Carmel Southend Ltd v Strachan & Henshaw Ltd [2007] EWHC 1289 (TCC)

[2007] EWHC 1289 (TCC)Case No HT-06-197
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
TECHNOLOGY & CONSTRUCTION COURT
Venue The Royal Courts of JusticeDate Thursday, 24 th May 2007
Strand
London
WC2A 2LL
Before
HIS HONOUR JUDGE PETER COULSON QC
Between
Carmel Southend LtdClaimantStrachan & Henshaw LtdDefendant
B E T W E E N:
CARMEL SOUTHEND LIMITED
v
STRACHAN & HENSHAW LIMITED
Transcript from a recording by Harry Counsell
Venue Cliffords Inn, Fetter Lane, London EC4A 1LD
Tel: 020 7269 0370
Hearing Hearing Dates: 21, 22, 24 May 2007
MR D. KYNOCH (instructed by Michael Conn Goldsobel) appeared on behalf of the Claimant
MR G. HEALEY (instructed by TLT LLP) appeared on behalf of the Defendant
JUDGMENT
[1]The Claimant, Carmel Southend Limited (‘Carmel’), is the freehold owner of industrial premises known as Units B and C, Ashton Vale Road, Ashton Gate, Avon (‘the property’). Built in about 1979, the property was constructed from a steel portal frame, with a combination of metal cladding and cavity brickwork to external walls beneath an asbestos cement covered roof. That roof construction was of shallow pitch, in traditional design, with support afforded by galvanised steel purlins which spanned between the primary structural steel portal frame. The covering itself comprised a built-up system with prefinished plasterboard panels set within a galvanised steel grid internally, a layer of fibreglass or mineral wool quilt insulation of unknown thickness, and profiled asbestos cement corrugated sheeting to the external skin, securely positioned with metal hook bolts. GRP roof lights were provided to approximately 10% of the roof surface area to provide daylight to the inside of the property. The experts are agreed that the roof design was typical of the era (about 1979) and in keeping with other industrial units on the estate and other properties in close proximity.[2]By a lease dated 14th December 1990, the property was demised to the Defendant, Strachan & Henshaw Limited (‘SH’), for a term of 15 years from 25th December 1989 to 24th December 2004. During the course of their tenancy, in 2000, SH sublet the property to a company now known as Metso Minerals UK Limited (‘Metso’). Metso remained in occupation following the expiry of the lease in December 2004. On 7th July 2005 Carmel relet the property to Metso on the basis that Carmel would pay for the overcladding of the roof with new profile metal sheeting fixed to the existing roof structure. This overcladding work was carried out in 2005 and is at the heart of the remaining disputes between the parties.[3]It was Carmel’s case that SH were in breach of various covenants in the lease and that, as a result, the property was in disrepair when it was yielded up. On 9th August 2005 a Schedule of Dilapidations was formally served on SH’s surveyor. The parties were unable to reconcile their differences and on 4th July 2006 Carmel started these proceedings for damages for breach of covenant.[4]Happily, agreement has now been reached in relation to all items included in the Schedule apart from those items of disrepair relating to the roof. As to that issue, Carmel’s case is that the only way of successfully meeting SH’s obligations under the lease at the time of its expiry was to overclad the original roof using new profile metal sheeting panels together with repairs to the gutters and pipes. In contrast, whilst they accept that they were in breach of covenant, SH deny that wholesale re-covering was necessary and that the main problem, namely the deterioration of the roof lights, could have been dealt with by the installation of entirely new roof lights with waterproof joints. SH maintain that very few of the original roofing sheets were damaged and that the sheeting as a whole had not reached the point where it could not be repaired in accordance with their obligations in the lease.[5]Now that SH admit liability, the principal remaining issue between the parties concerns the work which would have been required in order for the premises to have been yielded up in December 2004 with the roof in good repair and condition for the purposes of the relevant covenants in the 1990 lease. In order to deal with that issue, I propose to set out the relevant covenants in the lease (section B below), identify briefly the relevant principles of law (section C below), summarise the factual background and the history of the roof (section D below), identify the state of the roof as at 24th December 2004 and the works that were subsequently carried out (section E below), and then analyse whether the overcladding or the patch repairs scheme was required by the repairing covenants in the lease (section F below). Finally, in section G below, I address the outstanding issues of quantum. B. THE LEASE[6]The relevant covenants in Clause 3 of the lease were as follows: ‘(3) The tenant, to the intent that the obligations hereby created shall continue throughout the term, HEREBY COVENANTS with the landlord as follows: – (4)(a) At all times during the continuance of the said term to repair and keep in good and substantial repair and condition the demised premises and all additions thereto and all drains soil and other pipes sewers sanitary and water apparatus glass paving walls fences gates and appurtenances (5) To paint with two coats at least of good quality and suitable paint or such other paint as may first be approved both as to quality and colour by the landlord in a proper and workmanlike manner in the year ending 31st December 1991 and in every subsequent third year and in the last year of the said term (whether determined by effluxion of time or otherwise howsoever but not twice in any period of two years) all the gates fences and outside wood stucco and ironwork and other parts of the demised premises heretofore usually painted and any addition thereof proper to be so painted and at the same time as aforesaid in each case in a workmanlike manner to tar creosote distemper, colour whitewash or otherwise treat all other outside parts of the demised premises as have usually heretofore been so treated all such work as aforesaid to be carried out to the reasonable satisfaction of the landlord. (6) To paint with two coats at least of good quality and suitable paint or such paint as may be first approved by the landlord in a workmanlike manner in the year ending 1994 and thereafter in every subsequent fifth year and in the last year of the said term… all inside wood and ironwork… (35)(a) At the expiration or sooner determination of the term (howsoever the same may be determined) quietly to yield up unto the landlord the demised premises in such good and substantial repair and condition as shall be in accordance with the covenants on the part of the tenant herein contained, together with all fixtures, fittings, improvements and additions which now are or may at any time hereafter be in or about the demised premises (but excepting tenants’ fixtures and fittings) and in case any of the landlord’s fixtures and fittings shall be missing, broken, damaged or destroyed, forthwith to replace them with others of a similar character and of equal value… (b) Notwithstanding the grant of these presents it is hereby agreed between the parties hereto that the alterations effected to the demised premises by the tenants’ predecessors in title… shall: – (iv) at the end or sooner determination of the term hereby granted if so required by the landlord in writing and the tenant shall not less than three months before the end or sooner determination of the term remove all or part of the said alterations and reinstate the demised premises to their original state specification.” C. RELEVANT PRINCIPLES OF LAW[7]There was a certain amount of debate about the relevant principles to be applied in a case of this type. I set out below what I consider to be the appropriate principles of law.