Landlord and tenant — Significant decision on two important issues, namely the extent to which vendors may be liable for
This was an
action by the plaintiffs, Jack Leonard Gordon and Anya Teixeira, tenants under
a long lease of Flat C in a block called Court Mansions, Frognal, Hampstead,
London, against the defendants, Selico Co Ltd, the owners of Court Mansions,
the plaintiffs’ landlords, and Select Managements Ltd, estate agents, who at
all material times managed the block for the owners.
Jonathan S
Brock (instructed by Geoffrey Levine & Co) appeared on behalf of the
plaintiffs; J H G Sunnucks (instructed by Druces & Attlee) represented the
defendants.
Giving
judgment, GOULDING J said: This action is concerned with rights and obligations
regarding the repair and maintenance of Flat C in a block of flats called Court
Mansions, which is situated in the street named Frognal at Hampstead. It
relates in particular to damage done by dry rot, and it is accordingly not
surprising that evidence has been given about the history and condition of the
block of flats as a whole. I do not propose to say anything about the aetiology
or pathology of dry rot. The principal facts regarding that plague of timber in
old and damp buildings are well known and are not in dispute between the
parties.
The
plaintiffs, Mr J L Gordon and Mrs Anya Teixeira, are tenants of Flat C under a
long lease dated August 24 1979, to which I shall refer simply as ‘the lease’.
Both the defendants were parties to the lease. The first defendant, Selico Co
Ltd, is and was at all material times, the owner of Court Mansions. By the
lease it demised Flat C to the plaintiffs and it still remains their landlord.
The second defendant, Select Managements Ltd, is an estate agent. At all
material times it has managed Court Mansions for the first defendant. I shall
refer to the defendants as ‘the lessor’ and ‘Select’ respectively.
Court Mansions
contains five floors symmetrically disposed about a central front door and
staircase. On the left, as you look at the building from the street and raise
your eyes from the basement to the roof, there are in succession Flats A, C, E,
G and K. Similarly, on the right are Flats B, D, F, H and J. The basement flat
on the left, Flat A, has been subdivided. The anterior part is now known as
Flat L — the rear as Flat A. The defendants say that they never consented to
the subdivision. So far as material to this judgment, it appears that Flats A,
C, F, J and K have been let on long leases, all assumed (though without much evidence)
to be in terms similar to the lease held by the plaintiffs. The other flats
have been let on short tenancies, in some cases at least with furniture.
The implied
obligation of a lessor under section 32 of the Housing Act 1961 to keep in
repair (up to an appropriate standard) the structure and exterior of
residential properties applies to the latter group of tenancies but not to the
long leases.
The court’s
task has in my view been made more difficult in this case by the undue
reticence of the defendants. Constant pressure by the plaintiffs has been
required, both in interlocutory proceedings and during the course of the trial,
to obtain adequate discovery of documents. As to viva voce evidence, I
have not seen any officer or employee of the lessor, except Mr Jonathan
Schwartz, a member of the firm which audits its accounts; he, however, was
called only as the accountant who, for the purpose of service charges and on
the instructions of Select, certified the lessor’s costs pursuant to Schedule
19 to the Housing Act 1980 or its statutory predecessor, section 90 of the
Housing Finance Act 1972. It was evident, moreover, that Mr Schwartz had at all
times taken a strict view, though I do not mean to suggest an improper view, of
the limits of his duties in that respect. So much for the lessor.
The business
of Select is under the effective direction and control of a surveyor, Mr C J
Haskins, who holds all but two of its 500 issued shares but is not a member of
its board. Under the active control of Mr Haskins, the business is managed by
one of Select’s directors, Mr P G Colenutt. Neither Mr Haskins nor Mr Colenutt
has given evidence. Three employees of Select were called. Each of them had
strictly departmental duties, although in one case — that of Mr A E Jones —
they were, in my judgment, less circumscribed than he would have the court
believe, and none of them could speak to the policy or the responsible
decisions adopted on behalf of Select.
Let me turn
now to the grant and the provisions of the lease. Late in 1978 the plaintiffs
obtained particulars of Flat C from an estate agent and inspected it. It was
for sale as a long leasehold and the plaintiffs agreed, subject to contract, to
pay £31,000 for a 99-year lease. The usual preliminary inquiries were made and
replied to by the parties’ respective solicitors and a formal contract was
concluded on or about May 14 1979. Shortly afterwards the plaintiffs were
permitted to have access to Flat C for the purpose of carrying out repairs and
decorations. The contract was completed by grant of the lease on August 24
1979. The plaintiffs did not immediately take up residence in Flat C. I accept
their evidence that they moved in on January 3 1980.
I have not
perused the original lease or counterpart lease, but it has not been suggested
that the copy with which I have been furnished is in any way incorrect. It is a
long document, elaborately, although not always accurately, drawn. I shall try
shortly to summarise its material provisions, but I cannot avoid reciting at
length certain important topographical definitions contained in clause I of the
lease. After defining ‘the Lessor’s Property’ as the land and buildings
comprising Court Mansions and comprised in a particular registered title, and
defining ‘the Retained Property’ as including ‘all such parts of the Lessor’s
Property not by this or any other lease or tenancy demised or let’, clause 1
defines ‘the Demised Premises’ by reference to the First Schedule to the lease.
