England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHICHESTER COUNTY COURT
(His Honour Judge Baker)

		Royal Courts of Justice Strand London WC2
		31st July 1997

LORD JUSTICE HENRY: This is an appeal from His Honour Judge Michael Baker, sitting in the Chichester County Court, who on 1st March 1996 dismissed the plaintiff's claim for arrears of rent and an order that the defendant kept the demised premises (a shop) open for business during shop opening hours, and allowed the defendant's counterclaim rescinding and/or accepting the plaintiff's repudiatory breach of the covenants in the lease on or about 4th August 1993.

The facts are these: Miss Davies (who had some business, but little retail experience) wished to start a "niche" specialist shop, selling puzzles and executive toys. Her father was assisting her in the planning and implementation of this venture and became the lessee. He was a businessman but not a retailer.

The landlords were developers of a double fronted corner site on Bognor Regis High Street. They borrowed money to do this, secured by a charge on the freehold of the site. They are now in administrative receivership, and the plaintiffs are the mortgagees in possession. They did not assume responsibility for the management of this lease until after the events we are concerned with.

The development planned was a small shopping mall designed as eight units, but let as five units, three double and two single. It was necessarily small given the dimensions of the site. There were two double units on the High Street side, either side of a passage which formed a dog-leg to a small side street. The two units on the High Street frontage primarily relied on their own entrances into the High Street. The three back units relied on access by the passage. The defendant was, from 19th December 1988 until his purported "disclaimer" of the lease by letter of 4th August 1993, the tenants of one of the three back units.

The defendant was the first to take a tenancy of one of the units, and his daughter the first to occupy, before the development was wholly complete. They both said, and the judge accepted, that they proceeded to enter into the lease on the strength of material set out in the estate agent's particulars, which were headed "Preliminary Details", and continued:

"Situated in the heart of one of the prime locations in Bognor Regis, CLOCK WALK is an exciting new development in shopping malls that offers the perfect setting for successful retailing with an eye to the future.

The Victorian clock tower in the High Street has long been one of Bognor's best loved landmarks. Now it is set to become a focal point of one of the town's most prestigious retail developments, CLOCK WALK.

With its traditional design and bright atmosphere, CLOCK WALK will undoubtedly prove a major attraction for discerning shoppers and the modern mall stall setting will provide an environment that reflects the superior standard of today's retailer.

Situated close to the town's post office, banks and established stores, CLOCK WALK will be one of the most popular locations in Bognor and its combination of prominent position and eye catching facade will ensure an exceptionally high profile for every retailer in the development."

There then followed details of the unit sizes, rentals and tenure.

The judge was to get from that brochure, and the evidence that the Davies's gave as to their reliance on it, the representation that this was to be a high class development with a letting policy of letting only to tenants "within the category of a high class retail outlet". The judge found that that was a misrepresentation.:

"I think that the fact is that the landlords were prepared to let to whoever was prepared to take on these units at a rent that would satisfy the landlords."

The letting history was as follows: all five units were let within ten weeks of Miss Davies taking up occupation and starting trading. The two large units on the High Street were respectively taken by a coffee shop, and a charity shop, Cancer Research Campaign. The two other back units, one large and one small, were respectively taken by a woman's fashion shop, "Panthers", and another clothing shop "Seasons Country Clothing". The judge, on the evidence of Miss Davies, was to conclude that the Cancer Research Campaign was not the sort of retail outlet that could be regarded within the category of a high class retail outlet. Hence his conclusion already stated that the landlords mis-represented their intention. The plaintiffs draw attention to the fact that there was no written complaint by the tenants as to that letting when it happened.

In the event, the back shops, those not fronting onto the High Street, experienced trading and financial difficulties. Seasons Country Clothing traded for 13 months before ceasing. Panthers survived for some 22 months, until December 1990.

The Seasons site remained empty through to the time when the defendant disclaimed the lease in August 1993. The Panthers site was empty from December 1990 for 13 months, until 23rd January 1992. By the turn of the year solicitors on behalf of Mr Davies were writing expressing their concern both at the fact that the units had been unoccupied for so long, and as to the fact that the rentals being sought for them were so very low. They said:

"The fact that so many units at Clock Walk remain unoccupied obviously has a depressing on our client's own business carried on from Unit 6 and at the same time the levels of rentals now being sought for the unoccupied units means that our client's own unit has become effectively unmarketable."

