Newman v Framewood Manor Management Co Ltd

This is an appeal by Mrs Eunice Roberta Newman against the Order dated 7 December 2010 of Mr Recorder Pulman QC, sitting in the Slough County Court, following the trial of this action. Mrs Newman is entitled to a 999-year lease in Apartment 18 on the first floor of a newly constructed block forming part of the development known as Framewood Manor, Stoke Poges, Buckinghamshire. Her lease is dated 19 May 2005 and the lessor is the respondent, Framewood Manor Management Company Ltd (“the Company”). She had a number of claims arising out of alleged breaches of covenant by the Company, and she sought specific performance and damages for loss of amenity and (if specific performance was refused) in lieu of specific performance. Several of her claims in issue are on this appeal. They failed before the judge, save for one, referred to below as the Doorway claim, which was adjourned by the judge.

The covenants in question are derived from an earlier lease dated 29 June 1989 that Mrs Newman and her husband, Mr Maurice Newman, had of the same apartment. There is no dispute but that the covenants are binding on the Company in favour of Mrs Newman.

The covenants include the following:

The covenants made provision as to what was to happen if there was a need to do repairs. The Company could, on giving notice, enter an apartment to do repairs (schedule 7, paragraph 4). The lessee had to allow the Company access for the purpose of doing repairs (schedule 8, paragraph 7). In addition, the Company could make regulations to close parts of the development so that it could carry out repairs or maintenance. These regulations had to be in writing and to be notified to the lessee (schedule 8, paragraph 12).

The swimming pool is located in the same block as Mrs Newman’s apartment. Mr and Mrs Newman originally accessed the swimming pool by a door (“the Doorway”) leading from the internal stairwell that services their apartment. Mr and Mrs Newman chose apartment 18 so that they could have easy access in this way to the swimming pool. However, there was apparently a design problem which led to a persistent problem of damaging condensation forming in the stairwell outside apartments 18 and 19 as a result of warm moist air flowing from the pool complex through the Doorway. Unable to find a solution, in March 2009, the Company’s committee of management resolved to block up the doorway. The committee of management was a committee made up of lessees of apartments at Framewood Manor. They were in law the directors of the Company. In May 2009, the Doorway was indeed blocked up so that the Newmans could no longer access the pool internally.

That is one of the matters of which Mrs Newman complains in these proceedings (“the Doorway claim”).

It is common ground that the term “whirlpool” in the lease includes a jacuzzi. There was initially a jacuzzi adjacent to the swimming pool but this has been removed. This is another matter of which Mrs Newman complains (“the Jacuzzi claim”).

Mrs Newman’s other claims, so far as relevant to this appeal, are in respect of (1) damage done by tree roots to tarmac on the drive (“the tree-roots claim”) and (2) the failure to repair or replace gym equipment (“the gym claim”). There were other claims, including a claim for the lack of a light in the steam room (“the steam room light claim”), for which the judge awarded damages in the sum of £250, and a claim for damage to a wardrobe (“the wardrobe claim”), for which the judge assessed damages in the sum of £1,202.50p. The steam room light claim and the wardrobe claim do not form any part of this appeal, though they may be relevant to costs.

The Company has no insurance against liability for the matters of which Mrs Newman complains and so the first question that the judge had to decide was the effect of an exoneration clause purporting to exclude the liability of the Company and its agents under the lease on any claim for damages. This exoneration clause (clause 6(b) of the original lease) is in the following terms:

“the … Company shall not be liable or responsible for any damage suffered by the Lessee or any servant agent or licensee of the Lessee or any member of the Lessee's family … through any defect in any fixture conduit staircase or thing in or upon [Framewood Manor] or any part thereof … or through the neglect or fault or misconduct of any servant agent contractor or workman whatsoever employed by … the Company in connection with [Framewood Manor] except insofar as any such liability may be covered by insurance effected … by the Company.”

