Legal update


Property Management

ISSN: 0263-7472

Article publication date: 1 September 2004



Lee, R. and Waterson, G. (2004), "Legal update", Property Management, Vol. 22 No. 4.



Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited

Legal update

Marcic v. Thames Water Utilities Ltd [2004] 1All ER 135, [2003] WL 22769550, [2003] 3 WLR 1603 H.L. Readers may remember (Property Management, Vol. 21 No. 1, 2003, p. 118) that Mr Marcic suffered frequent flooding from 1992 onwards because the public sewers overflowed after heavy rain but Thames Water did nothing to remedy the situation. Mr Marcic sued Thames Water for nuisance, negligence and breach of statutory duty and under the Human Rights Act. Thames Water had claimed that it had no liability because it was acting under statutory authority under the Water Industry Act 1991 and it was not in breach of any entitlement order issued by the Environment Secretary; that it had acted responsibly in setting up a priority system to reduce flooding and was spending millions of pounds to remove thousands of properties from the category of serious risk of flooding.

In the Construction Court Havery J held that Mr Marcic was entitled to damages, but only on the ground that his human rights under Article 8 (respect for home) of the Human Rights Convention had been breached rather than in private nuisance.

Thames Water appealed. After an extensive review of the authorities the Court of Appeal (2002 2 WLR 932) agreed that Thames Water was not liable for breach of statutory duty under the 1991 Act and that there was no absolute or strict liability simply because flooding occurred. However Lord Phillips held that Thames Water was liable for nuisance in tort. He stated that “Thames Water are in no more favourable position than a landowner on whose property a hazard accumulates by the act of a trespasser or of nature. At all material times Thames have had, or should have had, knowledge of the hazard. If the principles identified in the Goldman [1967] 1 AC 645 and Leakey [1980] QB 485 cases are applied these facts placed Thames under a duty to Mr Marcic to take such steps as, in all the circumstances, were reasonable to prevent the discharge of surface and foul Water onto Mr Marcic's property” (p. 992). Furthermore, the flooding was not the inevitable consequence of Thames Waters' exercise of its statutory powers. Even if the current inadequacy of the sewerage system was the result of increased usage rather than any action on the part of Thames Water, it was liable to Mr Marcic unless it could prove that it done all that was reasonable. Their Lordships felt that Thames Waters' priority system for dealing with the flooding was not enough and its failure to take steps to alleviate the flooding was not reasonable. The fact that Thames Water might have to buy land for a new scheme to solve the problem was no defence, given its resources. The Court of Appeal did not actually set aside Havery J's finding on the human rights issue but their Lordships felt that as the common law has provided a remedy it was not necessary to consider it further. Thames Water appealed to the House of Lords.

It should be noted that in fact Mr Marcic's problem of continual flooding from the sewer operated by Thames Water no longer exists as work was carried out in 2003 to alleviate the problem in his and 250 other properties. However, the decision in the Court of Appeal, if it stands would mean that Water authorities would be obliged to act more promptly and effectively to remedy repeated flooding caused by inadequate sewerage systems. Thames Water's appeal to the House of Lords therefore, raised the question of whether Mr Marcic can recover damages for the continual flooding of his property.

The House of Lords was unanimous in rejecting Mr Marcic's claim in nuisance. As Lord Hoffman stated: “...If the Sedleigh-Denfield case lays down a general principle that an owner of land has a duty to take reasonable steps to prevent a nuisance from arising from a known source of hazard, even though he did not himself create it, why should that not require him to construct new sewers if the court thinks it would have been reasonable to do so?

The difference in my opinion is that the Sedleigh-Denfield, Goldman and Leakey cases were dealing with disputes between neighbouring land owners. In such cases it is fair and efficient to impose reciprocal duties upon each landowner to take whatever steps are reasonable to prevent his land becoming a source of injury to his neighbour. Even then, the question as to what measures should reasonably have been taken may not be uncomplicated...

Nevertheless, whatever the difficulties, the court in such cases is performing its usual function of deciding what is reasonable between two parties to the action. But the exercise becomes very different when one is dealing with the capital expenditure of a statutory undertaker providing public utilities on a large scale. The matter is no longer confined to the parties to the action. If one customer is given a certain level of services, everyone else in the same circumstances should receive the same level of service. So the effect of a decision about what it would be reasonable to expect a sewerage undertaker to do for the plaintiff is extrapolated across the country. This in turn raises questions of the public interest.

These are decisions which courts are not equipped to make in ordinary litigation. It is therefore not surprising that for more than a century the question of whether more or better sewers would be constructed has been entrusted to Parliament and administrators rather than judges”.

