Innerspaces Self Storage Ltd v Harding & Ors

This is an appeal against the decision of District Judge Sparrow sitting at the Southampton County Court dated 29 January 2013, permission to appeal having been given by the single judge. The issue in the appeal is whether the presence of a heap of rubble on part of an industrial estate retained by the respondent landlord constituted a breach by it of a covenant to perform certain services throughout the term of a lease relating to another part of the estate.

Pursuant to a lease dated the 30 May 2007 ("the lease") granted for a term of 25 years, the appellant, Innerspaces Self Storage Limited ("the appellant"), is the tenant of commercial premises known as Unit H, 79 Place Road, Cowes, Isle of Wight (defined in the lease, and referred to in this judgment, as "the Premises"). The Premises form part of an industrial estate known as Readers Business Park, (defined in the lease, and referred to in this judgment, as "the Estate"). The previous tenant of the Premises was a company called Inner Space Self Storage Limited ("Inner Space"), of which the appellant's beneficial owner and director, a Mr Robert Hampson, was formally a director and 49% shareholder. Inner Space operated a self storage facility from the Premises until 12 March 2009, when it went into administration. The appellant took an assignment of the lease from Inner Space, acting by its administrators, on 25 March 2009 and thereupon started trading from the Premises, effectively taking over the self-storage business previously conducted by Inner Space.

The first three respondents, Messrs Peter, Brian and Alan Harding, were the original landlords under the lease ("the first three respondents"). On 12 January 2011, the fourth respondent, Place Road Properties Limited ("the fourth respondent"), became registered as the freehold owner of the entirety of the Estate, including the Premises, and thereby became the landlord under the terms of the lease. Where it is not necessary to distinguish between them, I refer to all four respondents as "the respondents".

The evidence as found by the judge showed that, in early 2008, the first three respondents demolished a building in a poor state of repair which was located on a part of the Estate owned by them and not subject to a lease or a tenancy agreement. The rubble which came from the building was transformed into hardcore and piled up within the curtilage of the land previously occupied by the building, which was near to the main entrance of the Estate. The rubble heap was not located on the common parts of the Estate. The intention of the respondents was that the hardcore should be used to form the base of a new building to be constructed on the Estate, but, although various proposals had been submitted to the planning authorities, none had received approval to date. The judge accepted that the respondents had a genuine intention to develop the site, but had been delayed by the planning process.

Mr Hampson made several complaints to the first respondent about the continuing presence of the rubble heap and in April 2011 the fourth respondent erected a hoarding around it. However the appellant continued to assert that the rubble heap remained an eyesore which was off-putting to potential customers visiting the Premises.

On 23 September 2011 the appellant issued proceedings in the Southampton County Court claiming damages in respect of the presence of the rubble heap on the Estate. The appellant relied upon four distinct causes of action. These were:

Following the trial of the claim on 28 and 29 January 2013, District Judge Sparrow dismissed the appellant's claim on all four of the above causes of action.

In relation to the allegation that the respondents had failed to permit the appellant, as tenant, peaceably and quietly to enjoy the Premises as required by clause 4. 1 of the lease and/or had derogated from grant, the judge concluded as follows:

“7.

In relation to the issue of quiet enjoyment and the derogation from grant, the point that was made by Mr Sissons is whether or not the heap of hardcore is a breach of the landlord’s obligations, and the claimant says that it makes it much less suitable as a site for the purposes of the business of self storage units and the claimant goes on to say that there is a general obligation to maintain the site and, therefore, leaving this heap of hardcore there is a breach of the covenants and of the grant of the lease. The lease itself, as I say, was made expressly for the purposes of self storage business and Mr Sissons says this must be used then as the standard against which to judge whether anything which has been done makes it materially less fit for that purpose, and says that the visual impact of the hardcore is capable of being a derogation from the grant as something having a deterrent effect upon potential customers, and says that the evidence of the three ladies to whom I have referred as to the comments of customers is enough to show that there is a deterrent effect. He says that if it is not covered by the specific obligations under the covenants in the lease, then it should be covered by the argument of derogation from grant because the premises are made materially less fit for the purposes of the tenant.

