CSG (Stratford) Ltd & Ors v London Borough Of Newham & Ors

Until recently there was a Caribbean themed restaurant [“the restaurant”] on the ground floor of 2 Gerry Raffles Square in Stratford, London E15 [“the Building”]. The Building has at least nine stories. Those responsible for the restaurant say that for a number of years their trading prospects were blighted by ingress of water from a pipe some eight storeys above the restaurant, by works carried out on the footpaths and highway outside the restaurant, by a persistent pool of water to the side of the restaurant, and by the planting of trees which are said to have obscured the restaurant from passing trade. This action is intended by the Claimants to be the vehicle for recovery of damages in respect of the matters of complaint.

Proceedings were issued on 31 May 2013. It is said that they were issued in a rush which precluded the sending of a pre-action protocol letter. The reason given by the Claimants’ solicitor, Mr Huka, is that the Claimants were facing forfeiture of their lease in a week’s time. Since there was a clause in the sub-lease precluding set-off and since some at least of the matters of complaint go back to 2009, there appears to be no substance in this explanation. The proceedings as issued, however, show every sign of having been prepared hastily and without adequate thought.

As originally constituted, the named parties to the action were:

The original Particulars of Claim were short and inadequate, as is recognised by the Claimants’ attempts to improve them by substantial reamendment.

On 21 June 2013 Master McCloud struck out the claim against OM. The order recorded that “Upon it appearing that the Claimant has (despite request from the Second Defendant) failed properly to serve complete Particulars of Claim in accordance with Court rules, of the courts’ own motion: … upon it being the case that this claim was issued after 1 April 2013” the claim against OM was struck out. No further reasons for the decision are available. The Court has been told that Master McCloud was the Practice Master on 21 June 2013 and that the Order correctly recorded that the Master’s decision was made of the court’s own motion (i.e. without an application or request being made by OM). Master McCloud’s order was not brought to the attention of the Claimants promptly. When it was, they issued an application to set it aside. On 31 July 2013, Ramsey J ordered that the action should be transferred to the TCC. He made additional orders as follows:

The Claimants issued an application notice on 20 August 2013 asking for permission to amend the Particulars of Claim. However, their proposed amendments have gone through a number of iterations including an amended Particulars of Claim dated 3 June 2013, a document entitled Re-amended Particulars of Claim (though no permission for amendment has yet been given) dated 19 August 2013, and a further document, also entitled Re-amended Particulars of Claim dated 9 September 2013. At the hearing on 19 September 2013, counsel for the Claimants confirmed that he was asking permission to amend in the terms of the 9 September 2013 document. I shall refer to the 9 September document as “the Amended Pleading”.

One of the features of the Amended Pleading is that it deleted Novae Underwriting Limited and proposed to join Thames Water Utilities Ltd [“Thames”] as fourth Defendant. Thames was informed of the application shortly before the hearing. A solicitor’s representative attended with a watching brief but took no part in the hearing.

Two further features of the proposed amendment may also be noted at this stage:

At the hearing on 19 September 2013, the Claimants applied for permission to amend and to set aside Master McCloud’s order. OM opposed the Claimants’ applications as against it. Newham and ASB opposed the applications to amend and themselves applied to strike out the claims against them.

For convenience, I shall deal with the claims against each Defendant in turn. Before doing so, it is necessary to identify the roles of the parties in a little more detail. The factual background is derived from witness statements from Mr Huka and from Mr Mukadaya on behalf of Newham, Ms Ferguson on behalf of OM and Mr O’Shea on behalf of ASB and is uncontroversial.

On 29 May 2001 Newham granted Barratt Homes Limited [‘BHL’] a 130 year lease of the entire Building of which the restaurant formed part of the ground floor. Clause 3.4.1. of the lease contained a full tenant’s repairing covenant. On 18 May 2005, BHL assigned the lease to Peverel Freeholds Limited, which on 29 November 2007 assigned it to Peverel Properties Limited, which has since been renamed as Proxima.

