Landlord and tenant — Repairs — Covenants to be performed by management company — Whether covenant can be implied to make lessor liable for breach of management company’s covenants
By a lease
dated July 28 1978 the defendants held a term for 99 years at an initial rent
of £10 of a flat in a block of flats the reversion to which was owned by the
plaintiffs. The defendants were additionally plaintiffs in their counterclaim
against S Ltd, a company incorporated to manage the building and provide
services for the lessees. By the lease the defendants covenanted with the
lessor and S Ltd to pay to S Ltd a maintenance charge being a specified
proportion of S Ltd’s expenditure on specified matters and S Ltd covenanted to
carry out repairs and maintenance: the lease contained a right of re-entry upon
failure of the lessee, inter alia, to pay the maintenance charge to S Ltd. By
their claim the plaintiffs alleged that the defendants had failed to pay
£9,890.14 in arrears of rent and service charges and sought possession of the
flat following forfeiture. In their defence and counterclaim the defendants
alleged that S Ltd had allowed the building to fall into a stage of disrepair
and that the plaintiffs were in breach of an implied duty to perform the
covenants of repair and maintenance on S Ltd’s behalf. The plaintiffs sought a
determination of a question of law under Ord 14A of the RSC.
would observe the covenants for repair and maintenance on behalf of S Ltd. The
more comprehensive a code in a lease the less room there is for the implication
of a term. The defendants have a right to apply for the appointment of a
receiver in respect of any failure of S Ltd to perform its covenants under the
lease.
The following
cases are referred to in this report.
Barrett v Lounova (1982) Ltd [1990] 1 QB 348; [1989] 2 WLR
137; [1989] 1 All ER 351; [1988] 2 EGLR 54; [1988] 36 EG 184, CA
Blawdziewicz v Diadon Establishment [1988] 2 EGLR 52; [1988] 35 EG 83
Clayhope
Properties Ltd v Evans [1986] 1 WLR 1223;
[1986] 2 All ER 795; [1986] 2 EGLR 34; (1986) 279 EG 855, CA
Daiches v Bluelake Investments Ltd [1985] 2 EGLR 67; (1985) 275 EG
462
Duke of
Westminster v Guild [1985] QB 688; [1984] 3
WLR 630; [1984] 3 All ER 144; (1983) 48 P&CR 42; [1983] EGD 541; 267 EG
762, [1983] 2 EGLR 37, CA
Gordon v Selico Co Ltd [1986] 1 EGLR 71; (1986) 278 EG 53, CA
Halsall v Brizell [1957] Ch 169; [1957] 2 WLR 123; [1957] 1 All ER
371
Hart v Emelkirk Ltd [1983] 1 WLR 1289; [1983] 3 All ER 15; (1982)
267 EG 946, [1983] 2 EGLR 41
Liverpool
City Council v Irwin [1977] AC 239; [1976] 2
WLR 562; [1976] 2 All ER 39; (1976) 74 LGR 392; [1976] EGD 282; 238 EG 879,
[1976] 1 EGLR 53, HL
This was a
hearing of a summons issued by the plaintiffs, Hafton Properties Ltd, under RSC
Ord 14A for the determination of a question of law in proceedings against the
defendants, Mr and Mrs M D Camp, for forfeiture.
Michael
Daiches (instructed by Rumke Joseph & Rabin) appeared for the plaintiffs;
Stephen Hockman QC and Richard Barraclough (instructed by Amphlett Lissimore)
represented the defendants.
Giving
judgment, JUDGE FOX-ANDREWS QC said: The plaintiffs are the two owners
of five-storey blocks of flats known as Silchester Court, London Road, Thornton
Heath, Croydon, Surrey. It appears that the blocks consisted of 58 flats of
which approximately 15 are let out on rack-rents with the rest let out on
ground rents.
In this action
the plaintiffs claim, inter alia, possession of no 22 of which the
defendants are the present occupiers. The action is one of some 28 similar
actions, but this judgment is only as between the plaintiffs and these
defendants.