As Lord Nicholls observed in the present case, the cause of action in nuisance which Mr Marcic claimed comes down in essence to the assertion that Thames Water ought to build more sewers and its failure to do so before it eventually did in June 2003 gave rise to his cause of action. The difficulty with this line of argument is that it ignores the statutory limitations of the enforcement of sewerage undertakers' drainage obligations. They cannot control the volume of Water entering the system thus it would be surprising if parliament intended the individual affected by flooding to be able to sue the sewerage undertaker for an order to build more sewers or pay damages. In fact, the purpose of the enforcement scheme in the 1991 Act is that individual householders should not have this right. When flooding occurs the first enforcement step is that the director and the regulator of the industry will consider whether to make an enforcement order and in so doing he will necessarily take into account the wider context. The individual householder will therefore only be able to bring proceedings when the undertaker has failed to comply with an enforcement order made by the secretary of state or the director general. Thus, a parallel common law right to bring proceedings when no enforcement order has been made would make a nonsense of the statutory scheme and would undermine the regulatory role the director general was intended to discharge when questions of sewer flooding arise. Thus their Lordships agreed that there is no room for the common law cause of action in nuisance held by the Court of Appeal.

Their Lordships were equally clear that the claim under the Human Rights Act 1998 could not be upheld. As they pointed out, in a recent of the European Court of Human Rights, Hatton v. United Kingdom Application No. 36022/97, (unrep) 8 July 2003 the court emphasised the “essentially subsidiary nature” of the convention. National authorities have democratic legitimacy and are better placed to evaluate local needs and conditions. There may be differing opinions within a democratic society and a fair balance must be struck between the interests of the individual and those of the community as a whole and the domestic policy-maker is in the best position to strike this balance.

In this case, the court felt that parliament had acted within its bounds as a policy-maker and the scheme strikes a reasonable balance between the conflicting interests of those customers whose properties are flooded and all of the other customers whose properties are drained through the company's sewers. The fact that the system had failed in Mr Marcic's case did not cast doubt on its overall fairness. A complaint by an individual should be pursued with the director general through the statutory scheme, but Mr Marcic had not taken this route. However, their Lordships were critical of the way in which Thames Water had dealt with Mr Marcic's case and felt that it was unacceptable that in 2001, several years after, they first became aware of his problems there was still no prospect to the necessary work being carried out. Their Lordships also felt that in the interest of fairness to individuals like Mr Marcic the statutory scheme as it stands is defective in that it fails to provide for compensation to be paid to those adversely affected by flooding. As Lord Nicholls observed “...It seems to me that, in principle, if it is not practicable for reasons of expense to carry out remedial works for the time being, those who enjoy the benefit of effective drainage should bear the cost of paying some compensation to those whose properties are situated lower down in the catchment area and who, in consequence, have to endure intolerable flooding...The minority who suffer damage and disturbance as a consequence of the inadequacy of the sewerage system ought not to be required to bear an unreasonable burden. This is a matter the Director and others should reconsider in the light of the facts of the present case”.

For the reasons, given their Lordships felt that the claim under the Human Rights Act must fail. The scheme set up under the 1991 Act complies with the convention in that it provides a remedy for persons in Mr Marcic's position but Mr Marcic had chosen not to use it. Thus the appeal was allowed, except in relation to Mr Marcic's cost which Thames Water had agreed to cover.

This decision must be good news for statutory undertakers as it emphasises that public utilities cannot be provided cost free. However, it also acknowledges that individuals who suffer as a result must have effective routes for complaint and adequate compensation for the loss of their private rights for the public goods. This must necessarily be paid for by the general public who benefit from the provision of the utilities.

Network Rail Infrastructure Ltd (formerly Railtrack PLC) v. Morris (t/a Soundstar Studio) [2004] WL 229314

This case illustrates that despite the growth of legislation aimed at stopping or reducing interferences between neighbours, the action in private nuisance is still a useful weapon to the landowner and is capable of being developed to take account of modern technological developments.

Mr Morris had operated a sound recording studio in his premises in Croydon since 1987. The studio was only 80m from the main London to Brighton railway line. After its incorporation in 1993 Railtrack took over from British Railways Board, amongst other things, responsibility for the provision, installation, testing and maintenance of signalling systems and track circuits on the railway lines. In the early 1990s, British Rail had started to install new track circuits on this line to operate the signalling system. Railtrack took this over from British Rail. In 1991 British Rail had received complaints of magnetic interference for the circuits from tenants who had musical rehearsal studios under the railway arches in the vicinity. The matter was investigated and a report was made in November 1991. The installation in the vicinity of the complainant's studio was completed by Railtrack in 1994. Shortly afterwards, interference from the circuits was noticed. Mr Morris first complained to Railtrack in April 1995. However, Railtrack was unable to remedy the problem without disadvantage or at an economic cost. Mr Morris brought an action in nuisance based on the fact that when installing the new system Railtrack were aware (from the 1991 report to British Rail that it had inherited) that the electromagnetic radiation from it would cause the kind of interference he complained of. Mr Morris was awarded damages in private nuisance. Network Rail appealed.