On the same day, BHL sublet back to Newham the ground floor of the building for a term of 130 years less 1 day. Under the second schedule to the sublease the premises demised to Newham excluded service media which did not serve exclusively the demised premises; and they also excluded the main structure of the building. The sublease therefore demised no interest in the upper floors to Newham. Clause 4.2(a) contained an insurance clause whereby BHL covenanted to insure the building against loss or damage by “storm or tempest flood bursting or overflowing of water tanks apparatus or pipes” and if any part of the demised premises was damaged by any of the insured risks as soon as practicable to repair and reinstate. Under clause 4.5, BHL covenanted to carry out the services in the fifth schedule. These services included keeping in “good and substantial repair order and condition” the service media in the common parts as defined. So the service media above the ground floor were Proxima’s responsibility.

On 5 August 2008 Newham sub underlet unit 2 on the ground floor of the building to CSL for a term of 20 years at an initial rent of £95,000.00 per annum plus a service charge and insurance rent. By clause 3.1 CSL covenanted to pay the rent “and must not exercise or seek to exercise any right to claim or withhold rent, or any right or claim to legal or equitable setoff”. Clause 3.4.1. contained a full tenant’s repairing covenant subject to an exception for damage caused by the Insured Risks, which were defined as the risks insured under the Head Landlord’s insurance of the Building. In addition, by clause 5.3, CSL covenanted to insure the decorations, fixtures, fittings and equipment in the demised premises against the Insured Risks “in so far as not covered by the insurance maintained by the Head Landlord”. The council covenanted by clauses 4.1 and 4.3 to provide quiet enjoyment and to enforce the covenants of the sublease between BHL and Newham “on the request of and at the expense of” CSL. There was a standard forfeiture clause.

CSL experienced financial difficulties and was placed in administration in 2010 with Mr Alan Fallows being appointed administrator on 30 June 2010. On 23 December 2010 Newham granted a license for CSL to assign the sub-underlease to CSG. By clause 3.1 of the license to assign CSG covenanted to pay arrears of £69,307.00 within six months by instalments. The Marchés guaranteed the payment of rent and arrears by CSG. CSL assigned the sub-underlease to CSG on the same day, 23 December 2010.

On 3 December 2012 Newham re-entered the CSG property and forfeited the lease. As at that date CSG owed in excess of £58,000.00 in respect of rent and service charges.

The applicable principles are well known and do not require to be set out in detail here. The Court will only strike out a statement of case if it discloses no reasonable grounds for bringing the claim: CPR3.4(2)(a). That may include a statement of case which is unreasonably vague, incoherent, scurrilous or obviously ill-founded and other cases which do not amount to a legally recognisable claim. Similarly, the Court may grant a Defendant summary judgment when satisfied that the claimant has no real prospect of succeeding on the claim or issue in question and there is no other compelling reason why the case should be disposed of at a trial: CPR24.2(a)(i). On such applications, the Court shall not conduct a mini-trial of disputed facts, but may take into account facts that are uncontroversial. I approach the Defendants’ applications on this basis. When considering whether to overturn Master McCloud’s order, one of the matters to be borne in mind is the need to enforce, so far as practicable, compliance with rules, practice directions and orders; but I approach the Claimants’ application to amend as against all of the Defendants on the basis that, if there is a real and substantial claim disclosed by the Amended Pleading, the Court’s first instinct should be to enable real and substantial disputes to go forward.

In his skeleton argument for the Claimants, counsel submitted that striking out the claims would be a breach of the Claimants’ rights under Article 6 on the basis that it would deprive the Claimants of a fair and public hearing before an independent tribunal. If the stringent criteria for striking out a claim or granting summary judgment to the Defendants are satisfied, the Claimants will have had a fair and public hearing before an independent tribunal and no breach of Article 6 will occur.

CSG is the assignee of CSL’s sub-underlease. Newham is its immediate landlord. Proxima is the superior landlord. The assignment to CSG took place on 23 December 2010. It is therefore clear that it can have no claim based upon the sub-underlease before that date. The licence to assign recorded that CSL had not used the demised premises since 28 September 2010. There is no evidence that CSG started using the demised premises before the date of the assignment but, for the purposes of this judgment, I assume in CSG’s favour that it started occupying and running the restaurant on 28 September 2010.