The background to this of course is that the lease we are here considering was entered into before the crash of the property market, and the difficulties in letting no doubt represented the effect of the recession. And the tenant that the landlords finally accepted for the Panther's site was a trade that flourished in the recession: a pawnbroker. After their first year's trading, from January 1992 to January 1993, there was a front page article in the local paper headlined: "Boom time for pawnbrokers" where the manager of the shop was reported as saying that they had had 2,500 contracts in the first year and had been constantly busy:

"Our customers are mainly unemployed or have temporary cash flow problems. They use us as an alternative to a bank."

The defendant had already withheld the payment of part of the rent because of the fact that the landlords ignored and did not respond to his complaints. The most significant of these was that the coffee house had put tables in the entrance from the High Street, ordinary white plastic garden furniture, thereby obstructing the access to the shops at the back. But it was the letting to the pawnbroker that was the last straw. Miss Davies dealt in her evidence with the problem before the lease to the pawnbroker and after. Before, with both of the other shops dark,

"you could not see that there was anything past the tables, so no-one bothered to come down. We had that for a while. Then, when the pawnbroker went in, it just kicked the legs from under us."

Mr Davies described the advent of the pawnbroker as "like a knife going through [the business]".

There was no evidence before the court as to how a pawnbroker's business is usually carried on. It was the manner in which this pawnbroker's business was carried on that caused the main difficulties to the Davies's. Their windows on to the mall were obstructed so you could not see into the pawnbroker, and thus no light from them came out onto the passage. More importantly, entry to the premise was restricted to one customer at a time, on the door being unlocked for him. For this reason, potential customer (who, by the fact that they found it necessary to go there, would not be likely have money to spend on the sort of items the defendants sold) would wait in the passage, occasionally sitting at the coffee house's tables while waiting, or entering Miss Davies' shop. The largest number waiting at any time was ten, and numbers up to six were not uncommon. These groups of young men waiting had a deterrent effect on people who might otherwise have used the mall as a pedestrian way, and on people who might have window-shopped. It meant that effectively there was no passing trade at all. Miss Davies said this:

"Q: Did you have any specific problems with the behaviour of people that were going to the pawnbrokers?

A: Oh yes, quite definitely. We open at 9 o'clock in the morning, and the pawnbrokers open later than us, 9.30, sometimes 10.00 o'clock. He was never terribly precise. So I have opened the arcade. They started to hang around from the time that the arcade was open so you are then left with the problem of one person being on staff is not enough, so you need two, whereas you could have been able to continue till later in the morning. They would wait either in their cars or outside the front. Obviously you are open; they come in. They do not want anything but to wait, "Hello love, when's the pawnbroker coming in." It was threatening and difficult to cope with. I do not tend to look very old, so that also causes trouble. They closed for an hour and a half at lunch time and again, people do not go away, so I did not have a lunch hour for two years. You are for ever having to make sure you did not go to the toilet, which was outside the building, if there was only one in, and all this sort of thing. It actually made trading very difficult, and being a gift shop, I was employing middle aged ladies on a part time basis, who again found it very difficult to cope with that sort of element. It just made trading very unpleasant."

And so, on Miss Davies' evidence which the judge accepted, not only did the presence of the pawnbroker kill new business and deter old, but it also meant that she had to take on extra staff.

Indicative of the landlords' attitude was the question of where the pawnbroker's sign, the traditional three balls, should hang. The landlords by their lease agreed to it being central placed above the High Street entrance to the mall, making, as Miss Davies complained, it look as though it was Pawnbroker's Arcade.