On appeal Network Rail argued that it was unrealistic to claim that it could reasonably have foreseen the problem taking into account the distance between the signalling system and Morris' studio where the signal was much weaker.

The Court of Appeal stated that there was no previous English case in which it was held that electronic interference of the type complained of was capable of amounting to a nuisance. However, Lord Phillips MR stated that in Hunter v. Canary Wharf Ltd [1997] AC655 two law lords had held that in principle nuisance could extend to interference with television reception. In the present case, the District Judge had held that nuisance could apply and the defendants were not challenging that ruling.

However, there is a difference between showing that something may be a nuisance and proving that in the particular case it is. The defendants argued that Morris' studio was abnormally sensitive to magnetic waves and was not therefore protected by the law of private nuisance as it was an extraordinary commercial activity rather than the ordinary use of equipment. The concept of the “abnormally sensitive claimant” was applied in the famous case of Robinson v. Kilvert (1889) Ch D 88 to heat sensitive brown paper and in Eastern and South African Telegraph Co. Ltd v. Cape Town Tramway Co. Ltd [1902] to an underground telegraph cable which suffered electrical interference caused by trams. However, the trial judge in this case thought that times had changed and that in today's world the use of sensitive electrical and electronic equipment has become part of the ordinary enjoyment of property. Their Lordships felt that it might be more satisfactory that the potential problems of one neighbour causing electronic interference to another should be addressed by regulation rather than by the law of private nuisance but they did not express a decided view on this issue. However, Lord Phillips MR went on to say that if it had been necessary to decide the issue on the basis of the common law authorities, they would lead to the conclusion that the claimant's amplified guitars fell into the category of extraordinarily sensitive equipment which did not attract the protection of the law of nuisance. Buxton LJ went further. He stated “ is difficult to see any further life in some particular rules of the law of nuisance, such as for instance the concept of “abnormal sensitiveness” drawn from Robinson v. Kilvert (1889) ChD 88. That rule was developed at a time when liability in nuisance, for damaging a neighbour by the use of one's own land, was thought to be strict...the unreasonable results that could flow from that approach were mitigated by a number of rules of thumb; for instance, as shown by passages from Robinson vs Kilvert....It is very difficult not to think that such particular rules are now subsumed under the general view of the law of nuisance expressed in Deleware Mansions Ltd vs Westminster City Council [2001]: not dissimilar to the way in which the generalisation of the law of negligence initiated by Donoghue vs Stevenson has rendered obsolete the previous categories of dangerous chattels...”

Their Lordships were agreed that liability in nuisance currently depends on foreseeability as an aspect of reasonableness. Thus, in this case the Railtrack would only be liable if it should reasonably have foreseen that, by installing the new track circuits it might cause harm to someone in the position of the claimant. The trial judge had found that this requirement was satisfied on the basis of the 1991 report concerning similar interferences made by tenants of British Rail who had established music studios under the railway arches directly under the lines. In reaching this conclusion the trial judge had rejected expert evidence that the defendant could not reasonably have foreseen interference of this type at a distance of 60-70 m. However, the Court of Appeal disagreed. They pointed out that the defendant had installed something like 3,200 track circuits of this type in the south east and that only the claimant and the under arches tenants had complained. Their Lordships concluded therefore that the trial judge's findings on foreseeability were unsound and that without this the claimant's case must fail.

Estate agency

Sykes v. Taylor-Rose [2004] WL 62242 CA

This case raised the interesting question of how much information the vendor of a property need to disclose to potential buyers. Six months after purchasing their house in Wakefield, Mr and Mrs Taylor-Rose received an anonymous note informing them that a gruesome murder had taken place there. They were naturally upset and contacted their family solicitor who informed them that the vendor had been under no obligation to disclose the history of the house before they bought it and that similarly they would be under no obligation should they decide to sell it. They continued to live in the house for 18 months but then decided to move. The house was sold to Mr and Mrs Sykes without disclosing its history. When the Sykes' discovered its gory history they claimed that they had lost £8,000 by selling the house below its market price. They had felt unable to continue living in the house once they discovered its history and had felt bound to disclose this to potential buyers when they sold it. However, the District Judge dismissed their claim on the basis that the ancient rule of caveat emptor (or “let the buyer beware”) still prevails. The Sykes' appealed.

The three issues before the court were: first, was there any duty on the vendors to disclose the history of the house? Second, was the negative response given by the vendor to question 13 on the “sellers property information form” (which asks “is there any other information which you think the buyer may have a right to know?”) wrong? Third if it was wrong, did it provide a good cause of action for damages?

