Dispute as to tenant’s proper contribution under lease to increases in costs of central heating and hot water — Effect on tenant’s proportionate contribution of a change from solid fuel to an oil-fired installation and addition of a new building to be served by system — Tenant’s lease provided that he should contribute two-sevenths (based on floor area) of increased costs for the demised premises (literally his own maisonette only but accepted in practice as being for the whole of the original building) — In the new building joined up with the old the heating was more extensive, applying not only to rooms but also to internal passages and common parts — Landlords sought to supply the two-sevenths calculation under the new conditions — Tenant resisted, arguing that he would be subsidising
This was an
appeal by Professor J G Feinberg from a decision of Judge Willis at the West
London County Court in an action by Pole Properties Ltd, plaintiffs, against
Professor Feinberg as defendant. The dispute, which was as to how the increased
costs of providing central heating and hot water should be borne, related to a
marsonette at 17 Old Church Street, Chelsea, of which Professor Feinberg was
tenant.
The appellant
appeared in person; G Bennett (instructed by Frere Cholmeley) represented the
respondents.
Giving
judgment, LORD DENNING MR said: Everyone knows that the cost of central heating
has rocketed enormously in the last few years. This has had its repercussions
on a tenant in a block of flats in Chelsea. There is a very genuine dispute
between the tenant and the landlords. Pole Properties Ltd, as to how the
increased cost is to be borne.
The history of
the matter goes back to 1958. No 17 Old Church Street in Chelsea had been
converted into four flats and maisonettes. The building was heated by means of
a boiler which burned hard fuel. Professor Feinberg was a tenant under the
terms of a seven-year lease from 1958 to 1965. The lease contained a clause
which provided for increases in the cost of fuel. Professor Feinberg was to pay
two-sevenths of any such increase. That proportion was calculated in this way:
the floor space of the four flats and maisonettes was measured and it was found
that the floor space of Professor Feinberg’s maisonette came to two-sevenths of
the whole building. So he would have to pay two-sevenths of the cost of any
increase in the price of the fuel consumed in heating no 17.
A new
situation arose in 1967. The landlords acquired the next-door property, 13 Old
Church Street. They built a new block of flats on that site, and heated it in
an entirely different way. They put in a new system of radiators and pipes and
an oil-fired system of heating. In addition, they scrapped the original solid
fuel boiler at no 17. They heated no 17 by connecting the old pipes and
radiators to the oil-fired boiler which had been installed at no 13. So
Professor Feinberg’s maisonette was now heated by the new oil boiler. But the
radiators etc remained the same as before.
The question
then arose as to the apportionment of increased costs between the tenants. The
landlords said that the calculations should be based on the floor area of the
flats throughout the combined building and that Professor Feinberg should pay
his proportion according to the floor area of his maisonette as against the
rest of the combined building.
Professor
Feinberg said that that was unfair. The combined block contains seven flats as
against four in the old building. All the new flats in no 13 are heated
throughout, including the stairwells and passages, whereas in the old building,
no 17, only some of the rooms are heated and there is no heating provided for
the stairwells and passages. Therefore Professor Feinberg said it was most
unfair to apportion the cost on the basis of the floor area of the two
buildings combined.
That was the
dispute which arose between the parties. Professor Feinberg put in a tender of
what he thought was a fair proportion. But the landlords did not agree.
Eventually the matter was taken to the county court. Evidence was given by the
landlords. But Professor Feinberg brought in an expert. He called in Mr
Sutherland, a consultant heating and ventilation engineer. Mr Sutherland said
that the fairest way to apportion the cost was to take the number of rooms
which were actually heated in each of the flats in the combined building and
each tenant should contribute in proportion to the heat actually used by him.
That basis of apportionment gave a very different result. I will not go into
detail, but on the landlords’ figures 19.33 per cent of the increased cost of
fuel for the combined block would be borne by Professor Feinberg. Whereas Mr
Sutherland on his figures said that 12.08 should be the proportion which
Professor Feinberg ought to bear.