The correspondence shows that the Davies's were complaining about the pawnbroker, how she organised her business, and where the pawnbroker's sign was put, from shortly after the pawnbroker moved in, in February 1992 until the final "disclaimer" of the lease in August 1993. The correspondence shows a melancholy but familiar picture of letters being ignored by the landlord, what contact there was being marked by the buying of time and by promises unkept (including a bizarre episode where the landlords sent the pawnbroker's lease to the tenant's solicitors for advice from them as to what they could do about the pawnbroker and her conduct of her business). In all that time many letters were written, but nothing was done. The judge's conclusion as to this was as follows:

"Did the conduct of the plaintiff by letting, as it did, to the pawnbrokers ... amount to a repudiation of the lease by the plaintiff with the result that they derogated from their grant. The principle of derogation of grant is, according to Brown and Flower that it make the premises materially less fit for the particular purpose for which the grant was made.

It is a question of degree, and in my view ... the letting to the pawnbrokers was a substantial interference in the defendant's business, and it did make the purpose for which her father took out the lease on her behalf less fit. It is quite clear from her evidence that the pawnbroker's business was a substantial interference with her own business, and, indeed, was the cause of her giving up the business. There was a nuisance. There was the deterrent effect of the activities there on potential customers which resulted in her business collapsing, and if she had gone on there she would, no doubt, have gone bankrupt. This is something that the plaintiff ought to have foreseen in my view when they let those premises to the pawnbrokers."

It will be noticed that the judge found that the conduct of the pawnbroker's business was a nuisance. In cases such as this, there are three possible causes of action, breach of the covenant of quiet enjoyment, derogation from the grant, and nuisance. There is some authority that, in appropriate cases, the "label" attached to the cause of action does not matter. (see Hilton -v- James Smith & Sons (Norwood) Limited [1979] 2 EGLR 44, per Ormerod LJ at 44G). In this case, nuisance was not pleaded, nor specifically argued before the trial judge, and not before us until the final chapter of submissions. It is not clear whether there was any, and if so what, discussion of that tort in the court below. But I would take that conduct as found by the judge as amounting to a nuisance, namely undue interference with your neighbour's comfortable and convenient enjoyment of his land. The landlords did not create that nuisance, but it will be necessary to examine whether they are liable as adopting or continuing it, and whether that is a derogation from grant.

I deal first with the question of derogation from grant. Mr Driscoll QC for the plaintiffs submitted that this only arose where the landlords were responsible for some act which made it either physically or legally impossible to use the premises for the uses permitted (and required - see the "keep open" clause) under the lease namely:

"the retail sale of puzzles and executive toys and games and like products or such other use ... that falls within Class A1 of the Town and Country Planning (Use Classes) Order, 1987, as the landlord shall from time to time approve."

Class A1 deals with the retail sale of goods other than hot food.

In my judgment Mr Driscoll QC takes too narrow a view of the doctrine. As long ago as 1894 in Aldin -v- Latimer Clarke, Muirhead & Co [1894] 2 Chancery 437, Sterling J summarised the authorities to that date:

"The result of these judgments appears to me to be that where a landlord demises part of his property for carrying on a particular business, he is bound to abstain from doing anything on the remaining portion which would render the demised premises unfit for carrying on such business in the way in which it is ordinarily carried on ...." (p 444)

From that broad principle, the courts have proceeded step by cautious step. But the principle itself has always been firmly founded on the bedrock of basic fair dealing, rather than a restrictive straitjacket of individual restrictions. Many of the initial cases dealt with the protection of continuous or apparent quasi-easements, but Parker J in Brown -v- Flower [1910] 1 Chancery 219 at 224-225 made clear that:

"But the implications usually explained by the maxim that no-one can derogate from his own grant do not stop short with easements. Under certain circumstances there will be implied on the part of the grantor, or lessor obligations which restrict the user of the land retained by him further than can be explained by the implication of any easement known to the law. Thus, if the grant or demise be made for a particular purpose, the grantor or lessor comes under an obligation not to use the land retained by him in such a way as to render the land granted or demised unfit or materially less fit for the particular purpose for which the grant or demise was made."

