Legal update

Citation

Waterson, G. and Lee, R. (2003), "Legal update", Property Management, Vol. 21 No. 1. https://doi.org/10.1108/pm.2003.11321aab.001

Legal update

Repairs and improvements: landlord's right of entry

Yeoman's Row Management Ltd [2002] 34 EG 84

In this case the court was concerned with the question of whether the landlord's right of entry to carry out "any repairs and other work to the inside or outside of the flat" was sufficiently broad to entitle the landlord against the wishes of the tenant to enter the demised premises in order to carry out what appears to have been a fairly wide programme of refurbishment and improvement. "No" said the Court of Appeal, as had both of the judges in the courts below: the wide interpretation of the relevant words contended for by counsel for the landlord would, or could, mean in the words of Longmore LJ that not only would this interfere with the tenant's right to quiet enjoyment but "even if the works that the landlord wished to do were, in fact, excessive, or unreasonable, or lengthy, the landlord would still be entitled to do them, provided that it had a bona fide belief that such works were for the benefit of the flat and the building [in which the flat was situated]. I cannot believe that that would be the right construction of this tenancy agreement " Jonathan Parker LJ and Peter Gibson LJ concurred.

Long leases at low rent

R v. London Rent Assessment Committee ex p. Morris [2002] 24 EG 149

This case throws interesting light on the practical workings of the statutory machinery which deals with the situation where a long lease of residential accommodation comes to an end by effluxion of time. Originally the provisions of Part I of the Landlord and Tenant Act provided that the tenant of residential property held under a long lease at a low rent would normally have the right to hold over at the end of the contractual leasehold term and that the landlord would then have the right to serve a notice upon the tenant with a view to terminating the statutory continuation and replacing it by a regulated periodic tenancy subject to the Rent Acts. When the regulated tenancy regime was superseded by the present assured tenancy regime with effect from the 15 January 1989 under the provisions of the Housing Act 1988, Schedule 10 of the Local Government and Housing Act 1989 in effect set out long-term transitional arrangements for the phasing-out of the possibility of the tenant receiving the grant of a new regulated tenancy at the end of such a long lease, and instead made provision for the tenant receiving an assured tenancy subject to the provisions of the Housing Act 1988. The "cut-off point" for the transitional arrangements was to be 15 January 1999, ten years after the relevant provisions of the Housing Act 1988 came into effect: if notice were to be served on the tenant before that date he would still be entitled to the grant of a regulated tenancy; if the notice were to be served on the tenant after that date he would instead be entitled to the grant of an assured tenancy.

In the instant case, the landlords had granted a long lease at a low rent to a company, Dean Investments Ltd, which granted a long underlease to a Mr Barnby; Mr Barnby subsequently assigned the underlease to a Mr Fry who later acquired the headlease also; on 6 June 1995 the underlease was assigned by Mr Fry to the appellant Mr Morris. The contractual leasehold term expired on 19 September 1995. Meanwhile, on 21 April 1995, knowing that the term of the lease was drawing to a close, the landlords had sent a notice to the premises proposing the creation of a statutory regulated tenancy at the end of the long lease. However, the notice was not addressed to the then tenant Mr Fry, but to his predecessor in title, Mr Barnby, Mr Fry being mentioned in the notice only as a person who had a superior leasehold interest in the property in question. Subsequently, by a further notice dated 11 June 1999 the landlords proposed to the appellant, Mr Morris, the creation of an assured tenancy of the premises at the monthly rent of £3,900, or £46,800 per annum. Since the parties were unable to agree, the matter was referred to the Rent Assessment Committee for determination, and the Committee determined that a new assured tenancy should be granted at the annual rental of £32,496. In the High Court Hooper J had held that the 1995 notice had been invalid, and upheld the determination by the Rent Assessment Committee. The matter then came before the Court of Appeal.