The Schedule reads as follows:
THE Demised
Premises are THE FLAT known as Flat No C on the Ground Floor of the Building
and shown edged red on the plan annexed hereto and so that the Demised Premises
shall (for the purposes of obligation as well as grant) include:
(i) the internal plastered coverings and plaster
work of the walls bounding the flat and the doors and door frames and windows
and window frames including all glass fitted in such walls and
(ii) the whole of the walls and partitions lying
within the flat (Provided that any internal wall separating the Demised
Premises from any other parts of the Building shall be severed vertically and
shall be party walls) and the doors and door frames fitted in such walls and
partitions and
(iii) the plastered coverings and plaster work of
the ceilings and the floorboards and other surfaces of the floors thereof and
(iv) the surfaces of the floor of the balconies
(if any) which adjoin the flat and
(v) all conduits which are laid in any part of
the Building and serve exclusively the flat and
(vi) all fixtures and fittings in or about the
flat (other than tenants fittings) and not hereinafter expressly excluded from
this demise but not include:
(i) any part or parts of the Building (other than
any conduits expressly included in this demise) lying above the said surfaces
of the ceilings or below the said floor surfaces;
(ii) any of the main timbers and joists of the
Building or any of the external walls (except such of the plastered surfaces
thereof and the doors and door frames and window and window frames fitted
therein as are expressly included in this demise);
(iii) the structural parts and the railings of any
balconies;
(iv) any conduits in the Building which do not
serve exclusively the flat.
The word
‘conduits’, appearing more than once in that Schedule, is itself defined in
clause 1 of the lease as follows:
THE
expression ‘conduits’ shall mean and include cisterns tanks water and gas and
electricity supply pipes sewers drains tubes meters soil pipes waste water
pipes and also wires or cables used for the conveyance of electrical current
and all valves traps and switches appertaining thereto but shall not extend to
or include any wires cables or apparatus belonging to the Post Office or any
public utility supply authorities.
By clause 2 the
lessor, in consideration of a premium of £30,000 (£1,000 of the price
originally agreed having been allocated to fixtures and fittings), demised the
Demised Premises to the plaintiffs for 99 years from June 24 1978 at a yearly
rent of £65 for the first 25 years and with certain increases thereafter.
Clause 3
contained the plaintiffs’ covenants, including a covenant at all times to
repair and maintain the Demised Premises and all chimneys, conduits and
fixtures therein exclusively used or enjoyed by the owner or occupier thereof.
It also contained covenants to pay outgoings, including the costs of abating a
nuisance in obedience to a notice served by a local authority relating only to
the Demised Premises, and to pay for repairs to other parts of the building
necessitated by the plaintiffs’ act, negligence or default.
Clauses 4, 5,
6, 7 and 10 of the lease, coupled with the definitions of maintenance
contribution and maintenance account contained in clause 1 and with the
provisions of the Fourth Schedule to the lease, set up a system for providing
for the maintenance of the structure and common parts of Court Mansions.
The plaintiffs
covenanted with each of the defendants to pay a maintenance contribution by
quarterly instalments (clause 4); and it was plainly contemplated that other
long lessees were, or would be, under the like obligation. The lessor
covenanted with the plaintiffs and with Select to pay the equivalent of
maintenance contributions in respect of all flats in the building for the time
being let without such obligation or unlet (clause 10(E)). Maintenance
contribution was to be proportionate to the rateable value of the flat (clause
1 (M)) and to be paid to Select as maintenance trustee (clauses 4 and 5).
Select agreed to pay it into an account, referred to as ‘the Maintenance
Account’, to pay thereout its own remuneration as trustee, and to hold the
balance, if any, in the maintenance account upon trust to apply it for 10
specified purposes (clause 5).
Like the rest
of the lease, they are elaborately drawn (see clause 6). It will be sufficient
if I read nos (i), (ii) and (x) verbatim:
6. THE
Purposes aforesaid are:
(A)(i) to
employ and pay the reasonable remuneration of a Surveyor or Estate Agent to
manage the Lessor’s Property and to carry out such other duties as may from
time to time be assigned to him by the Maintenance Trustee or are otherwise
imposed on him by the provisions of this Lease. The Surveyor may (but need not)
be a member director or employee of the Maintenance Trustee or of the Lessor
and his remuneration hereunder shall not be more than is reasonably
commensurate with his services in relation to the Lessor’s Property.
(ii) as often as may in the opinion of the
Surveyor be necessary to wash and paint in suitable colours and in a
workmanlike manner or otherwise treat in an appropriate manner all the outside
wood iron cement and stucco work of the Building usually painted or treated as
the case may be and to clean and brush down all the outside stonework of the
Building (if any) AND ALSO at all times during the said term to keep the walls
ceilings and floors of the Retained Property (but excluding those of any flat
for the time being not demised by a lease in similar terms to this Lease as
envisaged in Clause 10(C) hereof) and the whole of the structure roof balconies
foundations and main drains of the Building and the walls rails fences and
gates appurtenant thereto in good repair and condition . . .