He was speaking there of making the land physically less fit - that the principle also applied where the land was made legally less fit was clear from the decision of the Court in Harmer -v- Jumbil (Nigeria) Tin Areas Limited [1921] 1 Chancery 200, where in the familiar passage, Younger LJ said, at 225:

"Now if these questions are to be answered in a sense favourable to the lessee, it must be on the principle that a grantor shall not derogate from his grant, a principle which merely embodies in a legal maxim a rule of common honesty. `A grantor having given such a thing with one hand,' as Bowen LJ put it in Birmingham, Dudley and District Banking Co -v- Ross (1), `is not to take away the means of enjoying it with the other.' `If A lets a plot of land to B,' as Lord Loreburn phrases it in Lyttleton Times Co -v- Warners (2), `he may not act so as to frustrate the purpose for which in the contemplation of both parties the land was hired.' The rule is clear, but the difficulty is, as always, in its application. For the obligation laid upon the grantor is not unqualified. If it were, that which was imposed in the interests of fair dealing might, in unscrupulous hands, become a justification for oppression, or an instrument of extortion. The obligation therefore must in every case be construed fairly, even strictly, if not narrowly. It must be such as, in view of the surrounding circumstances, was within the reasonable contemplation of the parties at the time when the transaction was entered into, and was at that time within the grantor's power to fulfil. But so limited an obligation imposed may, I think, be infinitely varied in kind, regard being had to the paramount purpose to service which it is imposed. If, for instance, the purpose of the grant would in a particular case be frustrated by some act of the lessor on his own land which, while involving no physical interference with the enjoyment of the demised property, would yet be completely effective to stop or render unlawful its continued user for the purpose for which alone it was let, I can see no reason at all in principle why `ut res magis valeat quam pereat' that act should not be prohibited, just as clearly as an act which, though less completely effective in its result, achieved it by some physical interference."

The modern statement of principle is to be found in the decision of Johnston & Sons Limited -v- Holland [1988] 1 EGLR 264 at 267J per Nicholls LJ:

"The expression `derogation from grant' conjures up images of parchment and sealing wax, of copperplate handwriting and fusty title deeds. But the principle is not based on some ancient technicality of real property. As Younger LJ observed in Harmer -v- Jumbil (Nigeria) Tin Areas Limited[supra] it is a principle which merely embodies in a legal maxim a rule of common honesty. It was imposed in the interests of fair dealing. [and he then quoted Bowen LJ in the passage from Harmer quoted above] As one would expect, the principle applies to all forms of grants. ... In Megarry and Wade on the Law of Real Property, 5th Edition, page 849, the view is expressed that in truth the doctrine is an independent rule of law. This approach was approved by Denning MR in Moulton Buildings Limited -v- City of Westminster [1975] 30 P&CR 182 at 186. He stated the broad principle thus:

"If one man agrees to confer particular benefit on another, he must not do anything which substantially deprives the other of the enjoyment of that benefit: because that would be to take away with one hand what is given with the other."

That being the general principle, the next step must be to apply it to a particular factual situation. Such a cases is the present, that exercise involves identifying what obligations if any on the part of the grantor can fairly be regarded as necessarily implicit, having regard to the particular purpose of the transaction when considered in the light of the circumstances subsisting at the time the transaction was entered into."

The central point to be got from the circumstances surrounding the lease at the time that Mr Davies took it was that what the landlords were marketing was not just a separate and independent retail unit, but such a shop in its place in a shopping arcade or (in the modern usage) mall. That was the "particular purpose for which the land was hired". The lease makes that clear. The mall was described in the lease as being "the Centre", the common parts (including the passages required for access and the cloakrooms) were defined and kept within the responsibility of the landlords, who were entitled to charge a service charge therefore. It was implicit in the form of the lease that other tenants would be subject to similar forms of lease, as the pawnbroker was. All tenants were obliged to keep open during shop opening hours. They could not, without the landlords' consent, make any alterations or additions to the property. They could not use the property for "any use ... similar to any other use for the time being permitted in any other part ... of the Centre". There was a covenant restraining tenants from committing a nuisance. They could not obstruct the windows without consent. The landlords retained a rule-making power for better use of the Centre, and in particular the common parts, and the power to make the tenants obey such rules. It was plain from the surrounding circumstances that the uses to which other units were put, the manner in which other tenants carried on their business, and the impact of those matters on the user of the common parts, could have a great influence both on the business of the individual tenants, and on the success of the development itself.