Delivering the principal judgment in the Court of Appeal, Mummery LJ held that the 1995 notice had been invalid: it had not been addressed to the then tenant, and had in fact been addressed to a person who had long ceased to be the tenant: in the words of the court "The notice was not addressed to the tenant, Mr Fry, either expressly by name or implicitly by status as tenant. It was expressly and unambiguously addressed to an altogether different person, Mr H. G. Barnby. That was not a minor error or slip. Mr Barnby was not Mr Fry and he was not and had long ceased to be the tenant of the flat. The reaction of the reasonable tenant receiving the notice addressed to Mr Barnby (or receiving an envelope so addressed) would be to think that the notice or the envelope and its contents were meant for Mr Barnby. The notice cannot be construed as a notice given to Mr Fry. As a consequence, the notice did not accomplish the statutory objective of serving a notice under s.4 of the 1954 Act, and it is impossible to say [as the appellant had contended] that the notice was in the prescribed form or in a form substantially to the like effect " He went on to uphold the decision of the Rent Assessment Committee and of Hooper J in the court below, save only that he went on to observe that if the effect of the determination was that the annual rent was in excess of £25,000, the only effect of this would be that the tenancy, which would otherwise have been an assured tenancy protected by the Housing Act 1988, would cease to qualify for such protection. Sir Murray Stuart-Smith and Brooke LJ agreed.

Duties of "manager" under Landlord and Tenant Act 1987

Maunder Taylor v. Blaquire [2002] 30 EG 135

Even though the decision in this case was made by Mr Recorder Hamlin at the Central London County Court, and stands low therefore in the scheme of judicial precedent, the points which are raised are of general interest and it is therefore included in the present Legal update. Briefly, the two main questions which arose were whether, first, when a manager had been appointed by the Leasehold Valuation Tribunal under the Act of 1987 with power to carry out the landlord's repairing obligations under the lease, the manager was charged with the obligations of the landlord in such a way that the tenant(s) could bring a legal action against the manager for breach of the landlord's repairing obligations to the tenant(s) and, second, as to whether the tenant(s) were entitled to set off any claim for damages for non-repair against the manager's claim for service charges due under the lease. In the words of Mr Recorder Hamlin: "I am unable to accept the proposition that, by taking up his appointment, the claimant undertook duties to the tenants equivalent to those owed by the landlord. I have reached this view for one primary and various secondary reasons. The primary reason is that I can see no legal route to the conclusion that the defendant advances. It is not, and cannot be, suggested that the effect of the appointment was to create any privity of estate or of contract between the claimant and either the tenants generally or those who sued for his appointment … I do not doubt the desirability of restoring the property to full repair. I cannot, however, see why this should mean that the claimant, who has as manager agreed to further this objective, should be regarded as having undertaken the responsibilities of the landlord …"; as regards the claim to set off any damages for non-performance of the landlord's repairing covenants against liability for service charges, this would not be equitable in all the circumstances of the case, and would also infringe on the provisions of s.42 of the 1987 Act which set up a statutory trust intended to "ring fence" any service charges paid by the tenants; this last consideration would not, however, affect any attempt by the tenant(s) to set off any such liability against claims for arrears of ground rent.

Service of notices

Blunden v. Frogmore Investments Ltd [2002] 29 EG 153

An interesting case, as much for the circumstances which gave rise to it as for the extraordinarily detailed consideration of the relevant case law by Robert Walker LJ, delivering the principal judgment in the Court of Appeal. Briefly, the premises in question were situated in the Corn Exchange Building in Manchester, which was badly damaged by the IRA bomb which more or less demolished the adjacent Arndale Centre in June 1996. In consequence the local authority served a dangerous structure notice on the premises, which with the assistance of the landlords had been vacated by the tenants in the aftermath of the explosion. In due course the landlords sought to terminate the lease under the provisions relating to "termination on destruction" which were set out in the lease itself; the lease provided that service was to be (inter alia) by registered or recorded delivery post to the tenant's last known address or by leaving the notice addressed to the tenant on the demised premises. There was considerable confusion after the bombing, and the landlord had no fewer than three possible addresses for the tenant: notices were sent to him by recorded delivery post at each of the three addresses but were returned unopened by the Post Office; a copy of the notice was also affixed to the outside of the demised premises, even though access to those premises was now barred to the tenant for safety reasons. The question was, had the notice been properly served? "Yes" said the court: the landlord had acted in good faith and had made every effort to ensure that the notices were properly served by recorded delivery post, even though they had not in fact reached the tenant; some considerable reservations were expressed by Carnwath LJ and Schliemann LJ about the efficacy of the purported service of the notice on the demised premises; nonetheless good service had been effected by attempting to deliver the notice by recorded delivery post in accordance with the terms of the lease.

