Landlord and tenant — Shopping mall — Nuisance caused by one tenant to another — Derogation from grant — Whether landlords liable for failure to control nuisance — Whether repudiation of lease
In December 1988 the defendant tenant was
granted a lease of a shop in a shopping mall owned by a common landlord. In
January 1992 an adjoining unit was let to a pawnbroker. The pawnbroker
attracted customers who had little money to spend in the other shops and who
had to wait outside in that part of the shopping mall outside the defendant’s
shop. A pawnbroker’s sign was erected in this part of the mall and the light to
the mall was restricted by the pawnbroker’s windows being obstructed, all of
which deterred passing trade. In August 1993 the defendant withheld rent to the
landlords and disclaimed the lease. The defendant contended that the landlords
had derogated from their grant by failing to control the nuisance caused by the
pawnbroker. The claim of the plaintiffs, the mortgagees in possession, for
arrears of rent and an order to comply with a keep open covenant, was dismissed
in the court below. The plaintiffs appealed.
landlord grants leases in a shopping mall, over which he maintains control and
recovers a service charge, it is no answer to say that a tenant’s sole
protection against a nuisance caused by another tenant is his own ability and
willingness to bring his own individual action. Litigation is too expensive,
too uncertain and offers no proper protection against trespassing and threatening
members of the public. The duty should lie with the landlords. The landlords’
failure to prevent nuisance by the pawnbroker could have been done either
directly under the lease, enforcing the covenant against nuisance, or by making
rules ensuring the mall passageway was kept clear. The landlords chose to do
nothing and thereby made the premises materially less fit for the purpose for
which they were let. The landlords had derogated from their grant and the trial
judge was entitled to find repudiation of the lease.
The following cases are referred to in
this report.
Aldin v Latimer Clark, Muirhead & Co
[1894] 2 Ch 437
Booth v Thomas [1926] Ch 397; [1926]
All ER Rep 425; (1926) 42 TLR 296, CA
Browne v Flower [1911] 1 Ch 219
Duke of Westminster v Guild [1985] QB 688;
[1984] 3 WLR 630; [1984] 3 All ER 144; (1983) 48 P&CR 42; [1983] 2 EGLR 37;
[1983] EGD 541; 267 EG 762, CA
Goldman v Hargrave [1967] 1 AC 645;
[1966] 3 WLR 513; [1966] 2 All ER 989; [1966] 2 Lloyd’s Rep 65, PC
Harmer v Jumbil (Nigeria) Tin Areas Ltd
[1921] 1 Ch 200
Hilton v James Smith & Sons (Norwood)
Ltd [1979] 2 EGLR 44; (1979) 251 EG 1063
Jaeger v Mansions Consolidated [1900–3]
All ER Rep 533; (1902) 87 LT 690; 19 TLR 114
Johnston & Sons Ltd v Holland [1988] 1
EGLR 264, CA
Malzy v Eichholz [1916] 2 KB 308;
(1916) 32 TLR 506, CA
Matania v National Provincial Bank Ltd
[1936] 2 All ER 633, CA
O’Leary v Islington London Borough Council
(1983) 9 HLR 81
Sedleigh-Denfield v O’Callaghan [1940]
AC 880; [1940] 3 All ER 349; (1940) 164 LT 72; 56 TLR 887
Smith v Scott [1973] Ch 314; [1972] 3
WLR 783; [1972] 3 All ER 645
This was an appeal by the plaintiffs,
Chartered Trust plc, the mortgagees in possession, against the decision of
Judge Baker, sitting in Chichester County Court, who had dismissed the plaintiffs’
claims for rent and an order to comply with the lease covenants against the
defendant, Mr Davies.
Michael Driscoll QC and Andrew Bruce
(instructed by Hardwick & Co) appeared for the appellants; Derek Wood QC
and Philip Glen (instructed by Chamberlain Martin & Spurgeon, of Bognor
Regis) represented the respondent.
Giving judgment, HENRY LJ said:
This is an appeal from Judge Michael Baker, sitting in Chichester County Court,
who on March 1 1996 dismissed the plaintiffs’ claim for arrears of rent and an
order that the defendant kept the demised premises, a shop, open for business
during shop opening hours and allowed the defendant’s counterclaim rescinding
and/or accepting the plaintiffs’ repudiatory breach of the covenants in the
lease on or about August 4 1993.
The facts are these: Miss Davies, who had
some business but little retail experience, wished to start a ‘niche’
specialist shop, selling puzzles and executive toys. Her father was assisting
her in the planning and implementation of this venture and became the lessee.
He was a businessman, but not a retailer.
The landlords were developers of a
double-fronted corner site on Bognor Regis High Street. They borrowed money to
do this, secured by a charge on the freehold of the site. They are now in administrative
receivership, and the plaintiffs are the mortgagees in possession. They did not
assume responsibility for the management of this lease until after the events
we are concerned with.