The judge held that the effect of the exoneration clause was to exclude liability for any damages for the blocking up of the Doorway, the removal of the jacuzzi, the tree-roots claim, the gym claim and the steam room light claim, on the grounds that the relevant decisions had been taken by the committee of management of the Company, which was an agent of the Company. He held:

“In my judgment, [the exoneration clause] means what it says on its face. The Company is not liable to pay damages for defects now complained of, unless that liability is covered by insurance. There is no reason not to give the words their ordinary and natural meaning. Mr. Newman in particular had occasion to be involved on both sides, first as a director and also as a lessee. In those circumstances, given that there is a full remedy available by specific performance, I do not regard any of the arguments defeating this exemption clause as having any weight. ” (judgment, paragraph 20)

As to the Doorway, the judge held that there was damp in the stairwell leading to apartment 18 caused by the moist air in the swimming pool room. He held that there was a breach of paragraph 4 of Schedule 8. As to the damages for breach of covenant, he held that there was no evidence as to the diminution in value of the apartment and that such loss would in any event arise only on sale. He held that the exoneration clause prevented any award of damages for loss of amenity.

After judgment but before the order was made, the Company instructed experts to produce a report showing what work could be done so that the Doorway could be opened. In the event, the judge adjourned to allow this to happen and, in the end, Mrs Newman was prepared to accept an undertaking to reinstate the Doorway within two months so that there was no question of any order for specific performance.

As to the jacuzzi claim, the judge noted that the jacuzzi fell within the description of “whirlpool” in the lease. He also held that the facility was significant in terms of the lease but that an award of damages had to take account of the fact that the Company had replaced the jacuzzi with a sauna. He held:

“Jacuzzi or spa bath The original spa bath or jacuzzi, was a domestic model which has proved inadequate. It had dirty water, there was a filtration problem, there were other problems to do with the fact that it was a domestic model and not designed for the users who lived in 19 adjacent apartments. The defendant company decided to switch it off and to replace it with a sauna. The spa bath or jacuzzi is referred to in the lease at (i) on page 12. I regard this as a substantial part of the rights of the tenants. The defendants argue that a replacement with a sauna was enough, and that this was reasonable, because that is what the tenants by a majority voted to do. A jacuzzi however is not the same as a sauna. In my judgment, the lack of the jacuzzi has to be set against the installation of the sauna. Any loss by removal of the inadequate jacuzzi is wholly covered by its replacement by the sauna, so although it is materially different, I am not able to say that there is any cause of loss of damage which has been sustained.”

In a supplemental judgment he held that specific performance should not be awarded because the sauna had been fitted. He likewise held that damages should not be awarded. The material parts of his supplemental judgment were as follows:

“It is remiss of me that I had not appreciated that specific performance involving reinstatement of a jacuzzi was still sought. I am not able to order specific performance for the reinstatement of a jacuzzi, for the following reasons.

A sauna has now been installed in the place of the jacuzzi. I have found that there is financially no loss in having the sauna rather than the jacuzzi. Put slightly differently, no award of damages could be made. Secondly, the cost of a new and better quality non-domestic jacuzzi, is put at over £30,000. The figures are what a layman would call ball park figures, and I reduce it to £20,000 as being the more likely and realistic figure.

I have to balance the cost to be incurred by the defendant company in carrying out the installation of a better quality jacuzzi, against what I have found to be no award of damages because the sauna is a sufficient replacement of the domestic jacuzzi that was there originally. In balancing these, I do not consider that specific performance could be ordered.”

The judge also rejected the tree-roots claim. He held that there was no evidence as to what work could be done, or what it would cost. The evidence was inconclusive as to whether any repair could lawfully be carried out because it was likely (as we are informed was the case) that the tree was subject to a tree preservation order. The judge regarded this aspect of the case as trifling and not worthy of an award of damages. He initially adjourned the application for specific performance of the covenant to repair the tarmac, but the Company carried out the repair before the adjourned hearing. Accordingly, it was not necessary for that remaining part of the tree-roots claim to proceed.

As to the gym equipment, the judge rejected Mrs Newman’s claim on the basis that she did not use the gym:

“Defective and missing equipment in the gym. This has now been replaced, so I am asked only to assess what loss there has been to Mrs. Newman or to Mr. Newman by the delay in replacing the equipment, lasting about 1 year. Mrs. Newman does not refer to ever going into the gym in her statement, except for the purpose of seeing that there were some defects. Mr. Newman does not refer to the gym or its equipment in his statement, as a matter of loss to him. I regard this loss as so trifling as not to be worthy of any damages.”

