Twinmar Holdings Ltd v Klarius UK Ltd & Anor [2013] EWHC 944 (TCC) (19 April 2013)

Neutral Citation Number: [2013] EWHC 944 (TCC) Case No: HT-12-19 IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION TECHNOLOGY AND CONSTRUCTION COURT Royal Courts of Justice Strand, London, WC2A 2LL 19/04/2013 B e f o r e : THE HON. MR JUSTICE EDWARDS-STUART ____________________ Between: TWINMAR HOLDINGS LIMITED Claimant - and - KLARIUS UK LIMITED -and- LANE GROUP PLC Defendant Third Party ____________________ Zoe Barton (instructed by McGuire Woods London LLP) for the Claimant Gabrielle Higgins (instructed by Hill Dicksinson LLP) for the Defendant Hearing dates: 6, 7, 8 and 15 November 2012 ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © Mr Justice Edwards-Stuart: Introduction This is a dilapidations claim. The Claimant owns the freehold of Unit C, Swallowdale Lane, Hemel Hempstead, Hertfordshire ("Unit C" or "the property"), which it acquired in February 2004. It consists of a single storey warehouse building and offices comprising 45,866 ft² of warehouse with 4,263 ft² of ancillary offices. It is surrounded by hard standings and soft landscaping. The warehouse building was built in 1993 and was occupied by the Defendant (to whom I shall refer as "the tenant") under a lease dated 14 October 1993 for a term of 25 years from 29 September 1993. The lease was determined on 28 September 2008. However, in January 2005 the property was sublet by the tenant to a third party for a term which expired on 31 July 2008. Between then and the expiry of the lease the tenant was again in occupation of the property. In July 2007, just after the tenant had exercised a break clause in the lease, the Claimant instructed its surveyor, a Mr Richard Beresford-Linnell, to inspect the property and to prepare a schedule of dilapidations. The cost of the works was subsequently estimated at £392,602, excluding contractors fees, professional fees and loss of rent. In August 2008 the work was put out to tender and the Claimant subsequently accepted a tender in the amount of £321,004. Subsequently, the scope of the work was reduced so, the Claimant says, as to remove any items in respect of which there was any doubt as to whether it was work for which the tenant was responsible. This reduced the cost of the work to £227,315. At this time the Claimant occupied premises on the Woodside Estate at Dunstable. Its intention was to vacate the Woodside premises and move back into the property as soon as the work had been done. To this end it gave notice under a break clause in the Woodside lease which terminated that lease on 10 December 2008. There is a claim for loss of rent, service charge and insurance which is equivalent to the sums that the Claimant had to pay for the Woodside premises whilst the work to the property was being carried out (until the Woodside lease came to an end). Many of the items in the schedule of dilapidations have been agreed. The most significant item in dispute (by value) is the sum claimed for repairs to the glass reinforced polyester (GRP) roof lights of the warehouse building, for which the sum claimed is a little over £46,000. The Claimant was represented by Zoë Barton, instructed by McGuire Woods London LLP, and the tenant was represented by Gabrielle Higgins, instructed by Hill Dickinson LLP. The repairing covenant in the lease The principal covenant relied on by the Claimant is clause 5.1 of Schedule IV, which is the following terms: "Throughout the Term where and so often as the occasion shall require to keep the whole of the Premises including the Building . . . in good and substantial repair and condition (damaged by any of the Insured Risks only excepted . . ." The Claimant also relied on clause 5.3, which provides: "When necessary to replace and renew and to keep clean all windows in the Premises." It is common ground that when considering a repairing covenant in standard form the starting point is to keep the premises in such repair as, having regard to their age, character, and locality would make them reasonably fit for the occupation of a tenant of the class who would be likely to take them: see Proudfoot v Hart (1890) 25 QBD 42 . However, Proudfoot v Hart must be read in the light of the subsequent decision of the Court of Appeal in Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716. In that case Bankes LJ said, at 723: "No case, in my opinion, has been a more misunderstood, or more frequently misapplied, then Proudfoot v Hart , as I think that further information supplied in the present case well illustrates." The point on which Bankes LJ said that Proudfoot v Hart had been misunderstood was whether the condition of the premises, in terms of their fitness for occupation by a tenant of the class who would be likely to take them, had to be considered at the expiry of the lease or at its commencement. The very clear answer was that it was the latter. It was pointed out in Anstruther-Gough-Calthorpe v McOscar that the lease under consideration in Proudfoot v Hart was for 3 years only, so that it probably made no difference whether the position was considered at the commencement of the lease or at its expiry. In Anstruther-Gough-Calthorpe v McOscar Atkin LJ made the following observations, at 734: "Repair is not confined to houses; it applies to chattels, and it connotes the idea of making good damage so as to leave the subject so far as possible as though it had not been damaged. It involves renewal of subsidiary parts; it does not involve renewal of the whole. Time must be taken into account; an old article is not to be made new; but so far as repair can make good, or protect against the ravages of time and the elements, it must be undertaken." Ms Barton submitted that an obligation to "keep" in good and substantial repair is very similar in nature to an obligation to "maintain" in good and substantial repair. She relied upon the decision of the Eve J in Mayor and Corporation of London v Great Western and Metropolitan Railways [1910] 2 Ch 314 . In that case the covenant was to: ". . . well and sufficiently maintain, uphold, support, and keep in good, substantial, and tenantable repair, order, and condition, all and singular the premises hereby demised." The dispute concerned the condition of the walls, pillars and girders of the Smithfield meat market. The tenant submitted the covenant would be complied with if the pillars and girders in their present condition were sufficient to sustain the burden and to perform the function for which they were originally put there. The landlord submitted that the test was whether the present condition of