Landlord and tenant — Arrears of rent and service charge — Landlords’ covenant to repair common parts — Disrepair of common parts due to some extent to flooding caused by tenant’s default — Whether landlords entitled to recover in respect of damage for which they were insured — Whether landlords had a claim for legal costs incurred in recovering service charge from other tenants
long lease of a flat in a large block belonging to the landlords and, in
addition to a ground rent, was liable to pay a service charge in respect of the
landlords’ obligations, including the maintenance of the common parts — In an
action by the landlords for possession and arrears of rent and service charge
the tenant counterclaimed for damages on account of the poor condition of the
common parts — The landlords replied that the common parts had been flooded on
several occasions as a result of a defective overflow pipe from the tenant’s
bath — The tenant’s repairing covenant relieved the tenant from liability in
cases where the landlords could claim under their insurance
court judge gave judgment for the plaintiff landlords in respect of arrears and
awarded the tenant £1,250 damages for loss of amenity on his counterclaim less
£570 for the damage caused by the tenant’s defective overflow pipe — The judge
disallowed the landlords’ claim for legal costs of recovering service charges —
The tenant appealed against the smallness of the £1,250 award and against the
deduction of £570; the landlords cross-appealed on the question of legal costs
— It appeared that at the trial there had been some discussion of the
landlords’ and their superior lessors’ insurance policies but the judge’s
attention had not been drawn to the provision in the lease excluding the
landlords’ right of recovery in respect of matters for which they were insured
— It seems, however, that before he gave judgment the judge had been referred
to the case of Mark Rowlands Ltd v Berni Inns Ltd
Appeal refused to entertain the tenant’s point about the exclusion of the
tenant’s liability where the landlords had an insurance claim — This point had
not been taken in the court below and was in any case one on which evidence
would have been required — The court rejected the tenant’s submission that the
judge’s award of £1,250 for loss of amenity was so inadequate as to justify the
court’s interference — They also rejected the landlords’ cross-appeal in regard
to legal costs incurred in pursuing other tenants for rent and service charges
— The provisions in the lease relied on by the landlords in support of this
claim were concerned only with the management and administration of the
building — Both the appeal and the cross-appeal were accordingly dismissed —
The court gave a separate judgment on the costs of the proceedings, where the
judge was held to have erred on a matter of principle; this judgment is also
reported fully below.
The following
cases are referred to in this report.
Ketteman v Hansel Properties Ltd [1987] AC 189; [1987] 2 WLR 312;
[1988] 1 All ER 38; (1987) 85 LGR 409; [1987] 1 EGLR 237, HL
Rowlands
(Mark) Ltd v Berni Inns Ltd [1986] QB 211;
[1985] 3 WLR 964; [1985] 3 All ER 473; [1985] 2 EGLR 92; (1985) 276 EG 191, CA
This was an
appeal by Martin John Patrick Mears and a cross-appeal by Sella House Ltd, the
tenant and the landlords respectively, of a flat on the third floor of a
property known as 56 Cadogan Place, London SW1, from a decision of Judge Parker
QC at West London County Court.
A J Simmonds
(instructed by Mears Hobbs & Durrant, of Great Yarmouth) appeared on behalf
of the appellant; S D Whitaker (instructed by Julian Holy) represented the
respondents.
Giving
judgment, DILLON LJ said: The court has before it an appeal by the defendant,
Mr Mears, and a cross-appeal by the plaintiff, Sella House Ltd, against parts
of a decision of Judge Parker QC, given in the West London County Court on June
15 1988. The litigation arises in this way. The plaintiff is the landlord of a
property known as 56 Cadogan Place, London SW1. The defendant is the tenant of
a flat on the third floor of that property. The defendant’s tenancy is by a
lease dated June 30 1980, and it was for a term of 65 years, less the last
three days, from September 29 1979, at a substantial premium. Under the lease
he has to pay a ground rent which, for the first 21 years of the term, is only
£100 per annum. The building, 56 Cadogan Place, consists of six floors
including the basement. One floor, presumably the basement, is occupied by a
caretaker, who did a certain amount of cleaning work in the premises. Of the
other floors, three were let on tenancies similar to that of the defendant’s
for long terms. The other two were occupied by protected tenants.
