Leasehold enfranchisement

Citation

Waterson & Rosalind Lee, G. (2002), "Leasehold enfranchisement", Property Management, Vol. 20 No. 4. https://doi.org/10.1108/pm.2002.11320dab.001

Leasehold enfranchisement

Leasehold enfranchisement

John Lyon's Charity v. Shalson [2002] 17 EG 156

The issue to be determined in this case was whether certain apparently rather extensive alterations which had been undertaken by the leaseholder to the house in question over the preceding years were to be disregarded under s.9(1A)(d) of the Leasehold Reform Act 1967 for purposes of determining the amount to be paid by the long leaseholder for the acquisition of the freehold. Briefly, the long lease of the property had been granted in 1947. Shortly thereafter the original lessee had converted the property into five flats at his own expense. Subsequently the long lease of the whole property had changed hands on a number of occasions, and the various leaseholders had by degrees re-converted the property back into a single dwelling. The question was, were the works of re-conversion "improvements done by the tenant or his predecessors in title at their own expense" such as to increase the value of the house, and as such to be disregarded in valuing the property for the purposes of the 1967 Act? The Lands Tribunal had decided that the works done to the property for the purpose of re-converting it into a single dwelling were not improvements for the purpose of the Act, and should therefore not be disregarded.

The Court of Appeal agreed. The property fell to be valued at the date of the lessee's application to acquire the freehold, which application had been made in November 1997. The effect of the works which had originally been carried out to convert the property into flats as at November 1997 (taking into account the’state of the market at that time) would, if no further alterations had subsequently been carried out to re-convert the property into a single dwelling, have been actually to decrease or depress the value of the property. The effect of these later works was simply to undo the adverse effects (in valuation terms) of the earlier works which had been done to the property, and as such it would be inappropriate to regard them as "improvements". It followed, therefore, that the effect of these later works on the value of the property should not be disregarded for the purposes of s.9(1A)(d) of the 1967 Act.

As for the situation where the long lease in question was a lease for 90 years determinable upon the death of the tenant by the giving of "not less than one month's notice" either by the landlords or by the executors of the deceased tenant's estate, it was held by the Court of Appeal in Skinns v. Greenwood [2002] 14 EG 123 (CS) that this fell within the excluding provisions of s.3(1)(b) of the 1967 Act relating to leases, where a notice period of "not more than three months" applied to such a lease: in the words of the law report:

The 1967 Act was intended to give to tenants having leases of more than 21 years the right to acquire the freehold. Section 3(1) was meant to exclude from the Act tenancies that were genuinely intended to be determinable upon the death or marriage of the tenant … the purpose of section 3(1)(b) could be achieved only by construing it as covering not only leases under which there was an obligation to give less than three months' notice but also those where there was a right to do so … the tenant's lease in the instant case was of that type and was precisely the kind of lease to which section 3(1) was intended to apply …

Accordingly, the long leaseholder in this case did not have the right to insist upon purchasing the freehold.

As to the need for full and accurate completion of the prescribed form by lessees who are hoping to enfranchise, see: Speedwell Estates Ltd. v. Dalziel [2002] 02 EG 104, where the court applied the broad test set out in the earlier case of Mannai Investment Ltd v. Eagle Star Life Assurance Co. Ltd [1997] AC 749; (1997) 1 EGLR 57; (1997) 24 EG 122 and 25 EG 138 (referred to further below) in deciding that the notices were so seriously defective that they were invalid.

As to the necessity for the landlord fully to set out the information required to be contained in the landlord's counter-notice (in this case under the Act of 1993) see: Burman v. Mount Cook Land Ltd [2002] 06 EG 156, where the Court of Appeal held that the counter-notice was invalidated by the landlord's failure to specify whether or not he admitted the lessee's claim and which (if any) of the lessee's proposals the landlord accepted, including in particular whether or not the landlord accepted the proposal that the terms of the new extended lease should be the same as the terms of the old lease mutatis mutandis.