8.

My view of that situation is affected substantially by the fact that when the present tenant took the assignment of the lease, he took it on knowing that the pile was there. Now, it then seems to me that there is a link with the issue of misrepresentation and whether or not there was any clear expectation that the pile would go. However, that is, as I say, a separate issue from the issue of quiet enjoyment and derogation from grant and I want to just deal with that quickly in this way. Is there sufficient in my mind by way of making the use of the premises unsuitable or materially unfit for use of the purpose by leaving that pile of hardcore there for the period? I have been referred to the authorities that talk about various examples of what can be a derogation from a grant making it materially difficult to operate the business but, in this case, I take the view that Mr Jones has expressed, namely that the business in fact has operated, and presumably reasonably successfully, for the four years nearly since March 2009 and in a way that it did not operate prior to that under the previous owners. It seems to me that, whilst leaving aside the other issues, Mr Hampson may be unhappy that that pile of hardcore is there, it does not seem to me that it materially interferes with his business. The evidence that I have heard does not lead me to the conclusion that it is sufficient to amount to a breach of covenant for quiet enjoyment or amount to a derogation of the grant. It may be an irritation. It may be that one or two customers are not impressed by it, but there is no evidence in my mind that leads me to reach the conclusion the claimant seeks me to reach.”

In relation to the claim that the respondents had failed, in breach of clause 4.2.1 of the lease, to provide the Services the judge concluded as follows:

“9.

The next issue then is the breach of expressed covenants requiring the landlord to provide services, including keeping the common parts of the estate tidy. Mr Sissons says that the obligations of the landlord to this extent extend to the wider estate as well as the common parts. The specific covenants are set out in the lease and refer to a list of services which the landlord is to provide and, in putting his case, Mr Sissons relied in particular upon two of them, 6.3.9 and 6.3.12. The first of those relates specifically to:

“Planting, tidying, tending and landscaping any appropriate part of the common parts in such manner as the landlord acting reasonably from time to time considers appropriate.”

10.

The term “common parts” is defined specifically at 1.5 of the lease and means:

“The areas and amenities on the estate required by the tenant for the use and occupation of the premises and such other areas and amenities made available from time to time by the landlord for use in common by the tenants and occupiers of the estate and visitors to the estate or any of them, including the pedestrian and vehicular ways, forecourts, landscaped areas and roads but not limited to them.”

Mr Sissons says, and I think he is right, that the interpretation of the lease must be considered as at the date of the original lease in May 2007 and that these are the primary obligations upon which he relies.

11.

In relation to paragraph 6.3.9, he says it is difficult to say that the estate could be regarded as tidy with this heap of hardcore at the front of it. However, this hardcore came, as I have said, from the demolition of the large building at the front of the estate and the hardcore is contained within what was the curtilage - I have just noted on my misprinted version of my judgment it says “cartilage”, but never mind - of the building that was demolished. The view Mr Sissons invites me to take is that the common parts can effectively change and he refers to the phrase within the definition that says, “from time to time”. However, in my view it is simply not consistent with the definition of “common parts” to say that the building, and, indeed, the land within which the building originally stood, is common parts. There is no suggestion that tenants have access to this part of the land as part of the enjoyment of the estate for which they are paying rent and it is clear to me that what “common parts” really means are those parts of the estate that they are required to pass over and, indeed, enjoy in order to take advantage of the lease of their own premises. I do not think it is right to say that “common parts” can include what was at the time of the lease a building.

12.

He then refers to 6.3.12, which is the covenant to administer and manage the estate and, in terms, to do that in accordance with good estate management principles. He says the reasonable person would not have said that this would allow the landlord to leave this pile of hardcore there. I think that there is a possibility of a claim in this particular part of the matter but, again, I take account of the fact the tenant in this case took on the lease in the knowledge that this pile of hardcore was there and it seems to me that it is insufficient in this case to say that the estate had to be put into a better state than it was at the time of taking on the lease unless there were specific assurances about that.”

