18,929
was awarded for the fixed costs of a closure of five weeks for refurbishment
The following
cases are referred to in this report.
Archdale
(James) & Co Ltd v Comservices Ltd [1954]
1 WLR 459; [1954] 1 All ER 210, CA
British
Transport Commission v Gourley [1956] AC
185; [1956] 2 WLR 41; [1956] 3 All ER 796, HL
This was a
claim by the plaintiff landlords, Connaught Restaurants Ltd, for arrears of
rent, interest and other damages against the defendants, Indoor Leisure Ltd,
the underlessees of premises at the Connaught Rooms in Great Queen Street,
London WC2; the defendants counterclaimed for damages for breach of covenant
for quiet enjoyment, nuisance, trespass and negligence.
Roderick
Denyer QC and Mark Warwick (instructed by Howard Kennedy) appeared for the
plaintiffs; Ian Leeming QC and John Leslie (instructed by McBride Wilson &
Co) represented the defendants.
Giving
judgment, JUDGE PETER BOWSHER QC said: The plaintiffs (who were once
named ‘Connaught Rooms Ltd’) are the lessees of the Connaught Rooms in Great
Queen Street, London WC2.
By an
underlease dated December 7 1983, the plaintiffs let to the defendants part of
the basement of the Connaught Rooms for a term from October 18 1983 until February
7 1996. The use of the basement was restricted by the underlease to use as a
private snooker club.
The defendant
company is now effectively a one-man company, controlled and managed by Mr
Keith Diss, who was once a police officer in the Metropolitan Police Force.
Since his retirement from the force in 1973, he has been in business.
To begin with,
Mr Diss had three co-directors. By 1985 he had persuaded two of them to retire
from the company and the outgoings were reduced in consequence. The business of
the club improved as the years went by. The defendants had good relations with
their landlords until in June 1987 control of the plaintiff company was
acquired by purchase of shares by Friendly Hotels plc. Before the change in
control, the plaintiffs’ premises were well maintained by the plaintiffs’
resident maintenance staff, and though there were occasional problems from
water penetrating into the basement, these did not cause any trouble because
they were dealt with speedily. After the change in control, substantial
problems arose which were not attended to by the plaintiffs speedily, or
effectively. The problems arose from the ingress of water into the basement by
various routes. The problems continued up to the trial of the action.
The problems
became so bad that the defendants declined to pay rent. The plaintiffs began
actions by writs dated August 25 1989, October 19 1989, and January 24 1990. In
those actions, the plaintiffs claimed forfeiture of the underlease, arrears of
rent and certain liquidated financial relief. Those three actions are
consolidated in the action before me. In the consolidated action, the
defendants counterclaim for damages for damage caused to the demised premises
and to the defendants’ business by the ingress of water and sewage into the
demised premises.
The causes of
action relied on by the defendants in their counterclaim include breach of the
covenant for quiet enjoyment, nuisance, trespass and negligence.
The defendants
claim to be entitled to set-off against the plaintiffs’ monetary claims the
damages counterclaimed. Subject to the claim to set-off, the defendants admit
the plaintiffs’ monetary claims apart from the claim to interest and a claim on
one invoice. The defendants have paid into a joint account the sum of £121,460.66
to abide the result of this action.
The first part
of this trial has been confined to a trial of the counterclaim. The balance of
the issues outstanding will be determined after I have given judgment on the
counterclaim.
At the early
stage in the opening of the case by counsel for the defendants, counsel for the
plaintiffs admitted liability for the ingress of water and sewage and accepted
that the defendants had good claims in respect of each of the causes of action
which I have mentioned subject to three issues:
1. The
plaintiffs claim that the terms of the underlease relieve them from liability
to pay any damages in respect of the admitted breaches;
2. Some
issues are taken in respect of physical damage alleged to the demised premises;
3. A
counterclaim for loss of profits is hotly contested.
Challenge is
made to the alleged causation of the loss of profits claimed. There is also an
allegation that the defendants ought to have mitigated their loss by accepting
an offer by the plaintiffs to do certain work in the basement in October 1990.
Accordingly, despite the admission of liability, it will be necessary in
determining the amount of damages to consider the history of events in some
detail. If the plaintiffs are right on the term relied on in the underlease as
excluding liability, it will not be necessary to consider the detail of the
case, and I therefore consider that point first, although counsel for the
plaintiffs came to it last.
Exclusion
of liability clause
In setting
out the term relied on by the plaintiffs, I shall emphasise those words which
the plaintiffs select for particular reliance:
Exclusion
of Landlord’s liability.
(6) The Landlord shall not be responsible to
the Tenant (save as and to the extent hereinbefore expressly provided) or
his employees or visitors for any injury death damage destruction or financial
or consequential loss whether to person property or goods sustained on or by
reason of the condition of the premises.
The short
answer to the plaintiffs’ reliance on this clause lies in the words in
brackets. The exclusion is not to apply to the matters ‘hereinbefore expressly
provided’ which include the landlords’ covenant for quiet enjoyment in clause
4(1). Even without the words in brackets, it would be difficult to construe
clause 5(6) as intended by the parties to exclude liability for an obligation
expressly undertaken by the terms of the lease. The covenant for quiet
enjoyment has admittedly been broken and it is also accepted by the plaintiffs
that all the causes of action should be taken together. Indeed, all of the
breaches must have amounted to breaches of the covenant for quiet enjoyment
whatever other causes of action might accrue to them individually.
Moreover, as
regards the cause of action in negligence, one has to bear in mind the
authorities concerning exception clauses in relation to the negligence of the
party claiming the exception. Those cases were summarised by Somervell LJ in James
Archdale & Co Ltd v Comservices Ltd [1954] 1 WLR 459 at p 461 as
follows:
. . . general
words in an exception clause do not ordinarily except the party seeking to rely
on the exception from liability for his own negligence or that of his servants.
There is an exception to what I may call this prima facie approach if, on looking
more closely into the subject-matter, it is found that substantially the only
scope for the operation of the exception clause is the negligence of the
servant of the person who is seeking the benefit of it.
There is
nothing in the circumstances of this case or in the terms of the underlease to
justify reading the general words of clause 5(6) as excluding liability for the
admitted negligence of the plaintiffs.
