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Silven Properties and Anor. v. Royal Bank of Scotland  EWCA Civ 1409 50 EG 96
Readers will doubtless be aware of the various cases in which the courts have expounded on the one hand, as to the power of the mortgagee to sell the mortgaged property without delaying the sale in the hope that by doing so a higher price may be obtained Tse Kwong Lam v. Wong Chit Sen  1WLR 1349 at p. 1355B) and on the other hand, as to the corresponding duty imposed upon the mortgagee, when exercising its power of sale, to ensure that it obtains the true market price for the mortgaged property (Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd  2 All ER 633;  Ch. 949).
This case is effectively a variation on the same theme, in that the appellant property companies had charged various properties to the bank, including a number of development sites and one vacant commercial property, which latter were the subject of the present appeal. The bank was owed just under £6,000,000 by the two property companies concerned and exercised its power to appoint receivers; the receivers investigated the possibility of obtaining planning permission for the development sites and the vacant commercial property, but in the event decided to go ahead and sell them all without making any application for planning permission for the development sites and without securing a tenant for the vacant commercial property. In the event, the sale of these properties together with the other mortgaged properties which were also owned by the appellants and charged to the bank, realised rather less than the monies which were outstanding under the mortgage(s), and the appellants claimed that many of the properties concerned, including the development sites and the vacant commercial property had been sold at less than their true value.
The basic questions were: what exactly were the duties which the receivers owed to the mortgagors in cases of this kind? And were they in any way different from those imposed on the mortgagee when it is exercising its power of sale in its own name, or were they the same? In the words of Lightman J. (at paras 23 and 24).
In a number of respects it is clear that a receiver is in a very different position from a mortgagee. While a mortgagee has no duty at any time to exercise his powers to enforce his security, a receiver has no right to remain passive if that course would be damaging to the interests of the mortgagor or mortgagee. In the absence of a provision to the contrary in the mortgage or his appointment, the receiver must be active in the protection and preservation of the charged property over which he is appointed...Thus, [for example] if the mortgaged property is let, the receiver is duty-bound to inspect the lease and, if the lease contains an upwards-only rent review, to trigger that rent review in due time...The critical issue [in this case] is whether...the wider management duties imposed upon a receiver (but not on a mortgagee) may require a receiver (and in particular a receiver appointed the agent of the mortgagor) to postpone a sale until after steps have been taken...calculated to increase the price obtainable [by] a sum greater than the cost of taking those steps, plus the [further] sum representing accrued interest over the period while those steps are being taken...
The consideration given by the court to the relevant authorities (and in particular to relevant aspects of the law of agency) was long and detailed, but the answer to the question posed was short (para. 29).
By accepting appointment as receivers, the receivers assumed a fiduciary duty of care to the bank, to the property companies and all (if any) others interested in the equity of redemption... [However] the receivers were at all times free (as was the bank)... to exercise their right to proceed with an immediate sale of the mortgaged properties as they were ...
Landlord and Tenant: Equitable set-off
Muscat v. Smith  EWCA Civ 962;  40 EG 148
In this case, the appellant tenant had had problems with his previous landlord revolving around the carrying out of repairs to the property which had caused major disruption and in consequence of which the tenant had begun withholding rent; the previous landlord had then disposed of the reversion to the present landlord, the respondent, and by a separate deed of assignment had also assigned to the respondent the right to pursue a claim for the outstanding arrears of rent, which by the time of the possession action which followed amounted to something over £5,000.
The question which arose was whether the tenant was entitled to set-off against the claim for arrears of rent by his present landlord, the same claim which he could have maintained against his previous landlord for damages in respect of the latter's own breach of the landlords' repairing covenants.
“Yes”, said the Court of Appeal, after being conducted by counsel on a most illuminating journey through the relevant case law, both ancient and modern: the assignment of the right to pursue the claim for arrears of rent was the assignment of a debt, a chose in action; on assignment that chose in action vested in the new landlord as the assignee, subject to all equitable rights which the tenant might have been entitled to maintain against his previous landlord, the assignor.
As Ward L.J. observed in the shortest of the three judgments, quoting from Snell's Equity.
