Irontrain Investments Ltd v Ansari

LORD JUSTICE JONATHAN PARKER: This is an appeal by Mr Salim Ansari, the defendant in the action, against an order made by His Honour Judge Mackie QC, in the Central London County Court on 24 February 2005. By his order, the judge entered judgment for Irontrain Investments Ltd, the claimant in the action and the respondent to the appeal, for £33,861.81 plus interest of £11,523.85 making a total of £45,385.66. The judge refused permission to appeal.

The respondent is the registered proprietor of the leasehold title to a building comprising shops on the ground floor and six flats on the upper floors and known as Merton Mansions, 57-59 Tooting High Street, Tooting Broadway, London SW17. Three of the flats are let on long leases; the remaining three flats are let by the respondent on short term tenancies at a rack rent.

Mr Ansari is the lessee of Flat 3 under a lease ("the Lease") dated 4 January 1985 and granted to him by Pollway Nominees Ltd, the respondent's predecessor in title, for a term expiring in December 2006. Flat 3 is on the second floor of the building. Mr Ansari has never himself occupied Flat 3. It appears that he owns a number of properties which he lets out on short term tenancies.

Immediately below Flat 3 is Flat 1 which is one of the three flats in the building which the respondent lets on short term tenancies.

Between February 1999 and January 2001 Flat 1 suffered serious damage as a result (as the judge found) of water leaking from Flat 3. There were two separate leaks. The first ("the first leak") was caused by a leaking waste pipe from a shower which had been installed in Flat 3 by Mr Ansari's plumber, Mr Moore, immediately above the rear bedroom in Flat 1. The second ("the second leak") was caused by a leaking pipe which had (according to the respondent's surveyor, Mr Darwall-Smith of Messrs Sandrove Brahams & Associates) been laid immediately beneath the floorboards of Flat 3, with the result that downward pressure on the floorboards caused to it fracture. The second leak caused water to leak into the area of the kitchen and boiler room in the centre of Flat 1.

As at February 1999 Flat 1 was let by the respondents on an assured shorthold tenancy at a monthly rent of around £1,200. In February 1999 the tenants of Flat 1 complained to the respondent's managing agents, Rand Management, that because of a leak of water from Flat 3 (i.e. reference to the first leak) the rear bedroom in the flat had become uninhabitable, and they thenceforth withheld £500 or thereabouts from their monthly rent. They moved out in September 1999, but the respondent did not re-let the flat until October 2001. In the meantime, the respondent had incurred expenditure in putting Flat 1 into a lettable condition.

In the action, the respondent claims damages against Mr Ansari in respect of loss and damage allegedly suffered by the respondent by reason of the damage caused to Flat 1 by the two leaks. The claim is pleaded on the alternative bases of breach of contract (that is to say, breach of a covenant in the lease) and in tort (that is to say, in nuisance/ negligence).

As to the claim in contract, the covenant which is alleged to have been breached is the covenant in clause 4 (i) of the lease, whereby the respondent covenanted with the lessor "and for the benefit of the owners and lessees from time to time during the period of the term hereby granted of the other flats comprised in the Mansion" to "repair uphold and keep the demised premises" - that is the flat - "as to afford all necessary support shelter protection and access to the part of the Mansion other than the flat".

As to the claim in tort, it is alleged that Mr Ansari, his servants or agents, were negligent in the following respects (I read from the particulars of negligence pleaded under paragraphs 19A and 19B of the Re-amended Particulars of Claim:

As to quantum, the respondent claims £3,626,12 in respect of the deductions which the tenants of Flat 1 made from their rental payments in the period from February to September 1999, plus £33,150 in respect of lost rent during the period from September 1999 until Flat 1 was re-let in October 2001. This latter claim is put on the basis that the damage caused to Flat 1 by the leaks was such that Flat 1 could not be put into a lettable condition until October 2001. The respondent also claims special damages in respect of expenditure incurred in works to Flat 1 totalling £7,196.25 and loss adjuster's fees of £132.19. The total sum claimed by way of damages is thus £43,104.56, together with interest.

By his Defence, Mr Ansari denies that he has breached the covenant in clause 4 (i) of the lease, and he denies that he has breached his common Law duty of care. As to the quantum of damages, should liability be established, he relies on section 18 (1) of the Landlord and Tenant Act 1927, contending that any damages recoverable by the respondent are limited to the diminution in value of its reversionary interest in Flat 3 and that in the instant case there was no such diminution.