Further, apart
from damage to a till and to carpet, there was no physical damage to property
or goods on the premises: the physical damage complained of was mainly
damage to the premises, it being agreed that the word premises is
defined in the underlease as the demised premises. So far as consequential loss
is concerned, the loss was not sustained by reason of the condition of the
landlords’ retained premises, which was such that water flowed into the
premises. In any event, the clause must refer to the state of the premises as
they were at the date of the demise, not to the condition to which they later
came as a result of the landlords’ breaches of duty in contract and tort.
I therefore
reject the point taken by the plaintiffs on clause 5(6) of the underlease and
turn to consideration of the facts and the history.
The
premises
The building
of which the premises forms part was built as to different parts at different
dates and as a result there are some problems with maintenance.
The building
is on the south side of Great Queen Street in an area mainly devoted to office
use, though there are some residents nearby in Covent Garden and elsewhere. The
entrance to the defendants’ club is from the street by an entrance to the west
of the main entrance to the Connaught Rooms.
At the foot of
the stairs leading to the club one sees first a small health club. This is a
club which was created in about 1984 by the conversion of some large lavatory
accommodation to the right of those stairs. The health club did not suffer from
any water damage. It is too small to do more than cover its costs together with
a modest profit. Since it does not feature in the counterclaim, it can for
practical purposes be virtually ignored.
The layout of
the snooker club before the addition of the health club is shown on a drawing
annexed to this judgment as appendix A (not reproduced here). The layout of
that part of the premises devoted to the snooker club is shown in more detail
on the drawing annexed as appendix B (not reproduced here).
The snooker
club has three principal rooms, the American Bar (also known as the Match Room
or the Private Room), the Sussex Room and the Princes Room (also known as the
Main Room). The table charge to play in the American Bar is considerably higher
than for play elsewhere in the club. To the south-east of the Princes Room is a
rectangle marked on the plan containing the markings ‘store’ and ‘elec’. That
part of the building is known as the brasserie cellar and does not form part of
the demise.
The base of
the floor in the Princes Room is a concrete oversite slab. On the concrete are
timber plates and timber joists supporting an overlay of tongued, grooved and
secret nailed hardwood strip flooring. One of the expert witnesses described
the strip flooring as made of oak, but having seen those parts which are
exposed, I prefer the evidence of another expert that it is maple. There is no
ventilation under the strip flooring. Not far from the edge of the concrete
slab there is a channel in the slab all round the Princes Room. That channel
holds galvanised steel central heating and other pipes used for the benefit of
the landlords’ retained premises: those pipes run through the demised premises
by way of easement.
The floor of
the rest of the basement is made of timber blocks resting directly on concrete.
In each of the
two north corners of the Princes Room (that is, on the front wall of the
property), there are cast-iron rainwater pipes, concealed behind false ducting,
coming down the inside of the wall. Those pipes collect rain from the roof four
floors up and also carry other water the origins of which have been difficult
to determine. The pipe in the north-east corner has been the cause of
particular difficulty.
If one goes
into the Connaught Rooms (as I did on a view) it is possible to climb through
the window of a ground-floor corridor on to a flat roof which is the base of a
well in the middle of the building. That flat roof is partly above the American
Bar and partly above the Sussex Room. On the outside, the roof is covered in
asphalt. Along one side of this roof is a sunken asphalt-finished gutter collecting
rainwater from this roof and from the main roof. That rainwater is discharged
into a rainwater pipe going down inside the building between the American Bar
and the Princes Room. The roof supports a considerable amount of ventilation
ducting and there are depressions in the surface of the roof around that
ducting and elsewhere which allow water to collect in ponds after rain. A
number of depressions were made by scaffolding put up in the well of the
building by the landlords to carry out repairs to the upper part of the
building.
Water has come
into the basement as follows:
1. From the
rainwater pipe in the north-east corner of the Princes Room into the Princes
Room;
2. From the
flat roof into the American Bar, into the Sussex Room and into the south-east
corner of the Princes Room;
3. From the
central heating pipes into the channel in the concrete and over the edge of the
channel over the top of the surface of the concrete on to the timber in contact
with the concrete in various positions;
4. From a
variety of positions from leaks through the ceiling; and in addition —
5. Sewage has
escaped from the brasserie cellar under the floor of the Princes Room.
History
A detailed
history of the leaks was given by Mr Diss and employees of the club. From the
autumn of 1989, Mr Diss and his employees began to take notes of occurrences
for the defendants’ solicitors. Before that their evidence relied on their
unaided recollections. I find their evidence honest and, with some small
exceptions, accurate. Mr Hedley Merriman [FRICS], a surveyor instructed by the
defendants to advise, to negotiate with the plaintiffs and to give evidence in
this action, also gave evidence of his factual observations. At first he did
not keep notes because he assumed that the matter would soon be cleared up by
negotiation with the plaintiffs. Some of the notes which he later took were
lost as a result of being mistakenly removed from his office when his firm was
taken over by the Prudential. None the less, I find his evidence both honest
and reliable.
I have been
supplied with a chronology making references to various events and observations
of witnesses for the defendants. To reduce the quantity of detail set out in
this judgment, an amended version of that chronology is annexed to this
judgment as appendix C (not reproduced here). I accept that chronology as
amended and supplemented by me as an accurate summary of events.
The trouble
began in November 1987. For that reason, the defendants’ expert giving evidence
regarding the loss of profits claim has used the year ended November 31 1987 as
the base year even though the defendants’ financial year runs from April to
March. It happens that November is the month when membership used to be
renewed, though renewals are now spread through the year.
In November
1987 there was a leak in the ceiling of the American Bar. Also in November, it
was found that there was a leak in the central heating pipe in the channel
under the Princes Room floor. The whole pipe was found to be disintegrating and
had to replaced. Water overflowed the channel and lay on the concrete base.
Although the evidence from the defendants was disputed on this point, I accept
that the water lay in the subfloor for six weeks before it was pumped out by
the plaintiffs.