The lease
under which the defendants held their interest was made on July 28 1978 between
the plaintiffs as lessor, Silchester Court (Croydon) Management Co Ltd (the
company) as the company and Brian Godfrey Johnson as the lessee. It appears
that on July 2 1979 Mr Johnson transferred his interest in the lease to a Mr Timothy
Sedgwick. I have no information as to whether the defendants acquired their
interest from Mr Sedgwick, but nothing turns on this.
The term was
for 99 years from January 1 1976 at a premium of £11,500 at an initial yearly
rent of £10.
I should read some
terms of the lease. Recital (2):
The Lessor
intends when the occasion arises to demise flats comprised in the Building in
accordance with a general scheme and then in every such lease (other than
leases at rack rents) of an individual flat the lessee thereof shall enter into
obligations and restrictions on or substantially as stated in clause 3 of this
lease to the intent that the lessee for the time being of any flat (other than
lessees of rack rents) may be able to enforce in equity the performance and
observance thereof by the lessee for the time being of other flats as demised.
Recital (3):
The Company
has been incorporated with the object (inter alia) of providing services
to and for lessees of the flats comprised in the Building and otherwise managing
the same as hereinafter appears.
Clause 1
provided, inter alia:
The lessor
HEREBY DEMISES unto the lessee all that flat the details whereof are set forth
in Part 3 of the said First Schedule . . . TOGETHER with (to the exclusion of
all others) the easements, rights and privileges specified in the Second
Schedule hereto subject as therein mentioned EXCEPT AND RESERVING as specified
in the Third Schedule . . .
It is not
necessary to consider the second and third schedules.
By clause 2
the lessees entered into the usual covenants. Clause 3 provided:
In accordance
with the said general scheme and for the benefit of the lessees of the other
flats comprised in the Building (other than lessees at rack rents) the lessee
hereby covenants with the lessor and the Company and the lessees for the time
being of the other flats comprised in the Building (other than the lessees at
rack rent) and with each of them that the lessee will from time to time and at
all times hereinafter during the said term
(A) Keep the said flat (other than the parts
thereof to be maintained by the Company pursuant to the Fifth Schedule hereto)
. . . in good substantial and
protect the parts of the Building other than the said flat . . .
(D)(i) Pay to the Company in respect of the year
ending on the 31st December 1979 and each year thereafter [2%] of the costs,
charges, expenses and management fees from time to time incurred by the Company
in carrying out its obligations under the Fifth Schedule hereto (hereinafter
called ‘The Maintenance Charges’) such amount to be paid as hereinafter
provided.
I should read
part of the fifth schedule:
Subject to
the due performance by the lessee of his obligations to contribute to the
maintenance charges as herein provided, the Company will at all times during
the said term
(1) Whenever reasonably necessary maintain,
repair, redecorate and renew
(a) The external walls and structures and in
particular the roof foundations chimney stacks gutters and rainwater pipes of
the building
(b) The gas and water pipe sewers drains vent
pipes and electric cables and wires in under and upon the Building or enjoyed
or used by the lessee in common with the lessees of other flats in the Building
(c) The main entrances common lifts passages
landings and staircases and other parts of the Building so enjoyed or used by
the lessee in common as aforesaid
(d) The boundary walls and fences of the lessor’s
land
(e) The flat or flat spaces and accommodation (if
any) for the time being occupied or used by the caretaker and other persons
employed by the Company as hereinafter mentioned.
Reverting to
clause 3 by (D)(ii) it was provided that the lessee would:
Pay to the
Company in advance on the first day of January and the first day of July in
each year (commencing on the 1st day of January 1979) on account of the
maintenance charges payable by the lessee for such year one half of such amount
as the Company or its Managing Agents shall certify to be the estimated amount
of the maintenance charges attributable to the said flat for that year (such
certificate to be final or binding on the lessee).
