England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM TORQUAY & NEWTON ABBOT COUNTY COURT
HIS HONOUR JUDGE TYZACK QC
5TQ02014

		Royal Courts of Justice Strand, London, WC2A 2LL
		15 November 2007

The Chancellor :

Introduction
1. The appellants, Mr and Mrs Pattrick ("the Lessees"), and the respondents, Marley Estate Management Ltd ("the Company"), are, respectively, the lessees and the lessors of Marley House, Rattery, South Brent, Devon for the residue of a term of 999 years from 1st July 1996 under a lease ("the Lease") dated 26th September 2000 and made between Millers' Dream Ltd ("MDL") (1) and Iver Salveson (2). This appeal from the order of HH Judge Tyzack QC, sitting in the Torquay and Newton Abbot County Court, made on 7th March 2007 raises three issues. Two of them relate to which of the Company or the Lessees is liable to repair and/or decorate specific parts of the premises. The third is whether the Lessees have substantially interfered with a right of way reserved to the Company or those deriving title under it as the successor in title to the original lessor. The judge found against the Lessees on all three issues. They now appeal with the permission of Lloyd LJ.
The Facts
2. The Marley Estate consists of a substantial grade II* listed mansion house, together with a dower house and other ancillary buildings standing in its own grounds off the A38. The mansion house is built on a west/east axis. As the land slopes down from the west to the east the front of the mansion house is higher than the back. This difference in height enabled the construction of a terrace on the north, east and south faces of the mansion house with cloisters under it. These cloisters are called 'the House Cloisters'.
3. In 1922 the estate was bought by a Bridgettine order of Nuns. They built a large chapel called Syon Abbey. It was rectangular in shape and built at right angles to the mansion house so juxtaposed that the north-east corner of the Abbey was contiguous with the south-west corner of the mansion house. It too was constructed with cloisters on its east facing retaining wall on the same level as the House Cloisters. These cloisters are called 'the Chapel Cloisters'.
4. In the 1990s the Marley Estate was sold to MDL for the purposes of development. MDL produced plans for carving 17 separate dwellings out of the mansion house and ancillary buildings. It was a condition of the planning permission which MDL obtained for such development that Syon Abbey was removed. In due course the Abbey was demolished so as to remove all the upper structures. The floor slab, part of which formed the roof of the Chapel Cloisters, was left but, without the superstructure, was not waterproof.
5. It was intended that on completion each dwelling should be let on a 999 year lease in substantially common form and that the freehold reversions to each of them and certain common parts should be vested in a service company owned and run by the lessees. Accordingly in 2003 such reversions and common parts were transferred to the Company. Each lessee owns one share in its capital. They appoint the directors. Each of the 17 leases specifies the percentage of the costs of running the Company to be paid by that lessee. In the case of the Lessees the percentage is 14. In the same year the benefit of the term originally granted to Mr Salveson was sold to the Lessees.
6. I shall refer to the relevant terms of the Lease in due course. At this stage it is sufficient to note that the premises demised to the Lessees, called Marley House, comprised the lower and upper ground, first and second floors of the front or west side of the mansion house; they include about 25 substantial Georgian style windows. Also included in the demise are the adjacent upper and lower terraces of the House Cloisters and the upper and lower terrace of the Chapel Cloisters as well as some 9 acres of parkland.
7. The proceedings were instituted by a claim form issued on 17th August 2005. It raised a number of issues of which only two now remain; the first issue relates to the repair of the Chapel Cloisters and the second to the repair and decoration of the windows of Marley House. The Lessees claim that the Company is liable. This is disputed by the Company. In February 2006 the Lessees put up a gate over a path on their land giving access to their garden beside the lower terrace. This led the Company to amend its existing defence and counterclaim to assert that such gate constituted a substantial interference with an easement reserved to them by the Lease. They counterclaimed for an injunction to secure its removal. I have attached to this judgment a plan depicting the features (except the windows) I have endeavoured to explain.
The Lease
8. The Lease recites:

"(1) The Landlord is the freehold owner of the property more fully described in Part I of the First Schedule hereto together with the buildings comprising individual houses ("the Houses") and ancillary buildings ("the Buildings") erected thereon or on some part thereof ("the Estate")

The demise contained in clause 1 was of

"ALL THAT the property more particularly described in Part II of the First Schedule hereto ("the Demised Premises") TOGETHER WITH (to the exclusion of all other easements rights and privileges) the easements rights and privileges mentioned in the Third Schedule hereto subject as therein mentioned EXCEPT AND RESERVING as mentioned in the Fourth Schedule hereto TO HOLD the Demised Premises unto the Tenant for the term of 999 years from" 1st July 1996.