the relevant parts of the demised premises substantially corresponded with the condition in which they were at the commencement of the lease. Eve J held that the landlord was right. It has been said that that case turned on the particular meaning that was given to the word "maintain": see Westbury Estates Ltd v The Royal Bank of Scotland plc [2006] SLT 1143 . I consider that that is probably correct. It is worth noting that in Westbury Estates Lord Reed considered the judgments of the Court of Appeal in Anstruther-Gough-Calthorpe v McOscar in great detail and applied them. At the commencement of the lease, Unit C had just been constructed. The class of tenant to be considered is therefore a tenant who at that time would be interested in taking a lease of that type of building. Westbury Estates and Anstruther-Gough-Calthorpe v McOscar make it clear that the test is what would make the premises reasonably fit for occupation by that class of tenant under the conditions prevailing at the commencement of the lease, not at its expiry. The roof lights (Items 1 and 11) Was there a breach of the repairing covenant? In the light of the authorities just discussed, I consider that the condition of the roof lights must be, so far as maintenance and repair can do it, the condition in which they were at the commencement of the lease. In other words, they must be capable of letting in about the same amount of light and must be structurally sound and weatherproof. If a repair can make good the ravages of time and the elements which, if left unchecked will result in the roof lights no longer being in good condition, I consider that it is one that may have to be undertaken under a covenant that requires the tenant to keep the building in good and substantial repair and condition throughout the term of the lease. In my judgment, to keep the building in good and substantial condition involves taking whatever steps are necessary to achieve and maintain that standard. However, there will be no breach of covenant unless and until the building is actually out of repair: it is not sufficient that the building will become out of repair at some time in the future if that time will be after the expiry of the lease. But if that time will arrive during the term of the lease, then if the tenant does not take the steps necessary to prevent the deterioration coming about, he will do so at his own risk. The principal issue in relation to the roof lights is in relation to their condition at the time when the lease expired in September 2008. The Claimant's expert, Mr Selves, an independent roofing consultant since 1994 with many years' experience of profiled fibre cement and metal roofing, was not instructed until August 2012 so he did not see the roof lights before they were treated by the Claimant (after the expiry of the lease) by the application of Delglaze coating. The only evidence that he could give about the state of the roof lights prior to the expiry of the lease was by reference to a condition survey of two blocks on the same industrial estate that he carried out in 2006. The buildings were about 15 years old at the time and their roof lights had exposed glass fibres as a result of the erosion of the surface layer and so the roughened surface had attracted dirt. The light transmission through the roof lights was visibly reduced as a result. Those roof lights were of a different profile to those on the Claimant's building and their manufacturer was unknown. Mr Selves also relied on an analysis that he carried out of the literature produced by the manufacturers of roof lights during the 1980s and 1990s. In general terms these showed that most manufacturers stated that their roof lights had a life expectancy of at least 20 years, a point on which the experts were agreed, although some loss of translucence could be expected after about 10 years (although the roof lights would still remain weatherproof). In the light of this material and his inspection of the roof lights on the other buildings in 2006 Mr Selves concluded that it was likely that by the date of expiry of the lease the roof lights on the Claimant's building had deteriorated as a result of surface erosion by wind borne dirt such that there would have been a visible loss of translucence. Mr Selves explained in his report, and I did not understand this to be disputed, that glass fibre reinforced polyester ("GRP") roof lights can fail in four ways. These are as follows: (1) Ultra violet light degrades the polyester resin, so that the GRP becomes brittle and cracks as a result of movement caused by wind, snow or hail, allowing leaks. (2) The surface is abraded by wind driven dirt exposing the glass fibres which then trap the dirt particles reducing the light transmission through the roof lights. (3) The fixings and sealant deteriorate with age, become loose and then permit leaks. (4) The light transmission through the GRP reduces to the point that electric lighting has to be used as the primary source of light regardless of the intensity of the daylight outside. This is caused by a combination of the discolouration of the aged polyester resin and the retention of dirt on the surface of the roof lights. It was not suggested in this case that the polyester resin in the roof lights had become sufficiently aged so as to discolour. The deterioration alleged was the abrasion of the surface of the roof lights and consequent trapping of dirt particles which resulted in a reduction of translucence. The tenant's expert, Mr McHardy, has been acting in this dilapidations dispute since 2008, when the first schedule of dilapidations was served on the tenant. He inspected the building on four occasions in March and April 2008, and then again on 1 August 2008 at the time of expiry of the underlease which had been granted by the tenant. Following the expiry of the head lease, he inspected the building on 13 February 2009 and then again on 23/24 July 2009. These visits were carried out jointly with the Claimant's surveyor, Mr Lincoln. Mr McHardy says that he has dealt with roof lights of all types during the 30 odd years that he has worked as a building surveyor. He said in his report that when he inspected the roof lights on 8 April 2008 they were in good general condition. He said that the surface of the GRP was slightly roughened and glass fibres were evident, but there was no evidence of silt build up or of moss or lichen growth. He noted that the condition of the roof lights was recorded in the underlease schedule of condition dated 16 November 2004. In that schedule the condition of the roof lights was described in the following terms: "GRP roof lights worn, some degraded and fibres exposed." In his report Mr McHardy said that the " degree of light transmission was reasonable for the age of the roof from the view within the warehouse ". The basis on which he made this comment is not clear from his report, but I assume that it must be based on what he saw when he visited the building in 2008. However, he did not say to what extent the degree of light transmission was below that of a new roof light. The roof lights were inspected on 1 October 2008 by Giromax, the manufacturers of the Delglaze coating, who commented on the condition of the roof lights in the following terms: "Some of the rooflights appear to be approaching the end of their life expectancy and will soon require attention. UV attack has caused degradation of the external surface resulting in opaque, fibrous sheets." They recommended that the roof lights be treated with Delglaze. Mr Selves felt constrained to concede that Giromax could have been expected to paint a fairly gloomy picture of the state of the roof lights because they would have been interested in securing a contract to treat them. I therefore take this description of the roof lights with a small pinch of salt. At section 3 of his report Mr Selves said this: "3.1 Glass fibre reinforced polyester (GRP) has been manufactured into profiled roof lights since circa 1955. Performance was greatly improved in the late 1970s with development of gelcoats and thin films applied during manufacture which reduced ultraviolet light transmission into the polyester resin layers and erosion of the exposed surface. Ultraviolet light degrades plastics including polyester causing the rooflights to turn brown in colour, become more brittle and loose the polyester resin from the surface as they age. This degradation of the exposed surface reduces the light transmission into the building. Pre 1980s polyester resin formulations tended to fail between 10 and 15 years. During the 1980s there were significant improvements to durability as the resin chemicals were developed for this market increasing the functional life to between 20 and 30 years. 3.2 Once the resin has been abraded by wind driven dirt the glass fibres are exposed on the top surface. The glass fibres then trap dirt and the light transmission into the building will be significantly reduced." Mr McHardy broadly agreed with this, but he said that gel coatings were developed initially and that film coatings were developed later, particularly after 2000. He said that film coatings were available in 1993, but were usually found only on the more expensive roof lights. He said that the use of a film coating should allow roof lights to last their full life - by this I think he meant without any significant degradation of the surface. I consider that it is likely, on the balance of probability, that these roof lights had gel coatings applied during manufacture and not film coatings. Mr McHardy said that he did not consider that a roof light was in disrepair until it leaked. Consistently with this he said that the wearing away of the gel coating should not affect the life of a roof light. I do not accept Mr McHardy's view on this point. In my judgment, a roof light ceases to be in good condition within the meaning of the covenant once there has been a visible and a significant reduction in its translucence. By "significant" I mean a reduction in translucence such that the light coming through the rooflights has to be augmented by artificial lighting in weather conditions that would not have required additional lighting when the roof lights were new. The question is whether this state of affairs had been reached by the time of the lease expired. I have already concluded that the description of the roof lights given by Giromax must be treated with some caution. However, the brief description in the November 2004 Schedule of Condition that I have set out above, on which I think more reliance can be placed, presents a rather different picture to that suggested by Mr McHardy. I consider that Mr McHardy's evidence about the condition of the roof lights is governed to a large extent by his view that a roof light is not in disrepair until it leaks. Whilst I accept his evidence that the state of the roof lights was not so bad that moss and lichen had taken hold, taking the evidence as a whole it seems reasonably clear to me that there had been a substantial degree of abrasion of the surface of the roof lights which, by the expiry of the lease, must have reduced their translucence by an amount that was not insignificant. It is plain from the photographs that the roof lights were still letting in a substantial amount of light, but beyond that I consider that the photographs cannot be relied on in any quantitative sense. Accordingly, I find that at the expiry of the lease the roof lights were not in good and substantial repair and condition. Although it is not now necessary to do so, I should deal with an alternative argument advanced by Ms Barton on the basis that the roof lights were "windows" within the meaning of the lease. In my view, they are not. In the context of a lease, I consider that the essential characteristics of a window are that it is a glazed panel in a frame that is set into the external envelope of a building (although sometimes there can be internal windows to allow the passage of light within a building), the purpose of which is to let in light and, usually, to enable those in the building to see out. However, sometimes windows are specially treated, for reasons of either privacy or security, to prevent someone outside the building from seeing in. But in my view this does not mean that it is no longer a window: it is just a particular type of window. Further, it is reasonably clear that a window does not have to be in a vertical plane: opening glazed roof lights (such as the "Velux" type window) are in my view properly described as windows. Whilst many windows are capable of being opened, this is not an essential characteristic of a window. For the purposes of this case I leave out of consideration the modern glazed curtain wall, or similar structures, where glass panels may be mounted on a metal frame. These are not windows in the sense of being glazed panels set into a frame, but whether they are to be regarded as windows or part of a curtain wall is a question that would have to be decided by reference to the terms of the relevant lease if and when the point arises. It seems to me axiomatic that windows are typically made of glass. I accept that there may be rare examples of windows that are not made of glass, but