I get all of that from the defendant's lease and from the similar lease to the pawnbroker. I get nothing additional from the estate agent's puff, to be found in the "Preliminary Details" already quoted. The judge found in that transparently fulsome description an implicit representation of the future letting policy of the landlords, and found his actual letting policy to be in breach of that representation, amounting to a misrepresentation. We live today surrounded by the blandishments of the advertising industry. We are used to them, and we take them with a pinch of salt. Read literally, this document praised the location and the design of the development, and expressed confidence in its success. It seems to me that even the most naive could not get any legal comfort from that document that they could not get from the lease. From the lease one gets a clear recognition by the landlords that the enjoyment of the benefit that the tenant took under the lease here depended in part on the actions of the landlords in letting and controlling the remaining units in and the common parts of this small retail development. I do not regard this as a case of misrepresentation: in my judgment the real issue is whether this is a derogation from grant.

The judge, in what seems to have been an ex tempore judgment, found that it was, in the passage already quoted. Mr Driscoll for the plaintiffs contends that in the passage the judge is wrongly finding that it was the mere fact of letting to a pawnbroker that constituted the derogation. And he submits with force that, while pawnbrokers are not a retail use, there was no evidence that they were necessarily such unsuitable neighbours that the fact of letting was such a substantial interference with Miss Davies's business to be a derogation.

I agree with that submission. But read in the context both of the evidence heard and the judgment itself, what the judge found in fact to be the derogation was in fact the actual conduct of the pawnbroker's business, which he held "ought to have been foreseen by the landlords." As to this, Mr Driscoll submits that there was no evidence that the ordinary conduct of a pawnbroker's business was likely to result in the interference with Miss Davies's business complained of, and that accordingly the judge should not have found that it was foreseeable: that was not an inference that the judge was entitled to make. Again, I am inclined to agree with that submission.

But the judge's crucial factual finding clearly related to the conduct of the pawnbroker's business - it was that which was a substantial interference with Miss Davies's business, it was that which was a nuisance, it was that that deterred customers and was driving her towards bankruptcy. And the real issue is whether the landlords were liable for that conduct. An important subsidiary issue that emerged on the case law cited before us was whether the landlords were under any legal obligation to intervene to put a stop to any nuisance caused by their pawnbroker tenant.

These were not matters specifically addressed by the trial judge, for whatever reason. He may have regarded the landlords' consent to the nuisance as implicit from his failure to remedy it, or for some other reason. But before us no-one was asking for a new trial. Nor do I believe that one is necessary. The plaintiffs did not choose to call any evidence from the landlords. Mr Davies and his daughter gave evidence. They dealt with the factual background on these issues. So we have the bed-rock of available evidence on the matter. It is merely a matter of drawing inferences from that evidence. In my judgment this is a case where we can and should do so, rather than remit the matter back to the County Court.

Mr Driscoll QC for the landlords submits that three Court of Appeal decisions have established that a common landlord is under no obligation to tenant A to enforce the express contractual obligation of tenant B not to commit a nuisance which renders the land leased to tenant A unfit or materially less fit for the purpose for which it was let. Tenant A should pursue his own remedy in tort for nuisance.

The first of these authorities is Malzy -v- Eicholz [1916] 2 KB 308 CA. In this case Eicholz, the lessee of a block of buildings in the Strand, in his turn let a restaurant in those buildings to the plaintiff Malzy. The lease contained a "keep open" clause, and also a quiet enjoyment clause. Subsequently he let a vacant tailor's shop, then reached by the same corridor as that used by the restaurant, to one Castiglioni, for the purpose of carrying on the business of "a dealer in fine arts with power to sell by auction diamonds, jewellery, plate and Japanese curios", extracting a covenant that Castiglioni would not permit or suffer a nuisance to the lessor or his tenants. Castiglioni then licensed one Dent to carry on mock auctions in the shop for his own benefit. These were carried on in such a way as to be a public nuisance, and called for the interference of the police.

"Eicholz frequently wrote to Castiglioni to remonstrate, but took no active steps .... Malzy alleged that his business was seriously interfered with and damaged by crowds and disturbances thereby occasioned, and he brought this action against Eicholz and Castiglioni for an injunction and damages."