Rent review

Barclays Bank plc v. Savile Estates Ltd [2002] 24 EG 142

The two principal questions raised in this case are first, as to whether in a rent review clause which did not expressly set out any time limit for the landlord to apply to the President of the RICS to appoint an independent expert to determine the rent due for the forthcoming review period such a time limit could be implied, and second, as to whether in a rent review clause which contained no provisions expressly making time of the essence it was open to the tenant by notice to require the landlord to make such an application and to stipulate that the time within which the landlord was required to do so was of the essence, so that, if such application was not made by the landlord within the period stipulated by the tenant, the review rent would continue at the same level as the rent currently passing.

Briefly, the lease had been granted in 1968 for a term of 42 years and provided for an initial rent of £1,250, and reviews at seven-yearly intervals thereafter; the parties were to agree the reviewed rent for the next seven years by the quarter day preceding the review date (which was 25 December in each case) and if no agreement had been reached the landlord only had the right to apply to the President of the RICS for appointment of an expert. The most recent review date was 25 December 1996, but there had been no agreement to increase it at that time and negotiations had continued in a rather desultory manner until 1 September 2000 when the tenant's agents wrote to the landlord's agents stating that they required that the landlord apply to the President of the RICS within 28 days for the appointment of an independent expert to determine the review rent and that time was to be of the essence as regards the 28 days allowed for the landlord to make such application.

The Court of Appeal held, first, that, in order to give business efficacy to the terms of the lease, it was reasonable to imply a term into the lease that application be made by the landlord for the appointment of an independent expert in default of agreement within a reasonable time, and that in the light of the terms of the lease what is reasonable in this connection was probably the three-month period between the date by which agreement should have been reached and the next quarter day on which any such agreement would come into effect and, second, that it was open to the tenant to require the landlord to make such an application and to stipulate as it had that time for such application was to be of the essence; moreover that the time allowed in this instance was sufficient for the landlord to make such application.

Nuisance

Marcic v. Thames Water Utilities Ltd [2002] 2 WLR 932

Readers may remember (see Property Management, Vol. 20 No. 4, 2002) that Mr Marcic suffered frequent flooding from 1992 onwards because the public sewers overflowed after heavy rain but Thames Water did nothing to remedy the situation. Mr Marcic sued Thames Water for nuisance, negligence and breach of statutory duty and under the Human Rights Act. Thames Water had claimed that it had no liability because it was acting under statutory authority under the Water Industry Act 1991 and it was not in breach of any entitlement order issued by the Environment Secretary; that it had acted responsibly in setting up a priority system to reduce flooding and was spending millions of pounds to remove thousands of properties from the category of serious risk of flooding.

In the Construction Court Havery J found that there was no foreseeable prospect of Thames Water carrying out any work to prevent flooding at Mr Marcic's property despite the fact that Thames Water had posted a £300 million-plus profit in 1999-2000. Also that for Mr Marcic and customers in a similar position to be dealt with more swiftly would require an increase in sewerage charges. Taking all of this into account Havery J held that Mr Marcic was entitled to damages, but only on the ground that his human rights under Article 8 (respect for home) of the Human Rights Convention had been breached.

Thames Water appealed. After an extensive review of the authorities the Court of Appeal agreed that Thames Water was not liable for breach of statutory duty under the 1991 Act and that there was no absolute or strict liability simply because flooding occurred.