In response to the first question, the Court refused to interfere with the District Judge's decision that there is no general duty on the vendor to disclose defects in the quality or expected enjoyment of land or matters that may affect the value of the land. It is for the buyer to make the necessary enquiries and to ask the necessary questions. The general rule is still caveat emptor.

The main issue was therefore the answer to question 13. The District Judge held that the answer to question 13 was honestly given and thus the second issue was decided in favour of the respondents. As that was the case it was unnecessary to consider the third issue but nevertheless he concluded that even if there had been a misrepresentation the facts did not provide a cause of action.

The heart of the appeal was whether an honest answer to question 13 was sufficient. Counsel for the appellants argued that the answer to question 13 required more than just an honest reply. He argued that it was effectively a statement by the vendor to the purchaser that the opinion expressed was based on reasonable grounds. In support he referred to a statement in Chitty of Contracts at page 339 which states that a statement of opinion may sometimes be regarded as a statement of fact “...if it can be proved that the person who expressed the opinion did not hold it, or could not, as a reasonable man having his knowledge of the facts honestly have held it”. Thus he argued that the answer to question 13 given by the respondent was a misrepresentation. He supported the argument by reference to William Sindall Plc v. Cambridge County Council [1994] 1 WLR 1016 and Economides v. Commercial Assurance Co. Plc [1998] QB 587.

However, their Lordships felt unable to accept this argument. Aldous LJ pointed out that question 13 is intended to be answered by vendors who lack legal training. Thus, if vendors were required to have reasonable ground for their belief this would raise many problems as to what counts as reasonable grounds for a belief. Vendors would then be unable to answer the question without seeking professional advice as the answer “no” would open the door to endless disputes. Thus since the question itself makes no mention of the need for reasonable grounds for belief there is no need to import one. Its words should be given their normal and ordinary meaning. Thus he felt that the District Judge was correct and as the answer to question 13 had been honestly given there was no misrepresentation.

Counsel for the appellant then went on to argue that question 13 must be taken to refer to any information that would affect the enjoyment of the property whether or not the vendor thought the purchaser had a legal right to know it.

This argument was also rejected by their Lordships as they said, it disregards the plain meaning of the words. They agreed with the District Judge that the question is subjective, is confined to information the purchaser might be entitled to know and must be answered honestly.

Counsel for the appellant then went on to argue that there was a duty of care on the respondents to answer the question on a reasonable basis and given the horrific circumstances of this particular case, it was clear that the answer had been negligently given. Their Lordships also dismissed this argument. The duty was to give a proper answer to the question and if all that was needed to give an honest answer then there could be no breach of duty. Furthermore the District Judge had found that there was, on the evidence, no breach of duty on the part of the Taylor-Rose's solicitor which could be imputed to them. There was no authority one way or the other which would have directed him to the “right” answer and he had considered the question adequately. Thus, there was no breach of duty. Their Lordships agreed that the District Judge was right to dismiss the claim.

Having reached this decision on the correct interpretation of question 13 their Lordships felt that there was no need to consider the third issue. The appeal was dismissed and leave to appeal to the House of Lords was refused.

Whilst most people, including their Lordships, might feel sympathy with Mr and Mrs Sykes, the decision probably represents practical common sense. This was a particularly horrific case but it would be impossible to decide where the line should be drawn as to what should or should not be declared in answer to question 13. Should it be declared if a former occupier was a convicted paedophile or if someone committed suicide in the house? Many events are unsettling but it is difficult to know whether or not they would be likely to affect the value of the property.

Bairstow Eves London Central Ltd v. Smith [2004] WL1054905

A difficulty sometimes encountered by estate agents is actually getting the client to pay up once the sale has been made. Taking clients to court is expensive and time-consuming. In this case one attempt to get around this problem came before the high court on appeal from a decision of the Romford County Court.

The defendants had appointed the claimants as sole agents in the sale of their flat. The agency agreement provided two alternative bases for assessing commission. First, as stated in the printed terms of business, was the “standard commission rate” of 3 per cent of the final sale price plus VAT. The second was the “early payment discounted commission rate” which was provided in a handwritten insertion into the agreement and was 1.5 per cent plus VAT. According to the agreement the 1.5 per cent rate was only available if the claimant received payment in full within ten working days of the completion of the sale. Failing that the 3 per cent rate would be applied. The agreement also provided that if full payment was not received within ten working days of completion interest at 3 per cent above base rate would become payable. Also on expiry of the eight-week sole agency period the claimant would continue to act on a multiple agency basis at the standard commission rate (i.e. 3 per cent plus VAT).

The flat was sold at close to the asking price to a purchaser introduced by the claimants. The commission calculated at 1.5 per cent was £2,925.75. The defendants' solicitor had been given irrevocable authority to pay the claimants out of the purchase price. However, for some reason they paid only £2,538.75, a shortfall of £387. This remained unpaid for about 4 months at which point the claimants began proceedings in the county court seeking commission at 3 per cent minus what had already been paid. The claimants made it clear that if the missing £387 was paid within ten days the action would not proceed. However, no payment was made and the action went ahead. The defendants brought Part 20 proceedings against their solicitor and by the time the case reached the high court, all parties had agreed that if the defendants were held liable their solicitor would have to indemnify them.

The defence sought to have the 3 per cent commission clause declared unfair under the Unfair Terms in Consumer Contracts Regulations 1999. Success would mean that the defendants could refuse to pay.

According to Regulation 5(1) a term is unfair if it has not been individually negotiated and if, contrary to the requirements of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract. The judge in the county court held that the clause was potentially unfair and therefore not binding on a private client as it was a “trap for consumers”. Its unfairness lay in the fact that the commission rate could double even if, as in the present case, only a small part of the commission was outstanding. The judge declared that the clause did not show a good standard of commercial morality or practice, i.e. it was contrary to good faith.

The county court judge's decision was not actually challenged on appeal to the high court. Instead the claimants tried to argue that the regulations did not apply to it at all. Regulation 6 provides that where a term is in plain intelligible language the assessment of its fairness shall not relate to “the adequacy of the price or remuneration as against the services supplied in the exchange”. This they claimed, was not the case where the real commission rate was 1.5 per cent with merely a penalty for late payment. It was simply an arrangement which allowed for two possible commission rates to be applied depending on the circumstances.

This argument was rejected by the two appeal judges in the high court. Gross J pointed out that both parties had regarded the 1.5 per cent as the real commission rate. The claimants admitted that they would be unable to obtain business if they charged 3 per cent on a sole agency basis. Thus, if read as a whole what was being challenged was not the relationship between the services provided and their price; what was being challenged was the harsh penalty in the event of default. This was therefore struck out as unfair.


Barker v. Saint Gobain Pipelines plc [2004] EWCA 545 CA

This appeal raises two important issues arising from the decision of the House of Lords in Fairchild v. Glenhaven Funeral Services [2002] (Property Management, Vol. 21 No. 1, 2003, p. 119). In that case the House of Lords decided that where an employee had been negligently exposed to asbestos dust by different employers and where the employee did in fact contract the disease, the fact that it was impossible to attribute the harm to any particular period of employment or to the cumulative exposure did not prevent him from successfully bringing a claim against any one or more of the employers who had significantly contributed to the exposure. That decision represented a significant departure from the “but for” test of causation normally employed in negligence cases but the House of Lords had felt that although this might impose responsibility on a defendant whose exposure of the claimant had in fact no causative effect, that was outweighed by the unattractiveness of the alternative of leaving a claimant without a remedy. Lord Nicholls of Birkenhead explained it thus “...considerable restraint is called for in any relaxation of the threshold “but for” test of causal connection. ...Unless closely confined in its application this principle could become a source of injustice to defendants. There must be good reason for departing from the normal threshold “but for” test. The reason must be sufficiently weighty to justify depriving the defendant of the protection this test normally and rightly affords him, and it must be plain and obvious that this is so. Policy questions will loom large when a court has to decide whether the difficulties of proof confronting the plaintiff justify taking this exceptional course”.

In the present case the defendant had been exposed to asbestos dust not only during periods of employment with others but also during a 20-year period of self-employment. The claimant, the widow of a man who had died from mesothelioma was awarded damages against the defendant which was responsible for the liabilities of a former employer of the deceased and who it was accepted, had negligently exposed him to asbestos dust.

The defendant appealed on two issues. First, should the decision in the Fairchild case be applied to a case where exposure to asbestos dust occurred both during period of self-employment and employment by others? Second, should an employer who was found liable be entitled to an apportionment of his liability to reflect the extent of his responsibility for the totality of the exposure?

In respect of the first issue, it was argued on behalf of the defendant that to apply the principle in Fairchild to this type of case would be to “push the boundaries of tort too far” and would lead to injustice as the complainant could have been responsible for his own injury. Thus the modified approach to causation could not be justified. Their Lordships rejected this argument and emphasised the strong policy element which necessarily arises when the law is developed to provide the most equitable solution to problems such as this. They said that was the approach of the House of Lords in Fairchild and that it should be applied here. A Kay LJ pointed out, “...It seems inevitable that whatever solution the law finds it will always be possible to suggest an extreme situation in which the answer may not seem to be entirely fair to one or other party. The policy decision has to be made on the basis of the generality looking for the fairest solution when the matter is considered in the round”. Their Lordships felt that the approach adopted in Fairchild was the most likely to achieve the fairest result. Furthermore they pointed out that if the complainant himself had been at fault then that could be reflected in a finding of contributory negligence.