9. Part I of the First Schedule specifies the relevant parts of the Marley Estate by reference to plan 1 attached thereto and the relevant titles in HM Land Registry. Part II defines the demised premises in the following terms:

"ALL THAT land shown edged red on Plans 3 A, B and C TOGETHER WITH the house located at the lower ground floor upper ground floor and first and second floors known as Marley House, Marley, Rattery, South Brent and the upper and lower terrace and stores and the garages and the parking area and the oil tank all shown coloured red on Plan 3B TOGETHER WITH the doors and windows thereof and the interior faces of the ceilings floors and main structural walls thereof (internal walls which are not structural and which divide the house from other parts of the Estate of which the Demised Premises form part being party walls) AND TOGETHER WITH all cisterns tanks sewers drains pipes wires ducts and conduits used solely for the purpose of the Demised Premises EXCEPTING AND RESERVING from the demise all cisterns tanks sewers drains pipes wires ducts and conduits used solely for any parts of the Estate and the main structural parts of the building of which the demised premises form part including the roof and foundations thereof)"


10. By a Deed of Variation dated 29th October 2001 and made between MDL (1) and Mr Salveson (2) plans 3A(1) and 3B(1) were substituted for plans 3A and 3B attached to the original lease because the original plans were "incorrect in that there [were] various inconsistencies between the definition of the demised premises in the Lease and the areas coloured red on the plans".
11. The relevant covenants are to be found in clauses 5 and 6. Clause 5 contains the Lessees covenants. So far as relevant it provides:

"5. THE Tenant hereby covenants with the Landlord and with the owners and tenants of the other houses leased by the Landlord that the Tenant will at all times hereafter:

(a) Keep the Demised Premises (other than the parts thereof comprised and referred to in clause 6 hereof) and all walls party walls sewers drains pipes cables wires and appurtenances thereto belonging in good and tenantable repair and condition and in particular (but without prejudice to the generality of the foregoing) so as to support shelter and protect the other parts of the building of which the demised premises form part

[(b) – (d)]

12. Clause 6 provides, so far as relevant:

"THE Landlord hereby covenants with the Tenant as follows:

[(a) to (c)]

(d) That the Landlord will maintain repair decorate and renew

(i) the main structure (including the roof chimney stacks gutters rainwater pipes and foundations) of the houses and the buildings

[(ii)..]

[(e)..]

(f) That the Landlord will so often as is reasonably required decorate the exterior including the wood and ironwork of the houses and the buildings in such manner as it shall think fit"

The Chapel Cloisters
13. The Lessees contended that the liability for the repair of the Chapel Cloisters, the need for which was common ground, lay with the Company under clause 6(d)(i) on the basis that it was a "building" within the meaning of that word in that context. This was disputed by the Company.
14. The judge directed himself by reference to the dictum of the Earl of Halsbury in Paddington Corporation v Attorney-General [1906] AC 1 that the meaning of the word 'building' depended on the context. At page 3 he said:

"…I entirely agree with Buckley J that in the books there may be found a great variety of cases where, with reference to the subject-matter of the covenant and the meaning of what was in question between the parties, a screen, or some erection of that nature, might be considered a "building" with reference to some covenants, and might not be considered a "building" with reference to others. The subject-matter to be dealt with is to be looked at in order to see what the word "building" means in relation to that particular subject-matter. It is impossible to give any definite meaning to it in the loose language which is used in some cases. Anything which is in the nature of a building might be within one covenant, and the same erection might not be a building with reference to another covenant."


15. The judge described the Chapel Cloisters in paragraph 45 of his judgment in the following terms:

"[it is] a permanent man-made structure present at the time of the grant; it includes walls consisting of concrete or stone or brick or block, at one point there is a rolled steel joist, there is a concrete slab roof, there is a flight of stone or concrete stairs and there is an inner store room. This was all deliberately left in situ when the chapel was removed, plainly creating a convenient way of dealing with what would I find otherwise have been possibly a quite expensive alternative and potentially less attractive solution. It also bears some similarity to the cloisters and terrace around the main house. It is certainly very damp and in poor overall condition but it does provide some shelter for rough storage of items like garden furniture and children's outside toys albeit that they would be completely open to the elements from the outside arched wall and dampness from above and below."