[8]Standard of Repair Generally(a) A covenant ‘to keep in good and substantial repair’ does not require the tenant to put the property into perfect repair (see Proudfoot v Hart [1890] 25 QBD 42) or pristine condition (see Commercial Union Life Assurance Co v Label Ink [2001] L&TR 380).(b) The standard of repair is that of an intending occupier ‘who judges repair reasonably by reference to his intended use of the premises’ (Commercial Union). In that case the judge criticised the landlord’s surveyor for basing his complaints upon ‘what a pristine building should look like, not what was required by covenant to keep what had been a pristine building in good and substantial repair’.(c) An obligation to keep in good and substantial repair and condition is different and more extensive that an obligation merely to repair (see Welsh v Greenwich London Borough Council [2000] 49 EGLR 118). This may be wide enough to require the tenant to put the property into that condition even if it had never been in such condition before (see Credit Suisse v Beegas Nominees Limited [1994] All ER 803). However, on that point, I accept Mr Healey’s submission, on behalf of SH, that arguments about the difference, if any, made by the inclusion of the word ‘condition’ in covenants of this type have tended to arise in circumstances where there is a challenge by the tenant to the scope of the works proposed or carried out by the landlord; where the tenant suggests that such works are so extensive that they have gone beyond mere repair. Here that point does not arise directly because SH accept that the overcladding was a repair option open to Carmel.[9]Repair Alternatives(a) If there is more than one possible method of repair, each of which would comply with the required standard, the choice is for the tenant is make (paragraph 10-05 of Dilapidations: Modern Law and Practice by Dowding and Reynolds 3rd Edition 2004) and if there is a cost differential, the measure of damages at common law is based on the less expensive option (paragraph 29-12 of Dowding and Reynolds).(b) Often the dispute, such as the one in the present case, is between, on the one hand, a replacement option and, on the other, a repair option. In such circumstances, replacement will only be required if repair is not reasonably or sensibly possible (see Ultraworth v General Accident Fire and Life Assurance Co [2002] EGLR 115 and Dame Margaret Hungerford Charity Trustees v Beazeley [1993] 2 EGLR 143). In the latter case, the Court of Appeal agreed with the trial judge that, although a new roof was required, the carrying out by the trustees of running repairs during the tenancy was enough to demonstrate compliance with their obligations, particularly given the age and character of the property in question.(c) A tenant cannot rely on his own breaches of covenant in order to lower the standard of repair. As Robert Walker J, as he then was, put it in Ladbroke Hotel Limited v Sandhu and Singh[1996] 72 P&CR 498:
‘If a tenant disregards his repairing obligations and as a result the premises become run down and commercially unattractive, it hardly lies in the tenant’s mouth to rely on that fact as lowering the standard of repair required under the tenant’s repairing covenant.’
[10]Futility(a) There will be cases where, on the facts, the repairing covenant will require works which not only effect a repair but which also achieve the object of rendering continual repair work in the future unnecessary (see Stent v Monmouth District Council[1987] 54 P&CR 193).(b) InElmcroft Developments Limited v Tankersley-Sawyer [1984] 270 EGLR 140 (Court of Appeal), Ackner LJ, as he then was, said: ‘The patching work would have to go on and on and on and on, because, as the plaster absorbed (as it would) the rising damp, it would have to be renewed and the cost to the appellants in constantly being involved with this sort of work, one would have thought, would have outweighed easily the cost of doing the job properly. I have no hesitation in rejecting the submission that the appellants' obligation was repetitively to carry out futile work instead of doing the job properly once and for all.’(c) I again accept Mr Healey’s submission that both these cases, and other similar authorities relied on by Mr Kynoch, on behalf of Carmel, were based on findings of fact rather than general statements of principle.[11]Incoming Tenant(a) The standard of repair must also take into account the reasonably-minded incoming tenant taking a lease on the same terms as the actual lease, including, as in this case, a full repairing covenant (see paragraph 9-06 of Dowding and Reynolds).(b) In considering this aspect of the dispute, the court may have regard to the actual stance taken by the actual incoming tenant (see Latimer and Another v Carney & Ors [2006] EWCA Civ 1417, and Beegas). But the standard of repair is an objective one, which does not depend on what, in the particular circumstances at the relevant time, an incoming tenant would accept (see paragraph 9-18 of Dowding and Reynolds). D. FACTUAL BACKGROUND[12]There were a number of events concerning the roof of the property which occurred between 1990 and 2005. Although ultimately this dispute will turn on the expert evidence, I consider that the factual background is of some importance Note 1 The factual background can often be of considerable relevance to the outcome of a dilapidations claim (see, by way of example, Riverside Property v Blackhawke Automotive [2004] EWHC 3052 TCC, [2005] 1 EGLR 114). Note 1. I therefore set out that background in some detail below, but before I do so I should add one note of caution. Many of the events over this period were not the subject of any direct oral evidence, and therefore the only material available to the court comes from the disclosed documents. It is important, therefore, to note at the outset that some of the details of these events, including matters of potential significance, are simply unknown.[13]Attached to the lease agreed in 1990 was a Schedule of Works to be carried out by SH. This included replacement of all cracked roof lights and all cracked and temporarily repaired roof sheets. It also involved cutting out the mastic seals to the roof lights and the sealing of the valley gutter joints. It appears that this work had to be carried out and completed by 30th April 1991. There are no documents evidencing precisely what was done and when.[14]In May 1993 SH procured the carrying out of the wholesale remedial coating of the asbestos cement roofing using a liquid applied compound. This work was carried out by Rentokil Roofing and was the subject of a 10-year guarantee. It appears that this work had the effect of enhancing the performance of the roof sheets because, as we shall see, even 10 years on, nobody suggested that anything other than a handful of the sheets themselves needed to be replaced.