The development planned was a small
shopping mall designed as eight units, but let as five units, three double and
two single. It was necessarily small given the dimensions of the site. There
were two double units on the High Street side, either side of a passage which
formed a dog-leg to a small side street. The two units on the High Street
frontage primarily relied on their own entrances into the High Street. The
three back units relied on access by the passage. The defendant was, from
December 19 1988 until his purported ‘disclaimer’ of the lease by letter of
August 4 1993, the tenant of one of the three back units.
The defendant was the first to take a
tenancy of one of the units, and his daughter the first to occupy, before the
development was wholly complete. They both said, and the judge accepted, that
they proceeded to enter into the lease on the strength of material set out in
the estate agent’s particulars, which were headed ‘Preliminary Details’ and
continued:
Situated in the heart of one of the prime
locations in Bognor Regis, Clock
Walk is an exciting new development
in shopping malls that offers the perfect setting for successful retailing with
an eye to the future.
The Victorian clock tower in the High
Street has long been one of Bognor’s best loved landmarks. Now it is set to
become a focal point of one of the town’s most prestigious retail developments,
Clock Walk.
With its traditional design and bright
atmosphere, Clock Walk will undoubtedly prove a major
attraction for discerning shoppers and the modern mall stall setting will
provide an environment that reflects the superior standard of today’s retailer.
Situated close to the town’s post office,
banks and established stores, Clock
Walk will be one of the most
popular locations in Bognor and its combination of prominent position and eye
catching facade will ensure an exceptionally high profile for every retailer in
the development.
There then followed details of the unit
sizes, rents and tenure.
The judge was to get from that brochure
and the evidence that the Davies’ gave as to their reliance on it, the representation
that this was to be a high class development with a letting policy of letting
only to tenants ‘within the category of a high class retail outlet’. The judge
found that that was a misrepresentation:
I think that the fact is that the
landlords were prepared to let to whoever was prepared to take on these units
at a rent that would satisfy the landlords.
The letting history was as follows: all
five units were let within 10 weeks of Miss Davies taking up occupation and
starting trading. The two large units on the High Street were respectively
taken by a coffee shop and a charity shop, Cancer Research Campaign. The two
other back units, one large and one small, were respectively taken by a woman’s
fashion shop, Panthers, and another clothing shop, Seasons Country Clothing.
The judge, on the evidence of Miss Davies, was to conclude that the Cancer
Research Campaign was not the sort of retail outlet that could be regarded
within the category of a high class retail outlet. Hence his conclusion already
stated that the landlords misrepresented their intention. The plaintiffs draw
attention to the fact that there was no written complaint by the tenants as to
that letting when it happened.
In the event, the back shops, those not
fronting on to the High Street, experienced trading and financial difficulties.
Seasons Country Clothing traded for 13 months before ceasing. Panthers survived
for some 22 months until December 1990.
The Seasons site remained empty through
to the time when the defendant disclaimed the lease in August 1993. The
Panthers site was empty from December 1990 for 13 months until January 23 1992.
By the turn of the year solicitors on behalf of Mr Davies were writing
expressing their concern both at the fact that the units had been unoccupied for
so long and as to the fact that the rents being sought for them were so very
low. They said:
The fact that so many units at Clock Walk
remain unoccupied obviously has a depressing on our client’s own business
carried on from Unit 6 and at the same time the levels of rentals now being
sought for the unoccupied units means that our client’s own unit has become
effectively unmarketable.
The background to this of course is that
the lease we are here considering was entered into before the crash of the
property market and the difficulties in letting no doubt represented the effect
of the recession. And the tenant that the landlords finally accepted for the
Panther’s site was a trade that flourished in the recession; a pawnbroker.
After their first year’s trading, from January 1992 to January 1993, there was
a front page article in the local paper headlined ‘Boom time for pawnbrokers’,
where the manager of the shop was reported as saying that they had had 2,500
contracts in the first year and had been constantly busy:
Our customers are mainly unemployed or
have temporary cash flow problems. They use us as an alternative to a bank.
The defendant had already withheld the
payment of part of the rent because of the fact that the landlords ignored and
did not respond to his complaints. The most significant of these was that the
coffee house had put tables in the entrance from the High Street, ordinary
white plastic garden furniture, thereby obstructing the access to the shops at
the back. But it was the letting to the pawnbroker that was the last straw.
Miss Davies dealt in her evidence with the problem before the lease to the
pawnbroker and after. Before, with both of the other shops dark:
you could not see that there was anything
past the tables, so no-one bothered to come down. We had that for a while.
Then, when the pawnbroker went in, it just kicked the legs from under us.
Mr Davies described the advent of the
pawnbroker as ‘like a knife going through [the business]’.