16. The judge then asked himself, having in mind the terms of the first recital to the Lease, whether the Chapel Cloisters was an ancillary building in the sense of being ancillary to the main building. He concluded (para 48) that it was not because:

"...these cloisters were never intended to come within that description, not being a building in the conventional sense – and being in a completely anomalous situation."

17. The judge then considered the well known speech of Lord Hoffmann in Investors Compensation Scheme v West Bromwich BS [1998] 1 WLR 896 and the equally well-known judgment of Bowen LJ in The Moorcock (1889) 14 PD 64. He posed the question whether a reasonable man would include the chapel cloisters within the term 'ancillary buildings'

"...knowing that at the time of the grant the concrete slab which formed the roof was not waterproof, neither were the inner walls and therefore the sheltered part which forms a walkway can only be used for very rough storage, and also knowing that if they do come within the description they would fall within the repairing covenant of the landlord and hence be the responsibility of all 17 lessees in accordance with their respective percentages?"

18. In paragraphs 54 to 56 the judge concluded:

"54. In my judgment the reasonable man would say that they should not be included because it would be wholly unreasonable in the circumstances for all lessees at Marley to be responsible for the potentially huge expense of maintaining and repairing this area which has never been in a state where it can be effectively maintained since far more radical treatment needs to be applied before it could be, and all of which only benefits one lessee. The reasonable man not only needs to look at what is there physically, he also needs to know what are the implications or ramifications of reaching a decision either way – and he would need to consider the estimates in Mr Squire's report which I have summarised above.


55. Thus although in some contexts these cloisters could in my judgment be within the definition of a building (for example in a restrictive covenant or planning permission situation), in the context of this particular case I rule that they do not. In my judgment therefore the cloisters and the terrace above are not ancillary buildings neither are they part of the main structure of the house and therefore do not come within the landlord's repairing covenant. They are therefore I find the sole repairing responsibility of C being within their demised premises....

56. For the avoidance of doubt (a) if I am wrong about applying the reasonable man test to this case I would still rule that these cloisters are not, in the context of this lease, within the ambit of the expression an 'ancillary building', and (b)..."

19. Counsel for the Lessees challenges this reasoning and these conclusions. He does not rely on the definition of the words "the Buildings" contained in recital 1. Accordingly he is not concerned to suggest that the Chapel Cloisters are ancillary buildings. Rather, he submits, the inclusion of the upper and lower terraces in the definition of the demised premises in Part II of the First Schedule requires the Chapel Cloisters to be treated as "parts of the building of which the demised premises form part" for the purposes of the exception and reservation contained in the definition of the demised premises. Consequently, so he submits, the main structural parts which require repair are excepted from the demise. Further, he contends, the Chapel Cloisters are a building within the meaning of that word in clause 6(d)(i).
20. In addition he contends that the judge was wrong in his application of the test he derived from the speech of Lord Hoffmann in Investors Compensation Scheme v West Bromwich BS [1998] 1 WLR 896. He points out that commonly tenants pay a share of the cost of the landlord's compliance with his repairing covenants the relative benefits to each of them being taken account of in the assessment of their respective shares. It is, he submitted, for the benefit of all that the Chapel Cloisters, as part of the immediate neighbourhood, should be properly maintained. Notwithstanding his reliance on the dictum of the Earl of Halsbury in Paddington Corporation v Attorney-General [1906] AC 1 he referred us to passages in the judgments in Thompson v Sunderland Gas Co. (1877) LR 2 Ex.D 429; Schweder v Worthing Gas Light and Coke Co. [1912] 1 Ch 83; Moir v Williams [1892] 1 QB 264 and Bowes v Law (1870) LR 9 Eq.636.
21. Counsel for the Company submits that the Chapel Cloisters are not a building within the meaning of clause 6(d)(i) of this lease. He disclaims any suggestion that to be such a building it must also be properly described as 'ancillary'. He accepts that if the Chapel Cloisters are a building for the purposes of clause 6(d)(i) then the parts which needed repair are parts of the main structure.
22. I can express my conclusions more shortly. The question is whether the Chapel Cloisters are a building for the purposes of clause 6(d)(i). That is an issue of construction to be resolved as at the date of the execution of the lease in September 2000. At that time the physical configuration of the Chapel Cloisters was as described by the judge in the passage I have quoted in paragraph 15 above. The fact that the cloisters had previously formed part of Syon Abbey, which was undoubtedly a building until it was partially demolished, is in my view irrelevant. Was it, as it stood in September 2000, after demolition of the chapel superstructure, a building for the purposes of clause 6(d)(i)?
23. It then had a floor, roof, three walls and a colonnade forming the fourth. They were all man-made. As the colonnade was open to the elements the uses to which the enclosed space might usefully be put were necessarily limited. If such a structure is not a building within the normal meaning of the word it is hard to know what it is. Part II of the First Schedule treats the Chapel Cloisters as being part of the building of which the demised premises formed part because the upper and lower terraces are included subject to the exception of the main structural parts. In addition, for what it is worth, the Deed of Variation prescribes by clause 2.5 that "...words importing the singular import the plural and vice versa....". Accordingly the exception of "the main structural parts..." in Part II of the First Schedule matches "the main structure of the...buildings.." in clause 6(d)(i). On the face of the Lease, therefore, the word "building" in clause 6(d)(i) comprehends the Chapel Cloisters.
24. I do not consider that the various other matters to which the judge referred in the passages in his judgment I have quoted in paragraphs 17 and 18 above, justify the contrary conclusion. Whether or not the parties to the Lease knew at the time of its execution that the floor slab had not been waterproofed, it would have been obvious that the Chapel Cloisters, being open to the elements on their east side, would need repairs from time to time. But so would the structural parts of all the buildings of which any of the 17 dwellings created by this development formed a part. No doubt the repair of some of them will be both expensive and of direct benefit to some only of the 17 tenants; this is commonly the case where a complex of buildings is in multiple occupation. The balance of relative advantage is taken into account in assessing the percentage contributions of each of the 17. There is no reason to think that the 14% share attributed to the lessee of this part, the highest attributed to any lessee, did not adequately take account of these considerations.
    