In relation to the claim in misrepresentation based on the allegation that the first respondent had given assurances to the appellant's director, Mr Hampson, prior to the assignment of the lease to the appellant in March 2009 that the rubble heap would shortly be removed, the judge concluded as follows:

“13.

So, therefore, in my mind this case comes down to something which has been the subject of the bulk of the evidence, which is that the claim is based primarily upon the argument about misrepresentation. I know Mr Sissons will say that that was not the primary obligation of the landlord, but having made the decisions that I have, it seems to me that the only way in which the claimant can maintain his claim effectively is on the basis of the allegation of misrepresentation. On this issue then, the question is what assurances, if any, were given and whether they can be regarded as actual misrepresentations. The evidence from the claimant is that the defendant said he would put the park into a good state and there was an issue here about whether or not a statement of future intent could or could not be a misrepresentation of fact, and the claimant also made a suggestion that because nothing had been done for four years to remove the hardcore, that led to an inference that there had been no genuine intent to do anything about it in the first place and also reference to section 2 of the Misrepresentation Act.

14.

The real crux of this, though, is whether or not there was in fact a representation of that kind at all and the point Mr Jones made, and I agree with him, is that the real issue in this case has throughout been the pile of hardcore and if it were other items around the estate that were being relied on alone, then this claim would not be before the court today.

15.

In 2011 there was some hoarding erected to try and screen it and the pile of hardcore was levelled and there was some evidence in an email from Mr Hampson that at that particular point in time, he regarded the problem as largely dealt with. I think he said that any reduction in rent for the period for which anyreduction of rent could apply would come to an end at that point and it has been subsequent to that that there has been the continuation of the complaints and the concerns.

16.

There was a suggestion that I should avoid relying upon selective photographs in the bundle to show that there is evidence of continuing untidiness. It is right that the hoarding blew down from time to time in the winter months when the weather was bad and there was evidence, in particular from Miss Martin, that there was the maintenance man on site and Mr Harding told me that Dave, the maintenance man, worked for some 30 hours a week on site.

17.

The evidence from Mr Hampson was largely directed to the issue of whether there were such assurances given by Mr Harding and whether that then might amount to actual misrepresentation.

18.

I do not have any difficulty at all in dealing with this limb of the claim. There was not one scrap of evidence to support it, despite a number of written communications over the years. None of them ever referred to any suggestion that any assurance had been given to remove the rubble in the first place, which has been the central reason for the claim. He expressed approval when Mr Harding took steps to ameliorate the situation by some action to level the heap and screen it, even though it was not wholly effective, but that is a long way short of being any form of supportive evidence that there were the sort of assurances given that Mr Hampson claims.”

The judge then went on to analyse certain aspects of the evidence in further detail and then concluded at paragraph 24:

“24.

All of this leads to the inevitable conclusion that applying the balance of probabilities test to the evidence, I do not think that any judge could possibly come to any conclusion other than that the alleged assurances were not given in the way that Mr Hampson claims at all.”

At paragraph 25 of the judgment, the judge said:

“25.

A number of interesting points have been made on legal issues relating to the issue of quantum. It is not part of my findings or my decision but, in passing, I can say that if I had allowed the claim, first, I would have relied upon the single joint expert’s report; second, I would not have deviated from the recommendation of the percentage advised to reflect diminution in rental values; and, third, I would have started with the open market rent rather than the passing rent for the reasons that were expressed by Mr Jones.”

Accordingly the judge dismissed the claim.

For the purposes of the arguments before this court, the relevant provisions of the lease were the following:

It is of some significance that the appellant’s claim, in so far as it was based in nuisance and/or upon a breach of the respondents' obligation to abate any nuisance in accordance with paragraph 6-3.16 of Schedule 6, was not pursued by the appellant in closing submissions at trial, nor was it pursued before this court. Similarly it is worthy of note that there was no allegation that the respondents had been in breach of the obligation imposed by paragraph 6-3.1 to repair, replace or renew the Retained Parts.