There was no evidence before the court as
to how a pawnbroker’s business is usually carried on. It was the manner in
which this pawnbroker’s business was carried on that caused the main
difficulties to the Davies’. Their windows on to the mall were obstructed so
you could not see into the pawnbroker and thus no light from them came out on
to the passage. More importantly, entry to the premises was restricted to one
customer at a time, on the door being unlocked for him. For this reason,
potential customers (who, by the fact that they found it necessary to go there,
would not be likely to have money to spend on the sort of items the defendant
sold) would wait in the passage, occasionally sitting at the coffee house’s
tables while waiting or entering Miss Davies’ shop. The largest number waiting
at any time was 10 and numbers up to six were not uncommon. These groups of
young men waiting had a deterrent effect on people who might otherwise have
used the mall as a pedestrian way and on people who might have window shopped.
It meant that effectively there was no passing trade at all. Miss Davies said:
Q: Did you have any specific problems
with the behaviour of people that were going to the pawnbrokers?
A: Oh yes, quite definitely. We open at 9
o’clock in the morning, and the pawnbrokers open later than us, 9.30, sometimes
10.00 o’clock. He was never terribly precise. So I have opened the arcade. They
started to hang around from the time that the arcade was open so you are then
left with the problem of one person being on staff is not enough, so you need
two, whereas you could have been able to continue till later in the morning.
They would wait either in their cars or outside the front. Obviously you are
open; they come in. They do not want anything but to wait, ‘Hello love, when’s
the pawnbroker coming in’. It was threatening and difficult to cope with. I do
not tend to look very old, so that also causes trouble. They closed for an hour
and a half at lunch time and again, people do not go away, so I did not have a
lunch hour for two years. You are forever having to make sure you did not go to
the toilet, which was outside the building, if there was only one in, and all
this sort of thing. It actually made trading very difficult, and being a gift shop,
I was employing middle aged ladies on a part time basis, who again found it
very difficult to cope with that sort of element. It just made trading very
unpleasant.
And so, on Miss Davies’ evidence, which
the judge accepted, not only did the presence of the pawnbroker kill new
business and deter old, but it also meant that she had to take on extra staff.
Indicative of the landlords’ attitude was
the question of where the pawnbroker’s sign, the traditional three balls,
should hang. The landlords, by their lease, agreed to it being centrally placed
above the High Street entrance to the mall, making, as Miss Davies complained,
it look as though it was Pawnbroker’s Arcade.
The correspondence shows that the Davies
were complaining about the pawnbroker, how she organised her business and where
the pawnbroker’s sign was put, from shortly after the pawnbroker moved in, in
February 1992, until the final ‘disclaimer’ of the lease in August 1993. The
correspondence shows a melancholy but familiar picture of letters being ignored
by the landlords, what contact there was being marked by the buying of time and
by promises unkept (including a bizarre episode where the landlords sent the
pawnbroker’s lease to the tenant’s solicitors for advice from them as to what
they could do about the pawnbroker and her conduct of her business). In all
that time many letters were written, but nothing was done. The judge’s
conclusion as to this was as follows:
Did the conduct of the plaintiff by
letting, as it did, to the pawnbrokers … amount to a repudiation of the lease
by the plaintiff with the result that they derogated from their grant. The
principle of derogation of grant is, according to Browne & Flower that it
make the premises materially less fit for the particular purpose for which the
grant was made.
It is a question of degree, and in my
view … the letting to the pawnbrokers was a substantial interference in the
defendant’s business, and it did make the purpose for which her father took out
the lease on her behalf less fit. It is quite clear from her evidence that the
pawnbroker’s business was a substantial interference with her own business,
and, indeed, was the cause of her giving up the business. There was a nuisance.
There was the deterrent effect of the activities there on potential customers
which resulted in her business collapsing, and if she had gone on there she
would, no doubt, have gone bankrupt. This is something that the plaintiff ought
to have foreseen in my view when they let those premises to the pawnbrokers.
It will be noticed that the judge found
that the conduct of the pawnbroker’s business was a nuisance. In cases such as
this, there are
derogation from the grant and nuisance. There is some authority that, in
appropriate cases, the ‘label’ attached to the cause of action does not matter:
see Hilton v James Smith & Sons (Norwood) Ltd [1979] 2 EGLR
44, per Ormerod LJ, at p44G. In this case, nuisance was not pleaded, nor
specifically argued before the trial judge and not before us until the final
chapter of submissions. It is not clear whether there was any, and if so what,
discussion of that tort in the court below. But I would take that conduct as
found by the judge as amounting to a nuisance, namely undue interference with
your neighbour’s comfortable and convenient enjoyment of his land. The
landlords did not create that nuisance, but it will be necessary to examine
whether they are liable as adopting or continuing it and whether that is a
derogation from grant.