The building
had, of course, common parts, particularly the entrance hall and staircase, and
the general scheme of the
should pay a service charge, and an interim charge on account of the service
charge, in respect of the total expenditure incurred by the landlord in
carrying out certain obligations under the lease. The defendant objected to
paying what was sought from him in the way of a service charge because of the
poor condition of the common parts of the premises.
The form of
the proceedings was that the plaintiff launched its claim against the defendant
to recover unpaid arrears of rent and service charge. The defendant disputed
various of the matters claimed. Apart from that, he counterclaimed against the
plaintiff for damages for breach of the plaintiff’s obligation to keep the
common parts of the premises in good repair and condition. In its defence to
that counterclaim the plaintiff asserted that part of the disrepair of the
common parts of the premises was itself due to a breach by the defendant of his
own repairing obligations in respect of his flat in that, as a result of the
defective condition of the overflow pipe from the bath in his flat, three times
there had been floods from bath water overflowing from his flat into the common
parts which had damaged the common parts.
Those were the
basic issues before the learned judge. I shall have to elaborate them further.
He, so far as is relevant to the present appeal, awarded the defendant the sum
of £1,250 damages on the counterclaim for the poor condition of the common
parts of the premises, less the sum of £570, which he deducted as the damage
attributable to the defendant’s own breach of covenant which had caused the
overflows that I have mentioned. He also disallowed one or two of the matters
claimed by the plaintiff under the heading of ‘Service Charge’ and, in
particular, an item in respect of legal costs.
The defendant
appeals on the ground that the award of £1,250 damages was too low and also on
the ground that the £570 should not have been deducted from the award of
damages because, in truth, it had not been shown that that was a breach of the
defendant’s repairing obligation under his lease.
The
cross-appeal by the plaintiff is in respect of the disallowance of a relatively
small sum under the heading of ‘Legal Costs’. Both parties have also given
notice of appeal against aspects of the costs order which the learned judge
made, but we have not heard argument on those aspects so far; we have merely
heard argument on the substantive issues raised on the appeal.
So far as the
£1,250 award of damages is concerned, the position on the judge’s judgment is
this. The defendant, whom the judge accepted as a witness of truth, described
the common parts at the time that he went into occupation, which was in 1980,
as:
. . . fairly
shabby, the hall and stair carpet needed a thorough cleaning, and it was marked
and scuffed in places . . .
and he wrote a
letter of complaint, apparently, as long ago as December 1980. Nothing was done
to refurbish the premises by the plaintiffs until 1987. Their obligation was
clearly to keep the common parts in good repair and condition. There was a
caretaker, a Miss Roberts, who occupied the basement flat rent free from July
1980. She was not paid as a caretaker but had certain obligations to carry out,
which included hoovering and dusting the premises, in so far as she could
reach, two or three times a week; and there was evidence before the judge that the
common parts were basically clean. The judge’s overall finding was that he
had no doubt
that the common parts were dingy and that some of the window ledges were
filthy.
Those were the
window ledges above Miss Roberts’ reach. The judge said:
the work of refurbishment
completed in 1987 should have been carried out several years earlier.
But it is not
suggested, and certainly not found, that the premises were a slum, merely that
they were not up to the condition that would be expected of a block of
residential flats in that very good part of London.
Against that
background, I am wholly unable to accept that the judge’s award of £1,250
damages for loss of amenity over the period of years from 1980 to 1987 is so
inadequate that this court would be justified in interfering. It is a
reasonable sum to award, whether or not the members of this court would have
awarded slightly more or slightly less, and there is no basis for interfering.
The position
as to the deduction of the £570 is rather more complicated. I have already
explained the way in which the flooding from the overflow from the bath came
about. There was correspondence between the parties or their solicitors before
the trial began, and in a letter from the defendant’s solicitors of September
26 1986 to the plaintiff’s solicitors this is said:
With regard
to the question of damage caused by the overflow from our client’s flat, it is
of course quite accepted that any damage directly attributable to the defective
overflow pipe will be our client’s responsibility. In practice this may well
mean that a proportion of the cost of work to the common parts will lie with
our client, but only to the extent that such work would not otherwise have been
necessary but for the defective overflow . . .