The Amended Pleading describes the Marchés as assignees of the sub-underlease. It is plain on the face of the license to assign and the sub-underlease that the assignment was to CSG and not to the Marchés. They are therefore not parties to the sub-underlease and are merely shareholders and directors of CSG who have guaranteed its debts. They do not allege that they otherwise have any proprietary interest in the restaurant or that they either occupied or operated it: that was done by CSL and CSG. In these circumstances the facts and matters pleaded in the Amended Pleading are not capable of supporting a cause of action giving the Marchés a right to claim damages from any of the proposed Defendants. The claims outlined in the Amended Pleading will therefore be struck out so far as they are made by the Marchés.

The rest of this judgment concerns the claims being advanced by CSG.

The Amended Pleading advances the following case against Newham:

The leaking drainpipe is pleaded by the Claimants to be 8 storeys above the restaurant: see paragraph 4. It is therefore plain that it is outside the area demised back to Newham by BHL and that Newham has no control over it. No covenant in the sub-underlease imposes responsibility upon Newham for the condition of the drainpipe or for water coming from it. The drainpipe was within Proxima’s area of responsibility and appears to have been subject to Proxima’s insuring obligations under the sub-lease. It follows that the Claimants’ remedies, if any, were to call on Newham to enforce the covenants in the BHL/Newham sublease (at CSG’s expense) pursuant to Newham’s covenants in the sub-underlease or to have insured against damage itself. If a claim in nuisance lay against anyone it may have lain against Proxima, from whose property the water appears to have escaped. But it does not lie against Newham.

The Claimants allege that the leakage from the drainpipe constituted breaches of implied terms of the sub-underlease: see paragraphs 5 and 10. However, the allegations in both of these paragraphs rest on the misconceived notion that the drainpipe was Newham’s responsibility. There is an additional objection to the claim as alleged in paragraph 10: the implied term that is there alleged goes far beyond anything that could reasonably be implied into the sub-underlease. Leaving aside the confused language that is used, to imply a term that a landlord will do everything in his power to facilitate, encourage or promote his tenant’s commercial interests would be highly unusual in the context of a lease of commercial premises. No authority or text-book has been identified by the Claimants’ counsel that supports the existence of such a term, and I know of none. Furthermore, no additional or special facts are pleaded or identified by the Claimants that would lead to implication of such a term adopting any of the normal criteria for implying terms into commercial (or other) contracts. In my judgment the Claimants have no prospects of establishing the existence of such a term in this case.

The Claimants seek to avoid the consequences of their full repairing covenant by the allegation in paragraph 7 that because the leak fell within the exceptions to clause 3.4.1 of the sub-underlease it was “as such” the responsibility of Newham to repair it. As appears from the structure of the various levels of tenure that I have outlined above, there is nothing in this allegation. Nor is there anything in the allegation in paragraph 8 that the sub-underlease was transformed into a licence on 23 December 2010. It is plain beyond argument that it was not: on the contrary, the sub-underlease was assigned as such on that date and CSG occupied the restaurant as tenants under that sub-underlease until forfeiture.

In paragraph 9, the Claimants allege that Newham acted negligently in attempting to repair the water leakage from the drainpipe. This allegation fails for two reasons. First, there is no evidence that Newham attempted to remedy the leak of water from the pipe on the upper levels of the building. Second, it was under no duty owed to CSG to do so. The allegations of negligence relating to the failure to remedy the leak from the upper-level drainpipe are therefore bound to fail.

It follows that the Claimants’ allegation in paragraph 13 that re-entry was wrongful or unfair because the closure of the restaurant was caused by negligence on the part of Newham in failing to stop the pipe leaking must also fail. It would also fail in any event because of the provision in the sub-underlease that there shall be no set-off.

I would therefore refuse permission to amend and would strike out the Claimants’ existing allegations against Newham in relation to the leaking drainpipe.

I have already rejected the existence of the implied term pleaded at paragraph 10. To my mind, the term alleged at paragraph 11a is equally misconceived, for much the same reasons. No authority or text book that supports the implication of such a term has been identified and I know of none. To my mind, the suggestion that a term should be implied in a lease of commercial premises that “Newham would not do anything that would deter business to the claimant” is unsupportable, not least because of its breadth and vagueness. I therefore reject the claim as advanced in paragraph 11 in its entirety.