On the issue of apportionment it was recognised by the defendant that normally there could be no apportionment where, as in Fairchild and in the present case, the injury was indivisible. However, the defendant argued that the apportionment rules should be modified to take into account the modification of the causation rules on policy grounds. The defendant pointed out that otherwise a diminishing number of employers, i.e. those who remained solvent and traceable, would become liable for the totality of the consequences of the exposure of employees to asbestos dust. However, although their Lordships could see the logic of the argument from the defendant's point of view they stated that the rule was essentially one for the protection of the person to whom the wrong had been done. Their Lordships thus felt that there was no justification in this case to alter the normal rule against apportionment. Furthermore, as Keene LJ emphasised, if apportionment were to be seen as appropriate in mesothelioma cases it would be difficult to reconcile with a defendant's right to claim a contribution from concurrent tortfeasors. This could lead to a claimant losing a part of his damages if there had been apportionment of liability between previous employers and one of those had become insolvent. This, he said, illustrates the kind of problem that could arise if the courts were to depart from the established approach to liability for indivisible injuries. Furthermore, if the claimant were in any way to blame for his own injuries that can adequately be dealt with by applying the principles of contributory negligence, and, indeed, those principles had been applied in this case.

The appeal was dismissed.

Occupiers liability

In Naylor (trading as Main Street) v. Payling [2004] EWCA Civ 560 C.A. the issue was whether an employer is under a duty to ensure that any independent contractor he employs is adequately insured. The complainant suffered severe head injuries when he was forcibly ejected by a doorman from the defendant's nightclub in Rotherham. It was admitted that the doorman was negligent. The doorman was employed by the security firm which had been employed by the defendant to provide security for the club. The security firm was licensed under a scheme (the Pub and Club Watch Committee) operated by the local authority and the police. The defendant had no public liability insurance which would cover the activities of his employees. However, at a preliminary hearing to determine liability, it was held that the doorman was not the defendant's employee and neither did the defendant owe the complainant a non-delegable duty of care. Thus, the only way in which the complainant could recover damages would be if the defendant owed him a duty of care to ensure that the independent contractor held adequate insurance as the security firm would be unable to satisfy a claim as it was uninsured. The trial judge held that the defendant was under a duty to the claimant to ensure that the doorman was insured and that he was in breach of that duty. The defendant appealed on the ground that he was under no such duty.

The court's attention was drawn to two precedent cases in which the issue of the occupier's duty to enquire into the insurance position of an independent contractor was discussed.

In Gwilliam v. West Hertfordshire Hospitals NHS Trust [2003] QB 43. [2002] AllER (D) 345 the hospital had enquired into the insurance position of a contractor who was to provide an attraction at a fund raising event. The trust was held not to be in breach of their duty under the Occupiers Liability Act 1957 s2(4) to select a competent contractor. It was said in that case that s2(4) imposes two obligations on the occupier; first, to act reasonably in entrusting the work to an independent contractor; second, to take steps to satisfy himself of the contractor's competence. It was said that this may therefore require an enquiry to be made as to insurance.

A similar case was that of Bottomley v. Todmorden Cricket Club [2003]All ER 102. In this case, the club was held liable for failing to check that a pyrotechnics contractor had insurance, because this was part of the process of ensuring that it was a competent contractor. It was felt that if the contractor could not obtain insurance there was probably a good reason for this that could be relevant to an assessment of its competence.

In both cases therefore checking the insurance position of the contractor was simply one factor in assessing competence. There was no independent absolute duty to check that the contractors were insured.

In the present case, the nightclub owner had the same obligations under the Occupiers Liability Act 1957 s.2(4) to select competent contractors to carry out his security. Thus the issue was did he take reasonable steps to do so? The argument on behalf of the claimant was that he did not, because he had not checked the contractor's insurance and the complainant was entitled to assume that such a person would be insured. Furthermore it was argued, the defendant personally should have sufficient insurance to meet any liabilities as this is an aspect of an occupier's duty of ensuring the safety of visitors to the premises.

The Court of Appeal held that the defendant was under no personal duty to be insured or to be able to meet any liabilities. Therefore, he could not have any greater liability with regard to insurance just because he employs an independent contractor. The court felt that the judge had been wrong to impose a duty on the defendant to check the contractor's insurance. They distinguished the decisions in Gwilliam and Bottomley. In both of those cases they said that the contractor was carrying out a one-off operation. Thus a check on their insurance position would have had a bearing on assessing whether or not they were competent. There was no on-going relationship on which this could be judged. However, in the present case, the contractor was licensed and approved by the local Pub and Club Watch Committee and was employed by the defendant over a significant period of time. There was no evidence to question their competence and thus the judge had been wrong to conclude as he did.

The appeal was unanimously allowed.