Business tenancies

Ambrose v. Kaye [2002] 15 EG 134

The questions raised in this case turned essentially on matters of procedure. The landlord was objecting to the grant of a new lease on the basis that he wished to use the premises for the purposes of his own retail textile business, which already occupied certain of the adjacent properties and was in need of the additional retail space which would be available, if the landlord were able to recover possession of the premises in question. The business was being carried on by a limited company, A & B Kaye Textiles Ltd. Section 30(3) of the Landlord and Tenant Act 1954 provides that the business carried on by a company may be regarded as a business being carried on by the landlord within the meaning of s.30(1)(g) of the 1954 Act, provided that the landlord has a controlling interest in the company concerned. At the hearing, and after the close of evidence and in the course of closing submissions, the tenant's solicitor-advocate took the point for the first time that no evidence had been offered to indicate that the landlord did in fact have a controlling interest in the company. The hearing was adjourned briefly and during the adjournment the landlord's wife transferred to him sufficient of her shares in the company to provide him with the requisite controlling interest. The judge at first instance then held that the landlord had made out his case and made the court orders which followed from that decision. The tenant appealed. The question on appeal was: should the judge have allowed the landlord time to alter his position and then to give further evidence based on the newly changed circumstances after what had been, originally at least, the close of the landlord's case? Yes, said the Court of Appeal: the point had only been raised by the tenant's advocate towards the very end of the hearing; if it had been raised earlier, it could and no doubt would have been dealt with earlier, if necessary by way of a preliminary hearing on a point of law, in which case by the time of the hearing it would simply not have been an issue.

As to the situation where the tenant's previous landlord had in effect tolerated regular late payments of the rent when it fell due, over a period of years in fact, and as to whether such continued late payments could subsequently be used as the basis of refusal by that landlord's successor in title as a ground for refusing to grant a new tenancy under the Act of 1954, see: Hazel v. Akhtar [2002] 07 EG 124: not really, said the Court of Appeal: in effect the new landlord was stopped from relying as a "misdeed" on the continuation of a practice on the part of the tenant which had previously been tolerated, at least until the landlord had given the tenant clear notice that a practice which had been acceptable in the past was acceptable no longer.

As to the situation where the business tenant, having initially applied for a new lease in response to the landlord's s.25 notice, and having then applied to the court for the grant of a new tenancy, subsequently had a change of heart and vacated the building two weeks or so before the date on which the old lease would have expired, see Single Horse Properties v. Surrey C.C. [2002] 14 EG 126 (CS), where the Court of Appeal held, contrary to the landlord's contention and to the decisions of the courts below, that the tenants were only liable for rent up to the term date of the original lease. The tenants no longer being in possession of the building on the expiry date of the original lease, they accordingly fell entirely outside the terms of the 1954 Act, so that the provisions of the Act under which the tenant had the right to terminate a business lease as defined in the Act on the giving of three months' notice (which by implication would have entitled the landlords to three months' rent in lieu of notice) simply did not apply in this instance.

Accuracy of notices

Ravenseft Properties Ltd v. Hall; White v. Chubb; Kasseer v. Freeman [2002] 11 EG 156

As readers will be aware, prior to the coming into effect of the Housing Act 1996, it was normally necessary for the landlord of residential premises, who was intending to grant an assured shorthold tenancy, to serve notice on the tenant to that effect before the parties entered into the tenancy agreement, and under the relevant regulations such notice had to be in the prescribed form or in "a form substantially to the same effect". In each of these three cases the courts had to consider whether errors or omissions in the form of notice served on the tenant prevented it from coming within the terms of the Act and the regulations. In Ravenseft v. Hall the start date of the tenancy was mis-stated; in White v. Chubb the end date of the tenancy was mis-stated; in Kasseer v. Freeman the guidance notes, which were part of the prescribed form, were incorrect. Nonetheless, in each of these three cases the Court of Appeal held that the notices were valid. The court was satisfied that the errors in each case had not been such that – to adopt the approach taken by the court in Mannai Investment Co. Ltd v. Eagle Star Life Assurance Co. Ltd [1997] AC 749; (1997) 1 EGLR 57; (1997) 24 EG 122 and 25 EG 138 "taking into account the relevant contextual scene", the purport of the notice would not be quite clear to any reasonable person reading it. As Lord Clyde had said in the Mannai case, the appropriate standard of reference in a case such as these is that of the reasonable person "exercising his common sense in the context and in the circumstances of the particular case’… "

