COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CARDIFF DISTRICT REGISTRY
THE TECHNOLOGY AND CONSTRUCTION COURT
(His Honour Judge Moseley QC)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE CHADWICK
LADY JUSTICE ARDEN
| JOHNSEY ESTATES (1990) LIMITED
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|THE SECRETARY OF STATE FOR THE ENVIRONMENT
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Mr Jonathan Gaunt QC (instructed by Hugh James Ford Simey of Cardiff for the Respondent)
Crown Copyright ©
LORD JUSTICE CHADWICK :
"1. The Claimant shall be entitled to the costs incurred between 24 June 1994 and 25 September 1996.
2. Both parties shall bear their own costs of the common law claims incurred between 25 September 1996 and 19 February 1999.
3. The Defendant shall be entitled to his costs of
the diminution in value issue incurred between
25 September 1996 and 19 February 1999.
4. The Defendant shall be entitled to his costs from
the 19th February 1999 onwards."
In that context the "costs of the common law claims" means the costs of establishing the actual cost of works of repair; and the "costs of the diminution in value issue" means the costs of establishing the amount of the diminution in value of the reversion.
"From 26 April 1999 the "follow the event principle" will still play a significant role, but it will be a starting point from which the Court can readily depart. This is also the position prior to the new rules coming into force. The most significant change of emphasis of the new rules is to require the courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new rules are reflecting a change of practice which has already started."
"(i) what Counsel referred to during the hearing as "the common law claims", meaning principally the claim for damages for the cost of repairs but including also claims under the contract for (for example) the cost of the schedule of dilapidation; and
(ii) the issue arising under the Landlord and Tenant Act 1927 section 18(1), being the diminution in value or valuation issue."
I accept, of course, that those were, indeed, the two broad issues in the litigation. But it is necessary to keep in mind that there is an important link between those two issues. The effect of section 18(1) of the Landlord and Tenant Act 1927 is not that the landlord automatically recovers an amount measured by reference to the reduction in future rental value. Section 18(1) of the 1927 Act provides a cap. The landlord has to establish the amount of his actual loss. If the cost of actually doing the repairs is less than the diminution in the value of the reversion (measured by reference to the reduction in the rent which could be obtained if the repairs were left undone) the damages will be equal to the cost of doing the repairs. To put the point another way: in such a case the diminution in value of the reversion will be measured by the cost of putting the property into repair. So, unless it is conceded by the tenant that, whatever the cost of repairs, they will exceed whatever amount is held to be the diminution in value of the reversion (measured by reference to reduced future rent) both issues are engaged. Further, it is, of course, necessary to establish that the factors which are said to lead to a reduced rent are attributable to the tenant's failure to comply with its repairing covenants. It would be possible to have the two issues tried separately - and there may be occasions where that course will lead to a saving of costs- but that was not the course adopted in this case.
"...It seems to me that the only realistic course notwithstanding the new approach of the Court as outlined in Lord Woolf's judgment [in R v Secretary of State for Transport ex parte Factortame Ltd (6 July 1998, unreported)] is to consider the broad issues mentioned above. As to those, it seems to me (1) that the defendant was overwhelmingly successful in respect of the diminution in value issue. The claimant's case, based on Mr Lawley's opinion, was that the diminution in value exceeded £1,000,000. The diminution in value was held to be £200,000, precisely the figure for which the defendant argued. In those circumstances in my view I should exercise my discretion in respect of this second stage of the litigation by ordering the claimant to pay the defendant's costs of the diminution in value issue. As to (2) the common law issues, the position is less clear. Again the defendant was overwhelmingly successful, but it was necessary for the claimant to expend some costs in proving that the cost of repairs amounted to some £840,000 and it did recover damages and interest exceeding the payment in by £36,000. I do not accept Mr Gaunt [counsel for the Secretary of State]'s argument that the defendant's success in respect of the diminution in value issue made the common law claims irrelevant. On the contrary I accept Mr Dowding [counsel for the landlord]'s argument that it was necessary to establish the cost of repairs to recover anything. However, taking into account that the defendant successfully resisted an excessive claim, in my view the order I should make is that both parties should bear their own costs of the common law claims."
LADY JUSTICE ARDEN
LORD JUSTICE SCHIEMANN