The action was tried by Mr Justice Darling and a jury. The judge left the jury five questions which they answered as follows:

"1) Was the business at 161A, Strand so conducted as to be a nuisance and an annoyance to the plaintiff and a prejudice to his business of a restaurant keeper ...? - Yes.

2) Was such business conducted in that manner by the defendant Castiglioni or with his authority? - Yes.

3) Was the business so conducted with the knowledge and assent of the defendant Eicholz? - Yes.

4) Did the defendant Eicholz take all reasonable steps and make all reasonable efforts short of legal proceedings to stop such nuisance and annoyance and prejudice? - No."

And the jury then found £250 damages. The question on appeal was whether the defendant Eicholz was liable on these findings. The headnote reads:

"A lessor is not liable in damages to his lessee under a covenant for quiet enjoyment for a nuisance caused by another of his lessees because he knows the latter is causing the nuisance and does not himself take any steps to prevent what is being done. There must be active participation on his part to make him responsible for the nuisance. A common lessor cannot be called upon by one of his tenants to for use the benefit of that tenant all the powers he may have under agreements with other persons."

Lord Couzens-Hardy MR at 315 said this:

"It is quite a novel doctrine to me that permission by a lessee to use demised premises for a purpose which may or may not involve or create a nuisance is a wrong act on the part of the landlord, and that the landlord can be rendered liable merely because a person does carry on that business in such a manner as to create a nuisance. It would be different, if it were let for a purpose which necessarily involved a nuisance, but this letting did not necessarily involve a nuisance."

He went on to say:

"In my view assent and knowledge are not sufficient unless you qualify it in a manner which the learned judge has not done here as being essential to create a liability on the part of the defendant. The learned judge in his summing up seemed certainly to intimate to the jury in considering whether this was done by the authority or with the knowledge or assent of Mr Eicholz they must consider what he could have done. That is not the way to test it. He was no more bound to enter into the premises under his power or to enter without such power and put the shutters up in front of the shop than he was bound to commence an action."

In relation to the commencement of an action, the learned judge had earlier said:

"A landlord ... according to the settled authorities is not bound to commence any legal proceedings to abate a nuisance ...".

To like effect, Pickford LJ quoted Lord Collins MR in Jaeger -v- Mansions Consolidated 87 LT 696 indicating that it was not enough that the nuisance was committed with the landlord's knowledge and consent unless:

"The acts of the persons using these flats for immoral purposes could be construed to be the acts of the defendant in the sense that they authorised them - not merely that they did not stop them but that they were in effect a party to them ...."

Though a Lexis search indicates that Malzy has seldom been relied on, it still finds it place in Woodfall, at 11.275 as authority for the proposition that the landlord:

"... is not liable merely because he knows the other tenant is causing a nuisance and takes no steps to prevent it: there must be consent or active participation on the landlord's part to make him liable for breach of covenant in such a case."

Mr Driscoll next relies on the case of Matania -v- National Provincial Bank [1936] 2 AER 633. There the plaintiff and the second defendants were both tenants of the bank. The tenants wished to carry out substantial works, which they did in a manner constituting an actionable nuisance. The bank consented to them doing this work provided they first obtained Mr Matania's consent. They did not do. So the bank never consented to the work, and those works were done without their authority. Clearly they had not derogated from their grant, nor were they in breach of their covenant of quiet enjoyment, nor had they adopted or continued the nuisance. This case does not assist Mr Driscoll.

The third authority is O'Leary -v- London Borough of Islington [1983] 9 HLR 81. Islington were landlords of a tower block. One of the tenants in that block created a considerable nuisance. The plaintiffs (other tenants in the block) brought proceedings against Islington for not taking action to enforce their "no nuisance" covenant against the offending tenant. The basis for this claim was first an implied term in the plaintiffs' lease that Islington would enforce that covenant against offending tenants, and second that Islington owed the plaintiffs a duty of care obliging them to enforce the covenant.

The appeal got short shrift. First, there was no implied term because one was not necessary to give the lease business efficacy. Second, there was no duty of care, because an analogous duty of care (in selection of prospective tenants) had been rejected in Smith -v- Scott [1973] Ch D 314. The court emphasised that the plaintiffs' remedy was in their own hands - suing the offender in nuisance.