The assignee of a chose in action cannot acquire a better right than the assignor had, and the assignee takes the chose in action subject to all the equities affecting it in the hands of the assignor which are in existence before notice is received by the debtor
Residential Tenancies: Rent Act 1977: Fair Rents
R (on the application of Wolters (London) Ltd.) v. London Rent Assessment Committee  EWHC 1465 (Admin);  41 EG 180
In this case there were a number of points at issue but the most important from the point of view of the practitioner would seem to be firstly, the question of how the Rent Assessment Committee should go about its task of assessing whether or not there is “scarcity” for the purposes of s.70(2) of the Rent Act 1977 and secondly, how the Rent Assessment Committee should justify its decision in this case that an appropriate deduction for “scarcity” would be 20 per cent of the market rent which would otherwise have been obtainable. The properties in question were studio flats in Lancaster Gate, a prestigious location in west London in the vicinity of Hyde Park; the area which the Rent Assessment Committee took for the purposes of deciding whether or not there was “scarcity” comprised only the London Boroughs of Westminster, Camden and Kensington & Chelsea.
The court considered the underlying reason for the “scarcity” provisions in s. 70(2) of the Rent Act 1977, as agreed between the parties, i.e. “to deprive a landlord of a 'wholly unmeritorious' increase in rent that has come about simply because there is a broad overall shortage of houses in the locality, which means a really large area. There must be an excess of demand over supply, which makes tenants enter into bargains they would otherwise not contemplate...” and, as counsel for the parties had also agreed, said that this should be distinguished from scarcity that flows from the amenity value of the dwelling itself and its immediate locality (s. 70(1)). On this basis, the court agreed that the apparently self-imposed limitation by the Rent Assessment Committee to consideration of the situation which obtained in only those three London Boroughs (rather than, by implication, a much wider area, possibly even the whole of Greater London, perhaps) even if this were justified in the particular case, would require very clear reasons to be given, and this had not been done; moreover, much the same applied to the selection of the “discount” of 20 per cent. In the words of Harrison J., “There is no knowing why the figure of 20 per cent was thought to be appropriate rather, than, for instance, a figure of 5 per cent or 10 per cent or any other figure...”
Accordingly, the decision of the Rent Assessment Committee was quashed and the matter remitted to a differently constituted committee for reconsideration.
Residential Tenancies: Housing Act 1988: Assured Shortholds
McDonald v. Fernandez  EWCA Civ 1219;  42 EG 128
Briefly, the tenants were statutory tenants holding over after the expiration of their fixed term assured shorthold tenancy; the original fixed term had expired on 3 March 2000 and the statutory tenancy continued thereafter from month to month; on 24 October 2002 the landlords served notice requiring possession on 4 January 2003. The question was whether or not it was a valid notice: “No”, said the Court of Appeal, since it had not expired on the last day of a period of the tenancy, as required by s. 21(4) of the 1988 Act.
Beegas Nominees Ltd v. Decco Ltd.  EWHC 1891 (Ch);  43 EG 138
This was a referral to the court for a declaration in connection with a rent review arbitration: basically, the rent review clause required the review rent for the property in question, which was a distribution warehouse situated on the Stone Business Park, to be calculated using comparables “which are located in or within a 5 mile radius of Tamworth Staffordshire or in or within a 5 mile radius of Minworth, Birmingham as if those premises were situated upon the Stone Business Park” even though the Stone Business park was situated over 20 miles away from both of the two areas which were to serve as the source of comparables. The tenant contended that the arbitrator had power to make an adjustment to the review rent to reflect the fact that the Stone Business Park was a less desirable location for the type of premises in question; the landlord contended that the arbitrator had no power to make any such adjustment. The court agreed with the landlord. In the words of Patten J.
It seems to me relatively clear, from the very fact that the lease was granted in this unusual form at a time when the Stone Business Park was largely undeveloped, that the landlord wished to achieve, on a review, a rent that was on a par with the rents obtainable in comparable business parks in Tamworth and Minworth which were then established trading centres. This seems to me a perfectly intelligible trading objective, even though it has the effect (unless and until Stone becomes as successful as those other centres) of requiring the tenant to pay a higher than market rent...there are therefore express words in this case that require the arbitrator to make a departure both from reality and from normal valuation practice... [but]...that formula seems to me to be perfectly workable even if it does require the tenant to pay more in rent than the actual market in Stone can justify at the time... [and]...I will...make a declaration accordingly.