Bakewell Management Ltd v. Brandwood and others [2004] UKHL 14, [2004] EG 168

In this tortuous little case the question at issue was whether the landowners in question were prevented from acquiring vehicular rights of way over part of a common by prescription or long-user, since they had never been given “lawful authority” to drive their vehicles over the common and in consequence their driving across it was an offence under s.193(4) of the Law of Property Act 1925, as well as under a succession of Road Traffic Acts, from 1930 up to the Road Traffic Act 1988 currently in force.

The courts below had decided, following the case of Hanning v. Top Deck Travel Group Ltd (1993) 68 P&CR 14 which had been decided some years earlier by the Court of Appeal, that an easement cannot be acquired by actions which at the time they took place were prohibited by statute.

The House of Lords disagreed: the Court of Appeal had misinterpreted the cases upon which they relied in coming to the decision which they had; all that the earlier cases had in fact decided was that no one could acquire by long-user or otherwise the right to do something which was prohibited by statute, which was not quite the same thing.

Lord Scott of Foscote in particular undertook an exhaustive examination of the cases relied on in Hanning as well as a number decided since, including George Legge and Sons Ltd v. Wenlock Corporation [1938] AC 204, where the defendant had claimed unsuccessfully that he had acquired an easement to discharge untreated sewage into a stream despite the fact that such discharge was a criminal offence under the provisions of the Rivers Pollution Prevention Act 1876, and Cargill v. Gotts [1981] 1WLR 441 where the plaintiff had claimed, again without success, that he had acquired a right to extract water from a mill pond in spite of the fact that under the Water Resources Act 1963 no such extraction could lawfully take place without a licence from the relevant water authority.

His Lordship went on to say that since it was perfectly possible in the instant case for the owner of the common at any time to have granted an easement without offending against the statute, that indeed this possibility was even referred to or envisaged in the wording of the act itself, there was nothing in the circumstances of this case which prevented the landowners of the properties adjoining or adjacent to the common from acquiring the easements contended for by long-user. The other Law Lords agreed.

Business tenancies

Pennycook v. Shaws (EAL) Ltd [2004] EWCA civ 100; [2004] 18 EG 102; The Times 20 February 2004; [2004] 08 EG 135 (CS)

Again, a moderately complicated little case, at least as regards the grounds for appeal before the Court of Appeal from the earlier appeal to the high court which was reported at [2002] EWHC 2769 (Ch); [2003] 45 EG 176.

Briefly, the landlord served a s.25 notice indicating an unwillingness to grant a new lease, in reliance on what are referred to in the law reports as “certain breaches of covenant”; the tenant's solicitor responded by serving a s.29 counter-notice indicating (in error) that the tenant was willing to give up possession of the holding; when the error was noticed by the tenant's surveyor, the tenant's solicitor served a second s.29 counter-notice stating (correctly) and still within the 2 months time limit laid down by the 1954 Landlord and Tenant Act for so doing, that the tenant was unwilling to give up possession of the holding.

In the county court the landlord's application to strike out the tenant's application for a new lease was allowed; on appeal to the high court, on grounds which apparently involved an alleged infringement of the tenant's rights under s.3 of the Human Rights Act 1998 as being incompatible with the tenant's right under Article 1 of the Convention of Human Rights not to be deprived of his possessions “except in the public interest and subject to the conditions provided for by law...”, the tenant's appeal was allowed by Pumfrey J; however, Pumfrey J did not decide the appeal on the human rights grounds which had been argued before him, but on the basis that the precedent case of re 14 Grafton Street London W1 [1971] Ch 935 which had been relied on by the landlord's advisors in the court below was distinguishable.

Unfortunately, as appears from the decision in the Court of Appeal, the fact that Pumfrey J. decided the case on grounds other than those which had in fact been argued before him meant that he also arrived at his decision without having heard argument as to the effects of a further and more recent precedent case Bridgers v. Stanford (1991) 63 P&CR 18; [1991] 2 EGLR 265 which had been decided in the Court of Appeal and which was in consequence binding upon the high court, and where it had again been held that a counter-notice once given is irrevocable.

In the present case, the Court of Appeal agreed: there had been no infringement of the tenant's human rights since if he or his advisors had served the correct notice he would have had the right to a full hearing; moreover, the original counter-notice, though worded in error, was irrevocable, and accordingly the landlord's appeal was allowed.

As the court observed, “This case is regrettably a cautionary tale against deciding cases on grounds other than those on which the advocates are properly prepared to address the court. That course carries risks...”

As the court also observed, the procedures which gave rise to the question at issue in this case have been significantly changed with effect from 1 June 2004 by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 SI 2003/3096, but these changes had not been made retrospective and therefore did not affect the outcome in this particular case.