The trial,
unfortunately, took a somewhat difficult course, as often happens when there is
a protracted hearing in the county court. The judgment of June 15 1988 was a
reserved judgment. There had been five days of hearing. The first two were on
October 12 and 13 1987. The case was then adjourned part heard to a date to be
fixed. The defendant had been represented by counsel for those two days. A new
date was fixed in November 1987. The defendant’s counsel, however, was
unfortunately ill when the day came and the date had to be vacated,
notwithstanding that costs were thrown away by the attendance of others
concerned at the court. The case was then refixed for April 28 1988, over six
months from the original hearing. When that date came the defendant was let
down by his then counsel, who declared at the last moment that he was unable to
appear for the defendant at the adjourned hearing because he was engaged in
another court. The defendant is himself a practising solicitor and, therefore,
he took upon himself the task of representing himself in the three days of the
hearing in April 1988.
The repairing
covenant in the defendant’s lease is a qualified repairing covenant only, a
point that does not seem to have emerged until a very late stage indeed, if at
all, in the court below. There is in clause 3(4) a covenant by the tenant with
the lessors as follows:
In accordance
with the Tenant’s covenants in that behalf hereinafter contained to repair
decorate and make good all defects in the repair decoration and condition of
the Demised Premises of which notice in writing shall be given by the Lessors
to the Tenant within two calendar months next after the giving of such notice.
The actual
repairing covenant is more limited, though the verbiage is greater. It is in
clause 4(1), a covenant by the tenant with the lessors, and with and for the
benefit of the owners of the other flats, that throughout the term the tenant
will:
(1) Repair maintain renew uphold and keep the
Demised Premises and all parts thereof including [inter alia] so far as .
. . within the Demised Premises . . . all . . . water . . . apparatus and . . .
pipes . . . in good and substantial repair and condition save as to damage in
respect of which the Lessors are entitled to claim under any policy of
insurance maintained by the Lessors in accordance with their covenant in that
behalf hereinafter contained . . .
— with an
exception which is not material —
in so far as
the policy may have not have been vitiated by the act or default of the Tenant
. . . or his . . . licensees or visitors.
The landlord’s
covenant to insure in clause 5(4)(c) is a covenant:
To insure and
keep insured the Building (unless such insurance shall be vitiated by any act
or default of the Tenant or any person claiming through the Tenant or his or
their servants agents licensees or visitors) against loss or damage
— by certain
specified risks which are not material —
and such
other risks (if any) as the Lessors think fit in some Insurance Office of
repute in the full value thereof . . .
There is a
further provision in clause 8(4) of the lease that the obligation of the
lessors:
to insure
under Clause 5(4)(c) hereof shall be sufficiently discharged by
compliance with the insurance requirements contained in the superior lease.
The plaintiff
lessor is itself head lessee of the Cadogan Estate under a lease of October 23
1979, and under that it has covenanted to insure the premises and keep them
insured with the Eagle Star Insurance Co Ltd, or some other nominated insurance
office, against a variety of risks which include:
loss
destruction or damage by . . . flood and bursting or overflowing of water pipes
water apparatus or water tanks . . .
On the
pleadings in the action, the defendant counterclaimed for damages for breach of
the plaintiff’s obligations to keep the common parts in good repair and
condition, and the plaintiff in its reply to the defence and counterclaim
asserted that if the plaintiff had any liability then, by way of set-off and/or
extension of such liability, it would say that the defendant had covenanted to
keep his flat in good repair and condition and that in breach of that covenant
the defendant:
had failed
and/or neglected to perform and observe the terms thereof in that on a number
of occasions within the knowledge of the defendant water [had] escaped from
pipes exclusively serving the [flat] and such escaped water [had] caused damage
to the common parts of the premises, particularly the second floor level
thereof.
The matter
rested thus on the pleadings. There was no reply to the defence to counterclaim
served. The point that is raised in the notice of appeal and which has been
argued by Mr Simmonds in support of the appeal is that as the covenant to
repair in clause 4(1) of the defendant’s lease was qualified so as to exclude
damage in respect of which the lessors are entitled to claim under any policy
of insurance maintained by them as there mentioned, the onus was on the lessors
to show that damage from the overflow through the disrepair of the overflow
pipe from the bath in the defendant’s flat was not covered by the terms of the
insurance, notwithstanding what might be supposed from the terms of the
plaintiff’s own insurance obligation in the head lease.
Reference to
insurance only came into the case shortly before the resumption of the trial in
April 1988. The defendant’s solicitors wrote to the plaintiffs’ solicitors,
referring to the landlords’ insurance obligation under clause 5(4)(c) of
the defendant’s lease, and said:
. . . Can you
please let us know whether your clients have sought to claim under the terms of
the Policy covering the building for the damage caused by Mr Mears’ water
overflows? If your clients have claimed,
then please let us have copies of the relevant correspondence; if they have not
claimed, would you please let us know why. In either case we shall be obliged
if you would also let us have a copy of the Insurance Policy . . .
They offered
to pay copying charges and asked for a speedy reply. That was followed by a
letter of April 21, which referred to the letter of April 19 concerning, as it
was said, ‘the flat’s insurance’. The letter went on:
We understand
that the insurance is effected with the Eagle Star. We have spoken to the Eagle
Star and they say that though they have no Policy described as a ‘Flat Owner’s
Comprehensive Policy’ their standard Household Policy has cover for overflow
damage of the type involved here. The Eagle Star have said that they will write
to us confirming this. In the meantime we invite you to make your own enquiries
of the insurers so that at the adjourned hearing this particular point can be
presented as not in dispute. We give you notice that we intend to refer to
this letter at the hearing.
In fact the judge
was not referred at the hearing to those letters, but he was referred to the
insurance covenant in the defendant’s lease, and to the plaintiff’s own
insurance obligations under its head lease, which I have already mentioned. The
submission which was put by Mr Mears during his speech at the April hearing was
that he was entitled to say that as there was a duty to insure and as there was
a clause in the head lease providing for insurance against flooding from pipes
and so forth, if there was insurance the plaintiff had suffered no loss because
it was covered by the insurance moneys. There was argument as to that for the
plaintiff, who cited authority to the effect that advantages gained by a
plaintiff from a wholly independent transaction, such as a sum due under an
insurance policy, cannot be relied on in mitigation of damages.
It is now, I
think, common ground that during the argument in April no one drew the judge’s
attention to the qualification in clause 4(1) of the lease of the defendant’s
repair obligation, so as to exclude damage in respect of which the lessors are
entitled to claim under any policy of insurance as there mentioned. After the
hearing had concluded and the judge had reserved judgment, Mr Mears lighted on
the report of a case called Mark Rowlands Ltd v Berni Inns Ltd
[1985] 3 All ER473*. In that case there was a somewhat similar tenants’
repairing covenant in a lease. There was an obligation by the tenants to pay an
insurance rent equal to the amount which the landlords expended in maintaining
the insurance of the demised premises against damage by fire. The landlords
insured the building against fire and the building was destroyed by a fire
caused by the tenants’ negligence. The insurers paid the landlords the cost of
rebuilding and reinstating the building and then, suing by subrogation in the
name of the landlords, brought an action against the tenants for damages for
negligence for causing the fire. The case was dismissed on the basis that the
insurers were claiming only by subrogation, and the landlords would have had no
right to claim against the tenants for their negligence. It is unnecessary to
go further into the judgments. The judge referred to that in his judgment and
said:
I have heard
no argument as to the scope and effect of this decision, and having regard to
the history of delay in this case I have not thought it right to attempt to get
the parties together for further argument.
I note that
in this case the insurance obligations under the head lease differ from those
between the plaintiffs and the defendant. The point raised by the defendant is
an interesting one, but the evidence relating to it is virtually non-existent.
I have not seen the Insurance Policies either under the head lease or the
sublease. I note the terms of the landlords obligations under the sublease . .
. In short, it is an attractive submission, but devoid of evidence. I must
therefore reject it.
*Editor’s
note: Also reported at [1985] 2 EGLR 92; (1985) 276 EG 191.
It seems to me
that the way the argument proceeded in the April hearing had the result that if
the judge was going to take in, from the reference to Mark Rowlands Ltd
v Berni Inns Ltd, the point now taken in the notice of appeal that
damage caused by the flooding was outside the scope of the defendant’s
repairing covenant, if it were covered by insurance, and the onus lay (as the
authorities to which we have now been referred suggest) on the plaintiff to
prove breach of the repairing covenant and thus to prove that the damage was
not excluded because it was covered by an insurance policy (which was a matter
particularly within the plaintiff’s field of knowledge), the judge would have
had to have appointed a date for further hearing and further argument, with the
possibility of the introduction of further evidence in the shape of the policy
of insurance and possibly of correspondence with the insurance company. In my
judgment, he was fully entitled to take the view that the point had come, in all
the circumstances, too late and that he would proceed to give his judgment,
without entertaining this further point. That it is proper to refuse to
entertain a point which is raised only at a very late stage of the trial is in
truth underlined by the speech of Lord Griffiths in the recent decision in the
House of Lords in Ketteman v Hansel Properties Ltd [1987] AC189
at p220.*
*Editor’s
note: Also reported at [1987] 1 EGLR 237 at p246.
In this court
we are always reluctant to entertain a point which was not taken in the court
below, and particularly if the point is one to which evidence could have been
directed. We are asked to entertain it on the footing that it was a point on
which the onus lay on the plaintiff, and it is said that the plaintiff must
lose the award of £570 because it failed to adduce evidence to cover a point on
which the onus lay on it, even though it was not properly taken in the court
below, even by submission if not by pleading. I would not, therefore, for my
part entertain this point, and I would accordingly reject the defendant’s claim
in respect of the deduction, from the award of damages for disrepair of the
common parts, of the £570 in respect of the overflow from the defendant’s flat.
It follows
that, on the points that have so far been argued, I would dismiss the
defendant’s appeal.
The
plaintiff’s cross-appeal is, as I have mentioned, concerned with legal
expenses. These are legal expenses said to have been incurred by the plaintiff
in recovering rent and service charge from other tenants. There are several
accounts rendered: one included a provisional sum, one included an actual sum.
The total expenditure on which the service charge is based is defined as
meaning the total expenditure incurred by the lessor in any accounting period
in carrying out its obligations under clause 5(4) of the lease. Clause 5(4)
includes in subclause (j) a covenant by the landlord with the tenant in
subheads (i) and (ii):
(i) To employ at the Lessors’ discretion a firm
of Managing Agents and Chartered Accountants to manage the Building and
discharge all proper fees salaries charges and expenses payable to such agents
or such other person who may be managing the Building including the cost of
computing and collecting the rents and service charges in respect of the
Building or any parts thereof
(ii) To employ all such surveyors builders
architects engineers tradesmen accountants or other professional persons as may
be necessary or desirable for the proper maintenance safety and administration
of the Building.
The argument
for the plaintiff is that solicitors’ costs and counsel’s fees for recovering
arrears of rent and service charges from tenants, if the solicitors are
instructed directly by the plaintiff, falls under the words ‘administration of
the Building’, in clause 5(4)(j)(ii), that is to say:
To employ . .
. professional persons as may be necessary or desirable for the proper . . .
administration of the Building.
If,
conversely, the solicitors are instructed by the managing agents, they fall
within the phrase:
including the
cost of . . . collecting the rents and service charges . . .
They are, it is
said, part of the managing agents’ charges and expenses for collecting the
rents and service charges.
The learned
judge dealt with this by saying, in relation to (j)(i), that
that relates to the management of the building. He then said that the words in
(j) (i)
including the
cost of computing and collecting the rents and service charges
are clearly
referable back to the words
Managing
Agents and Chartered Accountants
and do not
contemplate the fees of solicitors and counsel. In relation to (j) (ii),
the judge said that the words ‘or other professional persons’ must be related
to the proper administration of the building. The words did not appear to the
judge to cover legal proceedings for possession or arrears of rent.
The
respondent’s notice asserts that the judge erred, in that he:
did not allow
for the recovery by the Respondent/Plaintiff from the Applicant/Defendant, as
interim or excess service charge, rents sums to be expended or expended by the
Respondent/Plaintiff upon the fees of Solicitor and Counsel for the purpose of
recovery of rents from tenants of the building . . .
It does not
actually go into the refinement suggested in argument before us that it would
be the managing agents who would instruct the solicitors who would instruct
counsel, and that the fees in question are therefore fees of the managing
agents, if that is the course followed.
Mr Simmonds
has drawn our attention to various other provisions in the lease which relate
to legal fees where proceedings are contemplated. For instance, in clause 5(3)
it is provided that the lessor:
At the
request of the Tenant and subject to payment by the Tenant of (and provision
beforehand of security for) the costs of the Lessors on a complete indemnity
basis to enforce any covenants entered into with the Lessors by a tenant of any
flat in the Building of a similar nature to those contained in Clause 4 of this
Lease.
The covenants
in clause 4 include the covenant by the tenant to pay the interim charge and
the service charge.
There is also
a provision by way of covenant by the tenant in clause 3(9) of the lease:
To pay to the
Lessors all costs charges and expenses including Solicitors’ Counsels’ and
Surveyors’ costs and fees at any time during the said term incurred by the
Lessors in or in contemplation of any proceedings in respect of this Lease
under Sections 146 and 147 of the Law of Property Act 1925 . . . of and
incidental to the preparation and service of a notice under the said Sections
and of and incidental to the inspection of the Demised Premises . . . such
costs and charges and expenses as aforesaid to be payable notwithstanding that
forfeiture is avoided otherwise than by relief granted by the Court.
I have had
certain hesitation on this point, in the light of the argument in relation to
the position where solicitors are instructed by the managing agents. It does
not appear from the evidence whether that was actually the case. On the whole,
however, I have come to the conclusion that the judge was right in his view
that the fees of solicitors and counsel are outside the contemplation of either
limb of clause 5(4) (j) of the lease. Therefore, I would dismiss the
cross-appeal by the plaintiff also.
Agreeing,
TAYLOR L J said: I add only a few words on the issue whether legal fees can be
included in the service charge under this lease. Nowhere in clause 5(4)(j)
is there any specific mention of lawyers, proceedings or legal costs. The scope
of (j) (i) is concerned with management. In (j) (ii) it is with
maintenance, safety and administration. On the respondent’s argument a tenant,
paying his rent and service charge regularly, would be liable via the service
charge to subsidise the landlord’s legal costs of suing his co-tenants, if they
were all defaulters. For my part, I should require to see a clause in clear and
unambiguous terms before being persuaded that that result was intended by the
parties. Accordingly, I agree with Dillon L J that the terms of para (j)
of clause 5(4) do not extend to cover legal costs in the service charge.
Appeal on
costs
Giving
judgment, DILLON L J said: We gave judgment this morning on the substantive
issues raised by the appeal and cross-appeal, and I set out then the general
outline of the proceedings. Each side now has a further appeal against the
order for costs as ultimately made by the learned judge, in the light of a
payment into court which the defendant had made. The claim as pleaded in the
particulars of claim was (1) for possession of the third-floor flat at 56
Cadogan Place for non-payment of rent, interim charge and service charge; (2) a
sum of some £1,551 under para 4 of the particulars of claim, being the arrears
which remained outstanding of the rent, interim charge and service charge; (3)
interest on the sums claimed; (4) mesne profits at the rate of £100 per annum
from a date which, at January 8 1986 when the particulars of claim were served,
was a future date; and costs.
The defendant
counterclaimed for damages for breach of the plaintiff’s obligation to keep the
common parts of the building in good repair and condition; and in his
counterclaim he set out that he counterclaimed and/or sought to set off against
the plaintiff’s claim, in diminution and/or extinction thereof, damages.
On February 3
1986 the defendant paid the sum of £1,000 into court in satisfaction of the
plaintiff’s claim, stating additionally that in making this payment the defendant
had taken into account and intended to satisfy his counterclaim. That is
brought in under the County Court Rules, Ord 11, r1(9), which requires the
notice of payment in to ‘state, if it be the case, that in making the payment
the defendant has taken into account and intends to satisfy the cause of
action’ on which he counterclaims.
The ordinary
effect of a payment into court in any action for debt or damages is, under Ord
11, r1(8), that for the purposes of the rule ‘a plaintiff’s cause of action in
respect of a debt or damages shall be construed as a cause of action in respect
also of such interest as might be included in the judgment . . . if judgment
were given at the date of the payment into court’.
The order
which the judge intended to make, as set out on the final page of his note, was
as follows:
Judgment on
claim £1,307 which together with interest and mesne profits amounts to
£2,123.50 —
As at the
date, however, of the payment into court it would only have amounted to very
little more than the £1,307 — an estimate is £1,323 in all — because the
payment followed shortly after the service of the particulars of the claim and
interest was calculated only from the date of the particulars. The judge’s note
of his order proceeds:
Judgment for
Defendant on Counterclaim for £680 together with interest.
Total Judgment
£927.84.
Set off.
Balance
Judgment for Plaintiff £1,205.66
Plaintiffs to
have costs of Claim on Scale 2.
Defendant to
have costs of Counterclaim on Scale 3.
Judgment for
plaintiff in Form N27.
Form N27 is
the standard form of judgment for a plaintiff in an action of forfeiture for
non-payment of rent. It provides as follows:
IT IS ADJUDGED
that the Plaintiff is entitled to recover against the Defendant possession of
the land mentioned in the particulars . . . namely:
the rent of
the land amounting to £ . . . being in arrear and the Plaintiff having a right
of re-entry or forfeiture in respect thereof.
AND THAT the
Plaintiff do recover against the Defendant the sum of £ . . . for the arrears
of rent [and the sum of £ . . . for costs, (or his costs of this action to be
taxed on scale . . .) amounting together to the sum of £ . . . ] . . .
AND IT IS
ORDERED that the Defendant do pay into the office of this court the (total) sum
mentioned above on or before the [A date not less than four weeks from the
date of the order.] (and do pay the amount of the costs when taxed on or
before that day or, . . . within 14 days of taxation).
AND that
unless payment of the said sum is made by the said date the Defendant shall
thereupon give possession of the land to the Plaintiff . . .
The order as
actually drawn up does not quite achieve that form because it appears to
provide for possession without relief, but that is plainly not what the judge
intended.
It is argued
for the defendant on his appeal that the judge has erred in principle in that
he has ignored the payment into court. It is argued for the plaintiff on the
cross-appeal on costs that the judge has erred in principle in awarding the
plaintiff the costs of its claim on scale 2 only, when he awarded the defendant
the cost of his counterclaim on scale 3; it is said that the amount of the
judgment on the claim was for a larger sum than the amount of the judgment on
the counterclaim, and the issues on the claim were complicated. That
cross-appeal of the plaintiff, however, arises only if the defendant’s appeal
on costs is unsuccessful.
The plaintiff
relies on the provisions of section 138 of the County Courts Act 1984. That is concerned
with forfeiture for non-payment of rent. Subsection (1) provides:
(1) This section has effect where a lessor is
proceeding by action in a county court (being an action in which the county
court has jurisdiction) to enforce against a lessee a right of re-entry or
forfeiture in respect of any land for non-payment of rent.
(2) If the lessee pays into court not less than
five clear days before the return day all the rent in arrear and the costs of
the action, the action shall cease, and the lessee shall hold the land
according to the lease without any new lease.
That did not
happen in this case. If the action is automatically to cease, it must mean that
the lessee is to pay into court all the rent in
if the lessee, challenging the amount of rent that the lessor claimed was in
arrear, merely paid into court the amount of rent in arrear that he admitted to
be due, plus certain costs, leaving it somehow or other to be resolved by the
county court at trial whether or not the action had ceased under section
138(2). Be that as it may, subsection (3) of section 138 is more important.
That provides:
If —
(a) the action does not cease under subsection
(2); and
(b) the court at the trial is satisfied that the
lessor is entitled to enforce the right of re-entry or forfeiture,
the court
shall order possession of the land to be given to the lessor at the expiration
of such period, not being less than 4 weeks from the date of the order, as the
court thinks fit, unless within that period the lessee pays into court all the
rent in arrear and the costs of the action.
It was
submitted for the plaintiff that as in this case the court, in making the order
in form N27, was satisfied that the lessor was entitled to enforce the right of
re-entry or forfeiture for non-payment of rent and service charge in arrear and
it was ordering possession to be given unless the money was paid within a
period, therefore, it is said, the judge had no discretion to do other than
award the plaintiff the whole of the costs of the action. I find that a strange
conclusion, because the judge is apparently, anyhow, to have discretion over
what scale the costs are to be taxed or awarded on, and it would be very
surprising if he did not have the usual discretion to deprive a plaintiff of
part of his costs, if he felt that the claim put forward had been excessive or
there had been other difficulties in the way of the conduct of the action by
the plaintiff which made it right that the plaintiff should be deprived of
costs thrown away. Also, we have it provided in subsection (6) of section 138
that subsection (2) is not to apply where the lessor is proceeding in the same
action to enforce a right of re-entry or forfeiture on any other ground as well
as for non-payment of rent or to enforce any other claim as well as the right
of re-entry and forfeiture and a claim for arrears of rent. It cannot be that
if the action does not cease under subsection (2) and the court at the trial is
satisfied that the lessor is entitled to enforce the right of re-entry or
forfeiture, the provision for relief must, as a mandatory matter, award the
plaintiff the costs of the action including the costs of all claims in the
action as well as those for re-entry or forfeiture and arrears of rent.
It seems to me
that section 138(3) must be construed as meaning:
unless within
the prescribed period the lessee pays into court all the rent in arrear and the
costs of the action as awarded by the judge at the trial.
That is to
say, as awarded by the judge at the trial in accordance with the ordinary rule,
which is to be found in Order 38(1) of the County Court Rules that:
The costs of
and incidental to all proceedings in a county court shall be in the discretion
of the court . . .
Therefore, the
payment into court by the defendant is highly material to the order as to costs
that the judge should have made. The standard rule is that if there is a
payment into court which tops the claim (the claim being, in the light of Ord
11, r8, which I have read, treated as including interest only down to the date
of payment into court) the plaintiff can have his costs only up to the payment
in, and the defendant should have the costs thereafter.
The figures in
the present case show that as against the amount of the claim, with such
limited interest, of £1,323 or so, the defendant was entitled to recover £680
on the counterclaim. Even ignoring interest on that up to the payment in, it
plainly reduced the amount of the claim to less than the £1,000 which was paid
into court. Therefore, the order that the judge ought to have made was that the
plaintiff should have the costs of its claim up to the date of payment in, but
the defendant should have the costs of the counterclaim and also the costs of
the claim as from February 3 1986, the date of payment in. I cannot see any
reason why the costs of the claim should be on scale 2 rather than scale 3. In
my judgment, they ought in each case to be on scale 3.
Accordingly,
this being a matter of principle, in which, in my judgment, the judge has
erred, I would allow the defendant’s appeal on costs and vary the judge’s order
on costs as I have indicated.
TAYLOR L J
expressed his agreement.
DILLON LJ
added: So far as the costs of the appeal and the cross-appeal are concerned,
the defendant’s solicitors wrote a Calderbank* letter on October 20
1988, which has been shown to us. In view of that, there will be no order as to
the costs of the appeal or cross-appeal up to, I suppose, October 21 1988,
which would be when it might have been received. But the plaintiff will pay the
defendant’s costs of appeal and cross-appeal as from October 21 1988.
*Editor’s
note: So called from a dictum, now generally accepted, by Cairns LJ in Calderbank
v Calderbank [1976] Fam 93, 106, to the effect that an offer may be made
without prejudice ‘save as to costs’.
The appeal
and cross-appeals were dismissed. The defendant’s appeal on costs was allowed
and the order below varied. No order was made as to costs of appeal and
cross-appeal to October 21 1988: plaintiff to pay defendant’s costs of appeal
and cross-appeal as from October 21 1988.