Business Tenancies: Notices: Landlord and Tenant Act 1954
Pennycook v. Shuns (EAL) Ltd.  EWHC 2769 (Ch); 45 EG 176
An interesting question is raised by this case, and one on which, so far as one may judge from the law report, there is a surprising paucity of authority. The premises comprised a barbers' shop with accommodation over, and were occupied by the tenant under the terms of a 10 year lease running from 25 March 1989. On 8 November 2001, the landlord served a s. 25 notice on the tenant to terminate the existing tenancy, and of course requiring among other things that the tenant indicate whether or not he was willing to give up possession. The tenant instructed solicitors that he wished to negotiate for the grant of a new lease, and the solicitors instructed surveyors accordingly; they also served a counter-notice on the landlords, as required by s.29 of the 1954 Act: unfortunately, it apparently stated in error that the tenant would be willing to give up possession of the demised premises on the date specified in the landlord's s.25 notice. When this unfortunate error was noticed by the tenant's surveyor, he informed the tenant's solicitor, who promptly (and still within the 2 month deadline prescribed by the 1954 Act) served a further notice on the landlord stating that the tenant was unwilling to give up possession.
The question, of course, for the court, was whether or not the second correct notice was a valid notice for the purposes of the 1954 Act. The judge, whilst accepting that there might exist cases where it would not be right to allow the tenant to serve a second notice effectively over-riding or revoking the first, came to the conclusion that in this case it was acceptable and that the second notice was a valid notice for the purposes of the 1954 Act. Accordingly, the tenant's appeal against the decision of the county court judge, striking out his application for a new tenancy, was successful.
Goldstein v. Levy Gee (a firm) The Times 16 July 2003 ChD.
The question for the court to answer in this case was whether a valuer should be judged negligent if, despite incompetent errors in the method by which a valuation figure was reached, the end figure nevertheless falls within the “margin of error”.
The claimant argued that where the incompetent error in the reasoning made a difference to the final figure then that difference amounted to a recoverable loss even though the final figure fell within a bracket which could have been reached by a competent valuer using a competent method of reasoning.
The defendant's argument was that the only thing that matters is the final figure. If this is one which could have been reached by a competent valuer there could be no negligence even if the process by which it was reached was clearly incompetent.
The court considered two main lines of authority, one beginning with Lion Nathan Ltd v. C-C Bottlers Ltd  1 WLR 1438, a Privy Council decision which focussed on the method rather than the end result in preparing the valuation. This, the court found “very persuasive”. The second line of authority followed from Merivale Moore plc v. Strutt & Parker The Times, 5 May 1999;  2 EGLR 171, a Court of Appeal decision, in which the ratio of the majority was that where the issue was the figures then liability could only arise if the figures in question fell outside the bracket which could have been reached on a competent valuation.
In the present case it was being alleged that the process was incompetent and there was a similarity with the case of Curry's Group plc v. Martin , in which, the judge at first instance had refused to follow the Lion line of argument on the ground that because of the rules of precedent he was bound by the decision in Merivale Moore. Lewison J. ruled that the finding of Buxton L.J. in Merivale that evidence that a valuation falls outside the bracket is “a necessary precondition of liability” formed part of the ratio decidendi and was therefore binding. Thus unless the defendant's valuation in the instant case fell outside the permissible range there could be no finding of negligence.
The question for the court to decide therefore was how to decide on the appropriate bracket?
If the final figure depended on a number of variables, as in this case, would the margin be assessed by arriving at a bracket for each of those variables, or only for those variables that were alleged to have been negligently assessed? The approach taken in Merivale pointed to the first method. Thus in order to assess the margin of error one had to enter the lowest and the highest non-negligent figures for each of the variables. Using this method, which Lewison J. admitted seemed to favour the valuer, the defendant's valuation fell within the permissible margin of error.
The problem in McKinnon v. Esurv Ltd  WL 116680;  20 E.G. 149 was whether the court could use hindsight evidence in assessing the damages payable for negligence. The claimant bought a residential property on the basis of the defendant's valuation report. The surveyor had reported that there was evidence of past movement in the property but stated that it was likely to have stopped. This was inaccurate as it was not possible to establish this at the time of the report. The expert evidence accepted by all parties was that if the property was not subject to movement at the date of the valuation then its value at that time was £148,000. However, if the movement was on going at the time of valuation its value was £92,000.