[15]The roof lights were a different matter. It appears that intermittent water ingress continued to occur around the roof lights. In the summer of 2000 Rentokil Roofing returned to site to carry out further repair work to those roof lights. In their letter of 21st July 2000, they said their principal task had been to reseal the laps to the lights. The remedial work that was carried out was apparently the subject of a guarantee, although Rentokil were at pains to make clear that the life of those roof lights ‘must be drawing to an end’. In contrast, Rentokil said that the waterproofing treatment, i.e. the coating that had been applied a few years earlier, was ‘in generally good order’.[16]The following month there were further problems with the roof, this time in the location of the valley gutters and downpipes. On 17th August Rentokil Roofing wrote again to SH to propose the addition of two new outlets to the valley gutter. The quotation was in the sum of just under £2,000. It appears that this work was done by 13th September and was also the subject of a guarantee.[17]At just this time, SH were in negotiation with Metso (then called Svedala Limited) concerning the possible subletting of the property. They obtained a survey of the roof from Davis Blackburn dated 7th September 2000, which contained the following conclusions:
‘The roof sheeting material is in generally serviceable order, there being no evidence of significant fractures or damage to the sheets or evidence of poorly executed remedial works. The Aquapol surfacing provided to the sheets is in generally fair condition, although slightly discoloured… From our inspection we are able to advise that in our opinion the roof covering provided to the unit is generally satisfactory, although we have suggested that the jointing between the sheets be improved at a number of isolated locations by the application of a flexible sealant. We are of the opinion that the guttering details and downpipe arrangements to the unit are inadequate to cope with the maximum likely discharge from the roof surface, there being an inadequate number of outlets provided to the gutter runs… We have made an approximate calculation of the roof volume and would advise that 150mm diameter downpipes are provided, replacing the existing, to cope with this discharge volume.’
[18]It appears from the documents that although, as we have seen, the number of rainwater outlets was increased (see paragraph 16), no steps were taken to replace the existing downpipes with downpipes of a wider diameter. Despite that, in October 2000, Metso became the subtenants of the property.[19]It seems that the problems continued with the roof. On 6th March 2003, Mr Rickards, Metso’s general manager, wrote to Rentokil Roofing to complain about ‘the same leaks in the same places’. Oddly, it does not appear that at this time the document was sent to either SH or Carmel, nor was any claim made under the guarantees previously provided by Rentokil.[20]In their reply dated 10th March 2003, Rentokil Roofing said:
‘It is in our opinion that the existing roof covering is nearing the end of its useful life and that consideration should now be given to carrying out a complete refurbishment, as repeated remedial visits have proved in many cases unsuccessful. The most likely reasons for this are the overall age of the existing roof covering and the degradation of ancillary items such as lap sealant and fixing washers.’
They suggested oversheeting or resheeting. However, despite this letter, neither Metso nor SH put any part of these works in hand and it does not appear that Carmel were aware of the document at all.[21]In August 2003 Rentokil Roofing provided a further written recommendation that ‘all or part of the roof be overcladded and override the existing internal eaves’ gutters’. Overcladding all the roof was estimated at £35,800 plus VAT; overcladding a part of the roof only (it is not clear which part) was estimated at £12,300 plus VAT. Again, it does not seem that either of these options was taken any further.[22]In late 2003 Carmel had engaged two different surveyors in connection with the property: Mr Goldstone of Robinson Lowe Francis, who was going to deal with SH, and in particular negotiate the termination of the lease and the repairs required to remedy the dilapidations, and Mr Watson of Alder King, who was engaged to negotiate a new lease with Metso. Mr Goldstone informed Mr Uzel of Carmel on 1st December 2003, following his first visit to the property, that it was ‘in a considerably better condition’ than when it was originally let to SH. He said that ‘the majority of items which will require attention relate to the roof’. The letter made clear that Carmel’s starting point was, not unreasonably, to get SH to carry out the repairs required by the lease, which would put that property, they hoped, into a condition in which Metso would then accept, by way of a new lease, a full repairing covenant.[23]In the run-up to the expiry of the lease and the possible new lease with Metso, the roof was the principal matter addressed in the correspondence between the respective surveyors. For example, on 2nd March 2004, Mr Henson of Hurst Warne, the surveyors acting for Metso, wrote to Mr Watson to say:
‘I am aware that there is a continuing problem with roof leakage and that the most substantial claim against SH will relate to this item of the building.’
[24]At the same time, in late February 2004, a draft Schedule of Dilapidations was prepared by Mr Goldstone on behalf of Carmel. The production of the draft Schedule followed Mr Goldstone’s detailed inspection of the roof, which was carried out on 5th February 2004. On that inspection he was attended by the roofing contractors, Options. It was carried out with the aid of a cherry-picker. Mr Goldstone confirmed that it was the only detailed inspection of the roof that he ever undertook. In respect of the repairs to the roof, his Schedule identified Mr Goldstone’s view that the necessary remedial action was to ‘replace the defective roof sheeting, including the provision of new soaker sheets, bargeboards and roof lights’. In his oral evidence, Mr Goldstone confirmed that, whilst this envisaged the replacement of all the roof lights, it recommended the replacement of only a handful of the roof sheets because, by and large, they were in a reasonable condition. He accepted in cross-examination that he was therefore of the view that, at this time, this solution (called in the evidence ‘the patch repairs’) was the appropriate way of putting the roof into proper repair and condition.[25]It also seemed that Mr Goldstone had considered, and rejected, any sort of overcladding solution. When he sent his draft Schedule to Carmel, his covering letter of 11th March 2004 said:
‘As you are aware, the subtenant has carried out substantial works to the property to convert it from the original warehouse into good quality offices. The items which I have highlighted in the schedule relate to the exterior of the property, and in particular problems with the roof. I believe that the only sensible way to deal with the roof at this stage would be to renew it in total. I do not consider that the overlaying of the roof would be acceptable as the existing covering is a profiled asbestos cement sheeting.’