Before this court the appellant did not seek to challenge the judge's decision in relation to the dismissal of the claim based on the causes of action set out at subparagraphs 6(ii) – (iv) above. Mr Phillips Sissons, who appeared on behalf of the appellant, confined his challenge to the judge's decision to an argument that the judge was wrong to dismiss the appellant's claim for damages for breach of covenant on the part of the respondents to provide Services to the Estate. Mr Sissons' argument focused on what he alleged had been the respondents’ breach of their obligation to provide the Services specified in paragraph 6-3.12 of schedule 6 to the lease. In summary, Mr Sissons submitted as follows:

Mr Stephen Jones, who appeared as counsel on behalf of the respondents, in summary submitted as follows:

It is unfortunate that the judge appears to have decided the case in favour of the respondents on the basis of an argument that was not put before him either in the defence or as part of the case presented on behalf of the respondents at trial. As both parties accepted before this court, the judge was wrong to reject the claim under paragraph 6-3.12 merely on the basis that, because, to the knowledge of the appellant, the rubble heap was present on the Estate prior to the date of the assignment, there was no scope for argument that the relevant covenant required the Estate to be put into a better state than it was at the date of such assignment. As Bankes LJ said in Anstruther-Gough-Calthorpe v McOscarsupra at 727

“In construing the covenants in the present case, or any other covenant, it is material to see what the subject matter was which the parties had in their contemplation when the covenant was entered into: see per Willes J in Heffield v Meadows.”

It is also unfortunate that, apparently, no steps were taken by counsel, prior to, or upon, the handing down of the judgment to apprise the judge of the correct legal position or to invite him to make findings on the alternative hypothesis that the ambit of the covenant had to be construed as at the date the lease was granted, and that the appellant's knowledge of the presence of the rubble heap as at the date of the assignment did not preclude a claim for breach of covenant.

However, in my judgment, and in the light of the judge's findings of fact, the appellant would have failed to establish that, in not removing the rubble heap, the respondents had been in breach of the covenant contained in paragraph 6-3.12, and that the appellant had suffered damage as a result, even if the judge had adopted the correct legal approach to the covenant's construction. My reasons for this conclusion are as follows.

In my judgment, the words in the covenant "administering and managing the Estate" are wide words which are not limited merely to the discharge of office functions. They could, in appropriate circumstances, for example, connote an obligation on the part of the landlord actively to carry out works on the Retained Parts or the Common parts, or to prevent the carrying on of unsuitable activities on the Retained Parts or on "other lettable premises", to ensure that there was no material impairment of the Estate's tenants' enjoyment of the Common Parts or the various premises which respectively had been demised to them. But in my view, construed objectively in accordance with well-established principles of construction, the words are not broad enough to impose a generalised obligation of a wholly unspecific ambit to "maintain the appearance of the Estate" as Mr Sissons submitted. In the absence of any definition of a sufficiently certain standard, or set of criteria (whether objective or subjective) by reference to which the appearance of the Estate could be judged, it is impossible to construe the words "administering and managing" as implying an obligation of the type for which the appellant contends. As Mr Jones submitted, it might be the case that the landlord's obligation of "administering and managing the Estate" and "performing the Services" "in a proper and efficient and economic manner in accordance with the principles of good estate management" required the respondents to take steps to ensure that the rubble heap did not become a nuisance by encroaching onto access roads or preventing vehicular access to tenant's premises or otherwise. But in my judgment the clause cannot be construed, either in the context of the lease as a whole or against the background of the objectively known facts, such that the Estate was a business park, to which members of the public had regular access, or that the user of the Premises was for the provision of self-storage facilities, as requiring the respondents to remove, or lower the level of, the rubble heap simply on the grounds that such work would improve the appearance of the Estate.