The claimants argued that they were entitled to receive as damages for the admittedly negligent report, the difference between these two sums. In fact, at the date of purchase and subsequently the property had not been subject to any movement. The defendant therefore contended that in assessing damages, the court was entitled to use hindsight and that the damages should be significantly less than the amount being claimed.
The court held that the measure of damages in surveyors' negligence cases is prima facie the difference between the value of the property as described and the value in the condition that should have been reported to the client. However, that rule had to be applied in the light of the overriding principle that a claimant is to be put in the position that he would have been in if the negligence had not been committed. In accordance with the principle in Bwyellfa and Merthyr Dare Steam Collieries (1891) Ltd v. Pontypridd Waterworks Co  AC 426 the court could admit hindsight evidence to avoid overcompensating the claimant. Thus damages were to be measured by the difference between the purchase price and the open market value of the property in its true condition at the date of the defendant's valuation, with the true condition being assessed in the light of all of the evidence available to the court when assessing damages.
Bottomley v. Secretary and Members of Todmorton Cricket Club and Others  WL 22477259 (CA), The Times 13 November 2003.
This case involved a claim for damages by an unpaid and untrained volunteer who had been engaged by the contractors engaged by the defendants to carry out a fireworks display on land owned by the defendants (the cricket club). The claimant was severely injured when the pyrotechnic display went seriously wrong due to the incompetence of the contractors.
The claimant contended that the club was liable because:
• it failed to take reasonable care to select a reasonably competent contractor;
• it failed to take adequate steps to ascertain whether the contractors had adequate public liability insurance;
• it was vicariously liable for the contractor's negligence because, although they were independent contractors, it had employed them to carry out extra hazardous activity on their premises.
After a review of the case law: Honeywell & Stein Ltd v. Larkin Brothers Ltd  1 KB 191; Salbury v. Woodland  1 KB 191, Ferguson v. Welsh  1 WLR1553, Fairchild v. Glenhaven Funeral Service Ltd  1 WLR1052, Gwilliam v. West Hertfordshire Hospital NHS Trust  3 WLR 1425, Brooke L.J. stated that an occupier might be liable in negligence in respect of activities which he permitted or encouraged on his land. That liability stemmed from his “activity” duty. He might also be liable for the state of his premises and that liability stemmed from his “occupancy” duty.
The club should have taken reasonable care in its selection of a suitable contractor to carry out the dangerous fireworks display on its land but it had failed to do so. The fact that the contractors charged no fee for their services made no difference. The club had allowed a dangerous event to take place on its land without adequate public liability insurance and without written safety plans because it had failed to take the elementary precaution of checking whether these existed.
An occupier will escape liability if it can show that it has taken reasonable care in the selection of competent contractors. In those cases an injured employee or agent, such as the claimant Mr Bottomley, must bring a claim for redress against his own employer or principal. However, where an occupier wishes something dangerous to be done on his land for his own benefit, then he might be liable too and this was one of those cases. Applying basic negligence principles, the injuries suffered by the claimant were foreseeable because there was no proper safety plan. There was proximity between the club and the claimant who was lawfully on its premises. It was fair, just and reasonable to impose liability on the club because it did not do what it ought to have done before allowing a dangerous activity to take place on its land.
Waller L.J. and Clarke L.J. agreed and the appeal was dismissed.
In the following cases brought under the Occupiers Liability Acts, the courts have taken a strong line on the limits of the occupiers liability for natural dangers on the property and on the balance to be struck between the duty owed to one's neighbour and the individual's responsibility for risks inherent in activities they choose to undertake.
In Tomlinson v. Congleton Borough Council  3 WLR 705 the 18-year old plaintiff was rendered tetraplegic when he dived into a lake formed in an old sand quarry, striking his head on the bottom and breaking his neck. He had ignored signs erected by the council stating “dangerous water, no swimming”. The council had been aware for some years that people regularly ignored the no swimming signs in hot weather and had intended to make access to the water more difficult, basically by destroying the beaches around the lake by planting reed and shrubs on them. However, the work had never been carried out as the finance had not been available within the council's other priorities for funds. After the accident the council carried out the work and no further accidents had occurred.