Service charges

Heron Maple House Ltd v. Central Estates Ltd [2002] 13 EG 102

This case concerned the interpretation of the provisions of s.20 of the Landlord and Tenant Act 1985, as amended by the provisions of the Landlord and Tenant Act 1987, which, as amended, requires that the landlord of "a dwelling" in certain cases furnish the tenant(s) of the dwelling with details of estimates of proposed works and in certain cases requires further that the landlord consult with the tenant(s) before implementing such works. In this case the building in question was Maple House, in Tottenham Court Road, which housed the furniture store Maples, together with a mixture of other commercial, office and residential accommodation, the latter comprising a number of flats. The freehold of the building at the material time was owned by the claimant Heron Maple House Ltd, and the residential parts of the block comprising the flats, together with the lifts, lift-shafts, staircases and hallways etc. which were needed to gain access to them, together with the roof of the building, were let under a head-lease to Central Estates Ltd, and Central in turn sub-let the same parts of the block to Camden London Borough Council. Both the head-lease to Central and the sub-lease to Camden contained service charge provisions providing for reimbursement to the landlord of a fair proportion of the moneys expended by the head-landlord on maintaining the block as a whole, as certified by the landlord's surveyor. In 1999 the head-landlord had carried out substantial works to the building and the landlord's surveyor certified the amount due to the landlord as $17,665.27p. In the words of the law report: "It is said that this is the first that the tenants had heard of the works, or their cost’…" and it was agreed for the purposes of the court action that neither the head-landlord nor Central (as the mesne landlord) produced estimates or gave notices or did anything else that they would have been required to do by s.20 of the 1985 Act. The question which arose was whether the head-landlord was obliged in this instance to abide by the requirements of s.20.

Yes, said the court: the statutory provisions give rights to the tenant of a dwelling; "dwelling" as defined by the 1987 Act means:

A building or part of a building occupied or intended to be occupied as a separate dwelling, together with any … appurtenances belonging to it or usually enjoyed with it.

The 1985 Act, as amended by the 1987 Act, did not refer to tenants who were tenants of a dwelling and of nothing else but simply to tenants who were tenants of a dwelling; both Central and Camden fell within the scope of such wording and accordingly were entitled to the protection of the provisions set out in s.20.

Landlord's covenant to repair

O'Connor v. Old Etonian Housing Association Ltd [2002] 14 EG 127

This case concerned the proper ambit or extent of the landlord's implied covenants under the landlord's implied repairing covenants set out in s.11 of the Landlord and Tenant Act 1985. Basically, the implied statutory covenants require the landlord of residential premises let for not longer than a seven-year term to maintain and repair the structure and exterior of the building and to keep in repair and proper working order certain of the internal equipment and fittings including "… the installations … for the supply of water, gas and electricity …"

The property concerned in this instance was a block of flats, and the problem which arose was that, due to a fall in pressure from the external water supply which occurred between 1992-1998, the small-bore pipes which the landlord had installed in the premises in 1986-1987, prior to the commencement of the tenancies in question, were no longer sufficient to carry water to the top floor of the block. The situation was remedied in 1998, when the water company constructed a new pumping station to deal with the problem.

The question was, of course, whether the landlord was under a duty to ensure that "The installations … for the supply of water … " were, in the words of the law report, "physically or mechanically capable of supplying water to the flats" in question.

In the Mayor's and City of London Court, Judge Marr-Johnson had held that the landlord was under no such obligation: the pipes had been adequate for the task prior to the drop in water pressure and, since nothing had happened to prevent an adequate supply of water being delivered to the flats except the drop in water pressure, for which the landlord was not itself responsible, there had been no failure on the part of the landlord to keep the equipment in proper working order, as required by the 1985 Act. Blackburn, J. on appeal to the High Court, came to the contrary conclusion, on the basis that the landlord could have had works carried out to deal with the problem. The matter then went to the Court of Appeal. The Court of Appeal came down somewhere in between the two. In the words of Lord Phillips MR:

At the commencement of the tenancy, the installations for the supply of water, gas and electricity must be so designed and constructed as to be capable of performing their functions … [However] the characteristics of the supply of water, gas and electricity are all capable of varying, whether by accident or design. An obligation that required the landlord to provide installations that would function, regardless of the vagaries of supply, would be manifestly unreasonable. Equally unreasonable would be an obligation that enabled the landlord to supply installations that would accommodate no changes in the character of supply after the date of installation, even though some variations were reasonably to be expected … [What, therefore, is the situation where], after a tenancy has commenced, a variation occurs to the supply that could not reasonably have been anticipated but that requires some alteration to installation if the installation is to function properly? Is the landlord obliged to make that change or modification?Here … we do not think that it is possible to give a categoric answer. An unanticipated change in the nature of supply of a utility may occur in a variety of circumstances. Sometimes the change is imposed deliberately because of some scientific or technical advance – a change in the voltage of electrical supply, or the change from coal gas to natural gas are examples. In such circumstances, the change is likely to be introduced in a manner and subject to conditions under which it is reasonable to expect customers to modify their installations in order to accommodate the change. In such circumstances, business efficacy would suggest that the landlord's duty to keep installations in proper working order must involve the obligation to make the modifications necessary to enable the installations in question to continue to function. In other circumstances, the change may be forced on the undertaker by some unforeseen event – the collapse of a reservoir or a drought – resulting in a drop in water pressure. If the change is likely to be short-lived, the cost of modifying installations in order to accommodate it may be disproportionate. Where the changed circumstances are likely to persist for a lengthy period, it may seem unreasonable for a landlord to leave his tenants’deprived of satisfactory supply for want of relatively modest expenditure on modifications …

In this case, however, the Court of Appeal did not feel that there had been sufficient evidence available at the original hearings for either of the courts below properly to have arrived at a definite conclusion either way: in consequence the landlord's appeal was allowed.

As to an express covenant in similar terms, but in this case to keep "facilities for the collection of refuse … in repair and proper working order … " see: Southwark L.B.C. v. Long [2002] 15 EG 133 (CS), where the court held that the covenant did not require the landlord to install new facilities, if the existing facilities (a system of rubbish chutes and bins) came to appear inadequate to deal either with the volume of rubbish or with the large bin bags which the tenants were in the habit of using to dispose of their rubbish. However, the council was in breach of its separate covenant to take reasonable steps to keep the estate and common parts tidy and was also liable for the nuisance which resulted, or so it would appear, from a combination of the inadequacy of the rubbish disposal facilities, on the one hand, and from the failure on the part of the council adequately to monitor the contractors employed to keep the estate and common parts clean and tidy, as required by the landlord's express covenants.

Negligence

Baxall Securities Ltd & &~38; Antr v. Sheard Walshaw Partnership and Otrs [2002] 17 EG 158 CA

The case concerned the design of a valley guttering on the roof of an industrial unit. The appellants were the firm of architects which had been employed to design and construct the unit in the early 1990s. The respondents were lessees of the unit. The unit was subjected to flooding in May and September 1995, causing substantial losses to the respondents. They brought action in negligence against the architects, alleging that the valley gutter between the two pitched roofs of the unit had two latent defects; the absence of overflows and a shortfall in design capacity.

At first instance the judge found that the architect ought to have questioned the specialist roof contractor's designs. He held that the appellant was not liable for the first flood, because this was caused partly by blockages of the guttering and partly by the absence of overflows, which were both patent defects that should have been spotted by the lessee's surveyor. He found the architect liable for the second flood, because this was attributable partly to the absence of overflows and partly to the latent shortfall in the design. However, he also found that the absence of overflows ought reasonably to have been discovered by the lessee's surveyor. The architect appealed against liability for the second flood and the surveyor cross-appealed.

David Steel, J. gave the unanimous opinion of the Court of Appeal. Their Lordships dismissed the respondent's cross-appeal. The respondent's expert had given evidence that it was reasonable for their surveyor to have missed the absence of overflows, because torchlight was needed to see the ends of the gutters. This argument was dismissed on the grounds that a surveyor exercising reasonable diligence would have carried out this type of inspection, particularly when, as Steel J pointed out, the surveyor:

… had the inestimable advantage of conducting its survey when aware that there had been flooding of the building by way of the valley gutter.