(x) at all times during the said term to keep the
entrance halls staircases and passages in the Building and used in common by
any of the tenants and occupiers of the flats therein and all conduits now laid
or hereafter to be laid in or upon the Building or any part thereof (other than
those serving exclusively individual flats therein) in good repair condition
and decoration AND ALSO at all times during the said term to keep the common
parts aforesaid suitably lighted and cleaned.
The
maintenance contribution was to be paid in accordance with Select’s estimate of
expenditure to be incurred in the current year. That estimate was to be
increased by 1% of its amount (less the surveyor’s remuneration included
therein) which 1% was to be Select’s remuneration as trustee. The accounts for
each year were, as soon as practicable, to be audited in accordance with the
Housing Finance Act 1972 (later replaced by the Housing Act 1980) and any
excess or deficiency of contribution adjusted (Fourth Schedule).
Clause 8 of
the lease enabled the lessor to remove any maintenance trustee and appoint a
new one. Clause 9 authorised the defendants to enter into any agreement for
services by Select to the lessor, whether for remuneration or not. Clause 10,
in addition to provisions I have already covered, contained a covenant for
quiet enjoyment in the usual form (clause 10(A)), a much qualified covenant by
the lessor to enforce the obligations of other lessees at the plaintiffs’
request (clause 10(B)) and a covenant by the lessor to keep in repair the
walls, ceilings and floors of such of the retained property as should comprise
flats for the time being not demised by leases similar to the plaintiffs’ lease
(clause 10(G)). It also included this important covenant by the lessor in
clause 10(F):
THAT subject
to the payment by the Lessee of the Maintenance Contribution in accordance with
the provisions of Clause 4 hereof the Lessor will procure the due performance
by the Maintenance Trustee of the obligations contained in Clause 5 and 6
hereof and in the event of the Maintenance Trustee failing to perform any of
its said obligations the Lessor will (subject to the aforesaid) duly perform
and observe such obligations.
Maintenance
contribution was not by the lease reserved as additional rent, but failure to
pay it was one of the contingencies upon which, under clause 11 of the lease,
the lessor was to have a right of re-entry.
Clause 12 of
the lease contained a limitation of liability as follows:
NEITHER the
Lessor nor the Maintenance Trustee shall be liable or responsible for any
damage suffered by the Lessee or any servant agent or workman of the Lessee or
any member of the Lessee’s family or any guest of his through any defect in any
fixtures conduits staircases lift machinery (if any) or thing in or upon the
Lessor’s Property or any part thereof (including the flat) or through the
neglect default or misconduct of any porter or other servant employed by the
Maintenance Trustee or by the Lessor in connection with the Lessor’s Property
except in so far as any such liability may be covered by insurance effected by
the Maintenance Trustee pursuant to clause 6(A)(v) and (vi) hereof.
I need not
recite the remaining clauses and schedules in the lease. I mention, however, at
this point that counsel agreed in the course of the hearing that, since both
the statement of claim and the defence assert an intention to refer to the
lease at trial, no objections should be taken on the ground of failure to plead
particular clauses specifically.
I shall next
relate in outline the physical history of the premises. I do not know when, or
in what condition, the lessor acquired Court Mansions, but the building must
already have been in a poor state structurally when the plaintiffs came on the
scene. I have no doubt from subsequent events that the dry rot organism was
then already established in some part, or parts, thereof. The defendants were
not unaware of the position. The tenant of Flat A had in 1974 complained of
damp due to the blockage of external down-pipes. An occupier of Flat H had in
January 1976 drawn attention to a leaking roof, and in October of that year a
tenant of Flat F reported the entry of rainwater from a defective roof and/or
gutters. The same gentleman, who was a solicitor, protested in November 1976 at
what he described as the appalling state of the outside repairs to the building
and the common parts, and in the following March he sent a schedule of
dilapidations to the lessor’s solicitors. He alleged, among many other things,
defective tiling on the roof, perished valley and parapet gutters, loose
brickwork, wood rot in window sashes and window frames, and defects of
rainwater pipes and gullies causing dampness to the external walls. He
instituted proceedings against the lessor and appears to have settled his claim
and costs for £3,000. As I shall have occasion to mention later, the occupier
of Flat H reported dry rot and other dilapidations to Select in July 1977.
The plaintiffs
for their part were well aware that they were taking a flat in a badly
maintained building. The premium they paid would otherwise have been greater.
They employed a surveyor to examine Flat C before entering into a contract. He
said that Court Mansions was soundly built but the roof generally was in poor
condition and all the guttering and rainwater pipes needed to be thoroughly
overhauled and replaced where necessary. He said in particular that it was
essential that repairs to rainwater goods be carried out promptly, as any new
leakage could cause serious structural defects to the rest of the property. The
surveyor also reported that dampness was apparent in the rear bedroom wall of
Flat C and suggested ventilation of the chimney stack nearby. In another room
he found dampness and recommended the insertion of a damp-proof course. He did
not find any dry rot, but pointed out that he had only lifted one floor board
and could not guarantee that dry rot did not exist elsewhere in the building.