The judge at first instance dismissed the claim on the basis that the council had not been under any duty of care. He felt that the risk was obvious and that if there had been a duty owed, it had been discharged by erecting the signs. It was unreasonable to expect the local authority to go further and carry out expensive landscaping.
On appeal the appellant had argued that the judge had failed to attach sufficient weight to the history of injuries and near fatalities at the lake. The appeal was allowed basically on the ground that a duty of care was owed to the claimant as a trespasser and the council had breached its duty under the 1984 Act as they knew that their warnings were being regularly ignored. Thus under s1(4) the council had not taken such care as was reasonable in the circumstances. However, the claimant's damages were reduced by two-thirds for contributory negligence. The council appealed to the House of Lords.
In the House of Lords there was disagreement as to whether the case was rightly brought under the 1984 Act. Lord Scott of Foscote, in particular, felt that it should have been brought under the 1957 Act as going into the water, e.g. to paddle, was not forbidden, only swimming. He felt that at the moment of the accident it could not be said that the complainant was swimming. Another point of contention was whether the accident arose due to the state of the premises as the majority felt that it was caused by what the complainant chose to do on the premises rather than any defect in the state of the premises. However, their Lordships all agreed that the council did not owe a duty of care to the complainant as the risk was obvious to anyone of full age and mental competence and there are no guarantees of safety under either of the Occupiers Liability Acts. Their Lordships were also in agreement that even if a duty of care had been owed to the complainant in this case, the council would not have been found to be in breach of it. The result was that they felt that the accident was one of those unfortunate circumstances for which no one is to blame and the complainant lost his award of damages.
A similar approach was also taken in Donoghue v. Folkestone Properties Ltd  2 WLR 1138 in the Court of Appeal. In that case a naval diver who chose to dive into Folkestone harbour at midnight in December failed in his claim against the harbour owners when he struck his head on an underwater obstacle rendering him tetraplegic. In this case there was a hidden obstruction just under the water but it was held that no duty of care was owed to the claimant, although there might be a duty owed to other trespassers at other times to erect warning notices. No duty was owed in this case because there was no reason to foresee that anyone would walk onto the slipway at midnight in the middle of winter when drunk and dive into the harbour.
A similar conclusion was reached in Jamie Rhind v. Astbury Water Park Ltd, Maxout Ltd  WL 21161581(QBD). The facts of the case were almost identical to those of the Tomlinson case. The claimant was rendered tetraplegic when he struck his head, either on an underwater obstacle or on the bottom when he dived into the shallow water of Astbury Mere. This was a lake formed from an old sand quarry on the outskirts of Congleton. The claimant sought damages against Astbury Water Park Ltd, which was a licensee of the Mere and the surrounding land and Maxout Ltd, which operated a sailing school on the Mere under an agreement with the first defendant. As in the Tomlinson case, the Mere and the surrounding land were heavily used by the public and, despite notices forbidding it, they frequently entered the water to paddle and swim.
Morland, J. considered that the complainant was a lawful visitor to the Mere and his behaviour in entering the water to retrieve a football had not transformed him from the status of visitor to trespasser, despite notices, of which he was aware, stating “strictly no swimming allowed”. To decide otherwise would be “absurdly legalistic”. However, although he thought permission to be on the land extended to permission to enter the water to retrieve a ball, it did not, in his judgement, “extend to swimming or diving”. The problem with this analysis seems to be that the claimant in this case is described as having dived into the shallow water of the Mere to retrieve the ball, in which case one would have thought that on Morland, J.'s own analysis, the claimant had become thereby a trespasser, thus bringing into play the Occupiers Liability Act 1984. However, as in the Tomlinson case, it probably made no practical difference. Morland, J. held that since the risk of injury through diving into shallow water is so obvious the defendants owed no duty to post warning notices specific to that risk, nor to exclude members of the public from the water's edge by the use of fences, landscaping or notices. Nor did he consider that the defendants owed any duty to scour the bottom of the Mere for hidden obstacles or to have patrols to deter people from entering the water. The claimant knew that swimming was prohibited and it followed that so was diving. Thus Morland, J. concluded the cause of the claimant's accident was his own foolhardiness and there was no breach of any duty owed by the defendants to the claimant.
