QUIET ENJOYMENT: REPAIRING COVENANT

Repairing covenant - covenant of quiet enjoyment landlord carrying out repairs necessary under repairing covenant - disruption to tenant's business - whether breach of covenant for quiet enjoyment where all reasonable steps taken to minimise disruption - whether all possible steps required to be taken - appeal allowed

Goldmile Properties Ltd v Lechouritis: CA (Lords Justice Sedley and Rix): 29 January 2003

The appellant was the tenant, and the respondent was the landlord, under a 22-year business tenancy of the ground floor and basement of a seven-storey building.

The lease contained a landlord's repairing covenant, pursuant to which the landlord brought in contractors to clean the external walls and windows of the building and to repair the seals between the frames and the walls.

The work required scaffolding and sheeting to be fixed to the outside of the buildings.

During the course of the works, the tenant's restaurant business was seriously disrupted - from the outside, the restaurant appeared to be closed, and inside it became dingy and was frequently contaminated with building dust.

The tenant brought a claim against the landlord for damages for breach of the covenant of quiet enjoyment.

The district judge found that the covenant had not been breached because the works had been necessary under the repairing covenant, and the landlord had taken all reasonable steps to minimise the potential risks of disruption arising from them.

That decision was reversed on appeal, the appeal judge holding that the covenant would be breached unless all possible steps had been taken or the works would be impossible without some nuisance.

The landlord appealed.

Nicholas Dowding QC and Edward Peters (instructed by Guillaumes, Weybridge) for the appellant; David Berkeley QC and Jonathan Rule (instructed by Gorvin Smith Fort, Stockport) for the respondent.

Held: The appeal was allowed.

It was possible for the covenant of quiet enjoyment to be breached by the execution of structural repairs and maintenance - Southwark London Borough Council v Tanner [1999] 3 EGLR 35 applied.

However, the obligation to keep the building in repair had to coexist with the tenant's entitlement to quiet enjoyment of the premises.

That pointed to a threshold, for disturbance by repairs, of all reasonable precautions, rather than all possible precautions.

The repairing covenant was for the tenant's benefit as well as that of the landlord, and it was not beneficial for the tenant to be running a restaurant in a dilapidated building any more than it was in the landlord's interest to own the reversion of one.

It would have been apparent to the parties, when they signed the lease, that the tenant's enjoyment of the premises might be made temporarily less quiet and less profitable by the carrying out of structural repairs, and that the landlord's rights and obligations were neither to ride roughshod over the tenant's entitlements nor to be unreasonably impeded by them: Lyttelton Times Co Ltd v Warners Ltd [1907] AC 476, Saner v Bilton (No 1) (1878) LR 7 ChD 815, and Owen v Gadd [1956] 2 QB 99 considered.

Since the opinion of the trial judge, that the landlord had taken all reasonable steps, was not contested, the appeal should be allowed.

NEGLIGENCE VALUATION

Allegation of negligent undervaluation of mortgage security - conflict of expert evidence of net lettable area - judge finding that defendant's valuation within permissible non-negligent range - materiality of method used to arrive at valuation - claim dismissed

Lloyds TSB Bank plc v Edward Symmons & Partners: Technology and Construction Court (Judge Richard Seymour QC):

12 March 2003

The claimant bank held charges over two properties.

One of these (the centre) was a former factory, standing on a 3.6 acre site near Gosport, that had been converted into units for letting to small and medium-sized industrial undertakings.

In July 1998, the bank engaged the defendant (the firm) to value the centre with a view to sale.

In September 1998, at a time when the centre accommodated some 60 tenants on three floors, the firm reported that, operating as a business centre, the property was worth 525,000.

In reliance on the report, the bank sold and transferred the benefit of its charge to S Ltd at the price stated.

The bank subsequently brought proceedings against the firm, alleging that it had negligently failed to arrive at the true value, which was 1.1 million.

The main allegation was that the firm had ignored, or left out of account, certain lettable areas capable of producing an annual income in the region of 56,600.

At the close of the trial, the judge, having taken a critical view of the bank's expert evidence, was satisfied that the most reliable figures were the original valuation and a value of 540,000 suggested by an expert witness called by the firm.

Stephen Lennard (instructed by Eversheds) for the claimant; Timothy Harry (instructed by Williams Holden Cooklin Gibbons) for the defendant.

Held: The claim was dismissed.

To establish professional negligence against the firm, the claimant first had to demonstrate that the valuation fell outside the appropriate range of permissible non-negligent valuations.

Only if the claimant succeeded at that stage could the scope of the enquiry be broadened to consider whether the firm had in fact been negligent.

At that stage, the evidential burden fell on the defendant to show that it had exercised appropriate skill and care: see, generally, per Lord Justice Buxton in Merivale Moore plc v Strutt & Parker [1999]

1 EGLR 171 at pp176-177.

Since the claimant had failed at the first stage, it was not strictly necessary to consider whether the firm had gone about its task in a negligent manner.

However, on the evidence before the court, the claimant's allegations had no substance.

Once it had been decided that a particular building contained too much space, the focus inevitably shifted from the theoretical net lettable area to an identification of how much of it was likely to be let.

Identification of the precise extent of the excess of available space over that which was actually likely to be let was a purely academic exercise and was of no relevance to valuation.