The argument
before the judge turned on whether the terms of the lease still applied: or
whether the position had changed so radically that they could no longer be
applied (in which case it would be for the court to say what was fair and
reasonable). That is the way in which the judge put it in his judgment. He
said:
I am satisfied
that the changes which took place are not so radical and that the defendant
paying 2/7 of the excess fuel charges upon the basis of the area of the old
building is a proper way of achieving the apportionment
The strict
construction
That brings me
to the terms of the lease itself. On its strict construction the position would
be very much worse for the landlords. The lease was dated November 28 1958. It
was between Pole Properties Ltd and Professor Feinberg. Clause 2(20) provides:
In the event
of the prices of coke or oil fuel rising above the price of eight pounds two
shillings and five pence . . . per ton and 1/1 3/4d per gallon respectively to
pay to the Landlord on demand (on production of the invoices) for all fuel used
in providing the hot water and central heating in accordance with clause 4(1)
hereof at a rate equal to two sevenths of the sum by which the prices of the
said fuels shall exceed the respective prices hereinbefore mentioned . . . .
Clause 4(1)
provides:
The Lessor
covenants with the Lessee: During the period from the second week in October in
each year to the second week in April in the next year inclusive to provide
steam or hot water for the adequate heating of the demised premises and further
at all times during the year to provide and maintain a proper supply of hot and
cold water to the kitchen bath-room and lavatory . . . .
Sir Denys
Buckley, in the course of the discussion before us, pointed out that under the
terms of the lease — on its strict wording — what had to be done was to find
out what fuel was used in providing the hot water for this maisonette. Then the
tenant had to pay two-sevenths of the cost of it. On that strict construction,
it would operate very harshly against the landlords: because Professor Feinberg
would only have to pay two-sevenths of the cost of providing heating and hot
water to his own maisonette. But we do not have to construe the clause
strictly: Firstly, because the point was not taken in the court below; and,
secondly, because in a letter dated October 31 1979 Professor Feinberg’s
solicitors said:
It is
admitted that the tenant is obliged to pay 2/7ths of the excess cost . . . of
fuel actually used to provide heat and hot water to the parts of the building
originally supplied by the central heating system at the date of the grant of
the lease.
So it seems to
me that the strict construction has been departed from by the parties: it was
not taken in the court below and that admission puts it out of the question
here.
Was there
a radical change?
That brings me
to the point which the judge considered: and the one point in the case. This is
now a statutory tenancy. The terms of the original tenancy agreement still
apply so far as consistent with the provisions of the statute. On the other
hand, it seems to me that, when the two premises were combined, the situation
changed. The new block of flats was completely centrally heated — the
stairwells, the passages, and all the common parts. But the old building was
not — and still is not — completely heated. The stairwells and passages are not
heated: nor are the kitchens and bathrooms of the flats: nor are some of the
other rooms. It seems to me that it is very unfair to combine the new system of
heating with the old system and still seek to apply the original method of
calculation.
In this
context I would refer to the case of Staffordshire Area Health Authority
v South Staffordshire Waterworks Co [1978] 1 WLR 1387. That was a case
which dealt with a new system of water supply and how it applied to the terms
of a lease. I said at p 1395:
. . . we have
to ask ourselves: what were the circumstances in which the contract was
made? Does it apply in the least to the
new situation which has developed? If
events occur for which they have made no provision — and which were outside the
realm of their speculation altogether — or of any reasonable persons sitting in
their shoes — then the court itself must take a hand and hold that the contract
in its original terms ceases to bind.
It will have to
do what is fair and reasonable in the new situation.
In that case
we had to decide what was reasonable notice in a new situation. In this case
the situation has been radically changed by the new building and the new system
of heating. The change is so radical that the terms of the lease no longer
apply. The court has to do what is reasonable and fair in the circumstances.
Upon that the evidence is all one way. The landlord did not give any evidence
on that basis. But the expert, Mr Sutherland, went into it most carefully. He
said in his report:
The fairest
way to apportion the cost of providing space heating would be to use the
directly heated volume basis. Each tenant would then be contributing in
proportion to the facilities provided for him.
