Vasiliou v Hajgeorgiou
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Lord Justice Patten,Lady Justice Black,Lord Justice Ward |
| Judgment Date | 21 December 2010 |
| Neutral Citation | [2010] EWCA Civ 820,[2010] EWCA Civ 1475 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2010/0205 |
| Date | 21 December 2010 |
[2010] EWCA Civ 1475
His Honour Judge Dight
Before: Lord Justice Ward
Lord Justice Patten
and
Lady Justice Black
Case No: A3/2010/0205
CHY 06158
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
Mr Alper Riza QC (instructed by Direct Access) for the Appellant
Mr Paul Marshall (instructed by Gilbert Turner Coomber) for the Respondent
Hearing date: 30 th November 2010
Lord Justice Patten:
This is an appeal by the defendant, Mr Hajigeorgiou, against paragraph 2 of the order of HHJ Dight dated 11 th January 2010 by which he assessed the claimant Mr Vasiliou's claim for loss of profits in the sum of £422,186.
In order to understand the basis for this order it is necessary to refer in some detail to the extensive litigation between the parties which led up to the order under appeal.
The appellant has since 1995 been the owner of freehold premises at 29 Green Lanes, Palmers Green, N13 (“the Property”). When acquired it was in poor condition and was subject to repair notices served under the provisions of the Housing Acts. The Property is in an area of North London in which there is a large and long-established Greek Cypriot community. Many of the nearby premises are occupied and run as Greek restaurants. The respondent had prior to 1991 run a profitable and successful Greek restaurant called Chez Zorba in Charlotte Street. But in 1991 he had run into financial difficulties in connection with the extension of his business and this resulted in his bankruptcy.
In January 2001 the appellant agreed to allow him access to the ground floor of the Property in order to carry out work to convert it into a restaurant. This was in anticipation of the grant of a lease of the ground floor and rear yard which took place on 14 th May 2001. The lease was for a term of 15 years from 25 th December 2000 at a rent of £13,600 per annum subject to review every five years.
No premium was paid for the lease but the respondent carried out the works of conversion at his own expense which included the erection of a single storey extension in the rear yard to accommodate WCs for the use of customers in accordance with the planning permission which was obtained for a change of use to a restaurant. The works were completed in about October 2001.
The two upper floors of the Property were let by Mr Hajigeorgiou to residential tenants. Each of the flats had an old wrought iron balcony connected to an iron staircase which provided a form of fire escape. By 2001 the balconies and the staircase were all in a serious state of disrepair and were the subject of further statutory notices served by the local authority.
In November 2001 they were removed by Mr Hajigeorgiou but not immediately replaced. However, in about April 2002, replacement balconies were delivered to the Property and left in a position in the yard which obstructed the rear fire exit to the restaurant. This constituted a serious contravention of the relevant health and safety regulations and rendered the restaurant unusable. The obstruction was not removed until December 2003.
As a consequence of this, the respondent commenced proceedings against the appellant in the Edmonton County Court on 1 st August 2002 alleging breaches of the landlord's covenant of quiet enjoyment. I shall call this the first claim. It was subsequently transferred to the Central London County Court. The appellant counterclaimed in these proceedings for £85,000 in respect of works to the Property which he alleged that the respondent had carried out negligently but this was struck out for failure to provide further and better particulars and was never tried.
While the restaurant remained out of use due to the problems caused by the new balconies, further difficulties occurred. In April 2003 the tenant of one of the flats informed Mr Hajigeorgiou that the down pipes leading from the kitchens and bathrooms of both flats were blocked. Mr Hajigeorgiou instructed a plumber (a Mr Gypsiotis) to rectify the problem. He dealt with it, or attempted to deal with it, by diverting the relevant down pipes into the open rainwater outlet on the roof of the respondent's rear extension. This meant that waste from the flats began to flow straight on to that roof. Late in November 2003 the appellant's builders erected scaffolding at the front and rear of the Property in order to deal with the outstanding Housing Act repair notices. Part of the scaffolding rested on the roof of the rear extension. The builders also used the roof as access in order to carry out the works of repair to the rest of the Property.