I deal first with the question of
derogation from grant. Mr Michael Driscoll QC, for the plaintiffs, submitted
that this only arose where the landlords were responsible for some act which
made it either physically or legally impossible to use the premises for the
uses permitted (and required: see the ‘keep open’ clause) under the lease
namely:
the retail sale of puzzles and executive
toys and games and like products or such other use … that falls within Class A1
of the Town and Country Planning (Use Classes) Order, 1987, as the landlord
shall from time to time approve.
Class A1 deals with the retail sale of
goods other than hot food.
In my judgment, Mr Driscoll takes too
narrow a view of the doctrine. As long ago as 1894 in Aldin v Latimer
Clark, Muirhead & Co [1894] 2 Ch 437, at p444, Sterling J summarised
the authorities to that date:
The result of these judgments appears to
me to be that where a landlord demises part of his property for carrying on a
particular business, he is bound to abstain from doing anything on the
remaining portion which would render the demised premises unfit for carrying on
such business in the way in which it is ordinarily carried on …
From that broad principle, the courts
have proceeded step by cautious step. But the principle itself has always been
firmly founded on the bedrock of basic fair dealing, rather than a restrictive
straitjacket of individual restrictions. Many of the initial cases dealt with
the protection of continuous or apparent quasi-easements, but Parker J in Browne
v Flower [1911] 1 Ch 219, at pp225–226, made clear that:
But the implications usually explained by
the maxim that no one can derogate from his own grant do not stop short with
easements. Under certain circumstances there will be implied on the part of the
grantor or lessor obligations which restrict the user of the land retained by
him further than can be explained by the implication of any easement known to
the law. Thus, if the grant or demise be made for a particular purpose, the
grantor or lessor comes under an obligation not to use the land retained by him
in such a way as to render the land granted or demised unfit or materially less
fit for the particular purpose for which the grant or demise was made.
He was speaking there of making the land
physically less fit; that the principle also applied where the land was made
legally less fit was clear from the decision of the court in Harmer v Jumbil
(Nigeria) Tin Areas Ltd [1921] 1 Ch 200, where in the familiar passage,
Younger LJ said, at pp225–226:
Now if these questions are to be answered
in a sense favourable to the lessee, it must be on the principle that a grantor
shall not derogate from his grant, a principle which merely embodies in a legal
maxim a rule of common honesty. ‘A grantor having given such a thing with one
hand,’ as Bowen LJ put it in Birmingham, Dudley and District Banking Co
v Ross, ‘is not to take away the means of enjoying it with the other.’
‘If A lets a plot of land to B,’ as Lord Loreburn phrases it in Lyttleton
Times Co v Warners, ‘he may not act so as to frustrate the purpose
for which in the contemplation of both parties the land was hired.’ The rule is
clear, but the difficulty is, as always, in its application. For the obligation
laid upon the grantor is not unqualified. If it were, that which was imposed in
the interest of fair dealing might, in unscrupulous hands, become a
justification for oppression, or an instrument of extortion. The obligation
therefore must in every case be construed fairly, even strictly, if not
narrowly. It must be such as, in view of the surrounding circumstances, was
within the reasonable contemplation of the parties at the time when the
transaction was entered into, and was at that time within the grantor’s power
to fulfil. But so limited, the obligation imposed may, I think, be infinitely
varied in kind, regard being had to the paramount purpose to serve which it is
imposed. If, for instance, the purpose of a grant would in a particular case be
frustrated by some act of the lessor on his own land which, while involving no
physical interference with the enjoyment of the demised property, would yet be
completely effective to stop or render unlawful its continued user for the
purpose for which alone it was let, I can see no reason at all in principle why
‘ut res magis valeat quam pereat‘ that act should not be prohibited,
just as clearly as an act which, though less completely effective in its
result, achieved it by some physical interference.
The modern statement of principle is to
be found in the decision of Johnston & Sons Ltd v Holland
[1988] 1 EGLR 264, at p267J per Nicholls LJ:
The expression ‘derogation from grant’
conjures up images of parchment and sealing wax, of copperplate handwriting and
fusty title deeds. But the principle is not based on some ancient technicality
of real property. As Younger LJ observed in Harmer v Jumbil (Nigeria)
Tin Areas Ltd [supra], it is a principle which merely embodies in a
legal maxim a rule of common honesty. It was imposed in the interests of fair
dealing.
— and he then quoted Bowen LJ in the
passage from Harmer quoted above —
As one would expect, the principle
applies to all forms of grants … In Megarry and Wade on the Law of Real
Property, 5th ed, p849, the view is expressed that in truth the doctrine is
an independent rule of law. This approach was approved by Denning MR in Moulton
Buildings Ltd v City of Westminster [1975] 30 P&CR 182, at p186.