The judge found for the respondent on each of the alternative bases of claim. He held that Mr Ansari was in breach of the covenant in clause 4 (i) of the lease, and he held that he had breached his common law duty of care towards the respondent as owner of Flat 1 in most (but, it appears, not all) of the respects pleaded in the particulars quoted earlier.

As to quantum of damage, the judge accepted that the various heads of damage were recoverable, but he reduced the figures in certain respects. In the result, his total award of £33,861.31p (before adding interest) comprised £25,103.50 in respect of loss of rent and £8,758.50 in respect of the remaining heads of damage.

Mr Ansari now appeals with permission granted (save in one minor respect) by Lloyd LJ on the papers on 23 August 2005. There is no cross-appeal.

I can now turn to the facts in more detail. As already mentioned, the tenants of Flat 1 complained of the first leak in about February 1999 and thenceforth withheld some £500 from each payment of monthly rent. Mr Darwall-Smith later advised the respondent that this deduction was a reasonable reduction in all the circumstances.

On 19 April 1999 Mr Saul Cohen of Rand Management telephoned Mr Darwall-Smith and informed him of the tenant's complaint of the leak, asking him to carry out an inspection and to get in touch with the appellant. Mr Darwall-Smith duly telephoned Mr Ansari that day and told him of the position. On the following day, 20 April 1999, Mr Darwall-Smith wrote to Mr Ansari referring to their telephone conversation the previous day and asking him to deal with the matter urgently. According to an internal memorandum of Rand Management dated 29 April 1999, Mr Cohen also spoke to Mr Ansari who said the water penetration in Flat 1 was not caused by any leak in Flat 3 but was "coming in from the side".

On 14 June 1999 Mr Cohen asked Mr Darwall-Smith to carry out another inspection. Mr Darw ll-Smith did so on the following day. He inspected both Flat 1 and Flat 3. He provided a written report to Rand Management on 18 June 1999. In that report he records that he was told by one of the tenants of Flat 1 that "this problem has been ongoing for some months", and that it was thought that water was coming from the bathroom in Flat 3. Mr Darwall-Smith then went up to Flat 3 and found that the timber joists underneath a shower which had been installed in Flat 3 were wet to the touch. He records that he was informed by the occupier of Flat 3 that "quite a lot of work was carried out approximately two months ago on the shower unit and the pipework beneath". Mr Darwall-Smith concluded that the leak was coming from a pipe below the shower unit itself or below an adjacent hand wash basin. The report continues:

On 11 October 1999 Miss Wahr of Rand Management telephoned Mr Darwall-Smith to report that the leak had recurred. In his witness statement Mr Darwall-Smith says:

In his witness statement Mr Darwall-Smith goes on to say that in May 2000 Miss Wahr informed him that water was still leaking into the rear bedroom (that is to say, the first leak was continuing) and that a further leak had started in the middle of Flat 1 (that is to say, the second leak). Mr Darwall-Smith says that he was able to get hold of Mr Ansari who said he had someone carrying out work in Flat 3. Mr Darwall-Smith goes on to refer to the efforts made thereafter by himself and Miss Wahr "to get some kind of assurance from Mr Ansari that he would make good on his frequent promises to sort things out".

Mr Darwall-Smith's evidence in this respect is corroborated by computer records produced by Mr Schloime Rand, of Rand Management which record that Mr Darwall-Smith managed to speak to Mr Ansari in May 2000 and that Mr Ansari said work was being done to Flat 3. The fact that Mr Ansari knew of the complaint about the second leak in May 2000 or thereabouts is also corroborated by a letter dated 9 February 2001 from CMB Insurance Services Ltd, acting for Mr Ansari, to Messrs Ingram Winter Green, the respondent's solicitors.

In a letter dated 26 November 2001 to the respondent's solicitors, Mr Darwall-Smith reported that despite numerous telephone calls to Mr Ansari, who had assured Mr Darwall-Smith he would give the matter his urgent attention, Mr Darwall-Smith had been unable to gain access to Flat 3 to investigate the cause of the second leak. He went on to report that in December 2000 Rand Management advised him that the water penetration into the middle of Flat 1 was still continuing. He reported that he had again contacted Mr Ansari who had advised him that he had been to Flat 3 and could find no leak at all. Mr Darwall-Smith records what happened next as follows:

I turn to the evidence before the judge. For the respondent, the judge heard evidence of fact from Mr Darwall-Smith, and Mr Schloime Rand (who produced Rand Mnagement's computer records). Mr Ansari gave evidence of fact himself and he also called Mr Moore, his plumber, as a witness of fact. Also before the judge was an expert report by Mr Burbridge, a chartered surveyor instructed by Mr Ansari, dated 19 July 2003 (that is to say, more than two years after the events in question).