As to the steam room light claim, the judge accepted there was a breach of covenant due to the failure to replace the light bulb for a very long period and he assessed the loss at £250. We have not been concerned with this head of claim save in so far as it was ruled out by the judge’s construction of the exoneration clause.

As Mr Peter Knox QC, for Mrs Newman, submits, the effect of the judge’s interpretation of the exoneration clause is to make it impossible for Mrs Newman to make a claim for damages for loss of amenity. Mr Knox submits that loss of amenity is not “damage” within the meaning of this clause in any event. Moreover, he submits that the exoneration clause does not apply to the cause of action relied on in the present case, namely breach of covenant.

Mr Knox further submits that it would be no defence to a claim for breach of covenant, such as the covenant to repair the common parts, that a contractor had been instructed but had turned out to be incompetent. He submits as his primary case that the exoneration clause does not apply to breaches of the repairing covenant. His alternative case that it does not apply to breaches of the repairing covenant that were authorised by the Company. On his submission, the exoneration clause is directed to the situation where a person may have a claim in tort under, for example, the Occupier’s Liability Act 1957 for loss or injury suffered due to a defective installation at the property. It is not intended, on his submission, to apply to a breach of covenant.

Mr Knox further points out that if the judge’s interpretation is right, it would make otiose the specific code and mechanisms incorporated into the lease for the giving of notice by the Company that repairs needed to be done, and for the Company being obliged to undertake those repairs within a reasonable time.

Finally under this point Mr Knox submits that the committee of management were not in any event agents “employed” by the Company. They were officers of the Company.

Mr Mark Jones, for the Company, submits that the judge was right in his interpretation of the exoneration clause. On his submission, the effect of the clause is that the Company’s liability is generally limited to risks against which it was insured. It should, therefore, on his submission be interpreted with this in mind. However, he accepts that the clause should be interpreted on the basis of contra proferentem.

Mr Jones further submits that the directors were correctly held to be agents “employed” by the Company within the meaning of the exoneration clause. The word “employed” should be interpreted as “used”. It would, therefore, include someone who is employed under a contract of service or a contract for services. As the word “employed” had to cover an agent and contractor, as well as a workman, it should be construed to extend further than a contract of service or for services. The judge was right to say that liability due to an act of the directors was not also excluded from the scope of the exoneration clause. Mr Jones accepts however that this was the result of the application of a purposive construction, not a construction which is contra proferentum.

Mr Jones further submits that “damage” is wide enough to include a claim for loss of amenity, that is, damage that does not consist purely of physical damage.

Mr Jones submits that the exoneration clause should be construed as a mirror image of the obligation to insure. Thus anything that was outside the obligation to insure would be excluded. However, if insurance was taken out, which was beyond the contractual obligation to insure, the lessee should have the benefit of that insurance if he made a claim.

In my judgment, Mrs Newman is correct on the meaning of the exoneration clause. The clause has to be interpreted in the light of its factual matrix and this includes the fact that the Company is effectively owned by the lessees of all the apartments at Framewood Manor. The object of the clause is certainly to give them the benefit of any insurance held by the Company. However, the matter does not stop there. Effect has to be given to the clear wording of the exoneration clause. That wording makes it clear that the exoneration clause only applies where the Company is sued on the basis of vicarious liability. If the judge were right, the procedural provisions for giving notices of breach would be, as Toulson LJ pointed out in argument, completely circumvented and rendered otiose. The Company expressly undertook certain repairing covenants. It would be very odd indeed if, under later provisions of the lease, it was exonerated from liability for breaching those covenants unless it had taken out insurance.

I also take the view that the word “damage” was used in the exoneration clause, does not include a claim for loss of amenity. The word “damage” covers physical damage. If it had been intended that a claim for loss of amenity were to be included the commonly heard expression “loss or damage” would most likely have been used. As the exoneration clause has to be interpreted contra proferentem, it is only right to give it its narrower meaning.

In the circumstances, there is no need to deal with the meaning of the word “employed”. However, in my judgment the directors in this case were not employees. They were simply appointed and agreed to act on the terms of the Company’s memorandum and articles. Nor can they be said to be agents “used” by the Company. They are officers of the Company. Were it necessary so to decide, I would hold that the decisions of the directors of the Company in their capacity as such are not within the exoneration clause.