He stated the broad principle thus:
… if one man agrees to confer a
particular benefit on another, he must not do anything which substantially
deprives the other of the enjoyment of that benefit: because that would be to
take away with one hand what is given with the other.
That being the general principle, the
next step must be to apply it to a particular factual situation. Cases such as
the present, that exercise involves identifying what obligations, if any, on
the part of the grantor can fairly be regarded as necessarily implicit, having
regard to the particular purpose of the transaction when considered in the
light of the circumstances subsisting at the time the transaction was entered
into.
The central point to be got from the
circumstances surrounding the lease at the time that Mr Davies took it was that
what the landlords were marketing was not just a separate and independent
retail unit, but such a shop in its place in a shopping arcade or (in the
modern usage) mall. That was the ‘particular purpose for which the land was
hired’. The lease makes that clear. The mall was described in the lease as
being ‘the Centre’, the common parts (including the passages required for
access and the cloakrooms) were defined and kept within the responsibility of
the landlords, who were entitled to charge a service charge therefore. It was
implicit in the form of the lease that other tenants would be subject to
similar forms of lease, as the pawnbroker was. All tenants were obliged to keep
open during shop opening hours. They could not, without the landlords’ consent,
make any alterations or additions to the property. They could not use the
property for ‘any use … similar to any other use for the time being permitted
in any other part … of the Centre’. There was a covenant restraining tenants
from committing a nuisance. They could not obstruct the windows without consent.
The landlords retained a rule-making power for better use of the centre and, in
particular, the common parts, and the power to make the tenants obey such
rules. It was plain from the surrounding circumstances that the uses to which
other units were put, the manner in which other tenants carried on their
business and the impact of those matters on the user of the common parts, could
have a great influence both on the business of the individual tenants and on
the success of the development itself.
I get all of that from the defendant’s
lease and from the similar lease to the pawnbroker. I get nothing additional
from the estate agent’s puff, to be found in the ‘Preliminary Details’ already
quoted. The judge found in that transparently fulsome description an implicit
representation of the future letting policy of the landlords and found his
actual letting policy to be in breach of that representation, amounting to a
misrepresentation. We live today surrounded by the blandishments of the
advertising industry. We are used to them and we take them with a pinch of
salt. Read literally, this document praised the location and the design of the
development and expressed confidence in its success. It seems to me that even
the most naive could not get any legal comfort from that document that they
could not get from the lease. From the lease, one gets a clear recognition by
the landlords that the enjoyment of the benefit that the tenant took under the
lease here depended, in part, on the actions of the landlords in letting and
controlling the remaining units in, and the common parts of, this small retail
development. I do not regard this as a case of misrepresentation: in my
judgment, the real issue is whether this is a derogation from grant.
The judge, in what seems to have been an ex
tempore judgment, found that it was, in the passage already quoted. Mr
Driscoll, for the plaintiffs, contends that in the passage the judge is wrongly
finding that it was the mere fact of letting to a pawnbroker that constituted
the derogation. And he submits with force that, while pawnbrokers are not a
retail use, there was no evidence that they were necessarily such unsuitable
neighbours that the fact of letting was such a substantial interference with
Miss Davies’ business to be a derogation.
I agree with that submission. But read in
the context, both of the evidence heard and the judgment itself, what the judge
found in fact to be the derogation was in fact the actual conduct of the
pawnbroker’s business, which he held ‘ought to have been foreseen by the
landlords’. As to this, Mr Driscoll submits that there was no evidence that the
ordinary conduct of a pawnbroker’s business was likely to result in the
interference with Miss Davies’ business complained of and that accordingly the
judge should not have found that it was foreseeable: that was not an inference
that the judge was entitled to make. Again, I am inclined to agree with that
submission.
But the judge’s crucial factual finding
clearly related to the conduct of the pawnbroker’s business; it was that which
was a substantial interference with Miss Davies’ business, it was that which
was a nuisance, it was that that deterred customers and was driving her towards
bankruptcy. And the real issue is whether the landlords were liable for that
conduct. An important subsidiary issue that emerged on the case law cited
before us was whether the landlords were under any legal obligation to
intervene to put a stop to any nuisance caused by their pawnbroker tenant.
These were not matters specifically
addressed by the trial judge, for whatever reason. He may have regarded the
landlords’ consent to the nuisance as implicit from his failure to remedy it or
for some other reason. But before us no one was asking for a new trial. Nor do
I believe that one is necessary. The plaintiffs did not choose to call any
evidence from the landlords. Mr Davies and his daughter gave evidence. They
dealt with the factual background on these issues. So we have the bedrock of
available evidence on the matter. It is merely a matter of drawing inferences
from that evidence. In my judgment, this is a case where we can and should do
so, rather than remit the matter back to the county court.