At the date of
contract certain exterior repair work was in hand, and the lessor’s solicitors
promised that the plaintiffs would not be charged a proportion of its cost. It
was nevertheless included in the calculation of maintenance contributions later
demanded from them. After contract but before completion, the plaintiffs became
aware of the appearance of dry rot on the front elevation between the top of
Flat C and the bottom of Flat E. They informed their solicitors. They say they
did not take the matter very seriously at the time and were advised, rightly or
wrongly, that they must complete their purchase.
After
completion, more than three years passed before the commencement of this
action. During that time things went from bad to worse. The defendants made no
attempt to operate the system of maintenance set up by the lease. Select did
not appoint a managing agent as provided by clause 6: it managed (or
mismanaged) Court Mansions itself, charging 10% of the lessor’s maintenance
expenditure as a management fee, in addition to its 1% as trustee’s
remuneration. No real attempt was made to budget for estimated expenditure in
advance. The figures of actual expenditure, audited annually by Mr Schwartz,
pitifully increased each year by a conventional £200 called ‘Reserve Fund’,
were charged against lessees in proportion to rateable value. No maintenance
account, as contemplated by the lease, ever existed, either at a bank or even
as a ledger account. Mr Sunnucks for the defendants said that one could be
constructed retrospectively. It has not, however, been done. Not only did the
defendants not seek to budget for and raise the money needed to put the
building in repair but they made no serious effort to get the work physically
performed. Repeated complaints by the tenants were disregarded. Little was done
during these years except under the pressure of statutory notices, of which
there were many, from the Camden London Borough Council. Not all such notices
were obeyed. More than once the local authority did the work itself, and by the
time of the trial it was claiming over £30,000 in respect of Court Mansions.
Moreover, such work as was ordered by the defendants was frequently executed by
incompetent or ill-instructed builders. On more than one occasion the local
authority’s environmental health officer required it to be done again.
In those
circumstances all the lessees sooner or later withheld even the inadequate
maintenance contributions that were demanded. The intended scheme had
completely broken down.
The particular
troubles of the plaintiffs are these. Early in 1980 a defective down-pipe,
which was very badly corroded, was removed from the outside of the building
adjoining Flat C. Shortly afterwards extensive dry rot was found to be present
in the flat. The plaintiffs’ solicitors notified the defendants’ solicitors of
this on May 15 1980. I do not think it necessary to examine the subsequent
dispute in detail. Neither the plaintiffs nor the defendants were willing to do
the necessary work at their own expense, each claiming it to be the other’s
responsibility. There was much argument between them over obtaining access to
Flat E. The local authority served a dangerous structure notice in respect of
the dry rot dated August 18 1980 and obtained an order of the magistrates’
court thereon on January 5 1981. It was not complied with. Builders instructed
by the local authority did the required work in March and April 1981.
The quantum of
damage to the plaintiffs has not yet been investigated. They say that they had
to move into a hotel for 13 days; that Flat C is left in a condition requiring
extensive repairs and redecoration; and that dry rot in the flat is still not
wholly extirpated.
I am satisfied
that the probable cause of the disaster was that stated in a joint report by
the parties’ surveyors, where they said:
It appears
likely that the basic cause of the outbreak of rot is to be found in defects to
the external plumbing for disposal of rainwater resulting in water penetration
of the brickwork.
The writ was
issued on November 18 1982. In their subsequent statement of claim, as finally
amended, the plaintiffs assert six cumulative or alternative causes of action:
(1) deceit; (2) breach of the defendants’ express obligations contained in the
lease; (3) breach of terms alleged to be implied by the lease; (4) negligence;
(5) nuisance; (6) breach of trust on the part of Select. I shall say nothing
about the last, since no specific remedy is claimed for it and it was not
seriously developed in argument.
(1) Logically and chronologically, the allegation
of deceit is in the forefront of the action. The plaintiffs say that they were
induced to take the lease by the previous representation of the lessor by
itself, its servants or agents, that Flat C did not suffer from dry rot. The
particulars given allege a representation by conduct, namely, that the lessor
deliberately, or recklessly as to the result of its actions, covered up areas
of infestation by dry rot at some time prior to the execution of the lease.
Reference was also made to one of the answers given by the lessor’s solicitors
to the usual preliminary inquiries, but I am not persuaded that it will bear
the weight which Mr Brock, appearing for the plaintiffs, would place upon it.
The allegation of fraudulent misrepresentation must stand or fall on the
conduct, without words, of the lessor’s agents. It requires consideration both
of the facts and of the law.