The technical
services manager for Friendly Hotels plc was then and still is Mr Wildman. Mr
Wildman was directly responsible to Mr Edwards, the chairman and chief
executive of Friendly Hotels for the maintenance of the Connaught Rooms and was
in charge of the maintenance staff and also had responsibility for engaging
outside contractors. Mr Diss said that at the time of this under-floor flood,
Mr Wildman promised that the plaintiffs would replace the floor in the Princes
Room and that the work should be done the following summer in the defendants’
quiet trading period. Mr Diss was supported in that evidence by Mr Mark Terry
who had been employed by the plaintiffs on their permanent maintenance staff
from 1957 until January 13 1988 when all the permanent maintenance staff at the
Connaught Rooms were made redundant. Mr Terry was not well disposed towards
Friendly Hotels plc, but I accept his evidence as honest to the best of his
recollection. He said that when the defendants took over the basement, the
floor in the Princes Room was in first-class condition. The Princes Room was as
famous as the Princes Restaurant and was suitable for dancing with a level
floor. Mr Terry said that in November, the maintenance staff were having
trouble tracing a loss of water from the central heating system. Eventually
their search led them to the basement where they saw Mr Diss, who said he had
been coming to see them because some floorboards were lifting. He said that he
was present when Mr Diss spoke with Mr Wildman about the floor.
In chief, he
stated that at that meeting it was agreed that the wooden floor would have to
be replaced, but that a period for drying out would have to pass before the
work could be done and that it should be done during the summer when the season
was least busy. In cross-examination he said only that Mr Diss said that the
floor was unsatisfactory and Mr Wildman said, ‘We will have to wait and see
when the floor has dried out.’
In
re-examination, Mr Terry said that Mr Diss and Mr Wildman were talking about replacing
the floor. Mr Wildman denied promising to replace the floor. He does accept,
however, that replacement of the floor was discussed. He said that Mr Diss
asked whether Mr Wildman would replace the floor. Mr Wildman stated that he
replied that he would make inquiries through his contacts about the floor to
help Mr Diss. He added that he investigated the possibility of putting down a
solid floor at the defendants’ cost but never got a quote. Mr Wildman was then
shown a letter dated August 31 1990 from Ashgrove Building Services addressed
to himself. In that letter Ashgrove made a proposal about the floor in the
Princes Room and added, referring to that floor, ‘various timbers may have
notted and need renewing and it may be more economic to lay a solid floor, an
estimate for which has been submitted earlier’. Mr Wildman then said that he
did receive a verbal quotation on the telephone which he thought was ‘over the
top’. He did not pass that quotation on to Mr Diss because ‘there was no
arrangement to do the floor at our cost’. If Mr Wildman had really said to Mr
Diss that he would make inquiries as to cost for him to replace the floor at
the defendants’ cost, it would have been consistent to have passed on the
information to Mr Diss when he got it however high the estimate.
I find that Mr
Wildman did express willingness to replace the floor in the Princes Room at the
plaintiffs’ cost, though it is not alleged that there was any contractually
binding force in what he said. It is quite clear that at that early stage in
the history, water had distorted the floor so badly that replacement of the
floor was already being discussed and not dismissed out of hand by Mr Wildman
as unnecessary. Mr Terry said that it took seven to 10 days for an outside
contractor to mend the central heating pipe and that he himself did not pump
out the water for another four to six weeks. The floor was showing signs of
distortion and he had to make arrangements for the replacement of some parts of
the floor by what he described as temporary replacements which, according to
him, appear to be still in place.
Mr Wildman
asserted that after the trouble at the end of 1987, the defendants had no more
trouble until August 1989. I have no hesitation in finding that is quite wrong.
There is ample evidence to the contrary.
In about March
or May 1988, both the Connaught Rooms and the snooker club took part in what
was known as the ‘telethon’. The telethon was an event in which various
‘celebrities’ took part to raise funds for charity. A by-product was
considerable publicity for the Connaught Rooms and the snooker club. For the
occasion, the defendants redecorated the club. There has been some inquiry into
the extent of that redecoration. It was suggested that the £10,000 which Mr
Diss said was spent on the redecoration was not shown in the accounts of the
defendant company. But that was satisfactorily explained by Mr Brown, one of
the defendants’ expert witnesses, and Mr Diss produced invoices for the work. I
accept the evidence of Mr Diss that the club was repainted throughout and
looked in good condition afterwards.
The plaintiffs
for their part decided to clean the whole of the outside of the building. As a
part of the clean up they erected some scaffolding on the roof above the
American Bar to paint the windows of the upper floors. They did not need, nor
did they seek, the permission of the defendants for this. After the scaffolding
was taken down, some weeks before the telethon began, there were leaks from the
ceiling into the Match Room. Mr Garry Hollis, the general manager of the club,
went on to the flat roof and saw that the scaffolding had pierced the asphalt.
Mr Hollis stated, and I accept, that the contractors and Mr Wildman agreed that
the damage should be repaired. Although some work has been done on the roof,
the roof has not been made watertight and it is agreed between the parties that
substantial work still has to be done on that roof and that the plaintiffs are
liable to pay for it.
Mr Hollis also
said, and I accept, that in April 1988, they began to have leaks in the Princes
Room and the floorboards began to lift, which damaged the carpet. Mr Diss said
that there were numerous floods between September 1988 and April 1989 and there
were numerous oral complaints from members throughout this period. In general,
these floods were not logged. But Mr Bennett, a manager of the club, made a
note that on Monday February 20 the down pipe by table 3 was dripping and got
worse as the evening wore on. He said that the note referred to February 20 1989
and maintained that evidence when it was put to him that it referred to 1990.
In 1989, but not in 1990, February 20 fell on a Monday. I accept Mr Bennett’s
evidence that his note referred to February 20 1989.
By November
1988 there were constant leaks in the American Bar. Although Mr Diss and Mr
Hollis do not have contemporaneous notes of those occurrences in early 1988,
they are able to recollect matters in the earlier part of 1988 by relation to
the telethon. Moreover, since the roof is still not watertight today, and it
lets in water when it rains hard, it is unlikely to have been watertight in
1988. Further, in a letter of November 30 1988, the defendants’ solicitors made
detailed complaints about both the water damage which had caused the floor in the
Princes Room to warp and twist and the damage to the roof from the scaffolding.
The solicitors wrote that Mr Diss ‘has been protesting loud and long that both
the works to the floor and to the roof should be attended to but has had no
effective response’. The defendants’ attitude was shown in their solicitors’
letter in response, which alleged that the events referred to occurred in 1987
and were raised simply as stalling tactics to avoid paying rent. That attitude
was quite unjustified, as is shown by the acceptance in this action that work
needs to be done to the roof, even if the floor is still a matter in
contention.