Mr Driscoll, for the landlords, submits
that three Court of Appeal decisions have established that a common landlord is
under no obligation to tenant A to enforce the express contractual obligation
of tenant B not to commit a nuisance which renders the land leased to tenant A
unfit or materially less fit for the purpose for which it was let. Tenant A
should pursue his own remedy in tort for nuisance.
The first of these authorities is Malzy
v Eichholz [1916] 2 KB 308, CA. In this case Eichholz, the lessee of a
block of buildings in the Strand, in his turn let a restaurant in those
buildings to the plaintiff, Malzy. The lease contained a ‘keep open’ clause and
also a quiet enjoyment clause. Subsequently, he let a vacant tailor’s shop,
then reached by the same corridor as that used by the restaurant, to one Castiglioni,
for the purpose of carrying on the business of ‘a dealer in fine arts with
power to sell by auction diamonds, jewellery, plate and Japanese curios’,
extracting a covenant that Castiglioni would not permit or suffer a nuisance to
the lessor or his tenants. Castiglioni then licensed one Dent to carry on mock
auctions in the shop for his own benefit. These were carried on in such a way
as to be a public nuisance and called for the interference of the police: see
p309:
Eichholz frequently wrote to Castiglioni
to remonstrate, but took no active steps … Malzy alleged that his business was
seriously interfered with and damaged by crowds and disturbances thereby
occasioned, and he brought this action against Eichholz and Castiglioni for an
injunction and damages.
The action was tried by Darling J and a
jury. The judge left the jury five questions which they answered as follows:
1. Was the business at 161A, Strand so
conducted as to be a nuisance and an annoyance to the plaintiff and a prejudice
to his business of a restaurant keeper … ? — Yes.
2. Was such business conducted in that
manner by the defendant Castiglioni or with his authority? — Yes.
3. Was the business so conducted with the
knowledge and assent of the defendant Eichholz? — Yes.
4. Did the defendant Eichholz take all
reasonable steps and make all reasonable efforts short of legal proceedings to
stop such nuisance and annoyance and prejudice? — No.
And the jury then found £250 damages. The
question on appeal was whether the defendant, Eichholz, was liable on these
findings. The headnote reads:
A lessor is not liable in damages to his
lessee under a covenant for quiet enjoyment for a nuisance caused by another of
his lessees because he knows that latter is causing the nuisance and does not
himself take any steps to prevent what is being done. There must be active
participation on his part to make him responsible for the nuisance. A common
lessor cannot be called upon by one of his tenants to use for the benefit of
that tenant all the powers he may have under agreements with other persons.
Lord Couzens-Hardy MR, at p315 said:
It is quite a novel doctrine to me that
permission by a lessee to use demised premises for a purpose which may or may
not involve or create a nuisance is a wrong act on the part of the landlord,
and that the landlord can be rendered liable merely because a person does carry
on that business in such a manner as to create a nuisance. It would be
different, of course, if it were let for a purpose which necessarily involved a
nuisance, but this letting did not necessarily involve a nuisance.
He went on to say:
In my view assent and knowledge are not
sufficient unless you qualify it in a manner which the learned judge has not
done here as being essential to create a liability on the part of the
defendant. The learned judge in his summing-up seems certainly to intimate to
the jury that in considering whether this was done by the authority or with the
knowledge or assent of Mr Eichholz they must consider what he could have done.
That is not the way to test it. He was no more bound to enter into the premises
under his power, or to enter without such power and put the shutters up in the
front of the shop, than he was bound to commence an action.
In relation to the commencement of an
action, the learned judge had earlier said:
A landlord … according to the settled
authorities is not bound to commence any legal proceedings to abate a nuisance
…
To like effect, Pickford LJ quoted Lord
Collins MR in Jaeger v Mansions Consolidated (1902) 87 LT 690
indicating that it was not enough that the nuisance was committed with the
landlord’s knowledge and consent unless:
the acts of the persons using these flats
for immoral purposes could be construed to be the acts of the defendant in the
sense that they authorised them — not merely that they did not stop them but
that they were in effect a party to them …
Though a Lexis search indicates that Malzy
has seldom been relied on, it still finds its place in Woodfall, at
11.275, as authority for the proposition that the landlord:
is not liable merely because he knows the
other tenant is causing a nuisance and takes no steps to prevent it: there must
be consent or active participation on the landlord’s part to make him liable
for breach of covenant in such a case.
Mr Driscoll next relies on the case of Matania
v National Provincial Bank Ltd [1936] 2 All ER 633. There the plaintiff
and the second defendants were both tenants of the bank. The tenants wished to
carry out substantial works, which they did in a manner constituting an
actionable nuisance. The bank consented to them doing this work provided they
first obtained Mr Matania’s consent. They did not do this. So the bank never
consented to the work and those works were done without their authority.