However, Lord Phillips held that Thames Water was liable for nuisance in tort. He stated that:

Thames Water are in no more favourable position than a landowner on whose property a hazard accumulates by the act of a trespasser or of nature. At all material times Thames have had, or should have had, knowledge of the hazard. If the principles identified in the Goldman [1967] 1 AC 645 and Leakey [1980] QB 485 cases are applied, these facts placed Thames under a duty to Mr Marcic to take such steps as, in all the circumstances, were reasonable to prevent the discharge of surface and foul water on to Mr Marcic's property (p. 992).

Furthermore, the flooding was not the inevitable consequence of Thames Water's exercise of its statutory powers. Even if the current inadequacy of the sewerage system was the result of increased usage rather than any action on the part of Thames Water, it was liable to Mr Marcic unless it could prove that it had done all that was reasonable. Their Lordships felt that Thames Water's priority system for dealing with the flooding was not enough and its failure to take steps to alleviate the flooding was not reasonable. The fact that Thames Water might have to buy land for a new scheme to solve the problem was no defence, given its resources.

The Court of Appeal did not actually set aside Havery J's finding on the human rights issue but as the common law has provided a remedy it was not necessary to consider it further.

This decision means that water authorities will now have to act more promptly and effectively to remedy repeated flooding caused by inadequate sewerage systems. Furthermore, contractors and developers who construct developments that overload previously adequate sewerage systems may have to consider their possible liability in nuisance and/or negligence to third parties who suffer flooding as a result. They may also find themselves in breach of contract to the purchasers of affected dwellings.

Employer's liability

Fairchild v. Glenhaven Funeral Services Ltd and others, The Times, 21 June 2002

This important case inevitably found its way to the House of Lords. In this case the plaintiffs, who had suffered mesothelioma as a result of exposure to asbestos dust during the course of their employment with successive employers, failed in their efforts to gain compensation. The basic problem was that they were unable to establish on the classic "but for" test of negligence liability, precisely which of their employers had caused their damage: this, despite being able to prove that all of the employers were in breach of their duty to protect them from the known dangers posed by the inhalation of asbestos dust.

The plaintiffs appealed to the House of Lords. Lord Bingham expressed the problem thus: if

1. 1.

   a plaintiff was employed at different times and periods by both A and B; and

2. 2.

   A and B were both subject to a duty to take reasonable care or to take all reasonably practicable measures to prevent the plaintiff from inhaling asbestos dust because of the known risk that it might cause mesothelioma if inhaled; and

3. 3.

   both A and B were in breach of that duty in relation to the plaintiff during the period of the plaintiff's employment by each of them so that during both periods the plaintiff inhaled excessive quantities of asbestos dust; and

4. 4.

   the plaintiff suffered mesothelioma; and

5. 5.

   any other cause of the plaintiff's mesothelioma could be effectively ruled out; but

6. 6.

   the plaintiff could not because of the limits of science prove on the balance of probabilities whether his mesothelioma was caused by the dust he inhaled whilst employed by A or by B or cumulatively by both of them together;

was the plaintiff entitled to recover damages against either employer or both?

It was common ground that for each plaintiff conditions 1-5 above existed.

The Court of Appeal, applying the classic test for causation in negligence – the "but for" test – held that as the plaintiffs could not prove which employer or employers actually caused their mesothelioma they were not entitled to recover damages from any of them.

In this appeal their Lordships decided that principle demanded that the law should provide a remedy in circumstances where a plaintiff is unable to recover damages simply because the duty owed to him has been broken by two tortfeasors rather than one and he is unable to prove "what was scientifically unprovable". Furthermore it would "seem contrary to principle to insist on the application of a rule which appeared, if it did, to yield unfair results."

Their Lordships referred to McGhee v. National Coal Board (1973) 1 WLR 1; 1973 SC (HL) 37 in which a similar problem had arisen in Scotland. In that case the pursuer (plaintiff) had suffered dermatitis as a result of contact with brick dust and his employers were in breach of their duty for failing to provided showers to enable him to wash the dust off. In that case the medical evidence could not say whether the condition arose from a single or cumulative abrasions of the skin nor could it show that the provision of showers by the employer would probably have prevented the onset of the disease.