(iii) Within 28 days after the accounts for the
Company of the year have been audited and a certificate signed by the auditor
stating the amount of the maintenance charges attributable to the said flat for
that year (or a certified copy thereof) has been served on the lessee (such
certificate to be binding on the lessee) to pay to the Company the amount (if
any) by which the maintenance charges payable in respect of the said flat for
such year exceed the amount paid on account in respect of such year PROVIDED
that if the amount of such maintenance charges payable for the year in respect
of the said flat is less than the amount paid in advance on account the excess
shall at the discretion of the Company either be repaid to the lessee or
retained by the Company on account of payment due from the lessee in future
years.
Clause 3(F)
provided:
Upon any
transaction or disposition to which the lessee is a party or over which he has
control involving a change or a contract for a change in the ownership of the
said flat to procure that the person becoming or contracting to become as a
result of such transaction or disposition the owner of the said flat (which
expression shall be deemed to include any assignee of this lease and any person
holding as under-tenant for substantially the whole of the unexpired part of
the term hereby granted but excluding any mortgagee) (a) becomes (in the case
of an assignee of this lease) a member of the Company and (b) at the expense of
the lessee enters into a Deed of covenant with the Company to observe and
perform all the covenants by the lessee with the Company contained in this
lease in the terms specified in the Sixth Schedule hereto and pays the
Company’s solicitors reasonable charges in connection with the said Deed.
The sixth
schedule somewhat surprisingly related not only to the service charge but to
the rent as well.
Clause 3(H)
contained provisions whereby the lessee had to permit the company and its
respective surveyors and agents access to the flat and made provision as to
what had to be done by the lessee in the event of a consequent notice
specifying any repairs necessary to be done and for which the lessee was
liable.
By clause 4
the plaintiffs covenanted with the lessee:
(A) That the lessee paying the rents hereby
reserved and performing and observing the several covenants conditions and
agreements herein contained and on the lessor’s part to be performed and
observed shall and may peaceably and quietly hold and enjoy the said flat
during the said term without any lawful interruption or disturbance from or by
the lessor or any person or persons rightfully claiming under or in trust for
the lessor.
(B) That the lessor will require every person to
whom they shall hereafter grant a lease of any flat comprised in the Building
(other than leases at rack rents) to covenant to perform and observe
obligations as or substantially as stated in Clause 3 of this lease (with such
modifications as regards contribution to the maintenance charges as the lessor
may deem appropriate to the flat concerned) and that if so required by the
lessee will take all reasonable steps to enforce the same PROVIDED . . .
(C) That the lessor will allow the Company and
persons authorised — by the Company to have such access to the Building and
other parts of the lessor’s land as may be necessary and proper for enabling
the Company to carry out its obligations hereunder.
2. The Lessor
HEREBY FURTHER COVENANTS with the lessee . . . that the lessor will while any
flat comprised in the Building is let to a tenant at a rack rent make such
payments to the Company in respect of such flat as are provided in Clause
3(D)(i) and (iii) hereof.
Clause 5
contained rights of re-entry, inter alia, if there should be any breach
of any covenant or agreement on the part of the lessee.
By clause 6 it
was thereby agreed and declared that:
(A) The lessor shall not be liable or responsible
for any damage suffered by the lessee or any visitor employee invitee or
licensee of the lessee or any other person to their person or goods by reason
of any act neglect default or omission of any other lessee or occupier of the
Building and of any contractor employee visitor invitee or licensee of such
other lessee or occupier . . . or by reason of any default in any fixture pipe
wire staircase or thing or the absence of lighting in or upon the Building or
any part thereof including the said flat.
(B) If during the term hereby granted the Company
shall go into liquidation the lessor shall be entitled (but not bound) upon
giving notice to the lessee to undertake the obligations hereby undertaken by
the Company and if the lessor elects so to do the lessor shall be entitled to
the benefit of all provisions herein contained concerning the Company and to
recover from the lessee all monies hereby covenanted to be paid by the lessee
to the Company.