In other words,
each tenant should pay according to the use he has of the heating, not
according to the floor space, which may have no relation to it. Mr Sutherland
put in some revised figures in a letter of April 28 1976 for each flat, showing
what would be the appropriate proportions throughout the whole building on a
directly heated volume basis. The proportion for Professor Feinberg is 12.08
per cent.
That seems to
me to be the right and fair way of apportioning the cost. The calculations by
the parties should be made on that basis. In these circumstances — on this very
nicely argued and difficult point — it seems to me that the professor is right.
The court should do what is fair and reasonable in the circumstances.
I would allow
the appeal accordingly.
Agreeing, DUNN
LJ said: As we are differing from the judge I would say a few words of my own.
The defendant is holding over as a statutory tenant under the terms, so far as
consistent, of a lease of November 28 1958. A strict construction of the
clauses of that lease, which my Lord has read, shows that the defendant is
liable only for two-sevenths of the increased costs of heating and providing
hot water for the demised premises — that is to say, for his own maisonette.
But the parties never construed the clause in that way when they came to
operate it. They took it that the defendant was liable to pay two-sevenths of
the increased costs of heating the whole building as it then stood. At that
time the building consisted of 15 and 17 Old Church Street, which had been converted
into four flats and maisonettes. The defendant’s maisonette consists of four
rooms on two storeys with an internal stairwell and passages. There are
radiators only in the rooms. There is no heating in the internal passages or
the stairwell or in the common parts of the building. The proportion of
two-sevenths was calculated on the basis of the floor area of the flats, the
defendant’s flat representing approximately two-sevenths of the floor area of
the whole building.
Down to 1967
that presented no problem. There were only small increases in fuel costs, and
the defendant paid his two-sevenths share without question. In 1967 the
plaintiffs built a new building, 13 Old Church Street, with seven flats in it.
The original solid-fuel heating system was scrapped and was replaced by an oil
system which heated and provided hot water not only for the original building
but also for the new building which was joined up to it. The new building was
fully heated. There was heating not only in the rooms but in the passages and
in the common parts of the new building. The plaintiffs recalculated the method
of paying for increased fuel costs by the defendant. What they did was to take
the total area occupied by the whole of the new and old buildings; they took
the total gallonage delivered for those buildings during the relevant period;
they reduced that to a gallonage per square foot; they then applied that to the
area of the original building to find the total gallonage attributable to that
area, and then they took two-sevenths of that as being the gallonage
attributable to the defendant’s flat. Then, by applying the increase in price,
they arrived at the price payable by the defendant.
The defendant
said that this was unfair. By calculating the increase in price on the basis of
a proportion of the floor area, he was in fact contributing to the heating in
the new flats in no 13. He called in Mr Sutherland, a consultant heating and
ventilation engineer. Mr Sutherland said:
The fairest
way to apportion the cost of providing space heating would be to use the
directly heated volume basis. Each tenant would then be contributing in
proportion to the facilities provided for him.
He also
calculated the increase in hot water costs based on the number of persons the
dwelling was designed to house — based on its bedrooms — although the defendant
lives alone in his maisonette.
The defendant,
adopting Mr Sutherland’s approach, made payments in accordance with it, and
those payments are set out in the particulars of claim in the county court, and
they are based on 13.74 per cent of the directly heated volume. There seems to
have been no difficulty in calculating that figure, and it is on that basis
that the payments were made.
The plaintiffs
did not accept that, and they started county court proceedings originally for
possession of the maisonette because the increased payments were expressed to
be part of the rent in the lease, and so they claimed possession on the ground
of non-payment of rent. But that claim was not persisted in; and in effect what
they asked for and what the judge in the end granted was a declaration that
their method of computing the increase in fuel costs was the correct method.
Before the
proceedings came to trial, the defendant’s solicitors, acting within their
authority, wrote on October 31 1979 to the plaintiffs’ solicitors saying:
It is
admitted that the tenant is obliged to pay 2/7ths of the excess cost . . . of
fuel actually used to provide heat and hot water to the parts of the building
originally supplied by the central heating system at the date of the grant of
the lease.