Finally Mr Malone, the single joint expert appointed by the court, provided no less than five expert reports asking numerous and, to a certain extent, repetitive questions formulated, I would presume, by the solicitors on each side. In general terms, Mr Malone agreed with Mr Darwall-Smith that the damage to Flat 1 was caused by the leaks.

I turn next to the judge's judgment. In paragraph 22 of his judgment the judge concluded that he should rely mainly on the testimony of those who were in the best position to observe what happened (that is to say, Mr Darwall-Smith, Mr Ansari and Mr Moore - Mr Rand's evidence being essentially non-controversial). In paragraph 23 of his judgment, the judge described Mr Darwall-Smith as "an entirely reliable and professional witness". By contrast, he found the evidence of Mr Ansari and of Mr Moore to be less than satisfactory. In paragraph 26 of his judgment, the judge said:

As to the claim based on breach of covenant in clause 4 (i) of the lease, he concluded that the events in issue fell "plumb within" the covenant, saying this (in paragraph 29 of his judgment):

Turning to the claim in tort, the judge addressed the claim in negligence (on the basis, as counsel for the respondent had submitted and as is conceded in this court, the existence of a common law duty of care renders it unnecessary to establish the tort of nuisance). As to the claim in negligence, the judge said in his judgment (paragraphs 32 and 33):

The judge then turned to the quantum of damages.

After making certain reductions to the claims in respect of expenditure incurred, the judge turned to the claim for loss of rent. In paragraph 40 of his judgment he addressed the argument based on section 18 (1) of the 1927 Act, concluding that -

The judge then turned to an argument advanced by counsel for the appellant that Flat 1 could have been re-let prior to October 2001 for a rent equal to two-thirds of the rent eventually obtained. Having considered the evidence in support of that submission, he rejected it, and it is not a contention that has been advanced in this court.

The judge then went on to consider Mr Ansari's contention that the respondent had failed to mitigate its damage, accepting that contention in relation to one period. He then addressed, and rejected, a submission by counsel for Mr Ansari to the effect that a discount should be applied to reflect the existence of other contributory causes of the damage. In paragraphs 47 and 48 of his judgment he addressed that submission, saying:

Finally, the judge addressed the submission of counsel for Mr Ansari that he should discount the sum claimed for loss of rent from September 1999 to October 2001 on the basis that what the respondent had lost was the chance to let the flat at the rent eventually obtained. The judge accepted that submission and allowed a 15 per cent discount from the sum claimed. As I have said, there is no cross-appeal.

I turn next to the grounds of appeal. As to the claim for damages for breach of covenant, Mr Ansari contends (1) that the matters complained of do not fall within the terms of the covenant in clause 4 (i) of the lease; alternatively, (2) that in any event the respondent is not entitled to recover damages for breach of that covenant otherwise than in its capacity as reversioner of Flat 3; and (3) that such damages are limited by section 18 (1) of the 1927 Act to the diminution in the value of its reversionary interest in Flat 3 (that is to say, on the facts of the instant case, nil).

As to the claim in tort, it is contended that the judge erred in holding that the respondent "could effectively circumvent the rule that only the party in possession can maintain a claim in nuisance by framing its claim in negligence for the period that its tenant were in possession of Flat 1" (that is to say from February to September 1999).

It is to be noted that the grounds of appeal contain no express challenge to the judge's findings of breaches by Mr Ansari of his common law duty of care. However, in argument, Mr Adrian Davis (for Mr Ansari, he also appeared before the judge) has challenged those findings to the extent that he submits that Mr Ansari was not given proper or sufficient notice of the leaks (and particularly the second leak), and that in consequence he ought not to have been held to be in beach of his common law duty of care.

As to quantum, it is contended that the judge found against the weight of the evidence in awarding special damage under one head of claim in an amount which exceeded the sums recommended in the reports of Mr Malone, the single joint expert; and in finding that (save in one respect) the respondent had not failed to mitigate its loss. The alleged failure to mitigate has not been pursued in argument and, in any event, I can see no basis for such a contention. In argument it has also been contended by Mr Davies that a further head of special damage which the judge allowed (that is to say, the charge made by the respondent's loss adjuster in the sum of £132.19) is too remote and should not have been allowed.

I turn first to the arguments on the negligence claim, since if the appeal is unsuccessful in relation to that claim it will become unnecessary for us to consider the claim for damages for breach of covenant and the effect, if any, of section 18 (1) of the 1927 Act.