The defendants
allege that the plaintiffs’ attitude is explained by a desire on their part to
obtain a surrender of the underlease. Mr Diss said that in September 1988, Mr
Edwards, the chairman of Friendly Hotels came to see him by appointment. Mr
Edwards asked if the defendants would be prepared to surrender the lease. When
asked why, Mr Edwards said that Friendly Hotels wanted the premises back in
1990 because they had too much business and needed more function-room space. Mr
Diss said that he did not want to surrender, but he would be willing to sell if
the price was right. Mr Diss said that the value was about £500,000 to £600,000
and that if Mr Edwards agreed they should prepare valuations by three or four
independent valuers and meet again to agree a price. Mr Edwards said that he
would think about it, but did not come back to continue negotiations. There was
no evidence to challenge Mr Diss’ account of this meeting and I accept it.
Mr Wildman’s
assertion that the defendants had no trouble between the end of 1987 and August
1989 is also contradicted by independent evidence at least as far as March and
April 1989 are concerned.
Mr Merriman
was instructed by the defendants in late February 1989. On March 3 1989, Mr
Merriman inspected and found defective floor boarding in the Princes Room and
evidence of water penetration to the ceiling of the American Bar and the Sussex
Room. On a further inspection in April 1989, Mr Merriman saw water dripping
from the ceiling of the Princes Room adjacent to the bar opening to the Sussex
Room. The defendants complained of further water problems and, on September 15
1989, Mr Merriman attended with a colleague, Mr Brian Allsuch [FRICS]. They
made arrangements for a builder to open up the floor in the Princes Room for
inspection and for the removal of sections of false ducting in the north-east
corner of the Princes Room. Small areas of the floor were lifted on this
occasion and what was seen was very similar to what was seen on a more detailed
inspection on November 27 1989.
A detailed
inspection was made by Mr Merriman and Mr Allsuch and representatives of the
plaintiffs on November 27 1989 after the floor and the wall in the north-east
corner of the Princes Room had been opened up.
In the Sussex
Room, Mr Merriman found evidence of water penetration through the underside of
the ventilation ducting which runs in the corner of the ceiling and the wall
dividing the Sussex Room from the Princes Room. On later inspections, the
carpet was found to be sodden with water, and the woodblock floor finish in
places was rotten and saturated with water.
In the
American Bar Mr Merriman found water penetration through the dropped ceiling at
the southern end of the American Bar and to the floor and fittings in the room.
In the Princes
Room Mr Merriman found that although the concrete subfloor was dry at the time
of inspection (except in the north-east corner of the Princes Room), the upper
surfaces of the wood-strip flooring in the Princes Room were distorted, loose
and buckled in numerous areas and the timber joists and plates were severely
damp and suffering from wet rot in some areas. Work had been done on the
rainwater pipe in the north-east corner, but the pipe was still found to be
defective. Later, in March 1990, a sleeve was inserted in the pipe, but that
still did not cure the problem. The ventilation ducting on the ceiling in the
north-east corner was damp and the plaster was damaged. The floor was opened to
reveal the channel in the concrete near the wall between the Princes Room and
the American Bar. Water 2.5in to 3.5in deep was in the channel and the
undersides of the floorboards and the plates and joists nearby were infested
with wet-rot mould growth, caused, in Mr Merriman’s view, by condensation of
water vapour from the water in the channel.
The conditions
seen by Mr Merriman were, in his view, ideal conditions for the development of
dry rot, though none has as yet been seen. Those conditions were a combination
of water, warmth (from central heating pipes) and an enclosed and unventilated
space surrounded by wood. For the plaintiffs, Mr John Springett [FRICS], a
chartered building surveyor, later expressed the view that these conditions
would not produce dry rot because the heat would dissipate the water through
the wood of the floor surface. But Mr Philip Winn [FRICS], another expert
called by the plaintiffs, said that
stopping and then starting again. As he put it, there is a difference between
one flood and continual wetting. Both Mr Winn and Mr Springett said that an
investigation of the subfloor is required. The condition of continual wetting
referred to by Mr Winn is exactly what had been happening to the floor in the
Princes Room since late 1987. On the balance of probabilities on the evidence
before me, I find that when the underfloor inspection (which all experts agree
should be made) is carried out, it more likely than not that dry rot will have
developed in the period since the last limited inspection.
The continual
wetting of the floor was partly caused by water from above, but more
importantly from the state of the central heating pipes in the channel. On
November 27 1989, Mr Merriman recommended to the representatives of the
plaintiffs that, in view of the badly corroded condition of the central heating
pipes, all the corroded portions should be renewed then, rather than later.
That recommendation was not followed. Later, one section of piping was
replaced, but on January 5 1990 and April 5 1990 and on subsequent occasions,
water was found in the channel to varying depts of up to 8.5in. Mr Merriman has
formed the view that the present position is that the central heating pipes are
not leaking, but that leaking is occurring from other pipes in the channel. I
accept that opinion.
The dampness
of the underfloor was exacerbated by an escape of at least 70 gallons of sewage
from the brasserie cellar under the floor of the Princes Room on February 10
1992.
Between
January 5 1990 and February 10 1992, Mr Merriman visited the premises on
numerous occasions and saw a variety of problems of water ingress similar to
those already described.
I am in no
doubt that there has been substantial ingress of water since November 1987 up
to the trial. Apart from the water from the pipes under the floor in the
Princes Room, the water has been associated with heavy rainfall. Water has not
been visible in the club on every day, but the effects of water have been
visible throughout. Some effects of the water are seen in a volumn of
photographs taken between August 11 1989 and April 15 1992. In some of those
photographs water is to be seen not just dripping through the ceiling but
cascading into the club.
Mitigation
of loss
The plaintiffs
submit that in the autumn of 1990, they acted reasonably in offering to do
certain work and the defendants acted unreasonably in refusing that offer.
If that is
correct, it would follow that the damages awarded to the defendants should not
include any part of the defendants’ loss, which could have been avoided by
accepting the offer. The burden of proof is on the plaintiffs (the wrongdoer in
this case) to prove that it was reasonable that the defendants should have
accepted the offer.
This issue
goes to the claim for damages for loss of profits. If the plaintiffs are right
in their submission, no damages for loss of profits should be awarded for any
period after 1990. However, I deal with this issue at this point because on its
facts it relates to the physical state of the demised premises and of the
retained premises.
