Baillie v Savage [2018] EWHC 3035 (Ch)

Case No CH-2017-000297

[2018] EWHC 3035 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

CHANCERY DIVISION

Venue Royal Courts of Justice, 7 Rolls Building, Fetter Lane,

Date Tuesday, 6 November 2018

London, EC4A 1NL

Before

MR JUSTICE HENRY CARR

Between

JAMES ARCHIBALD BAILLIEDefendant/ Appellant

DAVID SAVAGEClaimant/

MARK DENCER (instructed by Whitehead Monckton) appeared for Defendant/Appellant

DAVID SAVAGE appeared in person for in person

Hearing Hearing dates: 6 November 2018

Judgment

Introduction

[1]This is an appeal by the Second Defendant (“Mr Baillie”) from the Order of District Judge William Jackson made on 23 November 2017, whereby he ordered that there be judgment against Mr Baillie on the Claimant’s claim in the total sum of £18,059 inclusive of interest, together with release of a deposit of £2025. District Judge Jackson further ordered that the Mr Baillie pay £10,000 to Mr Savage on account of costs. The appeal is concerned with the interpretation of a rent suspension clause, which was successfully relied on by Mr Savage at trial.

[2]I gave an unreserved judgement on this appeal and neither party wished for a transcript. However, since the decision may be relevant to the interpretation of rent suspension clauses in other tenancy agreements, I have set out my reasoning, somewhat more fully, in this approved judgment.

The facts

[3]The background to this claim is as follows. In July 2008 Mr Savage entered into a tenancy agreement on a house and garden known as Ferndown in Charing, Kent. The tenancy agreement had a two year term, and no break clause. Mr Savage paid all of the rent (approximately £34,000) in advance. Some four months later, a part of one of the garden walls collapsed onto a path in front of it.

[4]Before the collapse of this part of the wall, Mr Savage had contacted the letting agents, Ashton Burkinshaw Ltd on a number of occasions between July and November 2008. He drew their attention to the fact that the wall was bulging and that action needed to be taken before it collapsed. The letting agents agreed, but no action was taken.

[5]On 10 November 2008, part of the wall collapsed causing the passage to the side of the property to become blocked by rubble and causing damage to the pipe supplying the heating system to Ferndown.

[6]Mr Savage again contacted Ashton Burkinshaw and explained to them that the material (earth) that the retaining wall was holding was continuing to fall; that cracks had appeared in the walls of the property and were continuing to grow; that the kitchen floor was bulging; and that the remainder of the surviving wall was bulging and leaning. He stressed the urgency of the matter and the potential risks to which he and his partner were exposed to as a result.

[7]On 20 January 2009, Mr Savage wrote to Ashton Burkinshaw recording his concerns about Ferndown’s suitability for further safe occupation. He drew the letting agent’s attention to his concerns as to the remaining retaining wall and stated that the car port and garage rear walls were showing clear signs of distress.

[8]In February 2009, Mr Savage instructed his own structural engineer to prepare a report on the status of Ferndown. Following a site visit on 4 February 2009, Mr Tree, the structural engineer, concluded that it was apparent that there remained a serious problem with the rear slope and embankment to the property and that it was possible that the distressed wall to the other side of the shed where the failure had occurred could suffer a similar fate. He noted that the gap between the bank and the building at this point was only a metre. Mr Tree stated in his report that the degree of risk remained high for further landslip and wall failures. Therefore, he concluded that Ferndown was not considered safe as a habitable dwelling.

The Judgment

[9]District Judge Jackson gave judgment on 23 November 2017 (“the Judgment”), having heard evidence from Mr Savage, Mr Baillie, and experts retained by the parties. At [32] of the Judgment, the judge generally accepted Mr Savage’s evidence and concluded that Mr Savage was keen to do his best to make concessions where necessary. He rejected the case that Mr Savage had an ulterior motive to terminate the tenancy. He also considered the evidence of Mr Baillie and concluded that there were major problems with it. Mr Baillie was never really on the scene at all, and had relied on information provided by the letting agents of which he had no personal knowledge.

[10]The judge then considered the competing expert evidence. At [36] to [48] he assessed the expert report of Mr Tree in considerable detail. He compared it with the expert evidence of Mr Darling, who gave evidence on behalf of Mr Baillie. He had some criticisms of Mr Darling including, in my view, the entirely justified observation that his report appeared to be overly partisan.