As I indicated earlier, Mr Davies' sole contention in relation to liability in tort is that Mr Ansari was not given sufficient notice of the leaks to engage his common law duty of care. Mr Davies submits that it was not enough for Mr Ansari merely to be told, as patently he was told, that water was leaking through the ceiling of Flat 1 since in such circumstances it was open to him reasonably to conclude that the cause of the leak was something other than defective pipework in Flat 3 for which he was responsible. Mr Davies points to references in the documentation to other possible causes of the leaks.

As to damages which the judge awarded, Mr Davies submits, first, that as a matter of law only the tenants of Flat 1 could maintain a claim for damages for negligence in respect of the period during which they remained as tenants of Flat 1 (that is to say, February to September 1999). He submits that the decision of this court in Ehmler v Hall [1993] 1 EGLR 137 on which Mr Norman Joss, for the respondent, relies for the contrary proposition is distinguishable from the instant case.

In Ehmler v Hall the defendant negligently crashed his van into a showroom owned by the claimants, rendering the showroom unusable for some weeks. At the material time the showroom was let to a third party tenant for term which had some eight years still to run. Under the lease the tenant covenanted to pay a reserved rent of £26,000 per annum plus the sum incurred by the lessor in maintaining insurance against (among other things) the risk of impact by motor vehicles. By clause 6 (3) of the lease, the tenant was relieved of his obligation to pay the reserved rent so long as the premises were rendered unfit for use by reason of an insured risk. In consequence of the operation of clause 6 (3), the claimant suffered a loss of rent of some £4,300. The claimants sought to recover their loss by way of an action for damages for negligence against the defendant. The defendant admitted negligence but contended that notwithstanding that he would (as he admitted) have been liable to the tenant for rent payable while the showroom was unusable and rent continued to be payable by the tenant during that period, nevertheless the claimants were not entitled to recover for loss of rent during that period since they had only a reversionary interest in the showroom. The judge at first instances upheld the claimant's claim.

In the Court of Appeal the leading judgment was given by Nolan LJ, with whom Kennedy LJ and Parker LJ agreed. Nolan LJ concluded that the general principle of common law to the effect that a reversioner can recover only in respect of damages to his reversionary interest afforded no support for the defendant's argument in the case before him, pointing out that in any event the general rule was not a rule of universal applicability. He also rejected an argument advanced on behalf of the defendant that the claimant's loss of rent was a pure economic loss and as such not recoverable in an action in common law negligence. The defendant's appeal was accordingly dismissed.

Mr Davies submits that the distinguishing factor in the instant case is that in the instant case there was no provision in the tenancy agreement relating to Flat 1 which entitled the tenants to withhold rent on account of the condition of the flat. He submits that, absent such a provision, in allowing rent to be withheld the respondent was, in effect, committing an act of bounty towards the tenants and the respondent was, in that respect, responsible for the loss which it had thereby suffered. He further submits that such an act of bounty could not be relied upon by Mr Ansari in an action brought against him by the tenants.

Secondly Mr Davies makes submissions as to the various heads of special damage. He submits that the judge ought not to have allowed the loss adjuster's fee (in the sum of £132.19) since it is too remote; and that the claim in respect of expenditure on works to Flat 1 ought to be further reduced or disallowed altogether on the footing that the amount awarded exceeds the figures recommended by Mr Malone. He submits that there is no sufficient evidence to support any reward under this head.

In this respect, there are two elements of the claim. The first is a charge made by Surepin Ltd which related to work on the rear bedroom of the flat. The invoice of Surepin was in the sum of £1,821.25, and the judge reduced that sum to £1,200. My Lord, Lord Justice Lloyd, refused permission to appeal in relation to that head of damage. I would, for my part, confirm that refusal. Accordingly the submissions made by Mr Davies in relation to the repair costs relate rather to costs representing charges made by a company called Freeman Properties Ltd and a gentleman called Mr Gross in respect of which we have seen invoices totalling £5,375. That claim was reduced by the judge in paragraph 36 of his judgment to £4,800. Mr Davis submits that it should be reduced further or disallowed altogether on the basis of lack of evidence.

Mr Joss, making his submissions in relation to liability for negligence, points out that the judge, who had seen and heard the witnesses, found that Mr Ansari had breached his duty of care in a number of respects. He submits that it is clear on the evidence that Mr Ansari had ample and sufficient notice of both leaks and that it was up to him, having been put on notice in those respects, to remedy the leaks and to do so promptly. Mr Joss submits that Ehmler v Hall cannot be distinguished from the instant case and that it is direct authority for the proposition that the respondent is entitled to recover its loss of rent during the period from February to September 1999 when the tenant remained in occupation of Flat 1.