As to the date of service of notices under the 1954 Act by way of recorded delivery, see C A Webber (Transport) Ltd v. Railtrack plc. [2003] EWCA Civ 1167; [2004] 14 EG 142: in this case the landlord had sought to serve s.25 notices on the tenant terminating the tenant's business tenancies and indicating the landlord's unwillingness to grant new leases on the ground provided for by s.30(1)(f) of the 1954 Act, i.e. the landlord's intention to demolish, redevelop or substantially reconstruct the premises. The notice was posted to the tenant by recorded delivery post on Friday 20 July 2001 and stated that the tenancies in question would be determined on 22 January 2002; the notices were not actually delivered until the Monday or Tuesday following the date of posting, the 23 or 24 July. In consequence the tenant argued that the notices were invalid as they purported to determine the tenancies less than 6 months from the date on which the tenant had received them; additionally, or in the alternative, the tenant argued that if the simple posting by recorded delivery amounted to good service regardless of the date of actual delivery, then this was again contrary to Article 6 of the Convention on Human Rights.

The Court of Appeal disagreed on both counts: delivering the principal judgment and after an exhaustive review of the relevant case law, Peter Gibson LJ concluded that the overwhelming weight of the relevant case law indicated that the fact of posting the notices by recorded delivery was sufficient to amount to good service regardless of when or even, possibly, whether they had actually been delivered and that this was not an unreasonable or disproportionate interference with the tenant's human rights; the only case in which it had apparently been suggested otherwise and which had been cited on behalf of the tenant was Lex Service plc. v. Johns [1990] 1 EGLR 92 and it was clear that the case had been decided per incuriam, in ignorance of other binding legal authority.

Landlord and tenant: repairs

Niazi Services Ltd v. van der Loo [2004] EWCA Civ 53; [2004] 17 EG 130; [2004] 08 EG 134 (CS)

Basically this was a dispute between the mesne landlord which held the lease of a top floor flat in a four-storeyed block which comprised restaurant premises on the ground floor and basement level and presumably other flats on the second and third floor. The top floor flat had been let by the mesne landlord to the subtenant under a succession of annual tenancy agreements at an annual rent of £34,800. The subtenant had given up possession of the flat in May 2002.

The mesne landlord and the subtenant were in dispute as to rent (owed by the subtenant) and repairs (which the mesne landlord was under an obligation to carry out pursuant to s.11 of the Landlord and Tenant Act 1985). A substantial part of the subtenant's claim against the mesne landlord for failure to repair involved the failure to repair defective installations for the supply of Water and electricity to the top floor flat over a period of some 33 months, and in the county court the judge had awarded damages to the subtenant of £48,000 plus interest.

The mesne landlord claimed in the Court of Appeal that the judge below had been in error: the reason for the failure of Water and electricity supplies had been due to works which had been carried out to the restaurant premises and which were therefore on premises outside the mesne landlord's control.

Quite so, said the Court of Appeal: damages reduced to £9,050 accordingly, to cover only compensation for the mesne landlord's other admitted breaches of covenant.

British Glass Manufacturers' Confederation and Anor. v. University of Sheffield [2003] EWHC 3108 (Ch); [2004]09 EG 146

Again this case turned, at least in part, on the interpretation of the repairing obligations set out in the lease. The lease had been granted by the University to the British Glass Manufacturers' Confederation for the term of 1,000 years from June 1958 at the rent of £1 per annum, subject to an obligation to erect and then to keep in repair a laboratory and office building “and all other buildings and erections which at any time during the said term may be upon any part of the land hereby demised...”. As Lewison J pointed out however, the lease contained no restriction on user, no restriction on alterations (whether structural or non-structural), and no restriction on alienation. By the time of the events which gave rise to the present proceedings the Confederation had decided that the original buildings which had been erected in 1958 were no longer suitable for their needs; accordingly they had assigned the lease to a firm called NHE (Northumberland) Ltd which proposed that the original buildings be demolished and that the site be redeveloped, apparently for residential purposes.

The question was basically whether this was permissible under the terms of the lease, or whether (presumably for the lack of any other restrictions contained in the lease) this would be in breach of the tenant's repairing covenant, which was essentially a matter of construction. After reviewing the authorities the court found in favour of the tenant: it could not have been envisaged, given the length of the lease, that at the expiration of the term the tenant would hand back the original buildings to the University. In essence, the repairing covenants should be taken to impose an obligation to keep whatever buildings might be erected on the site from time to time in good repair. This construction was supported by the fact that the lease referred to the obligation to repair not only the original laboratory and office building but also all other buildings which at any time during the 1,000-year term might be erected upon the land comprised in the lease, which must be taken to include the sites of the laboratory and office building as well as any other part of the land. Accordingly the claimants were successful in obtaining the declaration which they had sought to the effect that they were entitled to demolish, and by implication, since there was no restriction as to user, they would equally be entitled to redevelop the land for residential purposes if that is what they chose to do.

The law is stated as it is understood to be up to 31 May 2004.

Rosalind Lee and Geoffrey Waterson

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