The crux of the argument in that case was therefore whether, as the plaintiff could not prove that the employer's breach of duty had probably made a material contribution to his contracting dermatitis, it was enough to show that the breach had increased the risk of doing so. The majority held that in the circumstances no distinction could be drawn between making a material contribution to causing the disease and materially increasing the risk of contracting it. Thus, their Lordships stated, the majority in McGhee, had adapted the orthodox test of causation to meet the particular case in which the plaintiff faced an insuperable problem of proof. However, one complication in the present case that was not present in McGhee was the existence of additional or alterative tortfeasors.

His Lordship also referred to Wilsher v. Essex Area Health Authority (1978) QB 730. In that case the majority of the Court of Appeal applied McGhee to a problem of medical negligence where the injury arose from a breach of duty which could have been caused by a number of factors. However, that decision was overturned on appeal to the House of Lords for reasons given by Sir Nicolas Browne Wilkinson who had delivered a dissenting judgment in the Court of Appeal. Unfortunately, Lord Bridge, who delivered the only opinion in Wilsher, stated that the case of McGhee had not laid down any new principle of law; in fact it had affirmed that the onus of proving causation lies on the plaintiff. However, their Lordships in this case felt that Lord Bridge's opinion did not accurately reflect the effect of what had been decided in McGhee and the passage should no longer be treated as authoritative.

Their Lordships also looked for guidance at international jurisprudence, legislation and case law. They concluded that, in most jurisdictions on facts such as those in this case, the plaintiff would obtain a remedy. They felt that in today's world where employees might work for the same company in a number of different countries there must be some virtue in a uniformity of outcome, no matter how that is reached.

However, their Lordships did recognise that this case presented a clash of policy considerations. On the one hand, there is potential unfairness to an employer if all of those potentially liable are not before the court and he might be held liable for damage he had not actually caused. On the other hand, there was a strong policy argument in favour of compensating those who had suffered grave harm which could only have been caused by a breach of the employer's duty and when it was impossible for the plaintiff to prove scientifically as between several employers precisely which was responsible for the harm suffered.

Their Lordships felt that the balance of justice came down in favour of imposing liability on the employer which is in breach of its duty rather than in denying redress to the victim. Thus they concluded that, in a case such as this proof, on the balance of probabilities that each employer's wrongdoing had materially increased the risk of the employee contracting the disease, was to be treated as proof that each defendant had materially contributed to it. This their Lordships felt was consistent with principle, authority, policy and the wider jurisprudence.

Limitations

The case of Cave v. Robinson Jarvis & Rolf reached the House of Lords (The Times, 7 May 2002). Readers may remember that the case in the Court of Appeal (see Property Management, Vol. 19 No. 4, 2001) turned on the interpretation of s.32(1)(b) of the Limitation Act 1980 which provides that, where any fact relevant to the claimant's right of action has been "deliberately concealed from him by the defendant", the relevant limitation period does not begin to run until the claimant has or ought to have discovered the concealment. Section 32(2) of the Act provides that the "deliberate commission of a breach of duty in circumstances where it is unlikely to be discovered for some time" shall be treated as deliberate concealment for this purpose. Thus a professional person cannot escape liability for a breach of duty by deliberately covering up the breach until the time limit for action runs out.

However, a problem arose when the Court of Appeal in Brocklesby v. Armitage & Guest [2001] 14 EG 150 (see Property Management, Vol. 19 No. 4, 2001) interpreted the phrase "deliberate commission of a breach of duty" to mean that any positive act by the defendant could be regarded as deliberate even though the defendant might at the time be unaware that he was acting negligently and was not therefore deliberately trying to conceal anything. The problem with this interpretation is that it could have the effect of postponing indefinitely ordinary professional negligence claims since any act by a professional in the course of his work is likely to have been deliberate in that sense.

The House of Lords therefore reconsidered the issue. Their Lordships held that a person is not deprived of the benefit of s.32 unless he took active steps to conceal a breach of duty after he became aware of it, or where he was guilty of deliberate wrongdoing and concealed or failed to admit it in circumstances where it was unlikely to be discovered for some time. Thus where a breach is merely inadvertent, albeit negligent as in this case, s.32 does not apply and the limitation period is not postponed.