made of some other transparent material such as perspex, but for it to be a window I regard it as essential that the glass substitute effectively behaves like glass in terms of the transmission of light (unless for reasons of security or privacy it has been deliberately "frosted"). For these reasons I do not consider that roof lights of the type installed on this building are windows. Apart from anything else, they are not glazed (either with glass or a glass equivalent) and have no frame. In summary, therefore, the Claimant is entitled to the cost of the treatment of the roof lights with the Delglaze proprietary coating system. The recoverable loss In addition to the cost of applying the Delglaze coating, the Claimant claims the cost of associated safety measures. The first of these is netting below the roof lights being worked on. By the conclusion of Mr McHardy's evidence, I did not understand this to be challenged: he said that, of the precautions available, netting was probably the best choice. Accordingly, in respect of the Delglaze treatment and the provision of safety netting the Claimant is entitled to recover the sum claimed, namely £22,954.75. The Claimant seeks to recover also the cost of perimeter edge scaffolding. This consists of a railing made of scaffold poles which is kept in place by 'A' frame scaffold structures that extend onto the roof and are supported from it. The feet supporting the outer edge of the railing stand on the parapet. The need for this scaffold edge protection is not only to protect those working on the roof lights but also to protect those cleaning the gutters. The tenant accepts that the gutters were not in good condition and that the Claimant is entitled to the cost of cleaning them. Mr McHardy says that the gutters could have been satisfactorily and safely cleaned from a scissor lift or cherry picker, which would have been a great deal cheaper than the cost of the perimeter scaffold. As I understood his evidence, sufficient protection for those cleaning the lower parts of the roof lights, who would have been working within about 1 m or so from the edge of the roof, could have been provided also by the use of a scissor lift or cherry picker covering the adjacent part of the roof perimeter. Mr Selves relies on the provisions relating to roof work in HSG 33, which are contained in Appendix D2. This provides that fragile areas, which include roof lights, are to be protected within 2 m of any gutter or access route across a roof. In my view, the object of this provision is to protect people walking across a roof or working in a gutter from the risk of falling onto and through the roof light. It is not concerned with the protection of those working on the roof lights themselves. However, I accept that as a matter of good practice and basic safety those working near the edge of the roof need to have some protection against the risk of losing their balance or footing and falling over the edge. In the context of work being carried out on the lower part of a roof light that is about 1 m wide, as these ones were, I consider that sufficient protection could be provided by the presence of a platform mounted on either a cherry picker or a scissor lift. It would have to be a platform that was about 2-3 m long, rather than the typical bucket carried by a small cherry picker. Further, I consider that such a platform placed against the edge of the roof parapet would have provided a perfectly safe and satisfactory means of access for cleaning the gutters. The gutters were about 400 mm deep and the edge parapet of the roof was about 200 mm wide. I see no reason why a person kneeling on the platform of a cherry picker or scissor lift could not safely clean out the gutters. However, the problem was the want of suitable access to the building at ground level. A large cherry picker carrying a platform of the type I have described could without difficulty have provided access to elevations 1 and 2. It could also have provided access to about half the length of elevation 3. But access was restricted to the remaining half of elevation 3 and to elevation 4. Elevation 3 had a narrow passage along part of its length which ran between Unit C and an adjacent building. This could only have allowed access to a cherry picker the feet of which had a fairly limited span. However, the remaining half of elevation 3 was not entirely free of difficulty. Beside it was a vehicle park, but between that and the building there was a low crash barrier and then a narrow strip of gravel. This would have prevented access by a scissor lift, which could only be used if its wheels could be positioned right against the wall of the building. Elevation 4 had a walkway along the length of the elevation, beyond which was a car park at a higher level. Between the walkway and the car park there was a bank. Mr McHardy said, and I am prepared to accept, that a small cherry picker could have negotiated this walkway. However, the access to the walkway was problematic. It appeared to be by way of a fairly narrow path which joined the walkway near the corner of elevations 1 and 4. A vehicle approaching down this access path would then have to make a very tight turn in order to gain access to the walkway. Mr McHardy thought, and again I am prepared to accept, that a small cherry picker would have been able to negotiate this turn, but there is no evidence that a scissor lift or a larger cherry picker could have done so. It seems that the car park was too far away to enable even a large cherry picker to provide access to the roof: at least there was no evidence to the contrary. I am not persuaded that a cherry picker that was small enough to negotiate the walkway would have been able to support a sufficiently wide working platform to provide suitable protection for those working near the edge of the roof. Accordingly, I consider that there was probably no alternative to the use of a perimeter scaffold for elevation 4 and about one half of elevation 3. This is about three eighths of the total perimeter. I am prepared to accept that the rest of the perimeter of the roof could have been reached by a suitable cherry picker (but not in all places by a scissor lift). For these reasons I consider that there was no real alternative to a perimeter edge scaffold for elevation 4 and half of elevation 3. Although this amounted to less than half the total perimeter, the unit cost of a smaller quantity of scaffold edge protection would probably have been higher than the unit cost for protection of the entire perimeter. Doing the best I can, therefore, I consider that 50% of the sum claimed, namely £4,333.34, would be the reasonable cost of such edge protection for these elevations and that is the sum that I would allow. In relation to the remainder of the perimeter, I consider that it would have been reasonable to use a large cherry picker carrying the type of wide platform that I have already mentioned. Mr McHardy allowed the sum of £500, but this was on the basis that the Claimant was not entitled to recover the cost of applying Delglaze. The figure of £500 represented the hire of a spider lift for one week at a cost of £250 per week and a cherry picker at £250 for 1 day. The evidence suggested that edge protection would be required during the works to the roof for a period of about 6-8 weeks [1] . If a cherry picker was to cost upwards of £1,000 per week, then it would be cheaper to have the edge scaffold. Accordingly, I allow for edge protection for the remainder of the perimeter in the balance of the sum claimed, namely £4,333.34. There is also a claim for the removal of a redundant flue. I agree with Mr McHardy that this could have been done from a suitable cherry picker. Therefore there is no additional cost of providing access for this. Damaged exterior panels (Items 79, 690 and 691) This claim is in respect of a number of external panels to the main elevations that are damaged, generally by impact. However, the tenant says that some of these panels were damaged by the Buncefield explosion in December 2005. In January 2007 the building was inspected by a loss adjuster in order to identify the extent of the damage caused by the explosion. In an email dated 4 January 2007 Kerry Buchanan, of the Andrews Partnership, said this: "As agreed with Chris Collins this morning, the cladding panels to the rear and side elevation that are damaged due to tenant impact damage are not to be replaced. The cladding works to these elevations will therefore only involve the replacement of panels identified as having been damaged by the blast, utilising panels obtained from the other side elevation where the cladding has been completely replaced. Chris reported that his (sic) will check one last time with the tenants, but if we do not here (sic) from him by the end of the week we are to proceed in this manner." There was then some discussion as to whether the tenant might take advantage of this opportunity to repair panels for which it was liable at the same time. The following day, 5 January 2007, the tenant's surveyor, Jeremy Salter, of Matthews & Goodman, asked Mr Buchanan if he would accept instructions on behalf of the tenant " to replace the noted number of impact damaged panels as has been discussed previously ". In the end, this did not happen. In my judgment, these two emails show very clearly that those dealing with the consequences of the Buncefield explosion on the ground were quite clear in their own minds which external panels had been damaged by the explosion and which panels had sustained impact or other damage for which the tenant was responsible (" the noted number of impact damaged panels "). I consider that it is unlikely in the extreme that any panel which had been damaged in the explosion was not identified at the time and subsequently repaired or replaced. Mr McHardy, who I accept has experience of dealing with blast damage, said that the appearance of such damage is very different from ordinary impact damage by, say, a reversing vehicle, and that the damage in question was consistent with a high velocity impact, such as would be caused by an item flung against the building by an explosion. But in my view this is a two edged point. If blast damage is very different from ordinary impact damage, as Mr McHardy says (and I am prepared to accept), then that would be very apparent to those on the ground in January 2007. The loss adjuster could be expected to know what he was looking for and there is no reason to think that he would not have acted in good faith. I therefore reject the tenant's suggestion that any of the external panels in respect of which the present claim is made were damaged by the Buncefield explosion. Whether or not they might have been damaged by some other later explosion, I cannot say. But that is not the tenant's case. Accordingly, I consider that the sum claimed in respect of item 79, namely £3,940.21, is recoverable. Item 690 is now agreed, so I need say no more about it. Item 691 concerns 3 dented panels in bays 2, 3 and 5 of elevation 3 and one badly damaged panel in bay 6. Mr McHardy considers that the last was also part of the Buncefield damage but if, contrary to this view, the court found that the tenant was liable for the damage, the cost of £341.55 should be allowed. In the light of my earlier conclusion in relation to the Buncefield damage, I therefore allow this item. In relation to the other panels, Mr McHardy's position was that the damage was de minimis . Whilst I accept that these events are relatively minor, that does not mean that the panels must be deemed to be in good repair. I consider that the Claimant is entitled to recover the sum claimed for this item. Cleaning (Items 14, 70, 174 and 290) Elevations 1 and 2 (Items 14 and 70) Mr Lincoln, the expert surveyor called by the Claimant, considered that both elevations 1 and 2 needed to be cleaned, even though the tenant had carried out jet cleaning to elevation 1. He said that if he was advising a prospective tenant, he would have asked for elevation 2 to be cleaned. Mr McHardy said that the elevations were in good condition so far as their function was concerned, but he conceded that cleaning put the building into a better condition from a visual point of view and, from a landlord's point of view, would be something that he might wish to do in order to avoid the risk of a tenant being put off by the dirty condition of the building. It seems to me that the photographs tell their own story. I consider that elevation 1 was in reasonably good condition after it had been cleaned by the tenant at the end of the lease. It is true that when it was cleaned again by the Claimant it looked even better, but I consider that the tenant left it in good and substantial condition. However, elevation 2 is a different matter. It was in a poor state and so the cost of cleaning it was not a disproportionate expense. Accordingly, I consider that the cost of cleaning elevation 2 was necessary in order to put the building into good and substantial repair and condition and that the cost of this item (70), namely £2,750, is recoverable. The warehouse ceiling (Item 174) I find that this was in a dirty condition and therefore not in compliance with the covenant. However, the