[26]Mr Goldstone was cross-examined about that letter. He confirmed that, at that time, he did not consider that the overlaying solution was appropriate or acceptable. In cross-examination, he explained the apparent inconsistency between the patch repairs set out in his draft Schedule, and his letter which talked about renewing the roof in total. He said that, whilst he thought that the patch repairs were the limit of what was required by the terms of SH’s lease, hence its inclusion in his draft Schedule, he also thought that what he called ‘more extensive work’ than was required by the lease would have to be carried out by Carmel at the termination of the lease itself. So although Mr Uzel said in cross-examination that in his letter Mr Goldstone was contradicting himself, I do not believe that that is a fair criticism. Mr Goldstone was in fact identifying two, at least potentially different, things: the work he thought was required by the lease, and the work possibly required for the purposes of Carmel’s long-term investment in the property. He was, at that point, properly keeping the two concepts separate. As we shall see, the principal difficulty in this case arose when, a few months later, he was obliged to blur the edges between them.[27]On 22nd April 2004 Mr Watson wrote to Mr Henson saying:
‘Repairs Insofar as is possible, it is our intention to draw up a tenant full repairing lease following rectification of all outstanding dilapidations. We understand you are agreeable to this in principle, except that your client will not accept full repairing liability for the main roof unless the existing covering is replaced in its entirety with appropriate warranties in place.’
In his reply Mr Henson confirmed this, noting that:
‘…unless the roof covering is replaced in its entirety with appropriate warranties in place, I believe the best way to deal with the roof would be for your clients to retain direct responsibility for maintenance and repair throughout the lease term at their own cost.’
I find on the evidence that this was entirety typical of Metso’s stance both before and after the date of this letter: they always wanted a new roof covering.[28]In his negotiations with Metso, Mr Watson persisted in the opposite view, writing again on 9th June 2004 to say that ‘the roof covering will be repaired as required but it is not our client’s intention to replace this in its entirety’. Although his next letter to Mr Uzel of 22nd June indicated that Mr Henson, Metso’s surveyor, had agreed to this, Mr Henson’s own letter of 30th June made Metso’s position crystal clear. He said:
‘I further put to my clients, with regard to the roof, that they will be responsible only for maintaining this in a wind and watertight condition throughout the term of the lease. Unfortunately, whilst the main principle of their repairing obligations is accepted, the proposal concerning the roof alone is not. Our main contact at the subject premises, David Rickards, who is the general manager, has advised that the above proposal would not be acceptable due to the fact that it will be impossible to patch repair the roof to a standard that keeps the building wind and watertight throughout the term. Even over the last few weeks, significant water ingress has occurred due to the failure of the roof covering. We are therefore 99% agreed with regard to the terms of this lease renewal, but need to resolve the question concerning roof covering, and in this respect I would envisage that the only feasible option would be for your client to commit to recladding/overcladding of the roof.’
[29]Mr Watson said in evidence that he was more of a valuation specialist and that it was Mr Goldstone who was dealing with the details of what works were required to comply with SH’s repairing covenant. However, on 1st July 2004 Mr Watson offered a view to Mr Uzel that was at least consistent with what was in Mr Goldstone’s draft Schedule. He said:
‘You will see that, regarding roof repairs, David Rickards feels that it will be impossible to patch repair the roof to a standard that keeps the building wind and watertight throughout the term. I am sure that this is not the case, as presumably once all the necessary repairs are carried out, the roof will be in sufficient repair for Metso to take wind and watertight liability.’
[30]On 5th July 2004 Mr Uzel sent Mr Goldstone the correspondence that had passed between Mr Watson and Mr Henson about the roof. Mr Goldstone’s reply was curious because it suggested that his Schedule included for roof renewal, when, as he accepted in cross-examination, it patently did not. He said that he could not explain why there was this discrepancy. It does not seem to me that anything turns upon it.[31]Just at this critical moment, there was then an outbreak of further leaks at the property. It seems that Metso dug their heels in as to their proposal for a new roof. Mr Uzel was finally obliged to agree to it. On 21st July he wrote to Mr Goldstone to tell him that he had agreed with Metso ‘that we will be putting on a new roof and charging this back to SH’. He also said Metso were going to let him have a letter which said, in terms, that they would not take the building unless a new roof was put on. It was not suggested that this decision was based on any advice whatsoever from either Mr Watson or Mr Goldstone.[32]The promised letter from Mr Rickards of Metso was also dated 21st July 2004. That said that ‘in addition to the existing leaks, substantial new areas of leaking have developed’. He identified the extensive damage caused by these leaks and concluded by saying that ‘unless we can be convinced of moves to provide a permanent solution to the leaking roof, we cannot consider signing the proposed new building lease’. Mr Ryan of SH said in evidence that he had no idea of these events; he was surprised that, if Mr Rickards had a real difficulty with the state of the roof, he had not contacted SH at all during this period.[33]Mr Uzel forwarded this letter to Mr Goldstone on 26th July and asked him to instruct Options ‘to give us a price for a new roof as per your design. This could potentially be, I suppose, an overcladding or a complete recladding’ Note 2 By this stage, Mr Watson had (on 22nd July) informed Mr Henson that the roof would be reclad entirely. Note 2. Whilst this letter made plain that Carmel had decided on either overcladding or recladding, Mr Goldstone remained of the view that the patch repairs solution was the appropriate measure of work for the purposes of the Schedule of Dilapidations against SH. We know this because, on 30th July, he produced another version of that Schedule, with the patch repairs referred to again, although this time it identified all 56 roof lights to be replaced. The revised Schedule identified just 20 asbestos roof sheets that, in Mr Goldstone’s view, would need to be replaced. The revised Schedule was sent to Mr Hewitt, the surveyor acting for SH, on 9th August 2004.[34]Mr Hewitt responded on 2nd September 2004. He said:
‘Roof The roof covering has been subject to remedial works and the covering itself is in a serviceable condition. The roof lights show signs of soiling, although are generally serviceable. I do not therefore concur with your assessment of the works required in relation to the roof.’