The previous
occupant of Flat C was a Mr Podolski. He lived there for many years and died,
so far as I can ascertain from the evidence, in 1977. Subsequently, Select, as
agent of the lessor, employed a builder, Mr Azzam, to redecorate and modernise
the flat. Mr Azzam wholly denies the plaintiffs’ charge. He found no dry rot
and, if he had done, he would have reported it immediately to Mr Haskins, under
whose supervision he was working, with a view to its eradication. Haskins, he
said, visited the flat several times during the course of the work, coming at
least once a week and being fully aware of what was happening. Azzam also swore
that Mrs Teixeira visited and inspected the flat more than once while his work
was in progress. He thought that on one occasion Mr Gordon was with her, but he
was less positive about this. On the other hand, I have evidence which, if
believed, leads irresistibly in my judgment to the inference that Mr Azzam
deliberately covered up active patches of dry rot without any attempt at
eradication. I refer to the testimony of Mr M Wolmark, the plaintiffs’
surveyor, Mr T E Job, the defendants’ surveyor, and Mr Tribbick, an
environmental health officer in the service of the local authority, the London Borough
of Camden. These witnesses, all of them men of professional competence and
complete probity, spoke of the condition of Flat C at later dates and of the
habit of growth of the dry rot fungus. But the plaintiffs’ case is not
supported only by retrospective inference from such evidence. Mr McGillivray,
who had for several years lived in Flat H, examined Flat C after Mr Podolski’s
death but before its redecoration. He is engaged in the timber trade and claims
to know dry rot when he meets it. Surviving correspondence shows that he
discovered dry rot in his own flat and complained of it to Select, along with
many other defects, in July 1977. His evidence about Flat C was that he found
rotten wood, both in the front bedroom and in the bathroom, and from the appearance
of the wood and the well-known characteristic smell, he believed the trouble to
be dry rot.
I believe Mr
McGillivray, and Mr Azzam’s evidence accordingly seems improbable. But so is
the serious act alleged against him, and I have considered very carefully
whether I ought to disbelieve him. He was a careless witness, easily trapped
into inconsistencies or demonstrably untrue assertions. He stuck firmly to his
statement that Mrs Teixeira had repeatedly visited the flat while he was
working. The plaintiffs, however, whom I allowed to be recalled to deal with
the point, swore positively that they never saw Azzam until November 8 1980, a
date fixed by Mrs Teixeira’s diary, and that the work done in Flat C had been
completed before they first saw it about two years earlier.
Now I did not
find the plaintiffs attractive witnesses. They have a
and a determination to vindicate them, but I do not believe that either of them
is a liar, and their evidence was not adversely affected by cross-examination.
I also remember that Mr Haskins has not been called by the defendants and that
no explanation has been given of his absence.
In conclusion,
I find that the fact of deceit alleged by the plaintiffs is proved. Is it,
however, actionable at law? The law must
be careful not to run ahead of popular morality by stigmatising as fraudulent
every trivial act designed to make buildings or goods more readily saleable,
even if a highly scrupulous person might consider it dishonest. But it is to my
mind quite a different matter for an intending vendor to hide so sinister and
menacing a defect as active dry rot. The case is fairly comparable, in my view,
with the concealment of cracks indicating the settlement of foundations,
considered in Ridge v Crawley (1958) 172 ESTATES GAZETTE 637,
and, in the Court of Appeal (1959) 173 ESTATES GAZETTE 959. There the plaintiff
relied on a combination of words and conduct, but I believe it to be the law
that conduct alone can constitute a fraudulent misrepresentation (see Horsfall
v Thomas (1862) 1 H & C 90 and Smith v Hughes (1871)
LR 6 QB 597). In my judgment the concealment of dry rot by Mr Azzam was a
knowingly false representation that Flat C did not suffer from dry rot, which
was intended to deceive purchasers, and did deceive the plaintiffs to their
detriment. I am satisfied that the plaintiffs would not have entered into a
contract or accepted the lease had they known there was dry rot inside Flat C.
I do not know
whether the lessor (against whom alone this claim of deceit is made) had by its
responsible officers any dishonest state of mind, but the dishonest act was
done by Azzam in the course of work ordered by Select within the scope of
Select’s authority as the lessor’s agent. The contrary has not been argued. I
accordingly hold that the lessor is liable to the plaintiffs in damages for
deceit.
(2) I next turn to the defendants’ express
obligations under the lease. Clause 5 of the lease begins with the words ‘The
Maintenance Trustee shall’, and is in my opinion a promise by Select to open
and operate a maintenance account and to act as trustee thereof in accordance
with clause 6. Then in clause 10(E) the lessor covenants to make its own
maintenance contributions and in clause 10(F) to procure Select to carry out
its part of the scheme. It seems to me plain that, by failing to carry out the
scheme of maintenance provided for by the lease, Select was in breach of clause
5 and the lessor was in breach of clause 10(E) and 10(F) thereof. On the
evidence the lessor was also in breach of its covenant in clause 10(G) to
maintain the walls, ceilings and floors of flats not demised by long leases,
the relevant flat being Flat E immediately above the plaintiffs. I am also of
opinion that the failure of the lessor to keep the building watertight was a
breach of the covenant for quiet enjoyment contained in clause 10(A) (compare Booth
v Thomas [1926] Ch 397).
In expressing
the foregoing conclusions as to breach of covenant, I have tacitly rejected a
number of points argued by Mr Sunnucks in defence, and I shall now explain my
reasons for doing so. The points arise under clauses 10(B), 10(F), 10(G) and 12
of the lease. By clause 10(B) the lessor covenanted to enforce the obligations
of the tenant or occupier of any other part of the building if so required
by the plaintiffs and then only subject to certain conditions, one being
that the plaintiffs should first make provision for reasonable costs. In my
judgment that clause (obviously framed to meet particular cases) is no excuse
for a general failure to operate the maintenance scheme envisaged by the lease.