That admission
reflects the way in which the clauses of the lease had been operated by the
parties ever since 1958. It was the basis on which the whole case proceeded
before the judge, and it was accepted by him as the correct basis. The point
was never taken before the judge that the defendant was only liable to pay
two-sevenths of the increased cost of heating his maisonette, and it is too
late for that point to be taken in this court. The question remains: what is
the proper method of calculating the increased cost of heating the defendant’s
flat? The judge accepted the plaintiffs’
method of calculation based upon a proportion of the floor area of the original
building. He based himself on the lease, and said in the passage quoted by my
Lord, ‘I am satisfied that the changes which took place are not so radical and
that the defendant paying 2/7 of the excess fuel charges upon the basis of the
area of the old building is a proper way of achieving the apportionment’.
In my view,
with respect to the judge faced with a difficult problem, he fell into error.
The whole situation was changed when the new building was erected. Instead of
four flats, each partially heated, there are now nine flats of which seven are
fully heated, although the defendant’s flat remains partially heated. There is
force in the defendant’s submission that he is in effect subsidising the
heating costs of the flats in the new building. This is such a radical change
as to warrant a change in the method of computation. Mr Sutherland, contrary to
what the judge said, does not go behind the lease because the lease gives no
clue as to the method of calculating the increased cost of heating the
defendant’s flat; and, in the absence of a direction in the lease, the court is
free to adopt a fair and reasonable approach. Mr Sutherland’s approach is open
to the objections referred to by the judge in his judgment, but in my view it
is a fairer and more reasonable one than the plaintiffs’ approach. In an
addendum to his report dated April 28 1976 Mr Sutherland says that 12.08 per
cent of the heated space is a fair proportion for the defendant to pay. In my
judgment that proportion should be taken. I do not anticipate any greater
difficulty in calculating that than in calculating the 13.74 per cent which was
the basis on which the defendant has paid hitherto.
For those
reasons I agree that the appeal should be allowed and that the order should be
varied so as to bring it into line with Mr Sutherland’s figure of 12.08 per
cent of the heated space.
Also agreeing,
SIR DENYS BUCKLEY said: If the problem with which we are concerned fell to be
decided upon the terms of the lease of November 28 1958, I think that we should
be constrained by the language of clause 2(2) and clause 4(1) of that lease to
decide otherwise than my Lords have indicated. But, in my opinion, in the
events which have happened, that cannot now be the basis of
adopted in practice that construction, but in the pleadings in this action they
have not relied upon that construction, and in argument in the court below no
one put forward that construction as being the true construction of the lease.
The admission contained in the letter of the defendant’s solicitor dated
October 31 1979, which has been referred to, is inconsistent with that
construction, and the defendant in this court has accepted Mr Sutherland’s
calculations contained in his letters of April 8 and 28 1976 in which Mr
Sutherland reached the conclusion, for the reasons given in those letters, that
the fair proportion of the heating charges to be borne by the defendant is
12.08 per cent, that being the proportion of the directly heated volume
comprised in his maisonette to the entirety of the directly heated volume in
the whole of the block of flats as it has resulted from the structural
alterations which the landlords made. In these circumstances, I find myself in
agreement with my Lords in thinking that we should decide the case upon the
lines which they have indicated and reach the conclusion which they have
reached, which is that any increase in heating costs incurred in relation to
the whole of the block of flats in respect of any year falls to be borne as to
12.08 per cent by the defendant.
I would add
that this decision of the position as between the defendant and the landlords
does not in my view in any way affect whatever may be the rights and
liabilities of the other tenants of other flats in the building. It may be —
and indeed I think it would be a sensible solution — that there should now be
an agreement between the landlords and all the tenants as to how the charges
should be regulated in the future so that the matter can be put on a firm basis
and all can be treated alike. But of course this decision between the plaintiff
company and the defendant cannot affect the legal rights or liabilities of
tenants of other flats, for the question which arises is a question which
properly would have arisen under the terms of the defendant’s lease and the
defendant’s lease alone.
For these
reasons as well as for those contained in the judgments delivered by my Lords I
agree with the conclusion which they have reached.
The appeal
was allowed with costs in the Court of Appeal and below.