Paragraph 9 alleges negligence on the part of Newham in failing to remove a pool of water outside the restaurant. The presence of the pool of water is also alleged to have been dangerous and to have constituted a nuisance. Both of these allegations are without substance. Photographs have identified the existence of a pool of water on the concourse outside the restaurant. The Amended Pleading does not allege that the area where the water lay was under the ownership or control of Newham. Even if it was, a claim in negligence will fail because there is no allegation that the water (which is alleged to have been and to have remained outside the restaurant) caused any physical damage to the Claimants’ property. Any claim in negligence must therefore be solely in respect of pure economic loss in the absence of physical damage, and will fail. The claim in nuisance faces the insuperable hurdle that there is no allegation of an escape from Newham’s land to the Claimants’ land and no other allegation of facts that would support the existence of a cause of action in nuisance. Newham also submits that the photographs show that the allegation that the pool of water was dangerous is fanciful. I tend to agree, but would not dismiss this head of claim on that ground alone, since the photographs available to the Court may not tell the full story.

Counsel for the Claimants properly accepted in his oral submissions that the allegation of malice he had pleaded in paragraph 12a of the Amended Pleading could not be justified; and he withdrew it. Photographs show clearly that, although the trees that were planted did to some extent obscure the view of the frontage of the restaurant from the road, the effect was partial and the restaurant was still clearly visible along much of its length and from significant stretches of the road. However, the compelling and complete response to this allegation is that the trees were planted as part of a wider Public Realm Project that was carried out to prepare for the 2012 Olympics. Planning permission was granted for them on 10 June 2010 by the London Thames Gateway Development Corporation acting on the basis of a recommendation from the Director of Planning who recommended them as providing a tree barrier to the road that would attenuate wind and noise and on the basis that they would greatly contribute to the regeneration aspirations of Stratford Town Centre. A further objection to this head of claim is that it is said to be a further breach of the alleged implied term not to deter business of the Claimants, which I have held to be unsupportable. The claim based upon paragraph 12a is therefore bound to fail because it is unsupportable as a matter of law or of fact.

Newham responds to the claim in paragraph 11b by pointing to its letter in response to a letter from Mr Marché on 27 April 2009 about signage at the restaurant. It is therefore evident that this dispute predated the assignment to CSG, though it may be the intention of the Amended Pleading to allege or infer that the dispute continued thereafter. The letter records that two planning and advertising applications had been made in relation to the sign in question which had both been rejected. No relevant challenge was brought against those public law decisions. The Claimants asserted in submissions that a letter had at some stage been sent to them suggesting that planning permission had been granted. However, while there is a reference in Newham’s letter that is consistent with that having happened, there is no evidence that the decision itself was changed. The most that can be drawn from the evidence that is available to the Court is that an incorrect notice was sent out which said that planning permission had been granted – but the notice also said that advertising consent had been refused. There was therefore neither a decision nor a notice which gave overall permission.

In these circumstances, the correct response to the decision not to grant permission would have been to challenge it as a matter of public law. That was not done. It is not open to the Claimants now to allege that they have a private law remedy arising out of the decision.

It is not clear whether paragraphs 2 and 23 are talking about the same thing. On the assumption that they were not:

For these reasons, the claims against Newham have no reasonable prospects of success. I therefore refuse permission to amend and strike out the claims against Newham.

The Amended Pleading advances the following case against OM:

The Amended Pleading suffers from the obvious defect that OM was not the superior landlord. Yet most if not all of the Claimants’ allegations are founded on the misconceived assertion that OM was the superior landlord and that as such it owed duties to the Claimants. The pleading against OM is also exceptionally vague and unclear, particularly in relation to complaints about the satellite dish where it is alleged that it was the Marchés (and not the operating company) who were prevented from erecting the satellite dish.

Even if this fundamental defect were to be ignored, the Amended Pleading does not disclose an arguable basis for a claim directly against the superior landlord in negligence, save possibly in relation to the leaking of the pipe on the upper storeys which, at least arguably, is alleged to have caused physical damage to the restaurant. As it is, no proper basis is established by the Amended Pleading to support a case that OM (as opposed to Proxima) was negligent or committed a nuisance in relation to the escape of water since the Amended Pleading does not allege facts or matters that are sufficient to establish a duty owed to CSG by OM to remedy the pipe.