[35]However, the dispute between the parties was actually just about to grow much larger, because on 16th September, in what was a purported response to this letter, Mr Goldstone said:
‘Roof – I have had an opportunity to inspect the roof and I must disagree with your comments. The roof is currently leaking and has had significant water ingress over the years. The sub-tenants have carried out works to the roof which involves the application of a bituminous type of compound. Even with this, water ingress is still occurring and as a result the sub-tenant will not be prepared to sign a lease with a full repairing covenant. With this in mind and considering the condition of the roof, the only thing we see possible would be to replace the roofing and I will be detailing this more thoroughly when I write to you with regard to the schedule as a whole.’
The letter concluded with these words:
‘The sub-tenants are not prepared to enter into a full repairing lease for the property, and my schedule deals with those items which will allow them to take the property on a full repairing basis.’
SH say that this letter demonstrates that Mr Goldstone had adopted the wrong criterion and included the replacement works in the next version of the Schedule because of the commercial requirements of Metso, not because of SH’s obligations under the lease. I address that point in some detail in section F below. What is beyond doubt is that this was the very first time that Mr Goldstone had said that, contrary to the terms of his original Schedule, he believed that the roof had to be re-covered. Mr Goldstone again accepted that in cross-examination.[36]Mr Goldstone’s next letter on this point was dated 19th October 2004. This letter set out a more detailed explanation of why he considered that the existing roof was not in a condition which would justify patch repairs only. The letter included this paragraph:
‘It is quite clear that the roof is leaking at present and that the sub-tenant will not accept responsibility for the repair of the roof in its present condition. It is therefore in disrepair and as part of the dilapidations claim should be put into repair. I do not believe that the application of any compound will provide a suitable repair and that the only method of dealing with the roof would be to overclad.’
In his further response of 15th November 2004, Mr Hewitt said that ‘the roof suffers from an inherent deficiency and, as such, responsibility for changing this does not fall to my client’. The battle lines had now been drawn. E. CONDITION OF THE ROOF AND SUBSEQUENT WORKS[37]The parties’ experts are agreed that, as at 24th December 2004, when SH’s lease expired, the roof was in a state of disrepair. They are agreed that the following defects were apparent:
‘(a) Rainwater ingress adjacent to the valley gutter and gable end wall gutter, associated with the gutters not performing satisfactorily due to a blockage and build up of detritus. (b) Degradation and deterioration to roof lights with a general loss of translucency. (c) Defective seals to edges of the roof lights. (d) Areas of rainwater ingress internally, generally associated with the poor condition of roof lights and failure of the seals at the perimeter of roof lights. (e) Isolated cracked roofing sheets. (f) Corroded fixing bolts externally with brittle rubber washers.’
In summary, the principal problem areas were the roof lights and the gutters. There was no inherent problem with the roof sheets themselves, with just a few (estimated by Mr Hewitt to be about 20, the same figure as was in Mr Goldstone’s draft Schedule) being damaged and requiring replacement.[38]Subsequently, the overcladding to the roof was carried out at Carmel’s expense. SH accept that this overcladding work was a repair option open to Carmel but they do not say (unlike the tenants in one or two of the reported cases referred to above) that the work went beyond repair and constituted enhancement or betterment. However, they say that the patch repairs, which first featured in Mr Goldstone’s original Schedule, were a cheaper repair option which was reasonably and sensibly possible and ought therefore, in accordance with the principles noted in paragraph 9 above, to form the basis of the calculation of damages. In response, Carmel says that the patch repairs were not an appropriate method of repair in all the circumstances and/or were impracticable. I address that key issue in section F below. F. PATCH REPAIRS OR OVERCLADDING? F1 The Agreed Scope of the Works in 2004[39]Mr Goldstone made a detailed inspection of the roof on 5th February; Mr Hewitt made his detailed inspection of the roof shortly thereafter. Following these inspections, as set out in paragraphs 24 to 33 above, Mr Goldstone was of the view that, in order to put the roof in to proper repair and condition, all roof lights had to be replaced and other work was necessary to the valley gutters. Mr Hewitt subsequently agreed with that. In addition, both men were of the view that only a handful of the roof sheets themselves required to be replaced. Although, as I have pointed out, this solution was called ‘the patch repairs’ in the evidence, it obviously involved rather more than that. On the facts, therefore, I find that up to 9th August 2004, both Mr Goldstone and Mr Hewitt were generally agreed that the patch repairs, as opposed to a more radical solution, were sufficient to meet SH’s liability under the covenants in the lease.[40]That, so it seems to me, is an extremely important starting point for any investigation into the dispute as to the appropriate remedial work under the lease. Mr Goldstone had said publicly that the patch repairs were appropriate. From 5th February 2004, when he made his inspection, through the production of his original Schedule on 27th February, his exchanges with Mr Uzel between March and July 2004, through his production of his revised Schedule on 30th July, right up to when he sent it off to Mr Hewitt on 9th August, Mr Goldstone was of the opinion that the patch repairs identified in the draft Schedule were what was required to put the building into proper repair and condition (in accordance with the relevant covenants), and nothing else. He had also said expressly that he was not in favour of overroofing.[41]By 16th September 2004 Mr Goldstone had changed his position. There is, of course, nothing wrong with that; indeed, experts, if they are doing their job properly, should always be willing to review the information available to them and, if appropriate, to change their position in the light of that information. But, given the circumstances of this case, it is necessary for the court to examine in a little more detail why Mr Goldstone wrote to Mr Hewitt on 16th September, just five weeks after he had reiterated his patch repair recommendation, and without having undertaken any further inspection of the roof, to say that only replacement was justified in order to put the roof in to appropriate repair and condition in accordance with the terms of the lease. F2 Why Did Mr Goldstone Change His Position?[42]The evidence, both written and oral, makes it clear that the most significant event in the summer months of 2004 was Mr Uzel’s decision in July to provide Metso with a new roof (paragraph 31 above). Mr Uzel told me that that was his decision based on his conversations with Metso. It was not a decision that he had discussed with Mr Goldstone or Mr Watson beforehand, and it was not a decision which was based on any pre-existing advice from either Mr Goldstone or Mr Watson; indeed, it could be said to be contrary to Mr Watson’s express advice, as well as being clearly contrary to Mr Goldstone’s draft Schedule of Dilapidations.