By clause 7
the company covenanted with the lessor and the lessee to perform and observe
the obligations set out in the fifth schedule (to which I have made partial
reference).
I should read
clause 8:
NOTWITHSTANDING
anything herein contained the Company shall not be liable to the lessee nor
shall the lessee have any claim against the Company in respect of
(A) Any loss or inconvenience occasioned by any
interruption of any of the services mentioned in the Fifth Schedule from
whatever cause.
(B) Any act neglect default or omission of any
caretaker porter or other of its staff servants or any person acting under any
such caretaker porter staff or servants.
(C) Any loss or damage or interference or
annoyance suffered by the lessee during the carrying out by the Company of
repairs decorations additions alterations or other work which may appear to the
Company to be necessary or desirable in the said flat or the Building.
Clause 9 made
provision for the supply or non-supply of central heating and hot water.
In these
proceedings, commenced on April 18 1991, the plaintiffs alleged that the
residue of the term created by the lease granted to Mr Johnson was vested in
the defendants. The statement of claim set out the covenant in the lease in
clause 2(1) relating to the payment of rent, the provisions of clause 3(D) and
the proviso for re-entry.
It was alleged
that on June 5 1990 the plaintiffs had served a section 146 notice. Para 5
reads:
The
defendants have failed to pay the rent and service charge in accordance with
the terms of the lease and the arrears amount to £9,890.14.
The plaintiffs
asserted that the lease had been forfeited on April 18 1991. The plaintiffs
sought to recover, inter alia, possession and £9,890.14 arrears of rent
and service charges.
During the
course of submissions my attention was drawn to the statement of claim. It did
not appear that the plaintiffs were entitled to seek judgment for the amount
claimed in respect of the service charge.
plaintiffs could seek a declaration that the defendants were obliged to pay to
the company the service charge. But that is not what is sought. Mr Michael
Daiches for the plaintiffs, while not making a formal concession, was disposed
to think that the plaintiffs were not entitled to recover the costs of the
service charge.
The defendants
served their defence and counterclaim on July 8 1991. Although the heading of
the document does not make this apparent, the plaintiffs were also defendants
to the defendants’ counterclaim. By their defence the defendants did not
expressly raise the point that under the terms of the lease the service charge
was payable to the company and not to the plaintiffs. By para 7 the defendants
pleaded the plaintiffs’ covenant for quiet enjoyment. By para 8 was set out the
company’s covenant in clause 7 to perform and observe the obligation set out in
the fifth schedule, which they then pleaded in para 9.
Para 10 set
out alleged implied terms so far as the company was concerned.
I should read
paras 11, 12 and 13:
11. The
Plaintiffs owed the Defendants a fiduciary duty to ensure that the Company did
not breach the covenants and terms referred to in paragraphs 8, 9 and 10
hereof.
12. It was an
implied term of the lease that in the event of the Company failing to observe the
covenants and terms referred to in paragraph 8, 9 and 10 hereof, the Plaintiffs
would perform them for the benefit of the tenant.
13. In breach
of the covenant for quiet enjoyment referred to in paragraph 7 hereof and the
duty imposed on the Plaintiffs by reason of the matters pleaded in paragraphs
11 and 12 hereof the Plaintiffs by themselves or their agents and in particular
the Company in breach of the covenants pleaded in paragraphs 8 and 9 hereof,
have allowed the Building to fall into a state of disrepair and condition . . .
Particulars of
such disruption were then set out. I do not at this stage refer to other
matters pleaded in the defence and counterclaim.
By a summons
dated January 19 1993 the plaintiffs made the following application:
(a) An application under Order 14A of the RSC for
the determination by the Court of the following questions of law, namely
whether it was an implied term of the lease dated 20th December 1976 between
(1) the Plaintiff and (2) the defendant by Counterclaim (hereinafter referred
to as ‘the Company’ and (3) Brian Godfrey Johnson, that in the event of the
Company failing to observe the covenants in terms referred to in paras 8, 9 and
10 of the defence and counterclaim, the Plaintiff would perform them for the
benefits of the tenants (as alleged in paragraph 12 of the Defence and
Counterclaim).