There are further passages in the judge’s judgment that are relevant to this claim. He set out the position in principle in paragraph 31 of his judgment.

“In my judgment, the Company’s duty to Mrs. Newman as lessee was as follows. They could not lawfully block the door, other than on a temporary basis. Mrs. Newman had a right to use the door, pursuant to her lease (see the fourth Schedule at paragraph 1 and paragraph 4). I find that access through that door was a quasi-easement. Secondly, the Company could not ‘substantially’ alter its obligations to a lessee, unless all the owners, i.e. the lessees, had ‘approved in writing,’ doing this (see schedule 8, paragraph 14 at page 43). I find that any permanent blocking up of the door would substantially reduce the Company’s obligations.”

He then dealt with the history of the blocking of the wall, with which I need not deal. At paragraph 36 he refused specific performance:

“36.

I am asked by Mrs. Newman to order that the door should now be reopened, but I am not able to order that for the following reasons. Such an order would have the immediate effect of causing further damage to the paintwork, the walls, the ceilings and the metalwork of the banisters and on the door. It would in addition cause mould to grow again, which I accept is a health hazard. This would mean that significant further expense would have to be incurred by the company, that is all the residents including the Newmans, on a regular basis. Though not recoverable in law, to which I refer later, the value of apartments 18 and 19 would again be reduced if either was to be sold.”

In the same paragraph, the judge went on to find that the damage was not permanent:

“But I do not find that this door cannot be opened in the future. The agreed expert’s report now explains that the current problem is due to a difference in air pressure between the indoor swimming pool room and the stair hall. That can be cured by what is recommended. This suggestion is firstly modification or replacement of the pool hall ventilation equipment and under floor duct work; secondly, formation of a lobby between the door and the pool hall; thirdly, ducting to be blocked to prevent fresh air infiltration and heat loss, and fourthly, space heating and ventilation in the stair hall. Prices are not given for this work.”

He then dealt with the damages breach of covenant in paragraphs 38 to 40 of his judgment:

“38.

If damages were to be awarded for breach of this covenant, there are two arguable heads of loss. Firstly there is the reduction of value in respect of the door being permanently blocked; and secondly, damages for inconvenience in having to go outside and round the building. As to the first loss, I am satisfied that that cannot be awarded as a matter of law. This is because such damages will only be incurred when the apartment is sold. It could be proved that an offer for sale had been sought from particular purchasers, and that they had made a reduced offer because the door was blocked, but no such evidence was put before me. It is important to remember that a speculative loss is not to be recovered in litigation of this kind. Secondly, the damages for inconvenience in having to go outside and round the building will be determined by the duration of that loss and how inconvenient it is. There will be periods during which advice and plans have to be made for the necessary works to be carried out, and secondly for the duration of the work being carried out. For such part of those periods which are reasonable, no damages would be payable. If either lasted an excessively long period, I consider that the damages would then be payable in respect of the excess period. So here, where no work has apparently been done except to get the expert’s report, the period lasts from when the work [blocking up the Doorway] was done in May 2009, to October 2010.

In view of what I have earlier found, damages cannot be awarded because of [the exoneration clause].

39.

Now, it may be said that [the exoneration clause] wholly defeats nearly all the Company’s obligations, but that would be wrong. It does not defeat a claim for specific performance, and here I have decided that the door could lawfully be blocked up temporarily for the purpose of maintenance work. The defendants say that it was closed for the purpose of maintenance work, and that finding out what to do has taken a long time, part of that delay has been their concern about this litigation, and how much the costs would be. I do not regard the issue about costs as relevant to their decision as to what to do. I find that the delay is inordinate. It may also be wholly inexcusable. But I am not able to accept the claimant’s case that the door has been shut permanently. Nor can I accept Mr. Newman’s suggestion that the door was bricked up deliberately to anger him. There was no evidence to support such an allegation.

40.

In those circumstances, I make those findings, and only a modest amount of damages is recoverable.”

Mr Knox makes three submissions in relation to the Doorway.

First, he submits that this court should make a declaration that, but for the undertaking, this would have been a case in which an order for specific performance would be made. The purpose of this declaration would be to enable Mrs Newman to argue on a separate appeal that is pending with this Court that the costs order made by the judge at the end of the trial was wrong because she had in fact won on this point. As to this, we did not invite Mr Jones to deal with the point. There is no need to have a declaration in these circumstances because it is enough to be able to say on any costs appeal that the proceedings achieved the undertaking to unblock the Doorway. The Company did not offer that undertaking before the proceedings were begun.