In clause
10(F) the lessor’s obligation is introduced by the words ‘Subject to the
payment by the Lessee of the Maintenance Contribution in accordance with the
provisions of Clause 4 hereof’, and Mr Sunnucks maintains that the plaintiffs’
withholding of maintenance contribution disables them from relying on the
clause. The plaintiffs’ failure to pay the contribution was justified at first
by the demand of sums for which they were not liable, and later by the complete
and obvious unwillingness or inability of the defendants to carry out the
scheme of the lease in such a way as to keep the building in repair. The
contribution was also in part irrecoverable under the provisions of Schedule 19
to the Housing Act 1980, because the works were not of a reasonable standard or
because the statutory requirements as to estimates were not generally complied
with. In my judgment the defendants have not shown that the plaintiffs failed
to pay maintenance contribution without lawful excuse and cannot rely on the
condition, even if correctly construed as a condition precedent (on which point
I express no opinion).
I had better
at this point read clause 10(G) in full:
(G) At the Lessor’s own expense at all times
during the said term to keep the walls ceilings and floors of such of the
Retained Property as comprises any flats for the time being not demised by a
lease or leases in similar terms to this lease as envisaged in Clause 10(C)
hereof in good repair and condition.
Now the
Retained Property was defined in clause 1 as property not demised or let at
all, thus not including Flat E, which has been almost continuously let on short
tenancies. However, that and the other definitions contained in clause 1 are
expressly limited to cases where the context requires or permits their
application, and in my opinion the language of clause 10(G) does not permit
introduction of the definition of the Retained Property. As a matter of
construction, I think it reasonably clear that ‘the Retained Property’ in
clause 10(G) means the Building.
I have already
read clause 12 in full. It was probably directed at the exclusion of claims for
personal injury, but in my judgment it is worded widely enough to cover damage
to property. The clause is expressed to exclude liability for damage suffered
‘through any defect in any fixtures conduits staircases lift machinery (if any)
or thing in or upon the Lessor’s Property’ or through the negligence of
servants. The word ‘thing’ ought to receive a liberal construction consistent
with the variety of those which precede it. Accordingly, the rainwater pipes,
gutters and the like, whose defects I have held to be the probable cause of the
dry rot in Flat C, are in my judgment either ‘conduits’ within the definition I
have already read or ‘things’. Clause 12 is, in my judgment, no answer to
claims for breach of the defendants’ respective obligations under clauses 5, 6,
10(E) and 10(G), but it would provide a defence to some claims under clause
10(A) — the covenant for quiet enjoyment — for example, claims based on the
incursion of water from defective pipes or gutters.
(3) and (4) It is convenient to consider implied
covenants and negligence together. I agree with the allegation in the statement
of claim of an implied covenant by Select to estimate each year’s likely
expenditure by Select for the purposes of the Fourth Schedule, except that I
read it as a covenant to estimate or procure the estimation thereof, for I
think the parties would have contemplated estimation by the managing agent that
Select was to appoint under clause 6. That implied term was inexcusably broken.
The other
implied term alleged by the plaintiffs is formulated in para 11 of the
statement of claim as follows:
Further or
alternatively the First Defendant at all times retained possession and control
of the whole of the Building except the Flat and in particular retained
possession and control of those parts of the Building described in paras 5 and
6 hereof. By reason thereof the First Defendant impliedly covenanted to take
reasonable care that the condition of the said retained premises should not
cause damage to the Plaintiffs or to the Flat.
The parts of
the building described in paras 5 and 6 are the structure, conduits etc. This
allegation is plainly inspired by a line of authority illuminated by recent
observations of the Court of Appeal. In Duke of Westminster v Guild
[1984] 3 WLR 630 at pp 640 and 641, the court said:
We now turn
to consider the defendant’s submissions based on an alleged breach of duty of
care by the plaintiffs. There is a general principle established by such cases
as Hargroves, Aronson & Co v Hartopp [1905] 1 KB 472 and Cockburn
v Smith [1924] 2 KB 119 which is summarised, in our opinion accurately,
in Woodfall, Landlord and Tenant, 28th ed (1978), vol 1, para 1-1469, p
621: ‘Where the lessor retains in his possession and control something
ancillary to the premises demised, such as a roof or staircase, the maintenance
of which in proper repair is necessary for the protection of the demised
premises or the safe enjoyment of them by the tenant, the lessor is under an
obligation to take reasonable care that the premises retained in his occupation
are not in such a condition as to cause damage to the tenant or to the premises
demised.’
After that
quotation from Woodfall the Court of Appeal continued:
In Hargroves,
Aronson & Co v Hartopp [1905] 1 KB 472 the plaintiffs were
tenants of a floor in a building of which the defendants were the landlords. A
rainwater gutter in the roof became stopped up and the defendants failed to
clear it out for a few days after receiving notice of the stoppage. They were
held to be in breach of a duty of care to the plaintiffs and liable for the
damage done. In Cockburn v Smith [1924] 2 KB 119 the facts were
similar and the defendant landlords were held liable to the tenant for damage
suffered by her as a result of defects in the guttering of the roof of the
building of which the landlord retained control. Scrutton LJ considered, at p
133, that the landlord’s duty was based on ‘that modified doctrine of Rylands
v Fletcher (1896) LR 3 HL 330 which is applicable where he retains in
his control an
decide whether the relevant duty arose out of a contract between the parties or
whether it was an instance of the duty imposed by law upon an occupier of
premises to take reasonable care that the condition of his premises does not
cause damage: see [1924] 2 KB 119, 130 and 134. But they expressed no doubt
that the relevant duty existed.
So here, the
plaintiffs have pleaded negligence as well as the implied term. For my part I
think the better characterisation of the alleged duty of the lessor is as an
implied term. Where there are gaps in an instrument expressing the reciprocal
obligations of landlord and tenant, it is, in my judgment, more natural to fill
them by implication, as the House of Lords did in Liverpool City Council
v Irwin [1977] AC 239, than to invoke the law of tort. The distinction
may be of more importance since the enactment of section 125 of the Housing Act
1974 to which I shall refer hereafter. On either view, however, the question
arises whether any such general duty, be it in contract or be it in tort, is
not excluded by the express maintenance scheme now under scrutiny. In my
opinion it is a question of difficulty. On the whole I think the particular provisions
of the lease are insufficient to exonerate the lessor from the obligation
generally arising from a landlord’s retention of property whose proper
maintenance is necessary for the protection or safe enjoyment of the demised
premises. It is clear that the maintenance scheme might not always provide
necessary and timely protection, for example, through the continued inability
or refusal of other lessees to pay their proper contribution, and in the
absence of express provision I do not think it can fairly be taken to exclude
altogether a landlord’s ordinary duty in this sphere.
Clause 12 of
the lease, however, provides a defence to claims for damages falling within its
scope.
(5) The relationship of landlord and tenant does
not of itself exclude the former’s liability to the latter for nuisance arising
from his retained property and affecting the demised premises (see, for
example, Sampson v Hodson-Pressinger [1981] 3 All ER 710, a
decision of the Court of Appeal). However, the nuisance alleged in the present
case is, on the more probable view of its source, in my judgment covered by the
exempting provisions in clause 12 of the lease. The plaintiffs’ claim in
nuisance accordingly fails.
Having
surveyed the several causes of action on which the plaintiffs rely, I turn to
the counterclaim. Thereby the defendants seek relief, which I need not
particularise, for the plaintiffs’ alleged breach of their covenant in clause 3
of the lease to repair the Demised Premises. That claim must in my judgment
fail, because the repairs required by the schedule served with a statutory
notice on behalf of the lessor relate only to the eradication of dry rot held
by me to have been fraudulently concealed by the lessor, who thus induced the
plaintiffs to accept the lease containing that covenant. Any relief given on
the counterclaim would thus automatically produce a corresponding increase in
the damages recoverable by the plaintiffs. Moreover, the schedule is wide
enough, I think, to require work on floor joists, which are now conceded to be,
in the language of the lease, part of the Retained Property and not of the
Demised Premises.
The
counterclaim also seeks a declaration that the defendants are liable to the
plaintiffs to perform the obligations contained in clauses 5 and 6 of the lease
only in so far as the plaintiffs have paid, or are willing and able to pay,
their maintenance contribution. What I have already said about that matter
shows my reason for not making any such declaration. I dismiss the
counterclaim.
As to the
relief to be given in the action, I am going to allow further argument on
certain limited matters. I shall therefore indicate my present notion of an
appropriate order, making it clear what I have at this stage finally decided
(so far as this court is concerned) and on what points I am willing to hear
further submissions.
The statement
of claim, putting it shortly, prays for specific performance of the defendants’
obligations under clauses 5, 6 and 10 of the lease or, alternatively, an order
requiring them to carry out works of repair sufficient to comply with those
clauses; rescission; and damages.
I have already
decided that I shall award damages against the lessor for the fraudulent
misrepresentation alleged by para 17 of the statement of claim. They must
either be assessed or made the subject of an inquiry, and in either case their
ascertainment can be referred either to the master or to an official referee.
My own inclination is for assessment by an official referee.
Since the
plaintiffs would not have taken the flat but for the lessor’s representation by
conduct that it did not suffer from dry rot and the effects of the concealed
fungus were foreseeable, it appears to me that none of the damage they have
sustained will prove too remote to be recoverable under that head. I shall
consider possible damages for breach of contract in a moment. I have already
decided that I shall not award damages for any tort other than misrepresentation.
Rescission of
contract in the strict sense is out of the question, for restitutio in
integrum is impossible. And, if the word is used merely to mean that the
plaintiffs are free of further obligations under the lease, the remedy is
likewise not available. The defendants have not in my judgment repudiated the
lease and, even if they have, the plaintiffs have not accepted the repudiation
but have continued in possession of the flat.
On the face of
it specific performance presents great difficulties, for the jurisdiction of a
court of equity is to enforce specifically the performance of contracts, not of
particular stipulations therein, although it will of course in suitable cases
prevent the breach of a particular stipulation by injunction. (See on this subject
Fry on Specific Performance, 6th ed, chapter 16.) Now it is obviously out of the question for
the court to supervise the conduct of all parties or their successors in title
during the whole long term of the lease. However, Parliament, by section 125 of
the Housing Act 1974 (as immaterially amended in 1977), has provided as
follows:
125–(1) In any
proceedings in which a tenant of a dwelling alleges a breach on the part of his
landlord of a repairing covenant relating to any part of the premises in which
the dwelling is comprised, the court may, in its discretion, order specific
performance of that covenant, whether or not the breach relates to a part of
the premises let to the tenant and notwithstanding any equitable rule
restricting the scope of that remedy, whether on the basis of a lack of
mutuality or otherwise.