As to the special damages claims, Mr Davies submits that there are no grounds for this court to interfere with the awards the judge made.

My conclusion in relation to the negligence claim is as follows. In the first place, I reject Mr Davies' submission that Mr Ansari was not given proper of sufficient notice of the leaks to engage his common law duty of care. In my judgment, it was plainly enough for him to be told that water was coming through the ceiling of Flat 1. Once he had been told that, it was for him to establish the cause of the leak and, if it was his responsibility to do so (which it plainly was in the instant case) to remedy it. In those circumstances the judge was, in my judgment, plainly entitled to conclude that the appellant had breached his common law duty "to do that which is reasonable in all the circumstances ..... to prevent or minimise the known risk of damage or injury to one's neighbour or to his property" (I quote from the judgment of Lord Justice Megaw in Leakey v The National Trust [1980] QB 485, 524).

I turn to the issues as to the quantum of damages recoverable by the respondent for Mr Ansari's negligence. The first issue is as to the respondent's entitlement to recover for loss of rent withheld by the tenants of Flat 1 while they remained in occupation. In my judgment, Ehmler v Hall is indistinguishable from the instant case, and the reasoning of Nolan LJ in that case accordingly applies equally to the respondent's claim to recover the amount of rent withheld by the tenants of Flat 1 during the period from February to September 1999. The fact that in the instant case there was no provision comparable to clause 6 (3) of the lease in Ehmler v Hall is, in my judgment, nothing to the point.

Mr Darwall-Smith, as I pointed out earlier, had advised the respondent that the deduction was a reasonable one in the circumstances and, faced with that advice, it was, in my judgment, eminently reasonable for the respondent to sue Mr Ansari for recovery of the rent deducted rather than requiring the tenants to comply with their contractual obligations. In any event, had the tenants been required by the respondent to pay the rent in full they would themselves have had a cause of action for recovery against the appellant. Nor could there be any question of double recovery from the appellant; the court would not allow that.

In my judgment, the decision of this court in Ehmler v Hall is decisive of the point in the respondent's favour. As I have indicated, no issue is taken by the appellant in relation to the judge's discounted award of damages for loss of rent during the period from September 1999 until Flat 1 was re-let in October 2001.

Accordingly, and subject only to considering the claims for special damages in respect of costs of repair works incurred by the respondent, I conclude that the judge's findings of negligence and his award of damages based upon those findings should be upheld. In the light of that conclusion, it is unnecessary for me to go on to consider the alternative basis of the claim, namely the claim for damages for breach of the covenant in clause 4 (i) of the lease.

I turn, then, to the various heads of special damage. I turn first to the loss adjuster's fee of £132.19. The judge allowed this claim, saying (in paragraph 37 of his judgment) that it seemed to him that it would not have been incurred but for the appellant's negligence and that it should be recoverable in full. Mr Davies submits that the liability for this expenditure is not attributable to any wrong committed by the appellant. As I understand the position, this fee was incurred by the respondent in the course of an unsuccessful attempt on its part to persuade its superior landlord to make a claim under the superior landlord's insurance policy. In the circumstances this head of special damage seems to me to be too remote, and I would disallow it.

The only other item of special damage in respect of which there is a live issue on this appeal relates to the costs of Freeman Properties and Mr Gross in carrying out further repair work to Flat 1, the claim being for the sum of £5,375. As I noted earlier, in paragraph 36 of his judgment the judge reduced that aggregate figure to £4,800. He did not give detailed reasons for doing so, concluding that the reduction was justified by the need to do broad justice in the case. In relation to this head of claim Mr Malone found himself very considerably hampered by what he regarded as insufficiently detailed invoices submitted by both Freeman Properties and Mr Gross. However there was evidence before the judge from Mr Schloime Rand to the effect that the respondent attempted to get the work done as cheaply as possible.

In all the circumstances I can see no satisfactory basis for interfering with the award the judge made under that head of special damage.

Accordingly, subject only to reducing the judge's award of special damages by the sum of £132.19, I would dismiss this appeal.

LORD JUSTICE LLOYD: I agree.

LORD JUSTICE AULD: For the reasons given by my Lord, Lord Justice Jonathan Parker, I, too, would dismiss the appeal subject to the small variation of special damages to which he has referred. The appeal is therefore dismissed.