(b) An application under Order 18 r19(1)(a) of
the RSC that paragraph 13 of the defence and counterclaim be struck out as
against the plaintiff as disclosing no reasonable defence to the plaintiffs’
claim and/or no reasonable cause of action against the plaintiffs.
(c) That, in the event that the answer to the
question of law posed at (a) is ‘no’, the defendants’ counterclaim against the
plaintiff be struck out under Ord 18 r19(1)(a) of the RSC as disclosing no
reasonable cause of action against the plaintiff.
(d) That the applications set out in paras (a) to
(c) above also apply to actions number 1992-ORB-1025 to 1051 inclusive and the
parties in relation to which are set out in the Schedule below.
Application
(d) failed because the defendants in the other actions were not present.
As regards Ord
14A I should set out the provisions of that order:
Determination
of questions of law or construction (O14A r1)
1.–(1) The Court may upon the application of a party
or of its own motion determine any question of law or construction of any
document arising in any cause of matter at any stage of the proceedings where
it appears to the Court that —
(a) such question is suitable for determination
without a full trial of the action, and
(b) such determination will finally determine
(subject only to any possible appeal) the entire clause or matter or any claim
or issue therein.
(2) Upon such determination the Court may dismiss
the cause or matter or make such order or judgment as it thinks just.
(3) The Court shall not determine any question
under this Order unless the parties have either —
(a) had an opportunity of being heard on the
question, or
(b) consented to an order or judgment on such
determination . . .
(5) Nothing in this Order shall limit the powers
of the Court under Order 18, rule 19 or any other provision of these rules.
Manner in
which application under rule 1 may be made (O14A, r2)
2. An
application under rule 1 may be made by summons or motion or (notwithstanding
Order 32, rule 1) may be made orally in the course of any interlocutory
application to the Court.
I was not
satisfied that it was appropriate to deal with the matter under Ord 14A. In the
event, however, it may make little difference because if the plaintiffs are
successful under (b) then the claim against them will in large measure
be struck out.
It is
well-settled law that a breach of covenant for quiet enjoyment requires a
finding that the landlord has breached some duty to the tenant. An omission
which was a breach of duty could constitute a breach of a covenant for quiet
enjoyment. But an omission causing a tenant damage which is not a breach of any
duty owed by the landlord to the tenant cannot amount to a breach of the
covenant of quiet enjoyment.
As has been
seen the only duties allegedly owed by the plaintiffs to the defendants are
those set out in paras 11 and 12 of the defence. As to the fiduciary duty
alleged in para 11 Mr Stephen Hockman QC frankly and fairly conceded that he
was unable to support the existence of such a duty. He did contend that there
was an implied term of a similar nature, but this was never clearly formulated
and I consider that the plea if made would not be sustainable.
As to the
implied term alleged in para 12 my attention was drawn particularly to the
decisions of Halsall v Brizell [1957] Ch 169; Liverpool City
Council v Irwin [1977] AC 239*; Duke of Westminster v Guild
[1985] QB 688† ; Gordon v Selico Co Ltd [1986] 1 EGLR 71; Barrett
v Lounova (1982) Ltd [1990] 1QB 348 and to various paragraphs in Woodfall
28th ed.
*Editor’s
note: Also reported at [1976] 238 EG 879, [1976] 1 EGLR 53.
† Editor’s
note: Also reported at (1983) 267 EG 762, [1983] 2 EGLR 37.
A copy of the
memorandum and articles of association of the company was proffered in the
course of the hearing. As Mr Heckman was concerned to consider these before
agreeing to my considering them, in the event I have not considered them at
all.