But the case is of limited assistance for our purposes, because the case was not put on the basis that Islington were liable in tort as having continued, if not caused, the nuisance.

I take the law to be clear that, where the mere fact of letting the landlord's retained and neighbouring land is not a derogation from his grant to the original tenant, then the landlord will only be vicariously liable for the activities of his tenant on the land where he has consented to (or, in the language of nuisance, continued or adopted) them. What I would question as to whether Malzy -v- Eicholz (supra) is authority for the proposition that the landlord is never obliged to take any action himself to restrain those activities. I question whether so sweeping a proposition can be the law today.

Mr Driscoll referred us to The Duke of Westminster -v- Guild [1985] 1 QB 688. The judge there had to consider whether the lease on its true construction placed on the landlords an implied contractual obligation to keep in repair and unobstructed the landlord's part of the drain, and whether if it did not, the landlord's were under a duty of care whether as landlords or as land-owners to the plaintiffs to repair that drain, or whether the express covenant for quiet enjoyment or the implied covenant against derogation of grant could be invoked to impose such a positive obligation upon them. The Court found that no such obligation was imposed. I do not find the reasons for that finding particularly helpful to evaluation of Mr Driscoll's proposition. But I found useful a later passage in the judgment of Slade LJ in that case. He refers to the decision of this Court in Booth -v- Thomas [1926] Ch 397:

"In that case a landlord, whose predecessor in title had enclosed a natural stream in an artificial culvert which was incapable of retaining it, was held liable to the tenant for injury suffered by the demised premises as a result of the outflow of water consequent upon the culvert falling into disrepair. The Court of Appeal, without finding it necessary to decide whether liability arose on other grounds also, considered that it arose under an express covenant for quiet enjoyment contained in the lease. This decision shows that a mere act of omission on the part of a landlord is capable of constituting a breach of covenant for quiet enjoyment, if, but only if, there is a duty to do something: see for example, at p 403 per Pollock MR and at p 410, per Sargent LJ. In that case `it was the duty of the owner of this culvert, which, if neglected, might cause damage to the adjacent property to prevent such damage by taking reasonable precautions': see pp 403 - 404 per Pollock MR." (emphasis added)

An illustration of a case where the landlords were obliged to take positive action is seen in another decision of this Court (Lord Scarman, Ormerod and Eveleigh LJJ) in Hilton & Another -v- James Smith and Sons (Norwood) Limited (supra). There a row of shops was owned and leased out by the defendant landlord. The plaintiff, an antique dealer, took one of these. The shops were served by a private way at the back, on which all tenants had a right of way and a parking place. However, other tenants so obstructed that right of way with their own vehicles that the plaintiff was unable to use either his parking place or that access when it came to the delivery and unloading of furniture. Ormerod LJ said (at 45H)

"What in ordinary human terms the plaintiffs are asking the Court to do is to require the defendant landlords to enforce the covenants which they themselves have taken from all the tenants in this row of shops so that the roadway is available for use by all of them."

That argument was met by the plaintiff's "highly technical" response based on:

"The old Common Law proposition that the grantor of a right of way owes no duty to the grantee of the right of way to preserve the way open, to repair the way or to do anything other than to allow him to pass and repass over it in accordance with the right of way which has been granted. ... In this case the plaintiffs, as Mr Prior concedes, would have a clear cause of action if the defendants had themselves obstructed the right of way, but he argues that the fact that the tenants and their licensees and visitors and friends leave their cars in this private road, so obstructing it, is something for which the defendants themselves are not liable.

The proposition is startling in these days because it seems if it is right, that it is possible to grant a right of way to grant the tenancy of a specific area that is designated as a parking space and then do nothing to enable the tenant to get to it no matter how greatly the access is obstructed and obstructed by people who in the last analysis are subject to the control of these landlord defendants."

There are echoes there of the old, now discredited view, that a landlord's acts of omission are not capable of founding a breach of the covenant for quiet enjoyment, or a derogation from grant. Thus, though there is no indication that Malzy was referred to, old authorities to similar effect were. The Court held that there would come a time:

"... when an occupier of land, who is well aware that his tenants ... are behaving in such a way as to obstruct a private road and thus interfere with the rights of way that he has granted, or to interfere with other rights which he has granted to other tenants, when the occupier of the roadway comes under a duty to act in the matter."

