Daejan Properties Ltd v Campbell

This is the oral renewal of an application for permission to appeal against a judgment of Roth J given on 1 November last year in a dispute between the landlord and the tenant of a maisonette on the third and fourth floors of 2, Upper Wimpole Street, London W1.

The current lease is dated 8 July 1999 and was granted by way of extension under the Leasehold Reform, Housing and Urban Development Act 1993. The original lease was dated 7 November 1958. In all respects material to the present proceedings, the current lease follows the terms of the 1958 lease. For that reason, before the judge the 1958 lease was the primary focus of attention, while recognising that the 99 year lease had superseded it in the meantime.

The oddity which gives rise to the dispute is that the 1958 lease contained a number of covenants under which the tenant was obliged to contribute to expenditure or outgoings in relation to the property, including expenditure incurred by the landlord in a number of different ways. For example, clause 2(viii) provides that the tenant shall pay and contribute a rateable or due proportion, with a provision for resolution of any dispute as to what the proportion was, of the expense of:

“…making, repairing, maintaining, painting, supporting, rebuilding and cleansing sewers, drains, pipes, watercourses…” and other such matters.

Clause 2(xx) provided that the tenant was to pay to the lessor on demand two fifths of every annual premium paid by the lessor for comprehensive insurance at the house, and Clause 2(xxi) provided for payment on demand of eight nineteenths of the annual cost of centrally heating the house and providing hot water, and there were other such provisions of various kinds. Earlier in the lease there was a provision to pay five sixteenths of the rates and water rates until separately rated, and there was a special provision in respect of the cost of the entry phone. Then one comes to clause 2(xxv), which was:

“To pay two fifths of the expense at all times and from time to time incurred by the lessor in performing the covenant contained in clause 3(iii) of the lease.”

Clause 3 was the lessor’s covenants and clause 3(i) was the normal covenant for quiet enjoyment of the premises. “The premises” are defined, I should have said, as the demised premises, that is to say the maisonette.

Clause 3(ii) was a covenant to keep the house insured against comprehensive risks, and that was of course what, under clause 2(xx), the lessee was to pay two fifths of, or 40 per cent. “The house” was defined as the entire building. Clause 3(iii), which is the critical one, is:

“To keep the roof and outside walls of the premises in good repair and condition and to paint the exterior of the premises once in every seven years…” and so on.

There is a provision for obtaining not less than two competitive estimates and to submit those to the lessee for approval, and the point of that is that “the premises”, as I have mentioned, means the maisonette. The maisonette is on the top two floors, so the roof is immediately above the maisonette. But if that covenant is correctly drafted as referring only to the maisonette, then the obligation of the tenant is to pay 40 per cent of the cost of maintaining the roof and 40 per cent of the cost of maintaining the outside walls of the top two floors of the building, and 40 per cent of the cost of painting the exterior of the top two floors, but not any part of the cost of maintaining the outside walls below the third floor, or painting the exterior below the third floor. That is, on the face of it, somewhat odd, at the very least, because one might expect the covenant in this respect to be in respect of “the house”, rather than “the premises”.

Clause 3(iv) is to keep the entrance hall of the house and the staircase properly cleaned and lighted. Clause 3(v) is to provide central heating to the radiators now installed in the premises and clause 3(vi) is as often as the premises or the flat – and “the flat” means the second floor flat – if they were destroyed or damaged by fire, to rebuild or reinstate. That is all I think I need to recount from the lease.

As is common in premises on the Howard de Walden Estate in that part of London, consisting of a basement and a ground floor, and a first, second, third and fourth floors, the ground floor and the first floor are, and it is thought probably already were in 1958, in use for medical consulting rooms. The basement is in a number of different uses and was partly derelict in 1958 according to the evidence. The second floor is the flat and the third and fourth floors are the maisonette.

The landlord’s contention is that clause 3(iii) is in error and the references to “the premises” should be to “the house”. The tenant disputes that and says that the draftsman knew perfectly well when he wanted to refer to “the house” and when he wanted to refer to “the premises” and it cannot be assumed that it was a mistake. There was no case of rectification. It is contended for the tenant that the judge was wrong to consider that the mistake was so obvious and that it was so clear that it should have been a reference to the house that it could be corrected as a matter of construction. The judge accepted the landlord’s contention and held that it should be construed as if the word “premises” was not there and the word “house” was there.

There are two aspects to the application for permission to appeal. One is that the terms of the lease, especially as regards contribution, are, as Mr Male puts it, “all over the place” and full of inconsistencies, and it cannot be assumed that the reference to “premises” in clause 3(iii) is a mistake.

The second is that Miss Campbell, the tenant, has maintained her present position for a good many years. There was evidence before the judge that Miss Campbell had put forward the position that she was only liable to contribute 40 per cent of the cost in relation to the outside of her part of the premises, including the roof, and that had at one point been accepted, but then the landlord had changed his position. But what is sought to be adduced in further support of the appeal is further evidence, which was in existence at the time of the proceedings below but which was not ferreted out, possibly because of Miss Campbell’s failure to realise its possible importance and possibly, it may be, because her then legal representatives failed to do the job that they should have done on her behalf; there has been a change since then.

It is sought to show that even before the 99 year lease was granted, the position was adopted on behalf of Miss Campbell that she was only liable on the basis that premises meant “premises” and that this was accepted by the then landlord, and that there were indeed proceedings in which the tenant asserted that position, although no-one really knows very much about what those proceedings were.

That could have a bearing on the position predating the 1999 lease, in that it could cast light on how the 1999 lease ought to be understood. If it was already the position in 1999 that the tenant was maintaining that premises means “premises”, and that the landlord had withdrawn the assertion that premises means “house”, that could have a bearing on the 99-year lease and how it should be read.

I can see some problems in respect of the additional evidence under Ladd v Marshall but coming back to the initial question of construction, while it seems to me that there is quite a strong case for the conclusion reached by Roth J, which I should say was endorsed by Patten LJ when he considered the matter on the papers, it seems to me that it is reasonably arguable that, looking at the matter as it was in 1958, as best one can, given the pattern of use of the premises at the time and a number of odd features of the lease, including a provision for a mutual deed of covenant between the tenant of the flat on the second floor and the tenant of the maisonette on the third and fourth floors as regards repairing covenants, it seems to me that there is scope for argument with some prospect of success on appeal as to whether the judge was right on the question of construction.

Accordingly, I propose to give permission to appeal in that respect. Having done so, it seems to me that it would be appropriate to adjourn to the hearing of the appeal the question of whether the appellant should be entitled to adduce the additional evidence which is the subject of the application notice and of a witness statement of Mr James Cotter of 12 February of this year. So that is to go forward and accordingly I will grant permission to appeal and I will adjourn to the appeal the question of additional evidence.