That conclusion is supported by the landlord's express obligations in relation to the Retained Parts and the Common Parts. Thus under paragraph 6-3.1 the landlord has an obligation to "replace… or renew….. the Retained Parts", whenever it "acting reasonably, regards it as necessary in order to repair…". Likewise, under paragraph 6-3.9 the landlord has a similarly objective/subjective obligation "to tidy and landscape" "any appropriate part of the Common Parts in such manner as the Landlord acting reasonably from time to time considers appropriate." In the light of those express obligations to carry out work on the Retained and the Common Parts, subject to the important objective/subjective condition that the landlord "acting reasonably" considers it necessary or appropriate to do the work, there is, in my judgment, no justification for construing the words "administering and managing the Estate" in paragraph 6-3.12 as imposing an implied obligation on the landlord to do work on the Retained Parts, to achieve the wholly uncertain result of "maintenance of the appearance of the Estate". Moreover, on the appellant's proposed construction, the implication of any such obligation would not be subject to the condition that the landlord, acting reasonably, considered it necessary or appropriate to carry out the work. The consequence that the implied obligation proposed by the appellant would impose a greater burden on the landlord than the express obligations imposed by paragraphs 6-3.1 and 6-3.9 in respect of repair, renewal, tidying and landscaping work on the Retained and Common Parts, is another reason why the appellant's argument is in my judgment bound to fail.

Second, even if I were to be wrong in my conclusion that the wording of paragraph 6-3.12, upon which the appellant based its allegation of breach of covenant, is not, on its true construction, wide enough to impose an obligation on the respondents to maintain the appearance of the Estate or remove the rubble heap, in my judgment the factual findings of the judge preclude the appellant from succeeding in its argument that the respondents acted in breach of covenant in failing to improve the appearance of the Estate because they had not removed, or reduced the size of, the rubble heap in the period following the demolition of the building, or that they suffered any damage as a result.

I accept Mr Jones' submission that the judge's statement at paragraph 12 of his judgment that he thought “…..that there is a possibility of a claim in this particular part of the matter …”, does not, when read in context, amount either to a conclusion as to the construction of paragraph 6-3.12, or a factual finding that, but for the state of the appellant's knowledge of the presence of the pile of hardcore at the time of the assignment, the continued presence of the rubble heap on the Retained Parts was a breach of covenant. The judge was doing no more than expressing the view that there was a possibility of a claim under this head. I also agree with Mr Jones that the judge's comment at paragraph 25 of his judgment (namely that, had the appellant been successful, the judge would have awarded damages based upon the percentages put forward by the single joint expert) cannot be characterised as any kind of factual finding that (had it not been for the judge's erroneous conclusion that the appellant's prior knowledge of the rubble heap precluded a breach of covenant) the judge would have concluded that the respondents had been in breach of the covenant set out at paragraph 6-3.12. Nor can such statements by the judge be regarded as factual conclusions by him that the visual impact of the rubble heap had caused any damage to the appellant.

Apart from the fact that nowhere does the judge express the conclusion that the respondents were in breach of covenant, his factual conclusions as expressed in paragraphs 8 to 11 and 22, albeit that they were not dealing with the claim under paragraph 6-3.12, are to my mind wholly inconsistent with any possible factual finding that the respondents were in breach of an obligation (on the hypothesis that it existed) to administer or manage the Estate, so as to maintain its appearance, and, in particular, inconsistent with any finding that the appellant had suffered any damage as a result of such breach. The judge was clearly of the view that the appellant had not suffered any damage as a result of the presence of the rubble heap, or any visual impact which it might have had on the appearance of the Estate. That was apparent from the last few sentences of paragraph 8 of his judgment:

“It may be an irritation. It may be that one or two customers are not impressed by it, but there is no evidence in my mind that leads me to reach the conclusion of the Claimant seeks me to reach.”

For the above reasons, although the judge's approach to his consideration of the appellant's claim for breach of covenant under paragraph 6-3.12 was wrong as a matter of law, in my judgment he nonetheless reached the correct result in dismissing the appellant's claim.

Accordingly I would dismiss this appeal.

I agree.

I also agree.