Seondly, Mr Knox submits that the judge should not have held that the blockage was only temporary. Mr Wall, the chairman of the committee of inspection, called the blockage “a permanent solution” in his witness statement. Moreover, the Doorway was not only bricked up but plastered and decorated, which was consistent with closure being permanent. What had happened was that, in the course of the re-examination of Mr Wall, it emerged that the Company was then prepared to consider some method of unblocking the door. But that had not been the position originally.

What happened in 2009 was that a wall was constructed in the Doorway. This was done because there was damage caused to the stairwell by virtue of the moisture from the swimming pool and no other solution had been found.

Thirdly, it follows, submits Mr Knox, that the judge should have awarded damages for loss of amenity due to the period between May 2009 and 31 January 2011 when the Doorway was blocked. Mr and Mrs Newman were inconvenienced because they had to walk about 19 metres round the outside of the block to enter the swimming pool. No doubt this was a source of irritation. They would have had to been suitably dressed to do this, especially in cold or wet weather.

Mrs Newman claims £50 per week for this period although she accepts that a deduction should be made for the period that she and Mr Newman did not occupy the apartment. This we were told, was about one third of each year. The total claim made by Mrs Newman under this head amounts to £4,000.

Mr Jones submits that, on the answers given in re-examination, the judge was entitled to make the factual findings that he did. As to quantum, he submits that the loss of amenity was minor.

My conclusion is that the blocking of the Doorway when it originally took place was permanent because the Company had no other solution in hand for the condensation damage caused by the moisture from the swimming pool. The Company had not, at that point in time, investigated any alternative. In the re-examination of Mr Wall, the judge appeared to take the view that the door had been shut “on a pretty solid basis”, as he put it. In his judgment, he misdirected himself as to the point in time at which it needed to be established whether the blockage was temporary or permanent. He proceeded on the view that it was sufficient if at the end of the day the blockage was only going to be temporary so that the doorway would be opened.

In my judgment, what happened was that the Company was not prepared to unblock the door at the start of the trial. It intended that the blocking up of the Doorway should be permanent. However, the Company changed its position in the course of the trial. It had power to make a temporary change in the facilities pending any repair, but this was not such a change.

As to damages for loss of amenity, it is not simply a question of compensating Mrs Newman for the short extra distance that the Newmans had to walk to use the pool. The loss of amenity also meant aggravation and inconvenience from having to walk outside rather than using an inside entrance. The Newmans had purchased their apartment specifically in order to have this facility. In those circumstances I would award damages for loss of amenity in the sum of £1,000 for loss of amenity. This represents in round terms the loss of amenity for one year at just under £20 per week.

Mr Knox makes three submissions in relation to the jacuzzi claim:

I have already set out paragraph 25 of the judge’s judgment in which the judge performed a balancing exercise in deciding to refuse specific performance. Mr Knox submits that that was not appropriate in the case of a breach of covenant. It was not a ground to refuse specific performance that it was costly, or that the other shareholders were happy to have a sauna instead. The Company could have raised the necessary funds by increasing the service charge.

As to damages for loss of amenity in the two years prior to trial, Mr Knox submits that the judge was wrong not to make an award of damages. Mrs Newman in particular had described in her evidence how she had used the jacuzzi, especially when her grandchildren came to stay.

As to damages in lieu of specific performance, Mr Knox submits that the judge’s holding that the sauna was a “sufficient replacement” was perverse since the jacuzzi performed a different function from the sauna. On Mr Knox’s submission, the starting point is that this is a case where there was a permanent loss of an amenity that was promised by contract. There was, therefore, an obligation to keep the jacuzzi in good repair.

Mr Jones seeks to uphold all aspects of the judge’s decision on the jacuzzi claim. If, contrary to his submission, any award for damages for loss of amenity should be made, this should be consistent with, and thus of the same order as, the award of £250 for the steam room light claim, where it had been said that the loss of the light had prevented Mr Newman from using the steam room.