Yet, even after the first flood in May, the problem was still not spotted and no argument was ever presented to the court as to why it remained reasonable at that stage for the absence of overflows to be still undiscovered. Thus their Lordships held that the defect in the form of the absence of overflows should have been discovered by a surveyor acting with reasonable care prior to the lease and certainly after the first flood. The cross-appeal was therefore dismissed.

A rather novel argument was raised on behalf of the architect that the design was not in fact defective. Their expert gave evidence that the capacity required for the gutters was 150mm per hour of rainfall and the gutters were only designed to take 75mm per hour. However, if one takes the capacity of the gutter and overflows together, they were capable of dealing with 150mm per hour of rainfall; thus the design was not defective. David Steel J. was unimpressed with this argument, because, as he pointed out, according to the British Standard the overflows are to allow for flow "in excess of design rate."

A second argument for the architect was that the design fault was not in fact latent, because it was discoverable on the kind of inspection that a buyer or lessee of property could be expected to carry out or to commission. Thus there was no duty of care in respect of damage caused by the absence of overflows. David Lane J. clarified the concept of latent defects as follows:

… The concept of a latent defect is not a difficult one. It means a concealed flaw. What is a flaw? It is the actual defect in workmanship or design, not the danger presented by the defect’… To what extent must it be hidden? In my judgement, it must be a defect that would not be discovered following the nature of inspection to which the defendant might reasonably anticipate that the article would be subjected. There is … a question of degree … in the commercial context a defect would not be latent, if it had been reasonably discovered by the claimant with the benefit of such skilled third-party advice as he might be expected to retain.

And later:

… a defect is not latent if it is discoverable by the exercise of due diligence, whether or not due diligence was in fact exercised. Awareness of the danger (i.e. the propensity to flood) is not of itself consistent only with a flaw. The relevance of such awareness is the ability to discover the actual defect by the exercise of due diligence.

Thus the defect is patent, whether or not a surveyor is actually engaged, and, if engaged, whether or not the surveyor performs his task competently. Consequently, actual knowledge of the defect, or, alternatively, a reasonable opportunity for inspection that would unearth the defect, will usually negate the duty of care, or at least break the chain of causation, unless it is reasonable for the claimant not to remove the danger posed by the defect and to run the risk of injury.

The Court of Appeal refused to follow the decision of the trial judge that the architect was liable for the second flood on the ground that it was caused partly by the under-design of the gutter and partly by the absence of overflows. Their Lordships felt that it was not possible to say that there were two contributing causes of the damage resulting from the second flood, when the remedy was the same in both cases, i.e. the provision of overflows. Thus the sole effective cause of both floods was the absence of overflows. The chain of causation between the architect's error with regard to the provision of overflows and both floods was therefore broken. The architect was not liable for either flood.

The appeal was allowed.

Hamilton and Another v. Papakura District Council and Another, The Times, March 2002 Privy Council

This was an appeal by Griffiths and Mary Hamilton from the decision of the New Zealand Court of Appeal to dismiss their claim for damages against Papakura District Council and Watercare Services Ltd.

Mr and Mrs Hamilton grow cherry tomatoes hydroponically. They claimed that their tomato crop was damaged by traces of the hormone herbicide triclopyr, which were present in their town water supply. The water was sold to the Hamiltons by Papakura, who obtained it from Watercare, the main bulk water supplier for the Auckland area, which included Papakura. The damage had occurred at two of the Hamilton's properties that were supplied by the town water supply but not at a third, which was not.

Watercare's contractors had sprayed gorse in part of the catchment area for the lake, which supplied the town's water with a spray containing the herbicide. The claim was that the herbicide had contaminated the water in the lake and that contamination had damaged the tomatoes.

The claims against Papakura were in contract and negligence and against Watercare in negligence, nuisance and under Rylands v. Fletcher [1868] L.R. 3H.L. 330.

The Hamilton's claims were dismissed by both the New Zealand High Court and the Court of Appeal. The Court of Appeal had proceeded on the premise that it had been shown as probable that the damage was caused by triclopyr contamination of the range of up to 10 parts per billion. The maximum amount of triclopyr allowed under the 1995 New Zealand Drinking Water Standards, which were developed with the assistance of an expert committee and extensive use of the World Health Organisation's guidelines for drinking-water quality, was 100 parts per billion.