The result of these cases is that the courts would appear generally to reject the idea that occupiers should be under any duty to prevent people from indulging in activities involving risks which they freely choose to take. The risk in imposing such a duty is, as their Lordships pointed out in the Tomlinson case, that it would unreasonably curtail the freedom and amenities of the careful majority.
Nuisance, Rylands v. Fletcher
Transco plc v. Stockport Metropolitan Borough Council  WL 22656452,  3 WLR1467 (HL)
In this case the House of Lords was invited to abolish the well known rule in Rylands v. Fletcher on the basis that its usefulness has been diminished with the growth of the tort of negligence.
Stockport Council owned a tower block of flats which was supplied with water by a statutory undertaker. The water was transported at mains pressure through a pipe into a tank in the basement of the flats. From there it was supplied to each of the 66 flats in the block. The pipe was an ordinary one large enough to supply the flats. At some point, and without negligence on anyone's part, the water supply pipe within the block of flats failed but the resulting leakage of water remained undetected for some time, again without negligence. The water escaped from the block and seeped into an embankment through which a main gas supply pipe owned by Transco was carried. The result was that support for the gas pipe was washed away and there was a danger of the gas pipe fracturing as a result. Transco carried out immediate remedial work and sought to recover the cost from the respondent council under the rule in Rylands v. Fletcher. To be liable under that well-known rule the defendant must have been engaged in some “non-natural” use of land. The first instance judge allowed the claim but this was reversed by the Court of Appeal. The appellant appealed to the House of Lords and submitted that the rule in Rylands v. Fletcher should be abolished as it has been superseded by the tort of negligence.
Despite the many exceptions to the rule in Rylands v. Fletcher, their Lordships felt that to abolish it would be inconsistent with their judicial function. Four main reasons were given.
First, there are a small number of cases in which it seems just to impose liability in the absence of fault. One example of such a case was Cambridge Water Co v. Eastern Counties Leather plc  2 AC 264 (had there been the required forseeability of damage). Second, common law rules do not exist in a vacuum and over the years statutory regulation has been applied to many of the matters to which the rule in Rylands v. Fletcher might have applied. For example s.209 of the Water Industry Act imposes strict liability and Schedule 2 of the Reservoirs Act seems to assume that strict liability would apply. Thus to abolish, the rule would have the effect of undermining the assumptions upon which Parliament has legislated. Third, the House of Lords in Cambridge Water declined the invitation to depart from Rylands v. Fletcher, preferring instead to see a more principled and better controlled application of it. Fourth, replacing the strict liability in Rylands v. Fletcher with a fault based system would increase the disparity between English law and that in France and Germany which have comparable strict liability provisions.
However, although their Lordships did not wish to abolish the rule in Rylands v. Fletcher they would not wish to see it more generously applied preferring instead that strict liability in respect of high risk operations to be imposed by Parliament for the reasons stated in the Cambridge Water case (per Lord Goff  2 AC 264, 305).
In this case there were two questions for the court to answer. First, had the council brought something onto its land something likely to do mischief if it escaped? Second, was that an ordinary use of land? Both questions were answered in the negative.
Water is capable of causing damage if it escaped and held in quantity. However, the supply of water to the block in this case was routine and would not have struck anyone as being particularly hazardous. Furthermore, the council did not accumulate any water, they merely supplied what was adequate to meet the residents' needs.
Secondly, the use by the council of its land could not be seen as extraordinary or unusual. It was normal. One factor which the court felt was useful in judging what constituted a natural user was the fact that insurance against various forms of property damage, including flooding caused by the escape of water in domestic settings, is extremely common. Property insurance is relatively inexpensive and people ought to be encouraged to ensure their own property rather than to seek to transfer the risk to others by means of litigation with the heavy costs which that entails. In this case the court felt that the Court of Appeal was correct in holding that this was not a non-natural user of land. There was no evidence of any risk greater than was normally associated with domestic plumbing even though the pipe in this case was larger. One could not assume that the bigger the pipe, the greater the risk. Moreover, the risk of damage to property by leaking water was one against which most people could and did ensure.
The law as stated as it is understood to be up to 1 January 2004.
G. Waterson and R. Lee