The result of the case is that a normal claim for negligence cannot be commenced more than 15 years after the breach of duty (s.14A Limitation Act 1980). Within the 15-year period claimants must make their claim within one of two periods; either six years from the date on which the cause of action accrued which has been interpreted in the courts as being the date upon which the claimant suffered loss or damage as a result of negligence; or three years from the date upon which the claimant is or ought to be in possession of all the material facts about the claim. Thus the limitation period is based on the claimant's knowledge but the claim will be barred once the 15-year long-stop has been reached.

Contract-condition precedent

The case of Hallam Land Management Ltd v. UK Coal Mining and another [2002] EG 96 illustrates the court's unwillingness to rewrite an agreement for the parties by implying into it a term that they clearly would not have had in mind at the time of contracting. The case concerned the purported exercise of an option to purchase 45 acres (18.2ha) of land in Rotherham, South Yorkshire which was within a 32ha "strategic site" that at the time of granting the option was earmarked for development in the local planning authority's UDP. The option was granted (to SF Ltd who later assigned it to Hallam) for a consideration of £5,000 and was subject to a condition that the purchaser undertook to submit a planning application "for development of the property" by a specified date and to use reasonable endeavours thereafter to obtain permission. Once the option was validly exercised the purchase price of the land was to be £100,000 "per developable acre." This was defined as "each acre of the property in respect of which planning permission is granted for development" on an application by the purchaser excluding areas of open space.

By the time that Hallam acquired the option in 1998, the local authority had changed its policy on development in the area and was against development of land except as part of a scheme covering a much wider area than the "strategic site". The appellant submitted an application for the option site in respect of 45 acres, 42.5 acres of open space and 2.5 acres (1ha) for a company HQ. Outline planning permission was eventually granted on appeal. The proposed development involved landscaping 40 per cent of the land.

The appellant purported to exercise the option to purchase the land for £250,000 calculated on the basis of the 2.5 acres (1ha) of building development but excluding the landscaped areas. The vendor claimed that this was not a valid exercise of the option and transferred the land to the second defendant. The appellant claimed for specific performance. The claim failed. The trial judge held that there had been no planning application in respect of "the property" as required by the option agreement because the appellant's application had not been for the whole site. Thus there was no valid exercise of the option.

The appellant claimed on appeal that "the property" meant the whole property or any part or parts of it; and that as landscaping work involved engineering operations it amounted to development within the meaning of those words as used in planning legislation. The planning application had therefore been for the whole of the site. The appellant also argued that a term, that the appellant would apply for the best planning permission reasonably available at the time of application, should be implied into the agreement to make it workable. The vendor cross-appealed on the ground that if the option had been validly exercised the purchase price should be one that took into account the landscaped areas.

The Court of Appeal rejected the appellant's first claim that it could make a planning application for only part of the property provided that it applied for the best planning permission reasonably available. The court held that the property identified in the agreement was 45 acres; thus the required planning permission had to be for the whole or substantially the whole of this because otherwise the vendor would lose the value of much of the land simply because only a small part of it was permitted to be developed within the time period for the exercise of the option. On a true interpretation of the agreement this was a risk the appellant had to take and that was reflected in the price paid for the option (£5,000). It was not necessary or reasonable to imply such a term even if it meant that the appellant might be unable to exercise the option. To import into the agreement the term contended for by the appellant would be substantially to rewrite the agreement to cover matters not contemplated by the parties at the time of making the agreement.

Whether the planning application was for substantially the whole of the land was a question of fact and degree. The 2.5 acres (1ha) for the HQ building was clearly insufficient. In addition, the appellant's interpretation of what counted as "development" based on planning legislation was inappropriate. That was not the meaning that the reasonable person with the background knowledge of the parties at the time of contracting would have had in mind. The appeal was dismissed, so the cross-appeal by the vendor did not need to be considered.

The law is stated as it is understood to be up to 30 September 2002.

Geoffrey WatersonRosalind Lee