The Hamilton's contract claim against Papakura was that it was in breach of an implied term in its contract for the supply of water to them that it was suitable for horticultural use. This was based on S16(a) of the Sale of Goods Act 1908 (New Zealand), which corresponds with S14 of the English Sales of Goods Act 1893. This provides that there is no implied condition as to quality or fitness for any particular purposes of goods supplied, unless the buyer expressly or by implication has made known to the seller the particular purpose for which the goods were required, so as to show that the buyer relied on the seller's skill and judgement and the goods were of a description which it was in the course of the seller's business to supply. The Hamiltons therefore needed to show that they relied on Papakura's skill and judgement and that Papakura knew that they were doing so. Counsel for the Hamiltons argued that their reliance could be inferred from the buyer choosing a seller whose business was to sell goods of the kind required and he relied on Ashington Piggeries Ltd v. Christopher Hill Ltd [1972] AC 441 for support.

Sir Kenneth Keith, who delivered the judgment of the majority, distinguished the Ashington case, because there the buyer had chosen the particular supplier and had specifically made known that the food to be sold would be used for feeding mink and that the expertise of the sellers was being relied on not to supply food that would be toxic to mink. In this case Papakura was in the business of selling only one product to all its customers on the basis of a standard charge. The only possible implied term in the contract with users was the statement in the standard water supply by-law that the water be "potable and wholesome". The water was fully treated before Papakura received it in their system and they had no ability to add anything to or subtract anything from it. It did not own or control the reservoirs and only had the water in this system for a matter of hours. It carried out all the required tests but was not required to test for herbicides. There was no suggestion that they were in breach of any of the drinking-water standards of any statutory requirements. It would never have occurred to Papakura that the Hamiltons were relying on it to provide water of the quality that they were contending and there was no evidence that it had ever occurred to the Hamiltons that drinking-water might not be suitable for their crops. Thus no question of reliance ever arose. Furthermore, even if the Hamiltons had made known their requirements Papakura would probably have said that it could not give the required undertaking and the Hamiltons would have known that. To fulfil the special requirement of an individual customer Papakura would have had to supply all its customers with water of a quality higher than that required by statute and would have had to charge them accordingly. That would make no commercial sense. Thus the contract claim failed.

The Hamiltons claimed that both Watercare and Papakura had breached their duty of care to supply water that was fit for the purposes for which it was intended, to monitor the quality of the water to determine that it was fit for the purpose and to warn them that the water supplied might not be fit for the purpose.

Watercare claimed in its defence that the water they supplied complied with the statutory standards and denied that they owed the Hamiltons any greater duty than they owed to other customers. It denied that there was any duty to ensure that the water it supplied was fit for any particular horticultural use. The duties claimed against Papakura related to fitness for any purpose for which the water might be used rather than to any specific horticultural use.

The Privy Council felt that the broad scope of the alleged duties alone was a good reason for rejecting the claims in negligence, as they went far beyond the duty which those authorities actually met, which was founded on the drinking-water standards drawn from World Health Organisation guidelines and other international material and extensive consultation. They felt that it would impose extra costs on other general users, which did not relate to their need for pure potable water.

However, they also dismissed the claim on the basis of foreseeability. They felt that it was not reasonably foreseeable either by Watercare or Papakura that water containing levels of herbicide well below the concentration allowable for’human consumption would cause damage to cherry tomatoes grown hydroponically. Damage was foreseeable only when there was a real risk of damage, which would occur to the mind of a reasonable person in the position of the defendant. However, Watercare had been spraying in the catchment area and testing the water for many years without any damage occurring or any complaints.

Their Lordships concluded that to impose on Watercare and Papakura much higher duties than those with which they already complied and duties of an indeterminate extent would go far beyond what was just and reasonable in the circumstances.

Marcic v. Thames Water Utilities Ltd, The Times, February 2002 CA

For about ten years the claimant's garden was flooded by surface and foul water, which had caused damage to the fabric of his house. The flooding was the result of Thames Water's failure to carry out repairs to its sewers. Mr Marcic claimed damages in negligence, nuisance, breach of a statutory duty and under strict liability in Rylands v. Fletcher.