Clearly, they had not derogated from their grant, nor were they in breach of
their covenant of quiet enjoyment, nor had they adopted or continued the
nuisance. This case does not assist Mr Driscoll.
The third authority is O’Leary v Islington
London Borough Council (1983) 9 HLR 81. Islington were landlords of a tower
block. One of the tenants in that block created a considerable nuisance. The
plaintiffs (other tenants in the block) brought proceedings against Islington
for not taking action to enforce their ‘no nuisance’ covenant against the
offending tenant. The basis for this claim was first, an implied term in the
plaintiffs’ lease that Islington would enforce that covenant against offending
tenants and, second, that Islington owed the plaintiffs a duty of care obliging
them to enforce the covenant.
The appeal got short shrift. First, there
was no implied term because one was not necessary to give the lease business
efficacy. Second, there was no duty of care, because an analogous duty of care
(in selection of prospective tenants) had been rejected in Smith v Scott
[1973] Ch 314. The court emphasised that the plaintiffs’ remedy was in their
own hands, suing the offender in nuisance.
But the case is of limited assistance for
our purposes, because the case was not put on the basis that Islington were
liable in tort as having continued, if not caused, the nuisance.
I take the law to be clear that, where
the mere fact of letting the landlord’s retained and neighbouring land is not a
derogation from his grant to the original tenant, then the landlord will only
be vicariously liable for the activities of his tenant on the land where he has
consented to (or, in the language of nuisance, continued or adopted) them. What
I would question is whether Malzy v Eichholz (supra) is
authority for the proposition that the landlord is never obliged to take any
action himself to restrain those activities. I question whether so sweeping a
proposition can be the law today.
Mr Driscoll referred us to Duke of
Westminster v Guild [1985] QB 688*. The judge there had to consider
whether the lease on its true construction placed on the landlords an implied
contractual obligation to keep in repair and unobstructed the landlords part of
the drain and whether, if it did not, the landlords’ were under a duty of care,
whether as landlords or as landowners, to the plaintiffs to repair that drain
or whether the express covenant for quiet enjoyment or the implied covenant
against derogation of grant could be invoked to impose such a positive
obligation upon them. The court found that no such obligation was imposed. I do
not find the reasons for that finding particularly helpful to the evaluation of
Mr Driscoll’s proposition. But I found useful a later passage in the judgment
of Slade LJ in that case. He refers to the decision of this court in Booth
v Thomas [1926] Ch 397, at p703D:
*Editor’s note: Also reported at [1983] 2
EGLR 37
In that case a landlord, whose
predecessor in title had enclosed a natural stream in an artificial culvert
which was incapable of retaining it, was held liable to the tenant for injury
suffered by the demised premises as a result of the outflow of water consequent
upon the culvert falling into disrepair. The Court of Appeal, without finding
it necessary to decide whether liability arose on other grounds also,
considered that it arose under an express covenant for quiet enjoyment
contained in the lease. This decision shows that a mere act of omission on
the part of a landlord is capable of constituting a breach of covenant for
quiet enjoyment, if, but only if, there is a duty to do something: see for
example, at p 403 per Pollock MR and at p 410, per Sargent LJ. In that case ‘it
was the duty of the owner of this culvert, which, if neglected, might cause
damage to the adjacent property to prevent such damage by taking reasonable
precautions’: see pp 403 – 404 per Pollock MR.
(Emphasis supplied.)
An illustration of a case where the
landlords were obliged to take positive action is seen in another decision of
this court (Lord Scarman, Ormerod and Eveleigh LJJ) in Hilton v James
Smith & Sons (Norwood) Ltd (supra). There, a row of shops was
owned and leased out by the defendant landlord. The plaintiff, an antique
dealer, took one of these. The shops were served by a private way at the back,
on which all tenants had a right of way and a parking place. However, other
tenants so obstructed that right of way with their own vehicles that the
plaintiff was unable to use either his parking place or that access when it
came to the delivery and unloading of furniture. Ormerod LJ said, at p45H:
What in ordinary human terms the
plaintiffs are asking the court to do is to require the defendant landlords to
enforce the covenants which they themselves have taken from all the tenants in
this row of shops, so that the roadway is available for use by all of them.
That argument was met by the plaintiff’s
‘highly technical’ response based on:
the old common law proposition that the
grantor of a right-of-way owes no duty to the grantee of the right of way to
preserve the way open, to repair the way or to do anything other than allow him
to pass and repass over it in accordance with the right of way which has been
granted … In this case the plaintiffs, Mr Prior concedes, would have a clear
cause of action if the defendants had themselves obstructed the right-of-way,
but he argues that the fact that the tenants, and their licensees and visitors,
and friends, leave their cars in this private road, so obstructing it, is
something for which the defendants themselves are not liable.