On 19 th December 2003 the obstruction to the respondent's rear fire exit was removed so that trading could then have re-commenced. But in February 2004 water began to penetrate through the roof of the rear extension caused, it was alleged, by damage due to the appellant's contractors. This was foul water from the flats above due to the inadequate work of Mr Gypsiotis. It meant that customers of the restaurant would be unable to use the WCs; the leak was a health hazard; and consequently no further trading was legally possible.
The last of these problems was identified during the trial of the first claim which took place over some 10 days before HH Judge Levy QC. That trial was limited to the issue of Mr Hajigeorgiou's liability for breach of covenant. He found that the restaurant was ready to be opened by October 2001 but was prevented from trading by the appellant's breach of covenant. He therefore directed an assessment of damages in respect of the period from 30 th April 2002 to 19 th December 2003. The claim was for lost profits.
In October 2004 Mr Hajigeorgiou's builders attempted to deal with the problems caused by water leaking into the rear extension. The down pipes were diverted into a new pipe across the roof but the problem continued. In January 2005 the scaffolding to the rear of the Property was removed, which expert evidence later indicated was essential if proper repairs to the roof were to be carried out. But the restaurant remained unusable and in May 2006 the respondent commenced a new action (“the second claim”) seeking damages for breach of covenant and/or nuisance in respect of the problems of water penetration since February 2004.
The assessment of damages in respect of the first claim took place before Judge Levy QC over a number of days commencing on 6 th February 2006. The judge was faced with having to decide what level of profits (if any) Mr Vasiliou would have made had he been able to trade from April 2002 to December 2003. In his judgment he identified the issues to be decided in these terms:
“8. The onus of proof is on the Claimant to establish, on a balance of probabilities, that he would have suffered the alleged loss, or indeed any loss, by reason of the breach of covenant.
9. Mr Clarke, for the Defendant, submitted that it is for the Claimant to establish, first, that his restaurant would have traded successfully, and the amount of likely loss of profit during the relevant period. It is common ground that in determining the likely loss of profits, I must have regard to the personal characteristics of the Claimant rather than an hypothetical restaurateur. Though the quantum of profits was a matter for the experts, the competence of the Claimant was a factor which required findings of fact.”
The judge heard evidence from a number of witnesses about the respondent's abilities as a restaurateur based on the Charlotte Street restaurant he ran in the 1980s. He said that this demonstrated that Mr Vasiliou was in that period a confident restaurateur with the knowledge and ability to succeed. But the question was whether he had lost that knowledge and ability since then. The appellant called witnesses who said that the new restaurant (called Zorbas) was unattractive and that the respondent lacked the competence to make a success of it. The judge set out his findings on this issue in paragraph 85 of his judgment. The reference to period A is the period when Chez Zorba was being run up to 1991. Period B is the intervening period between the respondent's bankruptcy in 1991 and the opening of Zorbas in late 2001:
“Having heard of the Claimant's record in Charlotte Street from a great number of witnesses, I am satisfied that his experiences during Period B did not mean that [he had] lost the abilities he had shown in Period A. I am further satisfied qua restaurateur, [that] he had the ability to succeed in Zorbas, and would on the balance of probability have succeeded but for the difficulties caused by the Defendant.”
That left the judge to deal with the amount of the profit that would have been earned had the restaurant been able to trade. This was dealt with as a matter of expert evidence. The task of the experts was to assess what, in their opinion, would be the level of profitability which the restaurant could be expected to achieve over the relevant period on the assumption that it operated successfully. Their figures were therefore based on a comparison with the turnover and profit margins of other similar restaurants, although the precise models and methodology differed.
It is unnecessary for the purposes of this appeal to examine where the differences lay or how the judge resolved them. What is relevant is that the calculations of both experts depended inevitably on a number of key variables, namely:
(i) the number of covers (i.e....
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