The events
relied on by the plaintiffs on this issue begin with a visit to the club on
August 30 1990 made by Mr Philip Winn, a chartered quantity surveyor instructed
by the plaintiffs: he is not a building surveyor. With Mr Diss, he inspected
three openings in the floor of the Princes Room and found water to depths of
between 1in and 4in. In a letter dated September 6 1990 addressed to Mr
Allsuch, Mr Winn proposed that the casing to a certain column should be removed
to inspect with a view to proving that water penetration from above had ceased.
Mr Winn put forward the proposition that the water under the floor was from
ground water permeating through the substructure. In his evidence, Mr Winn
accepted that that theory was proved to be incorrect. In his letter Mr Winn
stated that he was preparing a specification for the carrying out of certain
work to the premises and gave an outline description of the work proposed. That
outline description made it plain that what he was proposing was repair to a
number of water-damaged features in the demised premises. He did not propose
any work to prevent further ingress of water. Those proposals were in keeping
with the thinking displayed by that letter, which was that there was, by that
time, no ingress or likelihood of ingress of water due to any cause for which
the plaintiffs were responsible.
On September
14 1990, Mr Winn sent to Mr Allsuch a copy of a specification. That
specification, as was to be expected, contained only items directed to the
repair and redecoration of damage to the demised premises. In evidence, he
sought to suggest that his intention was not so limited. He said that the right
approach was a ‘one step at a time’ approach. He intended to get the builder on
site and when the premises were opened up then to discover what work was
required to stop the leaks at source and do whatever was required. I do not accept
that that was his intention or the intention of the plaintiffs. Mr Winn’s
evidence in that regard is inconsistent with all the documents, and Mr Winn
accepted in his evidence that he had not orally informed Mr Merriman or Mr
Allsuch that remedial works would be done to stop the ingress of water. There
is, in particular, no item in the specification requiring the builder to make
any investigations or to do any opening up to enable Mr Winn to make
investigations. A very small and unspecified provisional sum was included, but
it is plain that that could not have covered any works of investigation, much
less repair of the causes of water ingress. The nature of the work was
accurately described by Mr Winn in a letter dated September 27 1990 as follows:
We have
received clearance from our clients to place an order with a contractor to
carry out the repair and reinstatement work necessary within the snooker club
premises
Nothing was
intended to be done on the retained premises to prevent the further ingress of
water.
The proposed
work was priced at £15,305. The inadequacy of the proposal can be seen from the
fact that what is now agreed between the parties as necessary to be done is
priced at £47,976, excluding professional fees. That agreed work, unlike the
September 1990 specification, includes covering the flat roof with a waterproof
membrane and other work outside the demised premises.
On October 2
1990 there was a meeting at the club between Mr Diss, Mr Allsuch, Mr Winn and a
representative from the builders. At that meeting there was a lengthy
discussion of many items. There was disagreement in particular about the floor
in the Princes Room. The plaintiffs’ advisers considered that repairs to
individual areas would be sufficient. Mr Diss and his adviser considered that
the whole of the floor in the Princes Room needed to be taken up and replaced.
In
correspondence (for example, letters dated October 4 1990, May 3 1991 and June
27 1991) the plaintiffs took the stance that if the defendants proved by
further investigations that the floor in the Princes Room required complete
replacement, the plaintiffs would replace it. But the plaintiffs stipulated
that any opening up of the floor for further testing must be at the expense of
the defendants. Since both Mr Winn and Mr Springett agreed in evidence that
further examination of the floor in the Princes Room was required, and since
the need for testing arises out of the plaintiffs’ breaches of duty it was
unreasonable for the plaintiffs to require that opening up of the floor should
be done at the expense of the defendants and it was reasonable of the
defendants to refuse to do the opening up at their own expense. Moreover,
since, for the reasons which I have given, it is more likely than not that
opening up would reveal dry rot, it was reasonable for the defendants to refuse
the offer that work should be done which did not include the replacement of the
whole of the floor.
Additional
reasons which made it reasonable to refuse the offer of works which did not
include the replacement of the whole of the floor in the Princes Room are that:
1. The floor
is not level.
2. Piecemeal
repairs add to the lack of level in local areas.
In the Princes
Room, the carpet is much more worn than the equivalent carpet in the Sussex
Room. That wear is seen particularly where there is heavy use of the carpet
(for example at the corners of tables), where there has also been unevenness
due to water. Mr Merriman has demonstrated by the production of samples that
when the tongued-and-grooved floorboards are lifted they curve out of straight
so that there is no possibility of putting them back. Even removal of boards
for inspection requires replacement with new boards.
The plaintiffs
quite rightly point out that the correspondence since October 1990 suggests
that the sticking point in the refusal of the plaintiffs’ offer was the
unwillingness of the plaintiffs to replace the whole of the floor in the
Princes Room. However, Mr Diss said in his evidence that he was concerned that
there was no point in making internal repairs and redecorations unless the
problems had first been tackled at source and the ingress of water stopped.
That concern is obviously reasonable and was supported by the advice of the
defendants’ advisers Mr Merriman and Mr Allsuch in their report dated January
30 1990. That report also recommended that the entire floor of the Princes Room
be taken up to ascertain whether or not
defendants to insist both that all the leaks should be stopped before any other
work was done and that the whole of the floor in the Princes Room should be
taken up. By letter of March 20 1990, the defendants’ solicitors required
attention to these matters among others. Only a month before the offer at the
October 1990 meeting, the defendants’ solicitors, by letter dated September 7
1990 asked for immediate temporary repairs to the floor under table number 3.
In that letter complaint was made that table number 3 had been out of use for
the last nine months due to distortion around that area and a client wanted to
book all the tables in the main room on September 26 1990. By letter of July 12
1991, Mr Merriman again asked the plaintiffs to prevent the leaks first.
The defendants
were entirely reasonable in their response to the offer made by the plaintiffs
to do work in the demised premises.
Another point
made on behalf of the plaintiffs was by reference to the decorative state of
the premises. It was said, with some justification, that the premises are
scruffy. Mr Diss replied that it was not worthwhile redecorating while the
likelihood of further water damage remained. That is plainly right. It was then
put that the club would look better if the paintwork were washed and lampshades
straightened. That point has some force, but it is not surprising that Mr Diss
and his staff were discouraged by events and steps like washing down the
paintwork were neglected. The plaintiffs are not entitled to rely on that point
either in respect of mitigation of damage or causation.
Damage to
the fabric
The parties
have agreed that damages should be paid to the defendants in respect of the
cost of agreed items in the Scott schedule in the sum of £47,976. There are
five further items in respect of which alternative figures have been agreed to
abide findings of fact made by me.
It follows
from my finding as to the probability of dry rot that the whole of the floor
will require attention and therefore the higher figures are the appropriate
figures under items 1.1, 1.2, 1.5, and 1.10.1. Those figures are £7,920,
£9,100, £6,219 and £18,941.
Item 1.9
refers to the removal of water under the floor and channels, dehumidifying,
testing all heating, rainwater or other piped services within the floor and
column voids and ensuring that all such services are sound and watertight. The
alternative figures are £2,364 and £750. The plaintiffs’ comments in the Scott
schedule indicate that the £750 is for tests and dehumidifying only. It is
clear from Mr Merriman’s observations of the pipes that more than testing is
required. Actual replacement of some pipes is required. Mr Allsuch also
commented on the pipes in his letter dated October 2 1990:
In paragraph
5.5 of the preliminary report dated 30 January, 1990 we confirmed drawing your
clients’ attention to the corroded condition of the central heating pipework in
the channel within the concrete floor slab. Has any further consideration been
given to replacing this corroded pipework at the same time as other works are
carried out within my clients’ premises to minimise disruption to their
business, or is it proposed to reroute these pipes outside my clients’ demise?
I therefore
find that the higher figure is appropriate. The sum awarded under this head is
£2,364. In addition there are two items in the Scott schedule which were proved
by Mr Diss, namely items 5.4 and 5.5 in the sums £364.55 and £119.57.
|
The total of all those figures is: |
£93,004.12. |
To that total
is to be added an agreed 10% for professional fees on the total except for the
last two items —
ie 10% of
£92,520 = £9,252.00.
A sum equal to
VAT at the current rate, 17.5%, is also claimed on the sum of £92,520 =
£16,191.00.
The claim for
an amount equal to VAT is contested. For reasons which I shall give next, I
find that this sum should not be awarded. The total damages in respect of
damage to fabric is therefore £102,256.12.
Counsel for
the plaintiffs submitted that as part of the burden of proving its loss, it was
for the defendant company to prove that the VAT paid out on the proposed works
would not be recovered from the Customs & Excise; there had been no
discovery relating to the VAT position and no evidence called as to the ability
or inability of the defendants to recover the VAT outlay and therefore, it was
submitted, no damages should be awarded in respect of the VAT outlay. For the
defendants it was submitted that VAT would plainly be added to the costs of
doing the work; it was uncertain what VAT, if any, the defendants can recover;
it was not for the defendants to show that VAT was not recoverable and
therefore damages should be awarded in respect of VAT. No authority was cited
on this point.
The principle
to be followed in awarding damages is to provide compensation for the injury
suffered. In considering the amount of compensation, taxation is to be taken
into account: British Transport Commission v Gourley [1956] AC
185. On the turnover shown by the defendant company’s accounts it must be
required to be registered for VAT. The company sells bar food and drink and
provides services to its members which must attract VAT. Accordingly, VAT on
sums paid out in the course of its business must be recoverable either by
deduction from VAT collected and before it is paid over to the Customs &
Excise, or by claim direct from the Customs & Excise. Although the
defendants will pay VAT on the cost of the works, that VAT will not in the end
cost them anything. I do not see that evidence is required to show that other
than the company’s accounts, which I have seen.
Loss of
profits
The defendants
claim £1,082,900 for: (a) loss of profits from November 31 1987 to July 1992;
and (b) future losses after July 1992, relaunch costs and fixed costs during
refurbishment.
On behalf of
the defendants, expert evidence was given by Mr Peter Brown, a chartered
accountant and a member of the Institute of Management Consultants. Mr Brown is
currently working as managing consultant for Price Waterhouse Management Consultants.
From 1981 to 1991 he worked as a management consultant with Pannell Kerr
Forster Associates. Pannell Kerr Forster were the defendants’ auditors. I do
not regard the latter association as detracting from the independence of Mr
Brown’s evidence.
On behalf of
the plaintiffs, expert evidence was given by Mr Trevor Ward. Mr Ward is not
qualified as an accountant, though he clearly has considerable accountancy
skills. He graduated from Surrey University in 1980 with a degree in hotel
management. In 1983 he joined Horwath Consulting Ltd and became an executive
director of that company in 1989. Horwath Consulting is a distinguished
management consultancy practice specialising in the tourism, hotel and leisure
industries.
Mr Brown and
Mr Ward agreed that the basic method of assessing past losses was as follows:
1. Calculate
the actual receipts in the relevant years;
2. Assess the
gross receipts which would have been received if there had been no water
damage;
3. Subtract 1
from 2;
4. Apply a
gross margin of 84% to any difference found. That is a fair method of
calculation for a private company in which net profits are very much dependent
on the fiscal policy adopted for the apportionment of profits between company
profits and directors remuneration.
The actual
receipts of the defendant company are agreed between the two experts. In the
light of that agreement, it is quite extraordinary that it should have been
suggested to Mr Diss that he had two sets of books, with the clear implication
both that he had defrauded the revenue and that he was knowingly putting
forward a false claim to this court. That allegation was hotly denied by Mr
Diss but it was not withdrawn, although no evidence was called to support it.
The justification for the allegation was said to be a report made by David J
Pinder Ltd in January 1988 making a valuation of the business of the Connaught
Club to be shown to a bank to support an application made by the defendants for
further funding. On two pages of that report reference was made to gross
turnover in the previous 52 weeks of just under £275,000. On one page that
turnover was said to appear from ‘a well-maintained cash book’ and on another
page from ‘official trading records’. On each of those pages reference was made
to ‘further figures indicating rather better results’.
Mr Diss was
naturally incensed by the suggestion, made on such a tenuous foundation, that
he was guilty of criminal misconduct in his business and perjury during this
trial. He explained that the reference to ‘further figures’ must have been a
reference to the business he hoped for during the telethon, which was to take
place during early 1988. Whatever may have been in the mind of the writer of
the Pinder Report, it is ludicrous to suppose that a business would be commended
to a bank on the basis that it had a set of books which showed better results
than the audited books. I wish to make it completely clear that in my judgment
the very grave allegations against Mr Diss are totally without foundation. I
found him to be an
to the contrary.
