Johnsey Estates (1990) Ltd v Secretary of State for the Environmental, Transport and the Regions
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE CHADWICK,LADY JUSTICE ARDEN,LORD JUSTICE SCHIEMANN |
| Judgment Date | 11 April 2001 |
| Neutral Citation | [2001] EWCA Civ 535 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: QBENF/00/0028/A2 |
| Date | 11 April 2001 |
[2001] EWCA Civ 535
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CARDIFF DISTRICT REGISTRY
THE TECHNOLOGY AND CONSTRUCTION COURT
(His Honour Judge Moseley QC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Schiemann
Lord Justice Chadwick and
Lady Justice Arden
Case No: QBENF/00/0028/A2
Miss Shea (instructed by Messrs Edwards Geldard of Cardiff for the Appellant)
Mr Jonathan Gaunt QC (instructed by Hugh James Ford Simey of Cardiff for the Respondent)
This is an appeal from an order as to costs made on 11 November 1999 by His Honour Judge Moseley QC, sitting in the Technology and Construction Court at Cardiff, in proceedings brought by Johnsey Estates (1990) Limited against the Secretary of State for the Environment. The appeal is brought with the permission of the judge.
The appellant is, or was at the material time, the owner of premises known as Brecon House, Mamhilad Park Estate, Pontypool. The premises had been let to the Secretary of State, under a lease dated 7 May 1995, for a term of twenty years from 24 June 1974. The landlord had served notice under part II of the Landlord and Tenant Act 1954; the Secretary of State was content to give up possession; and did so on or about 24 June 1994.
The lease had contained repairing covenants in a conventional form. The landlord was dissatisfied with the state of the building as yielded up by the tenant at the determination of the lease. On 13 December 1995 the landlord commenced these proceedings in the Cardiff District Registry of the Chancery Division of the High Court seeking damages for breach of covenant. A statement of claim was served on 19 January 1996.
Prima facie, the damages which can be recovered by a landlord in respect of breaches of repairing covenants in a lease are measured by the diminution in the value of the reversion attributable to the fact that the premises are out of repair. In any event damages for breach of a covenant to leave premises in repair at the termination of a lease cannot exceed the amount by which the value of the reversion is diminished owing to that breach see section 18(1) of the Landlord and Tenant Act 1927.
The Secretary of State instructed an expert valuer, Mr Dickenson, to advise him as to the amount by which the value of the reversion had been diminished by the breaches of covenant for which he, as tenant, was liable. The advice received was that the diminution in the value of the reversion was £150,000 or thereabouts. The landlord, on the other hand, was advised that the diminution in the value of the reversion consequent upon the lack of repair was £1.25m. The unusually large difference in the two valuations is explained by the nature of the building (which, it was common ground, was difficult to value) and the differing perceptions of its potential. The gulf between the parties became apparent when, in September 1996, the valuers exchanged preliminary reports.
On 25 September 1996, the Secretary of State paid £200,000 into Court in satisfaction of the landlord's claim. Although not expressed to be in respect of any particular damage, it is a fair inference (and it is not in dispute) that the amount of that payment in was determined by the advice which the Secretary of State had received from Mr Dickenson. It reflected the figure of £150,000 which he had put on the diminution in the value of the reversion, with interest on that amount from 24 June 1994 to 25 September 1996, and with a small margin. Given the advice that the landlord had received from its valuer, Mr Lawley, it is a matter of no surprise that the payment in was not accepted by the landlord.
It is said that, after September 1996 and until February 1999, the parties proceeded on the basis of a common understanding that the cost of actually doing the works of repair necessary to remedy the breaches of covenant alleged would exceed the diminution in the value of the reversion; even if the diminution in value could be established at the figure for which the landlord was then contending (£1.25m). That may well be so; but (despite the service in May 1998 of a notice to admit) no formal admission that the cost of doing the works would be, at the least, no less than the diminution in the value of the reversion was made by the Secretary of State until 15 October 1998. Until that date the position on the pleadings was that the landlord was required to establish the cost of actually doing the works as well as the amount by which the value of the reversion had been diminished.