attempt at cleaning it proved unsuccessful and so it was decided that further efforts would be disproportionate. Thus the Claimant seeks to recover only the cost of the abortive attempt at cleaning in the sum of £959.85. I consider that the Claimant is entitled to recover this sum. The wall of the area 4 (Item 290) Mr McHardy accepted in cross examination that the degree of dirt and soiling to internal wall 2, which he said was caused by carbonised dust from the rubber of fork lift trucks, would have impeded occupation by a hypothetical reasonable tenant. Although Mr Lincoln did not regard this damage as very serious, I consider that the Claimant is entitled to recover the sum claimed of £1,150. The warehouse floor (Items 323 and 330) There were numerous floor fixings for the tenant's racking which had not been removed (Item 323). Mr McHardy estimated the number and assessed the cost of repairs accordingly. Mr Lincoln said that one of his colleagues actually counted the number of fixings and a copy of his notes was produced in evidence. I am satisfied that there were 926 floor fixings as the Claimant alleges and so I allow this sum in full (there appears to be no dispute about the rate). The Claimant alleges that there were also numerous areas of wear to the concrete floor where the aggregate had been exposed (Item 330). Mr McHardy's position was that wear to the surface was not disrepair. I disagree with this. I consider that if the aggregate is exposed then the concrete floor is not in good and substantial repair. I therefore allow the sum claimed of £1,214.11. The dock levellers (Item 744) These are devices to raise the floor at the loading bay entrances. There were two of them. The Claimant says that they were in disrepair because they did not work. They were inspected by a company called Door Loading Services UK Ltd who condemned them and said that they were " Not to be used. Safety risk ". By email dated 12 November 2008 the Claimant's surveyor was advised that there were two options. The first was to remove and strip down the dock levellers and replace the existing mechanism with new hydraulic rams. The cost of this was £3,850 for each unit. The second was to fabricate new ratchets, because the existing ratchets could no longer be replaced, which would cost £3,780 for each unit. Door Loading Services UK said that they had spent several hours trying to source the original ratchet system but had been unable to do so because the company that made them was no longer in existence. A second company, Industrial Door Systems (Southern ) Ltd, was invited to submit a quotation for the repair of the dock levellers, which it did on 19 November 2008. It said that the existing manual levellers were beyond economic repair " due to their age, condition and missing parts ". They quoted for new dock levellers a sum of £3,886 plus VAT per leveller (£5,051.80). Mr McHardy said that in his view the second dock leveller was in working order. He regarded this as a case of supersession, in that the Claimant had chosen to replace the dock levellers with modern and better equivalents. He said in evidence that he had found a website from which the original parts could still be obtained, but it emerged in cross examination that he was only in a position to say that what was shown on the website looked similar to what had been installed. In spite of the pressure to obtain work, I consider it unlikely that two independent specialists would condemn both dock levellers if one was really in working order. I find that both dock levellers were out of repair and that the appropriate measure of damage for breach of the obligation to keep them in repair is the cost of repair. Although Door Loading Services put forward the figure of £3,780 per unit, that was expressly stated to be an estimate and not a firm price. In these circumstances, it seems to me that the Claimant reasonably mitigated its loss by opting for the slightly more expensive option (by £70 per unit) of replacing the existing mechanism with a hydraulic ram mechanism. I therefore consider that the Claimant is entitled to recover the sum claimed. The entrance barrier (Item 167) The entrance gates and barrier had been removed and so the tenant was obliged to reinstate them. Although the original posts for the height barrier remained in place, the Claimant installed new posts and an opening height barrier. The original barrier was a rigid structure which was slotted over the posts at each end. It is clear that the Claimant had to repair the height barrier and it is equally clear that the Claimant has replaced it with a structure that is better (because it can open) and more robust. The sum claimed originally was for the full cost of the replacement barrier, namely £2,643.40. However, during the course of the evidence the Claimant was prepared to reduce its claim to £1,500 in order to allow for betterment. Mr McHardy was prepared to allow one third of the sum claimed, namely £881.13. The only issue here is the amount of credit that should be given for the undoubted betterment. An opening barrier is far better than a rigid barrier that has to be lifted off the posts. I agree with the tenant that the Claimant's proposal of £1,500 does not fairly reflect the extent of the betterment. I consider that Mr McHardy's suggestion of £881.13 is reasonable and that is the sum that I allow. The mark up (Items 658, 664 and 739) In the case of three items, the tenant accepts that the Claimant should be entitled to recover the basic sum charged by the relevant subcontractor plus a reasonable mark up. The tenant says that a reasonable mark up would be 10%, The Claimant says that it is 15%. There is no absolute percentage which represents a reasonable mark up: it depends on all the circumstances. I am not persuaded that 15% is an unreasonable mark up and so, if that is what the Claimant has actually paid in respect of a particular item, I consider that it is entitled to recover that mark up. It seems that in respect of Item 739 the Claimant is seeking to recover a mark up in excess of 70%. That is not reasonable. I consider that the Claimant is entitled to the sum charged by the subcontractor, £483, plus 15%. The loading bay doors (Item 745) Most of the damage to these doors is accepted by the tenant as being its responsibility. However, Mr McHardy says that the damage to the upper sections of the right hand loading bay door does not look like impact damage but is much more likely to be blast damage. Mr McHardy says that this is another case where the damage was probably caused by the Buncefield explosion. Mr Lincoln was unable