[43]The decision to replace the roof was, of course, entirely sensible from a commercial perspective, given Metso’s continuing complaints about it and Carmel’s desire to enter into a new lease with them. It was also consistent with Mr Goldstone’s letter of 11th March (paragraphs 25 and 26 above) to the effect that, regardless of the position under the lease, a replacement roof was a sensible step. It was also consistent with Mr Watson’s evidence that an incoming tenant such as Metso might well insist, with a property of this age, on a new roof before they agreed to a full repairing covenant. But it is clear that it was a decision taken with the position of Metso firmly in mind, and with no consideration of the potentially different position under the terms of SH’s lease. When Mr Uzel made his decision, he hoped that he could get the cost of the work back from SH, but nobody (certainly not Mr Goldstone) had given him any advice to that effect.[44]For these reasons, it is impossible not to conclude on the facts that what happened was this: Mr Goldstone advised both Mr Uzel and SH that, under the terms of SH’s lease, the patch repairs were appropriate; Mr Uzel, for understandable commercial reasons, provided Metso with a new roof.; Mr Goldstone then had no real option but to alter his position and argue that a new roof, or certainly overroofing, was justified under the lease after all. Indeed, he explained in cross-examination his changed position by reference to his letter of 16th September 2004 and he appeared to admit that he had altered his view because of what he called ‘the subtenant’s demands’.[45]Mr Goldstone also suggested that he had changed his mind because of advice he had received from Options (the roofing contractors) about the practical difficulties of carrying out the patch repairs. His evidence as to the detail of that advice, and how and when it was given, was very vague. For the reasons set out above, it would have had to have been provided between 9th August 2004, when the second version of the patch repairs Schedule was sent out by Mr Goldstone to Mr Hewitt, and 16th September, when the letter referred to at paragraph 35 was sent to Mr Hewitt by Mr Goldstone. But there is no written record or note of any advice about the roof being given by Options to Mr Goldstone during that period; neither was Mr Goldstone able to say that any such advice was given orally within that period of about five weeks.[46]Indeed, on all the evidence, I consider that it was most unlikely that Options gave the advice suggested during this period. In particular:(a) Options were present during Mr Goldstone’s only detailed inspection on 5th February. That inspection led Mr Goldstone to conclude that the patch repairs were appropriate. It was clear that Options did not at that stage suggest that such works could not practicably be carried out.(b) On 9th August 2004 Options sent a quotation for the overcladding works to Mr Goldstone. They were not asked to and did not provide an alternative quotation for the patch repairs. Thus, it must be an appropriate inference to draw that Options would have had no reason at this stage to consider the question of patch repairs and would not therefore have needed to advise Mr Goldstone after 9th August about the alleged difficulties with such works.(c) On 6th September 2004 Options sent Mr Goldstone another quotation ‘to replace 58 roof lights to the existing roof’. On its face, this was a description of the principal element of the patch repairs, although it may have been that, at this stage, this work was envisaged as part of the overcladding. However, either way, this quotation makes no mention of any alleged impracticalities involved in doing the replacement work.[47]Perhaps most tellingly of all on this question, Mr Goldstone did not at any time seek to justify the overcladding solution to Mr Hewitt on the grounds of practicality, and he made no reference at all to any such advice having been given to him by Options, or by any other roofing contractors. Instead, as he accepted in cross-examination, his letter of 16th September sought to justify replacement because ‘the subtenant will not be prepared to sign a lease with a full repairing covenant’. He made the same point in his letter of 19th October. As I have already noted, he agreed that he was seeking to justify overcladding by reference not to the covenant but to Metso’s demands. Not only was that the application of the wrong criterion, it was also the best evidence that Options had not in fact given the advice he later suggested they had during this period. If they had given that advice, I consider that he would inevitably have referred to it in his correspondence. It would have been the best possible reason to justify his change of position.[48]For all those reasons, therefore, I do not accept the suggestion that Mr Goldstone’s change of mind between 9th August and 16th September was caused by advice from Options or other roofing contractors. The only relevant event during this period, as I have indicated, was Mr Uzel’s decision to provide Metso with a new roof, and I am in no doubt that that was the cause of Mr Goldstone’s change of position. F3 Patch Repairs or Overcladding[49]In summary, and for the reasons I have given, I find that:(a) Following his inspection, Mr Goldstone was of the same view as Mr Hewitt, namely that patch repairs were the appropriate works under SH’s lease;(b) Mr Goldstone changed his position because of Mr Uzel’s unilateral decision to provide Metso with the new roof they required, which had nothing to do with the terms of SH’s lease. However, even if Mr Goldstone’s explanation for his change of position was confused or erroneous, and he was simply trying to ‘back-fit’ Carmel’s decision to the terms of the covenant, it is still necessary for me to consider whether, in all the circumstances, patch repairs or the overcladding was the appropriate method of putting the roof in to the appropriate repair and condition pursuant to the terms of those covenants.[50]In my judgment, there is a strong case for concluding that the patch repairs were the most appropriate scheme under the terms of the covenants. That is because, for the reasons that I have already set out, it was the patch repairs which had been agreed as such by Mr Goldstone and Mr Hewitt. Both men confirmed that they had been involved in other jobs where similar sorts of patch repairs to roofs of this type and age had been successfully carried out; indeed, Mr Hewitt told me of a project in Milton Keynes that he had just completed where precisely this type of work had been completed. In addition, it must not be forgotten that Mr Watson was also of the view that the overroofing was not necessary and that patch repairs were appropriate (see paragraphs 27, 28 and 29 above). There was, therefore, unanimity, at least up to 9th August 2004, between Mr Goldstone and Mr Watson, the surveyors engaged by Carmel, and between them and Mr Hewitt, SH’s surveyor.[51]Furthermore, it should also be noted that the sort of patch repairs proposed were, as Mr Hewitt confirmed in cross-examination, very common in the industry. As he explained, the Green Book of the Advisory Council for Roofing contains details as to how such work should be properly carried out. In addition, the Health & Safety Executive produce their own specific methodology for replacing isolated roof sheets and roof lights. What, therefore, made this work, which is relatively common, unacceptable or inappropriate in this particular case?[52]Two rather different attacks on the patch repairs solution were made by Carmel. The first was the suggestion that such works were futile because of the history of the roof leaks and the condition of the roof, and that, as a consequence, the patch repairs, as Mr Kynoch put it, represented ‘flogging a tired old horse’. The second was the suggestion that such works were impracticable. I deal with each of those criticisms below.