The trial judge dismissed all his claims, relying on the nineteenth century precedent Glossop v. Heston & Isleworth Local Board [1879] 12 ChD 102. However, Mr Marcic also claimed that his rights under Art. 8 (respect for private and family life, home and correspondence) and Art. 1 Protocol 1 (peaceful enjoyment of his possessions) of the European Convention on Human Rights had been breached. This claim was successful and he was awarded damages from 2 October 2000, the date on which the Human Rights Act 1998 came into force in the UK. The damages were intended to reflect the effect on the value of his home, as Thames Water would not be taking any steps in the foreseeable future to prevent further flooding.

Thames Water appealed against the award of damages and Marcic cross-appealed against the dismissal of his claims in negligence, nuisance, Rylands v. Fletcher and breach of statutory duty.

The Court of Appeal held that the inadequacy of the sewers constituted a nuisance which Thames had adopted by its passive continued use of them to perform its statutory duty to drain its area. The conduct of Thames Water also amounted to negligence, since it had actual knowledge of the problem but had failed to take steps to abate it, claiming in its defence lack of adequate resources. Thames Water were concerned that many other people were similarly affected and estimated the cost of the necessary remedial action for all its customers in a similar position at 1,000million. Their Lordships were unimpressed by this argument and applied the decisions in Goldman v. Hargrave [1967] 1 AC 645 and Leakey v. The National Trust [1980] 2 WLR 65. Lord Philip MR said:

… applying the Leakey test of duty to a sewerage undertaking, the reasonableness of Thames' conduct had to be judged having regard to all the steps it was open to Thames to take to abate the nuisance … Their Lordships could not readily accept that a body with the actual and potential resources of Thames could rely on lack of resources to justify taking no steps at all to abate a nuisance such as Mr Marcic suffered …

Since their Lordships had found that Mr Marcic had a valid claim in nuisance and negligence, there was no need to discuss the Human Rights Convention but they upheld the trial judge's findings on this. However, as Mr Marcic's common law claim had now been upheld, there was no need to restrict damages to the period following 2 October 2000. He was therefore entitled to damages for the whole period of his claim.

This case was essentially about the right balance to be struck between upholding an individual's private rights and the general public interest. Their Lordships commented that:

… It seemed at least arguable that, to strike a fair balance between the individual and the general community, those who paid to make use of a sewerage system should be charged sufficient to cover the cost of paying compensation to the minority who suffer damage as a consequence of the operation of the system.

The appeal was dismissed and the cross-appeal allowed.

McKenna & Others v. British Aluminium Ltd, The Times, April 2002 Ch.D

This was an application by British Aluminium to strike out claims brought by the claimant and about 30 others for damages for emissions from British Aluminium on the ground that not all the claimants had an interest in the land affected. The claims were based on strict liability (Rylands v. Fletcher) and nuisance.

His Lordship said that it was clear that before the Human Rights Act 1998 only those with an interest in land could sue in nuisance. However, in British Celanese v. Hunt [1969] 1 WLR 959 it had been suggested that no similar restriction applied to claims made under Rylands v. Fletcher. However, in Cambridge Water v. Eastern Counties Leather [1994] 2 AC 264, 306 (see also Property Management, Vol. 12 No. 3, 1994) Lord Goff had suggested that Rylands v. Fletcher was " … effectively an extension of the law of nuisance" rather than a separate head of liability. His Lordship felt that this should be followed, even though it involved a slight extension of the common law. Thus, because the claimants had an arguable case that the common law should be extended in the light of the 1998 Act, the application to strike out would be dismissed.

Thus it seems likely that those claimants with no proprietary interest in the land will only be able to succeed with their claim, if they can establish some breach of their rights under the 1998 Act. They will be unlikely to be able to get around this by bringing a claim in strict liability rather than general nuisance.

Negligence

Freeguard v. Royal Bank of Scotland plc, The Times, 26 March 2002 Ch.D

In this case the court had to consider the duty of care owed by a lender to a legal owner of the property who was not the borrower, when exercising its power of sale over property charged in its favour.

The claimant had acquired an option to purchase land but had never registered it. The owner of the land later charged it to the Royal Bank of Scotland but this charge also was not registered.

The claimant later exercised her option to purchase and proceedings were taken to determine priority between the two competing equities. These were resolved in the bank's favour, so the claimant took the property subject to the charge despite the fact that she was not the mortgagor.