(2) In this section —
‘landlord’,
in relation to a tenant, includes any person against whom the tenant has a
right to enforce a repairing covenant;
‘repairing
covenant’ means a covenant to repair, maintain, renew, construct or replace any
property;
‘statutory
tenant’ has the same meaning as in the Rent Act 1968; and
‘tenant’
includes a sub-tenant and a statutory tenant but does not include a tenant
under a tenancy to which Part II of the Landlord and Tenant Act 1954 (business
tenancies) applies, and any reference to the premises let to a tenant means, in
relation to a statutory tenant, the premises of which he is the statutory
tenant.
(3) This section shall come into operation on the
passing of this Act.
It seems to me
that, by the enactment I have just read, the legislature has authorised the
specific enforcement of a repairing covenant as an isolated obligation and on a
particular occasion. That appears to have been assumed without argument in the
only case I have found on the section, Francis v Cowcliffe (1976)
239 ESTATES GAZETTE 977, which accordingly throws no light upon the correctness
or incorrectness of my view.
The lease in
the present case was executed under seal, so that I need not consider whether
the word ‘covenant’ would include an obligation assumed under hand only. I must
ask myself, however, whether, given a deed, the word can extend to implied as
well as to express promises. I do not doubt that it can, for in the context of
the Housing Act 1974 the section must have been intended to benefit especially
the class of tenants who have to accept leases, framed without independent
bargaining on the details of a draft, where the tenant’s duties are spelled out
in minute detail and the landlord’s are largely left to be inferred.
Mr Sunnucks
has argued that the plaintiffs cannot have a remedy by way of specific
performance because they have been unwilling to accept their own obligations
under the lease. In my judgment, however, the defendants’ default has justified
the plaintiffs in withholding maintenance contribution and in deferring further
repair of Flat C. I shall therefore, by way of specific performance, order the
lessor within a definite time (I suggest six months) to put so much of Court
Mansions as is in the possession or control of the lessor into such reasonable
condition as not to cause damage to the plaintiffs or to the demised premises
by the incursion of water, the propagation of dry rot or otherwise. I will give
liberty to apply at chambers for any necessary directions for that purpose, for
example, to settle in case of disagreement a schedule of necessary works.
Both
defendants being in breach of their several obligations under the lease, I will
give nominal damages, say £10, against each of them. I do not see, however,
that up to the present time the plaintiffs have suffered anything worthy to be
compensated for by substantial damages under this head. On my findings their
troubles arose because concealed dry rot was already present in Flat C at the
date
plaintiffs failed to discover the latent malady before completion, they would
have had no remedy, for the lessor of an unfurnished flat does not warrant it
to be fit for habitation, save in cases where the obligation is implied by
statute. The plaintiffs themselves would prima facie have been liable to
restore the flat under their repairing covenant, though no doubt there would
have been argument about that. Thus I think they must look to their damages in
tort as compensation for their past and present loss, while the order for
specific performance will protect them for the immediate future.
To be fair to
both parties, I must in my opinion give counsel an opportunity for further
argument on certain points before the terms of my order are settled. The points
open to argument are these: (1) How are damages for deceit to be estimated — by
assessment or by an inquiry; by the master or by an official referee? (2) How long should the lessor have to comply
with the order for specific performance?
(3) Counsel are at liberty to make any submissions arising on the two
reported cases I have consulted without hearing argument upon them — Booth
v Thomas and Francis v Cowcliffe. (4) As the point did not
clearly emerge until this judgment, I will permit Mr Brock to try, if he thinks
he can, to alter my view that only nominal, and not substantial, damages should
be given for breach of contract. (5) I will of course hear submissions as to
costs.
Unless counsel
prefer to address me at once, it may be convenient to give them an interval to
consider this judgment before further argument.
The case was adjourned for further argument,
which took place on January 28 1985 and the court then ordered:
(1) that
the first defendant pay the plaintiffs damages for the tort of deceit to be
assessed on summons by an official referee such inquiry to be stayed pending
appeal;
(2) that
the first defendant at its own expense and without recovery from the plaintiffs
within eight months put the building of which the premises form part into such
reasonable condition as not to cause damage to the plaintiffs or to the
premises demised by the lease by the incursion of water, the propagation of dry
rot or otherwise;
(3) £10
damages for breach of covenant in favour of the plaintiffs against each
defendant;
(4) that
the counterclaim be dismissed, the plaintiffs to recover costs of the action
and counterclaim to be taxed if not agreed, with general liberty to apply for
the purposes of enforcing the order for specific performance.
It was argued
on behalf of the first defendant that the first defendant should be entitled to
recover from the plaintiffs after completion of the work required by the order
of specific performance the appropriate proportion of the cost under the
provisions for service charges in the lease, but this argument was rejected by
the judge as being inequitable in all the circumstances.