[53]I reject the suggestion that the patch repairs originally advocated by Mr Goldstone and maintained by Mr Hewitt were in some way futile because of the history and/or the condition of the roof. After all, Mr Goldstone had inspected the roof and concluded that, far from being futile, the patch repairs where what was necessary to put the roof into appropriate repair and condition. He did not suggest that at any time he received advice from Options, or indeed anyone else, that made him alter that view or persuaded him that the repairs were in some way futile; nor, it seems to me, could he have possibly done so, given that such matters were entirely for him, as Carmel’s surveyor, to assess and decide. He therefore plainly concluded that the patch repairs were appropriate and not futile.[54]Furthermore, if that were not enough, I should also note that this was not a case (unlike those cited in paragraph 10 above) where SH were arguing for a futile repair scheme to an element of the property that really needed to be replaced. On the contrary, the one element of the original roof that everybody was agreed had reached the end of its natural life was the roof lights. SH were not suggesting that the roof lights be the subject of futile repair; on their case, they would be replaced in their entirety. On the evidence, it seems to me that the roof lights were the principal source of the leaks in the past. Therefore, their proposed replacement was the opposite of futile; it was a critical step to prevent further leaks into the property. For all those reasons, therefore, I reject the futility argument; I simply do not accept that it is applicable on the facts.[55]The second attack was the suggestion that the patch repairs were impracticable. I deal with each of the relevant criticisms below.(i) Replacing Roof Lights It was suggested that, if the roof lights were replaced, this would damage the existing seals. That suggestion was not controversial because it explained why the new roof lights would have to be sealed into position with new sealant; that was part of the proposed scope of the patch repairs. Mr Goldstone was obviously aware of the need for such sealing once the new roof lights had been installed when he suggested their replacement in the first place; it was simply a feature of the patch repairs scheme. As Mr Hewitt observed, and I accept, roof lights often have a shorter life than the surrounding roof sheets and require replacement within an existing roof. Such work is quite common. Particular care has to be taken when the roof lights are sealed into position, but that does not render such work impracticable in any way.(ii) Disturbance of Roof Sheets Arising out of Replacement of Roof Lights The patch repairs involved replacing the roof lights in their entirety. As Mr Hewitt agreed, that would involve the possibility of disturbance of some of the surrounding roof sheets. That possible disturbance would bring with it the possible risk of damage. Again, it seems to me that that was inherent in the replacement process and was therefore again something which Mr Goldstone would have had well in mind when he originally concluded that the patch repairs was the appropriate scheme. He did not require to be told that this somehow rendered the scheme impracticable. No building operation to an existing building can be entirely risk-free; the question is whether the risk of disturbance to the existing roof lights was unjustified. There was no evidence that it was. It was again simply an inherent feature of a type of remedial works which are commonly carried out. The possible damage caused by possible disturbance does not begin to justify overcladding instead of the patch repairs, or render the latter not reasonably or sensibly possible.(iii) Bolts and Washers The evidence was that generally the bolts were protected adequately by the liquid coating that had been applied in 1993. It was also clear that some bolts had corroded and some washers had become brittle. That is a common enough problem on a roof of this age and, according to Mr Hewitt, it was quite capable of being addressed on the patch repair basis. Again, I am bound to note that this was also Mr Goldstone’s original view. Again it seems to me that replacement was not a question of practicability, because, if it had been, he would have pointed that out in his original Schedule. Mr Hewitt agreed that, because some bolts were corroded, they would need to be replaced, but he said that that was a relatively straightforward operation. The particular areas of the roof in question would be accessed by workmen on access gantries. He rejected the criticism that it would be dangerous for those below. He said it was a straightforward matter of coordination with the tenant to ensure that no one was beneath the areas of the roof that were actually being worked on. I accept Mr Hewitt’s evidence in relation to that point. (iv). Asbestos Roof Sheets It was clear that the removal of the 20 or so roof sheets that were damaged would be difficult because they contained asbestos. Again, this was known to Mr Goldstone when he advocated their replacement in February 2004. In any event, there are hundreds of roofs all over the country with these asbestos roof sheets and the procedures for handling them and disposing of them as licensed waste were, according to Mr Hewitt, well-known and entirely normal. Again, I accept that evidence and I reject the suggestion that the nature of the roof sheets created some sort of impracticality for the purposes of the patch repair solution.(iv) Health & Safety Considerations Generally There was some cross-examination on the basis that the patch repairs were somehow dangerous or difficult from a Health & Safety point of view. I make two general points about that. First, general Health & Safety criticisms of a particular remedial scheme can often be made, but, in my judgment, for such criticisms to be sustainable there has to be a detailed critique of the works that were required and the particular Health & Safety risks that might be created by those works. I do not believe that there was such evidence in the present case. Secondly, since both the patch repairs and the overcladding here were schemes involving works to and on a roof, they both raised particular Health & Safety issues. The real point was whether the patch repairs were somehow more dangerous or involved an unacceptable level of risk as compared to the overcladding. I conclude that there was no evidence to suggest that they were.[56]Both schemes involved risks to the occupants below which would have had to have been addressed by careful project management, as Mr Hewitt explained. Both schemes required proper safety measures, whether by way of netting or harnesses and inertia reels. Neither scheme allowed access from below because of the suspended ceilings installed by Metso. There was nothing to say that one scheme was any more dangerous or any more difficult from a Health & Safety perspective than the other. F4 Summary[57]For all these reasons, I consider that neither the ‘futility’ nor the ‘impracticability’ arguments advanced by Carmel are sustainable. They do not render the patch repair scheme, which Mr Goldstone originally advocated, impracticable or unjustified. On the contrary, the patch repairs, including the replacement of all the roof lights and the work to the gutters, were the appropriate repair works, given the particular disrepair to this roof and the terms of the covenants. The overcladding of the roof was the result of a decision taken by Carmel without any advice to the effect that the cost of such work was recoverable from SH. For all the reasons given, I conclude that it was not.