The
defendants’ claim in respect of lost profits takes the year to November 1987 as
its base year and assumes that if there had been no water damage to the club
the business would have been stable in the following years. The plaintiffs, on
the other hand, suggest that the business of the club would have declined by
13% in each of the years for which a claim is made by comparison with the
previous year. The rival contentions are based partly on evidence as to general
trends in popularity of snooker, partly on evidence of economic activity in
central London and partly on the accounts of the defendants.
The evidence
of general trends is that in the early 1980s there was a great upsurge in the
popularity of snooker, largely generated by television showings of tournaments.
Many new clubs were formed and there were considerable sales of tables, cues
and balls. In the mid-1980s, for a variety of reasons, popularity of the game
generally fell off and many poorly managed clubs went out of business and the
sale of tables, cues and balls in this country declined, but the growth of
satellite television has increased the popularity of snooker on the continent
so that there is a substantial export trade in tables and the basic equipment
for snooker. It is, however, particularly important that sales of snooker chalk
and cue tips in this country have not fallen off and have remained steady.
Tables, cues and balls do not require much in the way of replacement once the
country has approached saturation point in the supply of such articles, but
chalk and cue tips are consumable supplies and are a good indicator of actual
frequency of play of snooker. This appeared from the evidence of Mr Tyson, a
branch director of E J Riley (Billiards) Ltd, who are substantial suppliers of
snooker accessories. He also gave evidence that in the latter part of the 1980s
there has been a rise in the number of snooker clubs opened in this country. I
prefer his evidence to the analysis of the number of hours devoted to snooker
on television and the number of watchers per minute. Television no doubt
stimulated interest in snooker, but time spent watching snooker on television
is not necessarily related to time spent playing the game. The evidence of the
general trend in snooker playing supports the defendants’ case.
The
defendants’ club is not typical of clubs generally and any evidence of a
general trend has to be applied with some care to the defendants. There has
been some discussion of the effects of the recession on snooker and leisure
activity generally. In some areas, where a club is situated in a residential
area hit by unemployment, the club has benefited from the unemployment. That
would not be true of the Connaught Club. The club is situated in a business
area in the centre of London. It is pitched at an ‘up-market’ membership,
mainly from businesses, though there are residential areas nearby. There are,
as Mr Ward for the plaintiffs said, no comparables for the defendants. The only
other snooker clubs which are at all near are Centre Point and Paddocks.
Neither can be said to be a competitor. Centre Point has an unattractive
entrance from the underground subway by Centre Point, it is dark inside and is
aimed at a very different market. Paddocks is in High Holborn opposite the
Daily Mirror building and is associated with a discotheque and night club;
again, it is aimed at a very different market. As a result, the defendants draw
members from a very wide area, including the city, though its lunchtime
business may tend to come mainly from closer to its doors.
The defendants
offer reductions in membership fees for group members. The club records show
that there were a number of members from Mercantile Credit, which employed 400
people in the building immediately opposite the club. Mercantile Credit moved
away in October 1989 and the building has remained empty since, though ‘Let’
signs are beginning to appear in windows on some floors. Another business which
moved away is Pearl Assurance, which in September 1990 moved from its premises
in High Holborn. The importance of those moves should not be exaggerated. There
are many other offices in the area which have not been affected by the
recession. For example, evidence was given by an employee of the Civil Aviation
Authority in Kingsway of a snooker club organised by him for employees of the
CAA to play league games at the club. Evidence was given of the move of
newspapers from Fleet Street, but they have been replaced by other businesses
and Fleet Street cannot be said to be a recession-hit area. The closing of less
successful clubs in residential areas can only help the defendants to attract
former members of those clubs at the London end of their lives. The defendants
could have made out a case that the membership of the club would have increased
during the period after 1987, but they have chosen to take a more conservative
line, which I find is amply supported by the evidence. I find that it is
reasonable to suppose that the membership of the club would have remained
steady from 1987 onwards if there had been no water problem.
The 13% annual
reduction in business, for which the plaintiffs argue, is based on a comparison
of the receipts from table hire in the club between 1986 and 1987 (calculated
from November to November). It is argued that the reduction in receipts from
table hire in that period shows that the club had gone into decline. It is
difficult to see how a change in receipts on only one line of the club’s income
on only one year can justifiably be taken as showing a trend year on year. In
fact, when one looks at the defendants’ accounts (calculated from April to
April) and adds back the directors’ remuneration to the company profit, the
profits for the years 1986, 1987 and 1988 show an upwards trend (£13,000,
£34,000 and £42,000 respectively).
1986 was, in
any event, an unusually good year for the club because the national
championship tournament took place there in the week beginning April 27 1986.
Mr Ward analysed the takings for that week and found that in that week the
total revenue for the club was £3,000 more than in the equivalent week in 1985
of which only £1,400 was for table money. It is right that those figures would
do little to boost the defendants’ profits in 1986, but the point made by Mr
Diss had been that the tournament had had a substantial effect before and after
the tournament itself because of people in the club practising for the
tournament and the presence of members attracted by the tournament. I accept
the evidence of Mr Diss and his staff to that effect. Mr Diss also gave
evidence of a number of matters which might have made 1987 a particularly bad
year by comparison with 1986 — storms, an IRA letter bomb campaign and so
forth. There was a severe storm in the early part of 1987 which damaged the Old
Bailey, but apart from the very severe hurricane in the autumn of 1987, I do
not accept that there was anything which specially set 1987 apart from other
years so far as use of a snooker club in the centre of London was concerned. On
the other hand, if one applies Mr Ward’s 13% year-on-year one gets figures
which are substantially lower than were actually achieved by the club despite
the troubles from water. There can be absolutely no doubt at all that the club
did suffer severely from water problems and that it did lose business. The
general evidence to that effect is supported by specific evidence from members.
Taking the evidence as a whole, including evidence of the market in general, as
well as evidence related more specifically to this particular club, I find that
the probability is that the business of the club would have improved since
November 1987.
An argument
was also put forward on an alleged loss of members in 1987, but it is very
difficult now to reconstruct the actual membership numbers, and I accept the
evidence of Mr Hollis that there was no such loss of members.
While I cannot
accept Mr Ward’s calculations, I find it equally difficult to accept Mr Brown’s
calculations in the other direction. Mr Ward has calculated the actual increase
in income per member for each year, which was 11.1% for 1989, 16.1% for 1990
and 16% for 1991. He was unable to calculate the increase for 1988 but took it
as 9% because there was a rise of 9% in the membership subscription that year.