[11]At [71]

the judge concluded that:

“pulling the threads together in relation to all those issues I in general terms prefer the observations made by Mr Tree, who was measured in his evidence, was on the scene at the time, and was able to set out his case with a considerable degree of conviction so that made it convincing to the Court.”

[12]The judge then considered clause 14 of the lease, which formed the basis of Mr Savage’s claim. The clause is headed “Premises Uninhabitable”. The material parts provide that:

“The rent or a fair proportion of the rent shall be suspended if the Premises or any part thereof shall, at any time during the tenancy, be destroyed or damaged by any risk insured by the landlord so as to be unfit for occupation and use… The suspension of the rent or a fair proportion of the rent, according to the nature and extent of the damage sustained, shall remain until the Premises shall again be rendered fit for habitation and use.”

[13]At [80] the judge accepted the argument of Mr Dencer on behalf of Mr Baillie that it was necessary to consider the nature of the damage and whether that damage had caused the property to be unfit for occupation and use. The judge considered that there had to be a link between the damage and the unfitness of the premises for occupation and use.

[14]The judge considered the concerns expressed by Mr Tree, including the concern that he could see bowing on the remaining part of the wall. The judge said:

“There was not a lot of vegetation there. There was not a lot of evidence of anything retaining the wall. He [Mr Tree] was concerned about water coming through, snow melting and things of that sort and he took the view that there was every prospect that this may cause difficulties.”

[15]The judge then considered whether the prospect of further damage meant that the property was uninhabitable. He rejected the evidence of Mr Darling and accepted the evidence of Mr Tree. He concluded that:

“I really have difficulty in saying that when landslip occurs that somehow it is going to be controlled in a certain way so that it does not really cause any damage. It is a hostage to fortune.… When issues of this nature fall, there is no real guarantee as to what is going to happen and I think that is the essence of what Mr Tree is saying.”

He concluded at [84] that “We still have got the prospect of the entire wall collapsing.”

[16]At [88], the judge recorded that he was satisfied that the essence of clause 14 had been activated by the circumstances which had occurred. He explained that he reached this conclusion based on Mr Savage’s evidence and on his view that the expert evidence of Mr Tree was to be preferred to that of Mr Darling.

Permission to appeal

[17]By an order dated 19 March 2018, Zacaroli J refused Mr Baillie’s applicaton for permission to appeal. He did so because District Judge Jackson had concluded, as a matter of fact, that the premises were rendered uninhabitable by reason of the risk of further collapse, consequent on the collapse of the rear wall. That conclusion was based upon expert evidence which supported the conclusion that the premises were uninhabitable. Therefore the appeal had no realistic prospect of success.

[18]However, following a renewed oral application for permission to appeal, Zacaroli J granted permission to Mr Baillie to amend the Grounds of Appeal and, based on those amended grounds of appeal, granted permission to appeal.

[19]Zacaroli J’s reasons for granting permission to appeal were as follows:

“The Amended Grounds of Appeal contend that the learned judge erred (a) in holding that the collapse of one section of the wall caused increased instability in the second section of the wall and/or (b) in holding that, in so far as the bowing present in the second section of the wall caused the risk of further damage to the premises, that bowing constituted damage within the meaning of clause 14 of the tenancy agreement. So far as (b) is concerned, the Appellant contends that the bowing was present at the commencement of the tenancy and for that reason it is not damage within clause 14 of the tenancy agreement. On the basis of the evidence presented to the Court, in particular photographs identifying the sentry box between the two sections of wall, and witness evidence referring to the bowing in the second section of the wall having been present from the commencement of the tenancy, there is reasonable prospect of success of an appeal on the basis of these points.”

Assessment of the appeal

[20]Mr Dencer elaborated on this ground of appeal during his succinct and courteous address. He pointed to a photograph annexed to Mr Tree’s report at page 309 of the trial bundle which showed what the judge characterised as a sentry box (probably an outside toilet) between that part of the wall which had fallen down and that part of the wall which remained. He submitted that, as the wall was built in two sections, the collapse of one section did not increase the risk of the collapse of the other section as there were two separate structures. Mr Dencer accepted the judge’s finding that the un-collapsed section was liable to collapse. But he suggested that that danger was caused by bowing of the wall, which pre-existed the lease and was not caused by the collapse of a part of it. He submitted that no expert had said that collapse of one section of the wall had made collapse of the remainder more likely.