[58]I should also say by way of summary that this conclusion was the same as that reached by Mr Hewitt, Mr Watson and Mr Goldstone, at least up to 9th August 2004. It was therefore supported by the vast majority of the oral expert evidence that I heard during the trial. Although Mr Kynoch properly pointed out that others, including the various roofing contractors, Rentokil, Options and Icon (the contractors to whom Mr Hewitt referred), and Mr Greenyer, the surveyor acting for Metso, all advocated re-roofing of some sort, that was a view which in each case:(a) was not based on a consideration of the terms of SH’s covenants;(b) was not tested in cross-examination;(c) was based, on the part of the contractors at least, on a major degree of self-interest, because they would be paid more for overroofing than for carrying out patch repairs. Thus, I conclude that the weight of the evidence, particularly that adduced orally in court, was firmly on the side of the patch repairs.[59]For the avoidance of doubt and by reference to the principles outlined in section C above, I conclude that:(a) The patch repair option was prima facie an appropriate method for putting the roof in to the state of repair and condition required by the covenants (the principle in paragraph 8 above). In other words, the fact that the covenants referred to repair and condition did not somehow render the patch repairs inappropriate or inadequate.(b) The patch repair option was, on the evidence, reasonably and sensibly possible (the principle in paragraph 9(b) above). Mr Hewitt said that he was ‘confident that they could be done’ and I accept his evidence.(c) In reaching the conclusions at (a) and (b) above, I do not consider that SH were seeking to rely on their breaches of covenant in order to lower the relevant standard of repair (the principle in 9(d) above), nor did they lower the relevant standard.(d) The patch repairs in this case were far from futile (the principle in paragraph 10 above). They addressed the problems with the roof and included the replacement of a major element of that roof, namely the roof lights.(e) I have taken into account Metso’s request for a new roof covering (the principle in paragraph 11 above), but it was not based on a consideration of the terms of the lease. It is therefore outweighed by the evidence of the surveyors that I heard, all of whom at one time or another considered that the patch repairs were the appropriate method of dealing with the problems with the roof in accordance with the terms of the covenants. G. QUANTUM[60]The parties are agreed that the figure for the patch repairs is £24,462.44. This includes the claims for fees and so on, and also allows for a deduction in accordance with the first limb of Section 18 of the Landlord and Tenant Act 1927. Prima facie, Carmel’s claim is in this sum. For this reason, Mr Kynoch’s criticisms of Mr Hewitt’s calculations are now nothing to the point (because the appropriate figure has been agreed). Furthermore, as I observed during argument, Carmel did not offer an alternative figure for the patch repairs in any event.[61]However, SH have a further argument which they say reduces the correct figure to £18,278.44 by stripping out the work involved in the replacement of the roof lights. This argument relies on the second limb of Section 18 of the 1927 Act, which provides that:
‘…and in particular no damage shall be recovered for a breach of any such covenant or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the tenancy have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement.’
In essence, SH argue that the overcladding superseded the replacement of the roof lights and that, as a result of Section 18, the cost of the replacement works should be deducted from the sum otherwise due.[62]The second limb of Section 18 has been explained on the basis that: ‘Before it was enacted, a landlord could recover damages from his tenant for breach of a covenant to deliver up in repair, notwithstanding that the buildings were going to be pulled down or structurally altered in such a way as to make it useless to perform the covenant. The enforcement of the covenant in such circumstances was regarded as an unjust enrichment of the lessor and the legislature in Section 18(1) set itself to remove the injustice’: see Salisbury v Gilmore [1932] 2 KB 38.[63]The authorities suggest that the term ‘structural alterations’ is to be given a wide interpretation (see Firle Investments Limited v Datapoint Internal Limited [2000] EWHC 105 TCC and Pickering v Phillimore [unreported] 10th May 1976). However, these and other authorities all proceed on the (not unreasonable) assumption that the structural alterations are entirely different from the repairs covered by the covenants and that they are not (as would be the case if Mr Healey was right in his submissions in this case), one and the same.[64]In my judgment, this is the principal reason why the situation here is a long way from the sort of position with which the second limb of Section 18 was designed to deal. Here, there was a straight fight between two different remedial schemes, both of which were described by the experts as repairs. I have decided that the lesser scheme was appropriate because it was reasonably and sensibly possible. But the mere fact that Carmel undertook a more extensive and expensive repair scheme does not, in my view, trigger the second limb of Section 18. I derive support, for what I hope is a common sense analysis, from various observations of Arden LJ in Latimer and Another v Carney & Ors [2006] EWCA Civ 1417, and in particular paragraph 51 where she said:
‘On the other hand, it does not seem to me that the landlords should necessarily be deprived of their remedy simply because they performed the repairs to a higher standard than the outgoing tenants were required to do.’
[65]Accordingly, I conclude that there should be no deduction by way of the second limb of Section 18. I do not consider that this is a Section 18 case. There is no injustice to SH in my conclusion that they were liable for the lesser, rather than for the more extensive repair scheme, without further deduction. The work done by Carmel was work of repair and, as Mr Healey fairly accepted, it did not go beyond that. It seems to me that this, therefore, takes it outside the meaning and intent of Section 18. Thus, the work actually carried out does not supercede the patch repair scheme.[66]In addition, to the extent that it is relevant, I am doubtful whether the overcladding could be described as a structural alteration. As I have already noted, the experts referred to it as a repair. Moreover, it was suggested that it might be a structural alteration because it imposed a greater loading on the steel frame. However, most repair work involves an increase, to a greater or a lesser extent, to the loading imposed on the frame of a building. If that was the only test for a structural alteration, then it might be very difficult to identify any work of repair that was not also a structural alteration. Again, that is plainly not what the second limb of Section 18 was designed to address. On that ground as well, I consider that the Section 18 arguments fail.[67]For these reasons, I reject SH’s submission that the second limb of Section 18 is relevant. I conclude that the patch repairs were the appropriate repair scheme, without deduction, in the sum £24,462.44. That will be the amount of Carmel’s damages. I will deal separately, but not this afternoon, with all remaining questions of interest and costs. ----------------------------------------