to express a firm view either way: he said that the damage at high level could have been caused by the Buncefield explosion but was just not noted at the time. So far as one can tell from the photographs taken by Mr McHardy, the damage is not very obvious. It certainly does not look like impact damage and, in any event, it is far too high. Unlike the position in relation to the external panels, there is no evidence that this particular damage to the loading bay doors was noticed during the inspection by the loss adjuster following the Buncefield explosion. In my view it could well have been missed. It is hard to conceive of any mechanism likely to occur in the day-to-day occupation of the building that could have caused this sort of damage. I consider that the Claimant has not proved that this damage is damage for which the tenant is responsible under the repairing covenant. In these circumstances, I consider that the Claimant is entitled to recover £8,082.24 in respect of this item, being the amount agreed by the tenant. In any event, I would not have regarded it as reasonable and proportionate to repair something that, in my view, is a very minor cosmetic blemish. Preliminaries (Item 758) Preliminaries are claimed in the sum of £24,200. This is the amount that was included in the original tender sum, which was £253,122, to which was added £38,700 by way of preliminaries. The breakdown of these preliminaries is set out in the schedule. As one would expect, some of the items are time related, such as welfare facilities, whereas some are not (for example, skips/waste disposal). In my judgment it is only appropriate to reduce the amount of preliminaries that the Claimant cannot recover if the extent of the work for which I consider the tenant is responsible is significantly less than the work actually carried out so that the contract period would have been reduced. It is not sufficient to say, as I think Mr McHardy does, that if the value of the final account is less than the contract sum, the preliminaries should be proportionately lower. It is quite possible to have omissions from the work that do not have any impact on the time taken to complete the balance of the work. I have concluded that the Claimant is entitled to recover most of the sums in issue. I do not consider that the extent of the work represented by the sums that I have disallowed, had they been omissions to the work originally tendered, would have made any significant difference to the contract period, and hence to the preliminaries. Accordingly, I allow the sum claimed of £24,200 in respect of preliminaries. Professional fees It appears to be common ground that 12% is the appropriate percentage for professional fees. Since this is a straight percentage of the contract sum or the value of the final account (depending on the agreement with the professionals concerned), it is directly affected by the value of the work. I consider that the tenant is right to contend that the appropriate award for professional fees is 12% of the cost of the works actually awarded as damages. I will leave the parties to calculate the appropriate figure. Loss of rent and related expenses The claim for loss of rent and related expenses is for a 10 week period between the date of the expiry of the lease on 28 September 2008 and the expiry of the Woodside lease on 10 December 2008. The parties have agreed the weekly rate of the loss. The issue is as to the period. As I have already mentioned, the Woodside lease was for a term starting on 29 May 2008. However, it took a long time to negotiate the detailed terms and the lease itself was not signed until 9 September 2008. It contained unusual termination provisions. The term of the lease was 18 months but it provided for early termination on either 28 September 2008 or 31 October 2008 on one month's prior written notice. There was also a Rolling Termination Date, by which the Claimant could give 3 months' notice of termination to determine the lease at any time after 29 September 2008. The earliest date on which the Claimant could have given notice under the Woodside lease was prior to 28 August 2008 (in order to give a termination date of 28 September 2008). However, there were two potential problems with this. First, 28 September 2008 was the date on which the tenant was due to vacate the building, so the Claimant would in effect have to vacate the Woodside building and move into Unit C on the same day. Second, the Woodside lease was not signed until 9 September 2008 and there might well have been difficulties in seeking to give notice before then. I consider that in reality the choices open to the Claimant in mid September 2008 were either to give one month's notice to determine on 31 October 2008 or to give 3 months' notice in order to terminate on the first available Rolling Termination Date. In fact, the Claimant did the latter by giving notice on 10 September 2008 to determine the lease on 10 and December 2008. Mr Bordon, a director of the Claimant, said in his witness statement that it was on the basis of the Claimant's " estimate of the time that it would take to complete the work " to remedy the breaches of the repairing covenant that the Claimant invoked the rolling termination clause in the Woodside Lease and gave three months' notice to terminate the Woodside lease (at paragraph 20). In cross examination he said that notice to exercise the rolling termination clause could have been given before 10 September 2008, because the terms of the lease had been agreed before that date. However, it seems to me that the Claimant's solicitors must have taken the view that they could not be certain that effective notice could be given before the lease was signed or, alternatively, that if notice was given before the lease was signed the landlord might then refuse to sign it. In his witness statement Mr Bordon said that the Claimant moved back into the building on or around 3 December 2008 which, he said, was the earliest date on which this could have been done. Thereafter the Claimant vacated the Woodside premises, although its internet back office had to be moved temporarily to the Claimant's head office in Hemel Hempstead because the relevant work to the office accommodation at Unit C had not been completed. Mr Lincoln said that the Claimant could not have occupied Unit C before phase 2 of the work had been finished, although they could have done some fitting out before then. He said that the contractor's programme turned out to be 9½ weeks. Since the work started on about 29 September 2008, completion must have taken place in the first week of December 2008, which