The Bank exercised its power of sale as mortgagee and the claimant issued proceedings, claiming that as legal owner the Bank owed her a duty of care, which it had breached by selling the land at an under-value.

That action was struck out by the Deputy Master on the ground that it disclosed no reasonable ground for bringing the claim (Rule 3.4 (2) (a) Civil Procedure Rules). He also held that the Bank owed the claimant no duty of care in law. The claimant appealed.

His Lordship Simon Berry QC, based his decision on two previous cases. In Downsview Nominees Ltd v. First City Corporation Ltd [1993] AC 195 it was held that the mortgagee owed duties to the mortgagor and any subsequent encumbrance. His Lordship held that this was applicable to the present facts, because, like an encumbrancer, the claimant had an interest which was subject only to a prior right, the legal charge, and she would suffer damage as a result of any breach of duty by the defendant. His Lordship also relied on Medforth v. Blake [1999] 29 EG 119 (Property Management, Vol. 18 No. 2, 2000) in which it was held that the receiver owed a duty of care not only to the mortgagor but also to anyone else with an interest in the equity of redemption.

The appeal was, not surprisingly, allowed.

Occupier's liability

Tomlinson v. Congleton Borough Council and Another, The Times, March 2002 CA.

This decision is one of a growing line of cases which result from personal injury suffered by the claimant as a result of doing acts which can be categorised as foolish or rash. It demonstrates how apparently similar cases can turn on slight differences of fact.

John Tomlinson was 18 when he broke his neck by diving into a lake in a public park. He brought a claim against the owners and occupiers, Congleton Borough Council, and against the managers of the site, Cheshire County Council. His case came to the High Court just after Darby v. National Trust was reported in The Times (see Property Management, Vol. 19 No. 4, 2001). The judge dismissed his claim, relying on Darby and Ratcliff v. McConnel [1999] 1 WLR 670 (see Property Management, Vol. 17 No. 2, 1999).

The claimant appealed on the basis that, although Darby seemed to prevent him from recovering, in fact, the true legal position under the Occupier's Liability Act 1984 would do so. The accident happened in a lake, which had once been a sand quarry, which was 40ft deep at its deepest. It is a very popular place and is managed as a tourist attraction for up to 160,000 visitors per year. There were signs prohibiting swimming because of the dangerous water but they were regularly ignored, to the knowledge of the Council. The Council also employed rangers, who gave out oral warnings and safety leaflets, but these were ineffective. The Council had therefore devised a scheme to landscape and plant the sandy beaches, which encouraged people to enter the water, with reeds and shrubs. However, for reasons of cost this was not done until after the accident, even though the cost was modest.

Ward, LJ with whom Sedley, LJ agreed, stated that it is essential that the Act be used as a template in every case. The claimant had accepted that upon entering the water he ceased to be a visitor and became a trespasser, subject to the Occupier's Liability Act 1984. Applying S1 of the Occupier's Liability Act 1984, their Lordships felt that because of the history of the site the Council came under a duty to the claimant to carry out the landscaping and planting as a deterrent to swimming, having regard to the serious risk in injury from the "accident that was waiting to happen". The Council was in breach of the duty to the claimant to take reasonable care to see that he did not suffer injury at the park by reason of the dangers which awaited those who swam in the lake.

Longmore LJ, dissenting, said that there were obvious dangers in swimming in any water other than a dedicated swimming-pool and this lake was no different from any other stretch of open water. The fact that the council had promoted the site for leisure activities did not mean that it had to take steps to prevent swimming, unless it knew of any particular hazard. Even then to give a warning in relation to such a hazard should probably be sufficient.

Although one has sympathy for a claimant severely injured as Tomlinson was, it is hard to see why a clear notice of danger should not be adequate warning to an adult of full age and mental capacity, even if many other people also choose to take the same risk.

For the future Ward LJ expressed reservations as to whether signs saying "No swimming – dangerous water" turned an otherwise lawful visitor into a trespasser. However, as the full law report was not to hand at the time of writing, his reasons for this view are not known.

The law is stated as it is understood to be on 17 May 2002.

Geoff WatersonRosalind Lee