I have
therefore the position that the lease contemplated that a lessee would be a
member of the company, but I have no indication as to how control of the
company was to be exercised. The implication of a term in a lease is dependent
upon the same considerations that apply in any other contract. The question is
whether the insertion of the term is necessary to give business efficacy to the
contract between landlord and tenant.
An obligation
placed upon the tenant may require the imposition of a correlative or
corresponding obligation on the landlord. If it can be shown that a landlord is
taking the benefit of a covenant he may be under an obligation to accept a
corresponding burden. If a lease is silent as to an obligation which
necessarily falls on either the landlord or the tenant this may give rise to an
implication that the obligation is that of the landlord on the one hand or of
the tenant on the other.
Where it is
sought to raise an implied term one matter to which the court should have
regard is whether the lease provides a comprehensive code for the carrying out
of repairs and the payment of them. The more comprehensive the code the less
room there is for the implication of a term.
The
defendants’ case is that the lease not only imposed a duty on the lessee to pay
the company the maintenance charge but further, by clause 3, the lessee
covenanted with the lessor to make such payment and the lease provided that the
landlord had a right of re-entry in the event of noncompliance. Yet, say the
defendants, the obligation to comply with the fifth schedule was that solely of
the company unless on the liquidation of the company the lessor elected to
undertake those obligations. The lease was silent as to what was to happen in
the event
in the event of the company going into liquidation and the landlord not making
an election.
Yet, say the
defendants, these obligations had to be discharged by someone if the company
failed to do so.
A question of
implication ultimately turns on a detailed examination of the terms of the
lease. Prima facie the terms of the lease and in particular clause 6(B)
militate against the existence of such a term. Even assuming that the lessees
could not control the company they had undoubted rights to enforce the
compliance by the company of its obligations. Of course these might prove
nugatory. The company might go into liquidation and the lessor might not make
an election. But that is not the end of the matter.
Where a
landlord has an obligation to carry out repairs but fails to do so a court
frequently appoints a receiver and manager: see, for example, Hart v Emelkirk
Ltd [1983] 1 WLR 1289; Daiches v Bluelake Investments Ltd [1985]
2 EGLR 67; Clayhope Properties Ltd v Evans [1986] 2 EGLR 34 and Blawdziewicz
v Diadon Establishment [1988] 2 EGLR 52.
It is not
contended that the court lacked power to appoint a receiver and manager where
it is not the landlord but the management company which fails to discharge its
obligations. Among the relief sought in the defendants’ counterclaim was an
order for the appointment of a receiver and manager of the building under Part
II of the Landlord and Tenant Act 1987, alternatively under the Supreme Court
Act 1981, section 37.
Interesting
points were canvassed as to whether such relief could be claimed in the action,
whether an official referee, as distinct from a judge of the Chancery Division,
had jurisdiction to hear the application and as to whether the application had
to be made by originating application rather than by the pleading itself. My
attention was drawn, inter alia, to section 37 of the 1981 Act, sections
21 and 24 of the 1987 Act and RSC Ord 2 r1, Ord 3 r5, Ord 4 r3, Ord 5 r3, and
Ord 97.
But these
matters are academic so far as the striking out application is concerned. I do
not consider it appropriate to determine in this application this matter, not
least because there is no application to do so. The relevant fact is that the
defendants are entitled to apply for a receiver if the company fails to
discharge its obligations. How this should be done is a matter of no relevance
to this application.
The contention
that the lease contained the term alleged in para 12 is, I find, unsustainable.
I have reached
the conclusion that para 13 of the defence in so far as it raises allegations
against plaintiffs should be struck out as therefore should paras 11 and 12.
Obviously the defendants’ claim for relief from forfeiture stands. As indicated
I make no finding as to their right in these proceedings to claim for the
appointment of a receiver. Until such time as the plaintiffs amend their
statement of claim in respect of the service charge, para 15 of the defence
should stand. Nothing of course in this judgment in any way touches on the
right of the defendants to pursue their counterclaim against the company.
Because this
judgment indirectly affects others this judgment is given in open court.