ties in with Mr Lincoln's evidence that practical completion took place on 3 December 2008 and with Mr Bordon's evidence that the Claimant moved back into the building on or around 3 December 2008 and vacated the Woodside premises shortly afterwards. In these circumstances, I consider that the Claimant is entitled to the cost of alternative accommodation for the period up to 10 December 2008, less the amount that it would have had to pay in any event up to 31 October 2008 (being the first date upon which it could realistically have terminated the Woodside lease). I will leave the parties to calculate the precise amount. The cost of the preparation and service of the schedule of dilapidations The Claimant claims £5,138 in respect of this. Ms Higgins submitted that this amount was neither reasonable nor proper. She submitted that it was unnecessary to serve a costed schedule over a year before the end of the lease in circumstances where the Claimant was proposing to reoccupy the premises itself. Further, she submitted that the costing was not reasonably carried out. The total cost of the works on the schedule was a little under £400,000, as compared with the figure of a little under £300,000 which was the amount of the contractor's first tender (and which was itself substantially reduced thereafter). Ms Higgins submits that in these circumstances a reasonable cost of preparing the schedule would have been £2,950, plus £50 for service. Ms Barton submits that it was perfectly legitimate for the Claimant to serve the schedule well in advance of the date of termination of the lease so as to give the tenant an opportunity to remedy the numerous breaches. She says that the tenant performed minimal works prior to determination of the lease and did not in fact respond to the schedule until May 2009, some 8 months after it vacated the premises. I consider that there is some force in Ms Higgins's submission that the amount sought by the schedule was significantly inflated because no proper consideration had been given to the extent that the work said to be required was properly the responsibility of the tenant. Equally, there is force in Ms Barton's response that the tenant did not do anything with the schedule for well over 18 months. In these circumstances I propose to award the sum of £4,000 in respect of the preparation and service of the schedule. Interest Ms Higgins reminded me of the three propositions set out by Jackson J in Claymore Services Ltd v Nautilus Properties Ltd [2007] BLR 452 , at 460, where he said: "(1) Where a claimant has delayed unreasonably in commencing or prosecuting proceedings, the court may exercise its discretion either to disallow interest for a period or to reduce the rate of interest. (2) In exercising that discretion the court must take a realistic view of delay. In the case of business disputes, litigation is, for all parties, an unwelcome distraction from their proper business. It is not reasonable to expect any party to take every litigious step at the first possible moment, or to concentrate on litigation to the exclusion of all else. Delay should only be characterised as unreasonable for present purposes when, after making due allowance for the circumstances, it can be seen that the claimant has neglected or declined to pursue his claim for a significant period. (3) When determining what disallowance or reduction of interest should be made to mark a period of unreasonable delay, the court should bear in mind that the defendant has had the use of the money during that period of delay." Ms Higgins makes no complaint of events up to July 2009, but she submits that progress thereafter was only half-hearted. There was one without prejudice meeting with a view to settlement, but apart from that there seems to have been little activity until the Claimant wrote its pre-action protocol letter in January 2011. Proceedings were issued 6 months later. Ms Higgins relied also on the fact that the Claimant declined to accept a payment on account of its claim of £165,000, which was offered in September 2009. Ms Higgins submits further that there is no evidence of the rate at which the Claimant, or a company in a similar position, could borrow money. In fact the Claimant has never borrowed money, although it has a loan arrangement with an associated company, Astwood. Ms Barton submits that Mr Bordon's evidence was that Astwood would usually have to pay a flat facility fee of around 2-2.5% and a flat exit fee of around 2% on top of its borrowing cost which was above base rate. According to my note, Mr Bordon said that this amounted to a cost of about 7.5% in all, but I have to confess that I did not understand how he arrived at this figure. Ms Barton submits that I should award interest at 8%. Ms Higgins submits that it should be 1% over base. In the absence of any better information about the cost to a company like the Claimant of borrowing money, and having regard to the fact that there was a fairly substantial period of delay in pursuing the claim, I propose to award interest for the full period from the date of termination of the lease at 3% above base. Other matters I will hear counsel on any questions of costs and if there are any matters with which I have omitted to deal. In the light of this judgment the parties should be able to agree the sum for which judgment should be given and the amount of interest. However, since this judgment was distributed in draft I have been told that a winding up order was made against the Defendant in the Manchester District Registry of the High Court on 18 March 2013 (well after the conclusion of the trial and the submission of the parties' closing submissions). The Official Receiver, who has been appointed liquidator, has notified the court by letter dated 18 April 2013 that in his or her opinion this judgment should not be handed down by virtue of section 130 of the Insolvency Act 1986, which provides that when a winding up order has been made no action or proceeding shall be proceeded with or commenced against the company or its property, except by the leave of the court. I disagree. I can see no reason why this judgment should not be handed down in the form in which I have prepared it. It is in effect in a form which is declaratory. I am making no other order. The Claimant is entitled to know my findings and to make such use of them as it properly can in the liquidation. Note 1 I have taken this from the actual preliminaries of the contractor who did the work and from a programme that was provided with another contractor's quote. [Back] BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII