Consortium Commercial Developments Ltd v ABB Ltd
| Jurisdiction | England & Wales |
| Judge | Andrew Bartlett QC |
| Judgment Date | 30 July 2015 |
| Neutral Citation | [2015] EWHC 2128 (TCC) |
| Docket Number | Case No: HT-2012-000018 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 30 July 2015 |
[2015] EWHC 2128 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Rolls Building
7 Rolls Building, London EC4A 1NL
Mr. Andrew Bartlett QC
(sitting as a Deputy High Court Judge)
Case No: HT-2012-000018
Stan Gallagher Esq. (instructed by Wannops LLP) for the Claimant
Simon Pritchett Esq. (instructed by DLA Piper UK LLP) for the Defendant
Hearing dates: 8" — 10th July 2015
THE CLAIM AND THE ISSUES
THIS IS A CLAIM FOR DILAPIDATIONS UPON EXPIRY OF A BUSINESS LEASE.
THE LEASE WAS GRANTED IN 1996 BY THE CLAIMANT TO A PREDECESSOR OF THE DEFENDANT FOR A TERM OF 15 YEARS EXPIRING ON 16 JUNE 2011. THE DEMISED PREMISES ARE KNOWN AS CAPELLA HOUSE, SNOWDON DRIVE IN MILTON KEYNES (FORMERLY KNOWN AS CITYLINK HOUSE).
THE ESTIMATED COST OF REMEDYING THE BREACHES OF COVENANT HAS BEEN AGREED AS FOLLOWS (NET OF VAT, WHICH IS NOT CLAIMED):
| I) | REPAIR | £244,351.88 |
| II) | REDECORATION | NIL |
| III) | REINSTATEMENT ITEMS1 | £11,000.00 |
| IV) | STATUTORY ITEMS | £2,300.00 |
| V) | AGGREGATE OF ABOVE WORKS COSTS | £257,651.88 |
| VI) | PRELIMINARIES AT 10% | £25,765.19 |
| VII) | TOTAL COST OF WORKS | £283,417.07 |
| VIII) | FEES FOR CONTRACT ADMINISTRATION (10%) | £28,341.71 |
| IX) | PREPARATION OF SCHEDULE | £3,500.00 |
| X) | TOTAL | £315,258.77 |
THIS CAN CONVENIENTLY BE PRESENTED AS SUB-TOTALS INCLUSIVE OF APPLICABLE PRELIMINARIES AND FEES AS FOLLOWS:
THIS SET OF FIGURES DIFFERS FROM THAT IN THE EXPERT BUILDING SURVEYORS' JOINT STATEMENT BECAUSE ON DAY 3 OF THE TRIAL THE PARTIES RE-ALLOCATED TO REPAIRS SOME ITEMS WHICH THE SURVEYORS HAD INCLUDED UNDER REINSTATEMENT, AND REACHED A FURTHER COMPROMISE ON THE VALUES. THE PARTIES' AGREEMENT HAS SLIGHTLY INCREASED THE CLAIM, FROM £314,225.73.
| I) | REPAIRS | £295,665.77 |
| II) | REINSTATEMENT ITEMS | £13,310.00 |
| III) | STATUTORY ITEMS | £2,783.00 |
| IV) | PREPARATION OF SCHEDULE | £3,500.00 |
| V) | TOTAL | £315,258.77 |
IT IS AGREED THAT THE REMEDIAL WORKS WOULD TAKE 12 WEEKS. THE CLAIMANT CLAIMS THE LOSS OF RENT AND RATES DURING THAT PERIOD. THIS CLAIM IS CALCULATED AT £45,666.24 (CALCULATED PRO RATA FROM THE PASSING RENT OF £160,000 PA, AND RATES AT £728.60 PER WEEK).
IT IS COMMON GROUND BETWEEN THE PARTIES THAT THE TENANT OVERPAID RENT AT THE EXPIRY OF THE LEASE, IN THE SUM OF £43,068.52 PLUS VAT, TOTALLING £51,682.22. IT IS AGREED THAT THERE SHOULD BE AN APPROPRIATE CREDIT FOR THIS.
THE ISSUES BETWEEN THE PARTIES ARE:
i) THE DIMINUTION IN THE VALUE OF THE REVERSION BY REASON OF THE LACK OF REPAIR, AND HENCE WHETHER THE HEAD OF CLAIMFOR REPAIR COSTS (FL95,665.77) IS CAPPED BY S18(1) OF THE LANDLORD AND TENANT ACT 1927;
ii) WHETHER ON THE FACTS OFTHE CASE THE CORRECT MEASURE OF DAMAGES FOR THE REINSTATEMENT ITEMS AND STATUTORY ITEMS IS THEIR REMEDIAL COSTS OR THEIR EFFECT ON DIMINUTION IN VALUE, AND, IF THE LATTER, WHAT DAMAGES SHOULD BE AWARDED;
iii) WHETHER OR TO WHAT EXTENT THE CLAIMANT CAN ADDITIONALLY RECOVER RENT AND RATES FOR THE ESTIMATED DURATION OF THE REMEDIAL WORKS;
iv) WHETHER THE CREDIT TO THE DEFENDANT FOR OVERPAID RENT SHOULD INCLUDE VAT;
v) THE APPROPRIATE RATE FOR AWARDING INTEREST.
THE IMMEDIATE LANDLORD AT THE EXPIRY OF THE TERM WAS AN ASSOCIATED COMPANY OF THE CLAIMANT; IT IS AGREED BETWEEN THE PARTIES THAT NO POINT IS TAKEN AS TO THIS.
EVIDENCE
MR. WILLIAM FATTAL, MANAGING DIRECTOR OF THE CLAIMANT, GAVE ORAL EVIDENCE. I FOUND HIS EVIDENCE TO BE CAREFUL AND TRUTHFUL, WITH ONLY A FEW MISTAKES WHERE HE HAD TO BE REMINDED OF THE FACTS FROM CONTEMPORARY DOCUMENTS. HE WAS EVIDENTLY AN EXPERIENCED PROPERTY INVESTOR. RECEIVED UNCHALLENGED WITNESS STATEMENTS FROM MR. DUDLEY-SMITH, WHO OVERSAW THE PRODUCTION OF THE SCHEDULE OF DILAPIDATIONS BY MR. MAILE, AND FROM MR. BROUGHTON, THE DEFENDANT'S HEAD OF REAL ESTATE UK, WHOSE EVIDENCE CONCERNED ONLY THE RECEIPT OF THE SCHEDULE OF DILAPIDATIONS AND THE CORRECTION OF AN IMMATERIAL POINT ABOUT WHETHER A REINSTATEMENT NOTICE WAS SERVED. BECAUSE OF THE PARTIES' AGREEMENT ON ESTIMATED REMEDIAL COSTS IT WAS NOT NECESSARY FOR THEIR RESPECTIVE BUILDING SURVEYORS TO BE CALLED TO SPEAK TO THEIR JOINT STATEMENT. A VALUATION EXPERT WAS CALLED BY EACH PARTY: BY THE CLAIMANT, MR. JAMES STEEVENS OF CBRE, AND BY THE DEFENDANT, MR. DUNCAN LOCKE OF GVA. BOTH VALUATION EXPERTS WERE WELL QUALIFIED; I ASSESS THEIR EVIDENCE BELOW. MY FACTUAL FINDINGS REFLECT MY ASSESSMENT OF THE CONTEMPORARY DOCUMENTS, MR. FATTAL'S EVIDENCE, AND ADDITIONAL INFORMATION PROVIDED BY THE EXPERTS.
THE PREMISES
CAPELLA HOUSE WAS BUILT PROBABLY IN THE EARLY 1990S, DESIGNED AS OPEN PLAN SPACE WITH A CENTRAL SERVICE CORE (TOILETS AND KITCHENETTE). IT IS A DETACHED SINGLE-STOREY GLASS-FRONTED BUILDING OF JUST UNDER 15,000 SQ FT. THE EXPERTS HAVE AGREED A FIGURE OF 14,875 SQ FT FOR THE NET INTERNAL AREA. IT IS A STEEL-FRAMED CONSTRUCTION WITH A SHALLOW PITCHED STEEL ROOF AND IS EXTERNALLY CLAD WITH MIRROR-GLASS WINDOWS ON THE FRONT AND ON THE MAJOR PARTS OF THE SIDE ELEVATIONS. THERE IS CLADDING TO THE REMAINDER OF THE SIDE ELEVATIONS AND TO THE REAR. THE SPECIFICATION OF THE PROPERTY INCLUDES SOLID CONCRETE FLOORS THROUGHOUT, AND CARPETING TO THE FRONT PORTION. THE ENTIRE ACCOMMODATION HAS AN AIR CONDITIONING SYSTEM AND SUSPENDED CEILINGS. THERE IS A SMALL ROLLER SHUTTER DOOR FOR DELIVERIES AT THE REAR. THE EAVES HEIGHT IS TYPICAL OF A LOW SINGLE STOREY BUILDING, ABOUT ONE HALF OF THE 18 FEET WHICH IS THE MINIMUM FOR NORMAL WAREHOUSE USES. THE FRONTAGE ONTO SNOWDON DRIVE IS 400 FT. THERE IS PARKING FOR 61 CARS. THE BUILDING IS A TYPICAL BLHYBRID BUSINESS UNIT OF ITS ERA. THE ONLY THERMAL INSULATION UNDER THE STEEL ROOF IS A THIN GLASS FIBRE LAYER RESTING ON THE SUSPENDED CEILING.
IT IS LOCATED ON A BUSINESS PARK IN THE WINTERKILL AREA, ON THE FRINGE OF THE CENTRAL BUSINESS DISTRICT OF MILTON KEYNES. IT BACKS ONTO THE MAIN RAILWAY LINE BETWEEN LONDON AND MILTON KEYNES, AND IS SITUATED IN THE SOUTH-EASTERN PART OF SNOWDEN DRIVE, WHICH AT THAT LOCATION IS A NO-THROUGH-ROAD. IT IS ABOUT 15 MINUTES' WALK FROM THE CENTRAL SHOPPING AREA AND FROM THE RAILWAY STATION, BUT IN AN AREA TO WHICH PEOPLE WOULD TEND TO DRIVE RATHER THAN WALK.
OVER RECENT YEARS THE NORTH-WESTERN END OF SNOWDEN DRIVE, WHICH IS CLOSER TO THE TOWN CENTRE, HAS BEEN REDEVELOPED FOR OUT-OF-TOWN RETAIL PURPOSES, WITH MANY WELL—KNOWN TRADERS IN OCCUPATION. THE EASTERN EXTENT OF THE RETAIL AREA FALLS A FEW BUILDINGS TO THE WEST OF CAPELLA HOUSE. BUILDINGS IN THE IMMEDIATE VICINITY OF CAPELA HOUSE ARE PRIMARILY USED FOR WAREHOUSING OR OFFICE PURPOSES.
THE RATEABLE VALUE IS RECORDED AS £87,500 AGAINST THE DESCRIPTION "REPAIR CENTRE AND PREMISES", WITH SPECIAL CATEGORY CODE "OFFICES (INC COMPUTER CENTRES)", AND ON THE BASIS OF A DIVISION BETWEEN "OFFICES" OF 565. 18 M2(6,083 SQ FT) AND "WORKSHOP/WAREHOUSE" OF 821. 68 M2 (8,844 SQ FT).
HISTORY AND CONDITION
THE FIRST USE OF THE BUILDING WAS AS A FURNITURE SHOWROOM AND OFFICES. THE 1996 LEASE PERMITTED ANY USE FALLING WITHIN CLASS B1. IT WAS USED PARTLY AS OFFICE SPACE AND PARTLY FOR DEMONSTRATING ROBOT WELDING AND FOR TRAINING PURPOSES.
UNDER THE TERMS OF THE TEASE THE TENANT UNDERTOOK A FULL REPAIRING OBLIGATION SUBJECT TO AN EXCEPTION FOR INHERENT DEFECTS AND SUBJECT TO A LIMIT OF NOT BEING REQUIRED TO PUT THE PREMISES INTO ANY BETTER STATE THAN EVIDENCED BY AN AGREED SCHEDULE OF CONDITION ATTACHED TO THE LEASE.
THE INITIAL RENT WAS £75,000 PANTHER SECOND RENT REVIEW AS FROM 29 SEPTEMBER 2005 SET IT AT £160,000 PA.
THE PROPERTY WAS SUBLET IN LATE 2003. THE SUBTENANT VACATED ABOUT FOUR YEARS 1 BEFORE THE EXPIRY OF THE TERM. THE DEFENDANT RECEIVED A PAYMENT OF £160,000 FROM THE SUB—TENANT FOR THE RELEASE OF THE SUB-TENANT'S LIABILITIES. THE DEFENDANT MARKETED THE PROPERTY UNREPAIRED, BUT IT DID NOT ATTRACT ANOTHER OCCUPIER AND IT REMAINED VACANT FOR THE REMAINDER OF THE TERM. DURING THIS PERIOD THE DEFENDANT APPEARS TO HAVE DONE ALMOST NOTHING TOWARDS FULFILLING ITS OBLIGATIONS AS REGARDS THE CONDITION OF THE PROPERTY, SO THAT BY 16 JUNE 2011 IT HAD SUFFERED SIGNIFICANT DETERIORATION. THE AGREED SCHEDULE OF DILAPIDATIONS IS SUBSTANTIAL. PRIMARY EXAMPLES ARE (INCLUSIVE OF PRELIMINARIES AND FEES, AT 2011 PRICES):
i) BECAUSE THE AIR-CONDITIONING SYSTEM WAS NOT MAINTAINED, IT BECAME UNUSABLE AND NEEDS TO BE WHOLLY REPLACED AT A COST OF £106,480;
ii) THE EXTERNAL AREAS BECAME OVERGROWN TO SUCH AN EXTENT THAT THEIR RESTORATION WILL COST £51,920;
iii) THE CARPETING NEEDS TO BE WHOLLY REPLACED AT A COST OF £24,290.
EVENTS SINCE THE EXPIRY OF THE TERM
THE SCHEDULE OF DILAPIDATIONS WAS SERVED ON OR AROUND THE TERM DATE. THE DEFENDANT DID NOT COMPLETE THE TENANT'S COLUMNS IN THE SCHEDULE UNTIL APRIL 2012 WHEN ITS DEFENCE WAS FILED.
IT IS COMMON GROUND THAT, GIVEN THE WEAK STATE OF THE MARKET IN 2011, THE PROPERTY HAD LITTLE PROSPECT OF BEING LET WHILE OUT OF REPAIR. THE OVERALL PICTURE WHICH I DERIVE FROM MR. FATTAL'S ORAL EVIDENCE IS THAT THE CLAIMANT DID NOT WISH TO EXPEND ITS OWN RESOURCES ONTHE REPAIRS WHILE THE DEFENDANT CONTINUED TO "PLAY HARD BALL" IN ITS RESPONSE (OR LACK OF RESPONSE) TO THE SCHEDULE OF DILAPIDATIONS; IN ADDITION, THE CLAIMANT REASONABLY TOOK A LONG TERM VIEW, CONSIDERING THAT IT WOULD MAKE BETTER SENSE TO WAIT UNTIL THE MARKET IMPROVED AND THEN ACHIEVE A BETTER RENT, RATHER THAN SEEKING TO ATTRACT A TENANT BY CARRYING OUT EXPENSIVE WORKS AND OFFERING THE PREMISES AT SUCH A LOW RENT AS WOULD QUICKLY ATTRACT A NEW TENANT.
AN OFFER FOR THE FREEHOLD INTEREST WAS MADE BY AN...
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