In my judgment, the judge was correct not to award specific performance. The jacuzzi had been replaced by the sauna at considerable cost. Moreover, the cost of the installing of a new jacuzzi was estimated at £20,000. To incur this cost would be excessive and disproportionate when compared with the loss of amenity. This result would be similar to that in Ruxley Electronics and ConstructionLtd v Forsyth [1996] AC 344, where the House of Lords refused to award substantial damages for the installation of a swimming pool to a depth of six foot rather than the intended seven foot six inches for which the parties had contracted, and instead approved the award of damages for loss of amenity.

As to damages for loss of amenity, in my judgment the judge was wrong not to make an award. The judge’s holding that the sauna was a sufficient replacement for the jacuzzi was made in the context of whether there was any financial loss due to a diminution in the value of the leasehold interest of Mrs Newman. There was indeed no evidence that the value of her lease was likely to be affected by the question whether she had the right to use a sauna or a jacuzzi. In any event, such a right would be a comparatively small aspect of the rights conferred by the lease.

As I read the judge’s judgment, the judge expressed no conclusion on the claim for damages for loss of amenity. There was, however, evidence from Mrs Newman in support of her claim that she liked to use it when her grandchildren came to stay. It is correct that Mrs Newman did not go on to say that she did not, therefore, regard the sauna as a replacement. Mr Jones submits that her claim for damages for loss of amenity must therefore fail. However, in my judgment, the sauna and jacuzzi are so different that, unless there is some evidence that a person deprived of a Jacuzzi accepted a sauna as a substitute, acceptance of the substitute should not be inferred. Accordingly, if it was the Company’s case that she was adequately compensated by the provision of the sauna and that this offset her loss, that should have been put to her in cross-examination. That did not occur.

In any event, the question of what her personal preferences were is not conclusive, any more than it was a question whether a majority of leaseholders at Framewood Manor were prepared to approve the change. The question, in my judgment, was also whether a reasonable person with knowledge of the circumstances in which people acquired leasehold interests in this sort of development would say that it was not a substitute for a jacuzzi.

In my judgment, a reasonable person would reach this conclusion. A sauna and a jacuzzi do not serve the same function. A sauna uses steam to induce perspiration in an enclosed space. A jacuzzi, on the other hand, uses warm aerated water and is fitted with a whirlpool, and is usually situated near a swimming pool. A jacuzzi would be much more useful as a facility to enjoy safely with one’s young children or grandchildren than a sauna. Both would require adult supervision but a child would clearly have to be older to use a sauna for any length of time than he or she would have to be to use a jacuzzi. The development at Framewood Manor was after all for private residential use by individuals and families. It was reasonable to expect that a resident might wish to entertain young children.

In those circumstances, I would substitute for the relevant part of the judge’s order an award of damages to cover loss of amenity since the jacuzzi was removed. Sums awarded for loss of amenity are for reasons of policy generally low. The jacuzzi was decommissioned in July 2008, leaving a period of nearly 2½ years down to trial. In my judgment, a award of £1,000 would cover the loss of amenity to trial.

Clearly the loss of amenity would continue into the future. I would therefore award a further modest sum to cover this, namely £2,500.

It appears that the root damage to the tarmac has been dealt with by making the area of tarmac smaller and without touching the roots in question. In the circumstances, I do not consider that there is any merit in the claim for loss of amenity (put at £200) due to the disturbance on the tarmac. The drive was fully usable. The judge was right not to make an order for specific performance for the reasons he gave.

Mr Jones submits that there was no finding by the judge that the delay in repairing the gym equipment was inordinate. He supports the judge’s finding that the loss was so trifling as not to be worthy of an award of damages.

In my judgment the judge was clearly wrong in his findings on this point. There was cogent evidence that the gym was not properly maintained for approximately a year and that Mr and Mrs Newman used the facilities (or would have had they been properly maintained). Accordingly Mrs Newman should receive damages for loss of amenity. However, the evidence does not justify such a substantial figure as £1,000 claimed for loss of amenity. The period involved was only one year and that has to be discounted for the period that the Newmans did not use their apartment. In my judgment, it is more realistic to value this loss of amenity at 50% of the amount claimed, that is, £500. That is the sum that I would award.

I would therefore allow this appeal, and award damages as appears from the table below:

I agree.

I also agree.