And the learned Lord Justice went on to find that the landlords had continued the nuisance by permitting it to continue, relying on Sedleigh-Denfield -v- O'Callaghan [1940] AC 880.

Mr Driscoll submits that Hilton -v- James Smith & Sons is simply an action in nuisance, and so distinguishable. It is right that Ormerod LJ said that he did not think that the label given to the case mattered very much, and Lord Scarman and Eveleigh LJ dealt with the issue as one of nuisance. But in a landlord and tenant context, nuisances caused or continued by the landlord which interfere with the enjoyment of the demised land will usually also be conduct which renders the demised land unfit or materially less fit for the purpose for which the demise was made, and so constitute a derogation from grant. I am satisfied that that is the position here, and so Mr Driscoll's distinction does not avail him.

Additionally, the law of nuisance has developed since 1917 when Malzy was decided, including of course the mile-stone decision of Sedleigh-Denfield -v- O'Callaghan. But as Mr Wood QC for the tenants emphasised, the critical factual distinction between Malzy and this case is that here the nature of the grant to a large measure depended upon proper management of the shopping mall and the common parts thereof. This development was marketed as a shopping mall, was legally set up in a way which gave the landlord rule-making powers in relation to the development, and the tenants were charged a service charge to finance the necessary management. Proper management might, in appropriate cases, require the provisions of security, whether men or cameras, to police the mall. Here it may be that determined use of the rule-making powers to preserve the shared rights of way over the common parts would have sufficed. Instead the landlords did nothing.

I accept that in order to succeed (whether on derogation from grant, or quiet enjoyment or nuisance) on the basis of a landlord's failure to act, the tenant must show that the landlord has a duty to act. So Hilton's case decided, and clearly rightly. If a landlord was never required to take action to protect what he had granted to his tenant, he could render valueless the protection of his tenant's business seemingly built-in to the letting scheme he was marketing. That would offend the principle of fair dealing. There must come a point where the landlord becomes legally obliged to take action to protect that which he has granted to his tenant. (subject perhaps to the landlord's ability to take the necessary action -see the analogous situation in nuisance: Boldman v Kargrave [1967] AC 645 at 663A-664C).

Where a landlord is granting leases in his shopping mall, over which he has maintained control, and charged a service charge therefor, it is simply no answer to say that a tenant's sole protection is his own ability and willingness to bring his individual action. Litigation is too expensive, too uncertain and offers no proper protection against, say, trespassing and threatening members of the public. The duty to act should lie with the landlord.

Here it is plain, as the pawnbroker's lease makes clear, that the landlords must have consented to the sign placed as it was dominating the entrance to the arcade. Though the pawnbroker was not permitted to obstruct his windows without the landlords' consent, I do not think that that consent can safely be inferred: it seems to me just as likely that the pawnbroker simply did it. But neither of those points are central. What is clear is that the landlords could have acted to stop the pawnbroker's clientele queuing in the access, and if necessary could have cleared the tables and chairs obstructing that access. Then the back shops might have had a chance. This could have been done either directly under the lease, enforcing the covenant against causing a nuisance, or by making rules ensuring that the passage-way was kept clear. This might have involved the pawnbroker re-arranging the interior of her premises, but that was her problem. Instead, the landlords prevaricated and did nothing. They could have acted effectively, and they should have done so. Instead they chose to do nothing, and thereby made the premises materially less fit for the purpose for which they were let. In failing to act to stop the nuisance, in my judgment the landlords continued the nuisance and derogated from their grant.

The trial judge found this to be a repudiation of the lease - a substantial interference with the tenant's business driving her to bankruptcy. That was a judgment he was entitled to come to on the evidence he heard.

Accordingly, I agree with the judge's conclusion, albeit that I have reached it by a different route. I would dismiss this appeal.

LORD JUSTICE STAUGHTON: I entirely agree with the judgment of Lord Justice Henry. For the reasons he gives, I too would dismiss this appeal.

ORDER: Appeal dismissed with costs. Leave to appeal refused.

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