On 14 January 1997 the £200,000 then in court was paid out to the landlord, by agreement, as an interim payment. That payment out was, subsequently, to affect the computation of interest awarded by the judge; but it is common ground that it could have no effect on the incidence of costs.
By the end of 1998 – and in preparation, no doubt, for an impending trial fixed to commence in April 1999 those advising the Secretary of State gave further consideration to the particular elements of disrepair for which it might be accepted that he was liable under covenants in the lease. Particulars of the landlord's claim were sought in December 1998. Those particulars were provided in January 199In the light of those particulars – and, no doubt, after further consideration of the potential of the building the expert valuers revised their reports. Mr Dickenson increased his assessment of the diminution in the value of the reversion from £150,000 to £200,000. Mr Lawley brought his figure down, from £1.25m to £1.025m. But there was still a substantial gulf between them.
The experts' reports, in their revised form, were exchanged on 11 February 1999. On 19 February 1999 the Secretary of State paid a further £250,000 into Court; bringing the total monies notionally in court up to £450,000. The notional amount in court was not accepted by the landlord.
On 26 February 1999 the parties were before the court on a pre-trial review. The Secretary of State obtained permission to withdraw his admission (made in October 1998) that the costs of actually carrying out the works of repair would necessarily exceed the diminution in the value of the reversion. It was explained to us that that admission was withdrawn because the Secretary of State had reached the view, in the light of the particulars provided by the landlord, that the works which needed to be done in order to put the building into the state of repair in which it should have been if the repairing covenants had been observed were not as extensive as he had first thought; and might not exceed the amount (£1.025m) of the diminution in the value of the reversion for which the landlord was then contending.
Also on 26 February 1999 the landlord obtained leave to amend its statement of claim. The amended statement of claim introduced a new claim, based on an alleged failure to comply with the provisions of clause 4(12) of the lease – which had required the tenant to comply with all health and safety regulations imposed by statute. The damages claimed in the amended statement of claim fall under three main heads: (i) the cost of the work needed to remedy the breaches of repairing covenants £1,913,609; (ii) the loss of rent during the period needed to carry out the works of repair £173,254; and (iii) costs associated with the preparation of a notice of disrepair served in June 1994 shortly before the termination of the lease, purportedly under section146 of the Law of Property Act 1925 £12,846. The claim in respect of the costs of work (£1,913,609) included (a) £205,040 said to be attributable solely to painting or decoration and (b) £155,544 said to be the costs of works needed to comply with clause 4(12). The significance of those two items (together £360,584) is that it was said that they were not subject any cap imposed by section 18(1) of the Landlord and Tenant Act 1927; that is to say, that they were recoverable in addition to any amount in respect of the diminution to the value of the reversion. On the basis of the figures set out the amended statement of claim (and ignoring, as it does, the effect of section 18(1) of the Act) the landlord's total claim was for a sum in excess of £2.25m; and there was a claim for interest on top of that.
The action came on for trial on 12 April 1999. The trial extended over 7 days. Judgment on the claims in the action was handed down on 29 October 1999. The judge rejected the claim (£12,8746) in respect of the costs of preparing and serving the section 146 notice. He held that the circumstances in which the notice had been served led to the conclusion that it could not have been served for the proper purposes of that section. He rejected the claim based on alleged breach of clause 4(12) the covenant to observe the health and safety regulations. He rejected, also, the contention that the claim for painting and redecoration was outside the scope of section 18(1) of the Landlord and Tenant Act 1927. He held that the cost of repairs needed to put the premises in the state in which they should have been in at the determination of the lease was £840,106. The judge allowed nothing for loss of rent on the basis that the building would, anyway, have remained empty during the period over which it would have been reasonable for the works of repair to be carried out.
The judge then turned to the question: what was the diminution in the value of the reversion consequent upon the breaches of repairing covenants which he had found to be established....
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