A claim in nuisance or negligence arising out of the presence of the pool of water is bound to fail for the same reasons as the similar claim against Newham.

The complaints about the satellite dishes at paragraph 14-16 appear to be founded upon a relationship of landlord and tenant. Otherwise, they are too vague and lacking in particularity about precisely what OM did to prevent the erection of the satellite dishes and why that should be regarded as wrongful so as to give rise to a private law right to claim damages for financial loss. In some circumstances it might be relevant to consider whether this failing might be remedied by amendment; but I bear in mind that the Amended Pleading is the Claimants’ fourth attempt to formulate their case, which gives no confidence that a further attempt would improve things.

Paragraph 17 does not disclose a cause of action. It is lacking in any form of particularity that could lead to a finding that merely supporting a campaign to prevent the Claimants from erecting a sign could be “wrongful” so as to give rise to a private law right to claim damages. The same is true of paragraph 18 which is even vaguer: no particulars are provided that could lead to a finding that leading a campaign of residents to sign a petition could give rise to a private law right to claim damages. Equally, the allegation about the concierge in paragraph 21 appears to lead nowhere: if it is intended to lay the foundation for an allegation that OM took on the responsibilities of either the superior landlord or of Newham as immediate landlord, it is inadequate for the purpose.

For these reasons the claims against OM have no reasonable prospects of success. No useful purpose would be served in reversing the order of Master McCloud since, if it were to be reversed, I would then refuse permission to amend and strike out the claim against OM.

The Amended Pleading advances the following case against ASB:

In the course of submissions it was suggested that paragraph 27 of the Amended Pleading included additional allegations of negligence against ASB. However, that paragraph is in fact directed to making allegations of negligence against Thames and I do not consider it further here. I merely record that if it were suggested that it related to ASB, my conclusion would be that the facts and matters alleged did not disclose a good cause of action against ASB. There was therefore no reason why ASB should have paid the sums demanded, as alleged in paragraph 24.

The claim in negligence is a claim for pure economic loss that is not consequential upon physical damage. It is bound to fail. The claim in nuisance fails for the same reasons as the similar claim against Newham.

It is not clear what the allegation of agency in paragraph 26 is intended to add or achieve. There appears to be no foundation for the allegation in any event, and it is denied by Mr O’Shea on behalf of ASB. His denial appears to be well founded and the Claimants have not advanced any reason to doubt it. In any event, the facts and matters alleged in paragraph 26 are inadequate to support a good cause of action supporting a private law claim for damages against ASB.

For these reasons I would hold that the claims against ASB have no reasonable prospects of success. I would therefore refuse permission to amend and strike the claims out as against ASB.

I have identified compelling reasons why the specific allegations that the Claimants now wish to advance are without foundation. In my judgment the specific claims and the Amended Pleading as a whole (as against the first three defendants) are characterised by a failure to analyse the true nature of the claims that the Claimants might have or to plead the claims that have in fact been advanced with the clarity and particularity that are required of a party attempting to remedy the acknowledged inadequacies of its original pleadings. It is a well-established principle that has been recognised from long before the introduction of the CPR that a party who seeks to amend its statement of case is under an obligation to formulate its amendments clearly and coherently, so that the Court and the opposing parties may understand the true nature of the case that is being brought. The continuance of the principle is central to the CPR objective of enabling cases to be dealt with justly and with appropriate allocation of resources. The Amended Pleading singularly fails to comply with those requirements.

I strike out the claims against Newham and ASB. The application to reverse the order of Master McCloud is refused. There will be judgment for Newham and ASB against the Claimants.

I indicated at the end of the hearing that, if I was going to strike out the claims against the first three Defendants, I would dismiss the application to amend to join Thames. Joining Thames to an action where the great majority of the Amended Pleading was being struck out would leave a limping document that would require extensive further changes to make a claim against Thames coherent. If the Claimants wish to bring a claim against Thames they should do so by a fresh action that is not hampered by the residue of this one. The application to join Thames is therefore refused.