The proposition is startling in these
days because it seems, if it is right, that it is possible to grant a right of
way, to grant a tenancy of a specific area that is designated as a parking
space, and then do nothing to enable the tenant to get to it, no matter how
greatly the access is obstructed and obstructed by people who, in the last
analysis, are subject to the control of these landlord defendants.
There are echoes there of the old, now
discredited, view that a landlord’s acts of omission are not capable of
founding a breach of the covenant for quiet enjoyment, or a derogation from
grant. Thus, though there is no indication that Malzy was referred to,
old authorities to similar effect were. The court held, at p45J, that there
would come a time:
when an occupier of land, who is well
aware that his tenants … are behaving in such a way as to obstruct a private
road and thus interfere with the rights-of-way that he has granted, or to
interfere with other rights which he has granted to other tenants, when the
occupier of the roadway comes under a duty to act in the matter.
And the learned lord justice went on to
find that the landlords had continued the nuisance by permitting it to
continue, relying on Sedleigh-Denfield v O’Callaghan [1940] AC
880.
Mr Driscoll submits that Hilton v James
Smith & Sons is simply an action in nuisance, and so distinguishable.
It is right that Ormerod LJ said that he did not think that the label given to
the case mattered very much and Lord Scarman and Eveleigh LJ dealt with the
issue as one of nuisance. But in a landlord and tenant context, nuisances
caused or continued by the landlord which interfere with the enjoyment of the
demised land will usually also be conduct which renders the demised land unfit
or materially less fit for the purpose for which the demise was made and so
constitute a derogation from grant. I am satisfied that that is the position
here and so Mr Driscoll’s distinction does not avail him.
Additionally, the law of nuisance has
developed since 1917 when Malzy was decided, including of course the
milestone decision of
tenants, emphasised, the critical factual distinction between Malzy and
this case is that here the nature of the grant to a large measure depended upon
proper management of the shopping mall and the common parts thereof. This
development was marketed as a shopping mall, was legally set up in a way which
gave the landlord rule-making powers in relation to the development, and the
tenants were charged a service charge to finance the necessary management.
Proper management might, in appropriate cases, require the provisions of
security, whether men or cameras, to police the mall. Here it may be that
determined use of the rule-making powers to preserve the shared rights of way
over the common parts would have sufficed. Instead the landlords did nothing.
I accept that in order to succeed
(whether on derogation from grant or quiet enjoyment or nuisance) on the basis
of a landlord’s failure to act, the tenant must show that the landlord has a
duty to act. So Hilton‘s case decided, and clearly rightly. If a
landlord was never required to take action to protect what he had granted to
his tenant, he could render valueless the protection of his tenant’s business
seemingly built-in to the letting scheme he was marketing. That would offend
the principle of fair dealing. There must come a point where the landlord
becomes legally obliged to take action to protect that which he has granted to
his tenant: subject perhaps to the landlord’s ability to take the necessary
action–see the analogous situation in nuisance: Goldman v Hargrave
[1967] 1 AC 645, at pp663A–664C.
Where a landlord is granting leases in
his shopping mall, over which he has maintained control, and charged a service
charge therefor, it is simply no answer to say that a tenant’s sole protection
is his own ability and willingness to bring his individual action. Litigation
is too expensive, too uncertain and offers no proper protection against, say,
trespassing and threatening members of the public. The duty to act should lie
with the landlord.
Here it is plain, as the pawnbroker’s
lease makes clear, that the landlords must have consented to the sign placed as
it was, dominating the entrance to the arcade. Though the pawnbroker was not permitted
to obstruct his windows without the landlords’ consent, I do not think that
that consent can safely be inferred: it seems to me just as likely that the
pawnbroker simply did it. But neither of those points are central. What is
clear is that the landlords could have acted to stop the pawnbroker’s clientele
queuing in the access and, if necessary, could have cleared the tables and
chairs obstructing that access. Then the back shops might have had a chance.
This could have been done either directly under the lease, enforcing the
covenant against causing a nuisance, or by making rules ensuring that the
passageway was kept clear. This might have involved the pawnbroker rearranging
the interior of her premises, but that was her problem. Instead, the landlords
prevaricated and did nothing. They could have acted effectively and they should
have done so. Instead they chose to do nothing, and thereby made the premises
materially less fit for the purpose for which they were let. In failing to act
to stop the nuisance, in my judgment, the landlords continued the nuisance and
derogated from their grant.
The trial judge found this to be a
repudiation of the lease — a substantial interference with the tenant’s
business driving her to bankruptcy. That was a judgment he was entitled to come
to on the evidence he heard.
Accordingly, I agree with the judge’s
conclusion, albeit that I have reached it by a different route. I would dismiss
this appeal.
STAUGHTON LJ agreed and did not add anything.
Appeal dismissed with costs. Leave to
appeal refused.