Those figures were calculated with a falling membership. Mr Ward then assumes
that the membership would have stayed steady at 516 and multiplies the assumed
income per member by 516 in each year. By that means he reaches loss of profits
figures which rise each year until they reach £220,700 in 1991. If one moves
away from statistics, there is no reason put forward for an increase in income
per member apart from inflation, and there are reasons to doubt whether in somewhat
difficult times the club would have been able to put up its prices in line with
inflation (Mr Ward made that point rather more strongly). It is also readily
understandable that the ‘average’ take per member would easily be distorted by
a few members spending large individual sums on corporate entertaining, taking
over the whole of the club or a large portion of it for a function.
Taking a
steady membership of 516 as a starting point, I ask what is the revenue lost in
the years from 1988 onwards? I cannot
accept Mr Brown’s annual percentage increase per member. Mr Leeming QC, on
behalf of the defendants, suggested that if I cannot accept Mr Brown’s figures,
I should substitute my own. I cannot pluck a percentage increase out of the air
without evidence, even though I think it likely that the defendants would have
been able to increase their prices at least in part to keep pace with
inflation. I do not even have figures for inflation in the relevant years. The
best I can do on the evidence before me is to compare the actual receipts of
each year
the agreed multiplier of 84% to find the lost profits. The defendants may well
have lost more, but they have not proved what the additional loss was.
The result is
as follows:
|
Year |
Actual receipts |
Lost revenue |
Lost profits |
||||
|
1987 |
234.2 |
— |
|
— |
|
||
|
1988 |
233.2 |
1.0 |
|
0.8 |
|
||
|
1989 |
181.8 |
52.4 |
|
44.0 |
|
||
|
1990 |
152.8 |
81.4 |
|
68.4 |
|
||
|
1991 |
108.8 |
125.4 |
|
105.3 |
|
||
|
|
|
218.5 |
|
||||
An additional sum for loss of profits is claimed for the seven
months from November 1991 to July 1992, when it is anticipated that repairs
will be put in hand at the club. Since I cannot accept the calculation put
forward by the defendants for that period, the best I can do is to take 7/12ths
of the loss of profits for 1991. For reasons which I shall give shortly, I add
a further month’s loss of profits giving a total of 8/12ths or 3/4 which equals
£78,975. The total loss of profits up to July 1992 is therefore £297,475.
In addition,
the defendants claim an agreed figure for relaunch expenses in the sum of
£17,100. The defendants also claim a figure for fixed costs for a closure of
five weeks for refurbishment. The figure is agreed in the sum of £18,929, but
the plaintiffs contend that no closure will be required. With the level of work
which I find will be necessary, it is plain that closure of the club for the
work will be required. Therefore, both these sums will be awarded as damages.
The plaintiffs
also claim a continuing loss of members up to July 1992. For reasons which I
have already given with regard to alleged annual losses, I reject that claim.
It is also
alleged that even after money has been spent on relaunching the club there will
be a permanent loss of members. That loss is put forward wholly on the basis of
assumptions. One can readily see that there may be some individual members who,
as a result of bad experiences, will never go back to the club. On the other
hand, there must be some saturation level for membership of this club and since
it has no effective competition in a city of millions I cannot see why members
permanently lost should not be replaced by fresh blood.
It is also
suggested that it would take at least 15 months for the club to reach its
former levels after the relaunch and that there should be further damages for
profits lost on a reducing scale over that period. The figures put forward are
again based entirely on assumptions rather than evidence. Those assumptions may
turn out to be right, but I cannot find them to be proved. However, there will
be a total loss of profit during the period of renovation, and members will not
return overnight as a result the relaunch. It is for those reasons that I have
added an additional month to the seven-month period for the first part of 1992.
I therefore
assess the total claim for loss of profits, relaunch, and cost of closure at:
|
|
£297,475 |
|
|
£17,100 |
|
|
£18,929 |
|
Total: |
£333,504 |
Adding to that sum the figure for damage to the fabric, namely £102,256.12,
the total figure awarded in damages is £435,760.12.
The defendants
also claim interest. The defendants accept that they have not proved their
claim to interest as damages, but they claim discretionary interest. Plainly,
the defendants should not be awarded interest on the costs of repairs, nor for
the relaunch expenses and costs of closure which have not yet been expended.
However, having heard argument on the question of interest, I award interest on
the annual loss of profits awards and on the award for the last eight months at
the rate of 1% above base rate. The interest should be calculated separately on
each annual amount from the mid-point of each year to date and from the
mid-point of the last seven-month period to date (even though that seven-month
period has not yet expired). I leave it to the parties to agree that interest.
After
further argument the following orders were made:
Judgment
for the plaintiffs on the claim for £202,690.48 and
interest at the contractual rate in the sum of £44,832.80, making a total of
£247,523.28. The sum standing to the credit of the parties in a joint account
with the Halifax Building Society (including interest) is to be paid out
forthwith to the plaintiffs’ solicitors in part satisfaction of the claim. The
defendants are to pay the costs of the claim on the standard basis, those costs
to include a quarter of the costs of June 2 1992.
Judgment
for the defendants on the counterclaim for
£435,760.12 and interest at 1% above base rate in the sum of £52,323.64 making
a total of £488,083.76. The plaintiffs are to pay the costs of the counterclaim
on an indemnity basis, those costs to include the whole of the costs of June 3
1992 and three quarters of the costs of June 2 1992. There is to be a set-off
of the costs of the claim and counterclaim.
The sum of
£300,000 paid into court by the plaintiffs in respect of the counterclaim is to
be paid out forthwith to the defendants’ solicitors without further order in
partial satisfaction of the judgment on the counterclaim. By consent that sum
is to be applied by the defendants’ solicitors first by payment of the
outstanding balance of the judgment for the plaintiffs on the claim for rent
and interest and the balance is to be paid to the defendants.
The interest
on the money in court is to be paid out to the plaintiffs’ solicitors without
further order.
The costs of
the three summonses heard on February 12 1990 are to be the plaintiffs’ costs
in the claim taxed on the standard basis.
The costs of
the summonses heard in October 16 1991 and December 6 1991 are to be the
defendants’ costs in the counterclaim taxed on an indemnity basis.
The defendants
are to pay the plaintiffs’ costs of the preparation of appendix G to Mr Ward’s
statement taxed on the standard basis.
The plaintiffs
are refused leave to appeal against the order in respect of the costs of the
counterclaim.
For
further cases on this subject see p 33
