Dilapidations dispute involving Colliers CRE subsidiary reaches Court of Appeal

  A dilapidations dispute between Colliers’s property co-investment subsidiary, Deanwater Estates, and the freeholder of its former Watling Street offices has reached the Court of Appeal.   The freeholder, Business Environment Bow Lane (BE), is appealing a High Court finding that Deanwater had a defence to BE’s £400k damages claim, for failure to deliver up in repair, on the basis of an agreement with the building’s previous owner, Lionbrook Property Partnership.   In 1980, the 10,936 sq ft offices at 73 Watling Street, London EC4, were leased to Deanwater, formerly known as Gooch Webster, for 25 years.   However, in 2001, Lionbrook decided to recover possession of the ground and basement floors to enhance its adjacent retail development.   Lionbrook therefore agreed that if Deanwater were to surrender that part of the premises it would be granted a new five-year lease over the remainder and would not face a final schedule of dilapidations at the end of that term.   In December 2004, Deanwater exercised a break clause and the lease ended.   In February 2005, however, the property was sold to BE, which served a final schedule of dilapidations on Deanwater.   Refusing BE’s damages claim in December 2006, Briggs J said that he had found “on the narrowest of balances” that the claim must be dismissed on the basis of the prior collateral agreement.   On appeal, BE’s counsel, Mark Warwick, argued that should it stand, the judgment will take the law on collateral contracts beyond existing legal authorities.   He submitted that the overall effect of the judge’s decision was “truly extraordinary” because it meant that the prior agreement had “expressly exculpated the tenant in advance from any and all repairing liability at the end of the lease, however arising”.   That was “surprising” because “the decision means that the landlord and its successors had given up the opportunity to claim any damages at the end of a lease, regardless of the state of the premises at the end of the term, and whoever was the tenant at the end of the term”.   The three appeal court judges intend to give judgment at a later date.   Business Environment Bow Lane Ltd v Deanwater Estates Ltd Court of Appeal (Sir Andrew Morritt CVO, Chancellor and May and Lloyd LJJ) 6 June 2007.   Mark Warwick (instructed by Howard Kennedy) appeared for the appellant; Jonathan Ferris (instructed by Michael Conn Goldsobel) appeared for the respondent.