[21]Attractively as this argument was put, I am unable to accept it for the following reasons. First, this appeal raises the question of whether, damage having occurred during the tenancy, a risk of further damage of a similar nature, which renders the property unfit for habitation and use, sufficient to invoke the rent suspension clause. In my view, as a matter of interpretation of clause 14, this question should be answered in the affirmative.

[22]Many leases provide for rent to be suspended in specified circumstances. In Aldridge Leasehold Law (2018) Volume 1, Part 4, Chapter 2, the authors explain at para. 4.028 that such provisions are valid, but are to be interpreted strictly, so that the rent is only suspended on the happening of the precise events specified in the clause. For example, in Manchester Bonded Warehouse Co v Carr (1880) 5 C.P.D. 507 CCP, the Claimant granted a lease to the Defendant of certain floors of a warehouse. The lease prohibited sub-letting and provided for rent suspension in the event of the premises being burnt down or damaged by fire, storm or tempest. As a result of an (illegitimate) sub-lessee overloading one of the upper storeys with bags of flour, the whole building collapsed. The Claimant rebuilt the premises and claimed against the Defendant for rent during the time the building was unoccupied as well as damages caused by the destruction of the building (i.e. reconstruction). Coleridge CJ held that the Defendant was liable to pay rent as if the building had not fallen. Whilst the covenant to pay rent was qualified, the qualification did not extend to the damage caused on the present facts.

[23]In the present case, clause 14 is not limited to the occurrence of specified events, such as damage caused by fire, storm or tempest. It applies if the premises or any part thereof shall, at any time during the tenancy, be destroyed or damaged by any risk insured by the landlord; there being no issue on this appeal as to the fact that the relevant risk was insured by the landlord.

[24]Clause 14 has two relevant requirements, which give rise to factual enquiries. First, during the tenancy, was a part of the premises destroyed or damaged? Since a part of the garden wall collapsed, this requirement is satisfied, as the judge found. Secondly, was the nature of the destruction or damage such as to render the premises unfit for occupation and use? The judge found that this was the case based upon the risk of further damage. In my view he was right to reach this conclusion.

[25]In Summers v Salford Corporation

[1943] AC 283

, Lord Atkin considered whether a risk of further damage rendered a house not reasonably fit for human habitation. He said at page 289:

“I will only cite one passage from my own judgment in Morgan’s case, because I know no better way of expressing my present opinion after a lapse of fifteen years. ‘If the state of repair of a house is such that by the ordinary user damage may naturally be caused to the occupier, either in respect of personal injury to life or limb or injury to health, then the house is not in all respects reasonably fit for human habitation’. In the present case the breaking of one sash-cord necessarily involved the strong probability that its fellow cord, especially with the extra strain imposed on it, would also break, with the further certainty of danger to anyone handling the window at the time of the break [which] would prevent that room from being reasonably fit for occupation.”

[26]In my judgment, the occurrence of damage during the tenancy was a prerequisite for the operation of the rent suspension clause. However, once damage had occurred during the tenancy, the real risk of further damage of a similar nature, which rendered the premises unfit for occupation and use, was sufficient to satisfy the requirements of clause 14, particularly where such further damage was potentially dangerous to the occupants of the premises. The alternative interpretation of the clause, which would require the tenant to continue to pay rent whilst the property was at risk of landslip, is not, in my view, commercially sensible.

[27]I accept, as did the judge, that there has to be sufficient connection between destruction or damage during the tenancy and the unfitness for occupation and use. In my judgment, the fact of damage during the tenancy, coupled with the risk of further such damage, with the consequence that the premises were unfit for habitation and use, is a sufficient connection.

[28]There is a further, and independent, reason for dismissing this appeal. Given the nature of Mr Tree’s expert evidence, if the appellant wished to establish a break in the chain of causation on the basis of the “sentry box”, that point needed to be put to Mr Tree during cross examination so that he could deal with it. Mr Dencer did not suggest that Mr Tree was asked about this issue. A positive, factual case was advanced on behalf of Mr Baillie on this appeal. An appellate court does not find facts, and I am not willing to reach to factual conclusions, not found by the judge, on the basis of a photograph which was not explored with the relevant witness.

[29]I should add that Mr Dencer criticised the judge’s apportionment of one third of the rent during the period from November 2008, when Mr Savage continue to occupy the premises after damage had occurred, until he moved out in April 2009. However, no permission to appeal has been given in respect of this apportionment and I do not consider that this criticism supports the appellant’s primary case on this appeal.

[30]For these reasons, this appeal is dismissed