25. Accordingly, for these reasons, I consider that the judge was wrong to have concluded that the responsibility for the repair of the Chapel Cloisters lay with the Lessees under clause 5(a) of the Lease. I would allow the appeal in this respect, set aside the declaration contained in paragraph 2(b) of the judge's order and substitute therefore a declaration that the Company is liable to maintain, repair, decorate and renew the main structure of the Chapel Cloisters.
The Windows
26. There are 17 west facing windows in Marley House in respect of which the issues of repair and redecoration arise. In addition there appear to be four facing south and another four facing north in respect of which the same issues may arise in the future. Each is a typical 'Georgian' sash window in a portrait configuration. Each sash carries 9 glass panes. Though there appears to be no direct evidence of their construction the photographs indicate that the sashes are carried by dressed stone frames built into the main walls. Their regularity and size relative to the walls in which they are set afford them a strong visual impact typical of Georgian architecture.
27. In their particulars of claim the Lessees claimed that the Company was liable to redecorate the outside of the windows pursuant to its obligations in clause 6(f) on the footing that such surfaces were part of the exterior as confirmed by the specific inclusion of woodwork. Before the judge the claim was extended, apparently without objection from counsel for the Company, so as to include the maintenance, repair and renewal of the window frames as a whole pursuant to the obligations undertaken by the Company in clause 6(d)(i) on the footing that they were part of the main structure of the house. In addition the Lessees claimed that if contrary to their main submissions the Company was not liable under those provisions it was estopped by convention from so contending.
28. The judge found against the Lessees on all three points. He noted that the "windows" were specifically included in the demised premises contained in Part II of the First Schedule; consequently their maintenance in good and tenantable repair and condition was the responsibility of the Lessees under clause 5(a) unless they were "both comprised in and referred to in clause 6 and they are not". He considered that the phrase "wood...of the house" in clause 6 was insufficient to displace the inference to be drawn from the express reference to windows in the definition of 'demised premises' in Part II of the First Schedule. He thought that 'wood...of the house' must be limited to bargeboards and soffits.
29. With regard to the alleged estoppel the judge rejected the suggestion that there had ever been "an informed and settled basis [for] dealing with the question of liability for the painting and repair of windows". He specifically refused to find that there was a shared assumption that the Company would in all circumstances be responsible for repairing and painting the windows. Finally he concluded that even if there had been a sufficient 'convention' the Lessees had not suffered any significant detriment in reliance on it.
30. I deal first with the contention that the Company is liable for the decoration of the windows as part of "the exterior including the wood and ironwork of the houses and buildings". Counsel for the Lessees submits that the judge was wrong in his analysis of the words in clause 5 "comprised and referred to". He submits that they are not cumulative conditions but should be read disjunctively. Thus if on the proper construction of clause 6 the windows come within the terms of any of its subparagraphs then they are excluded from the purview of clause 5 even though windows are not mentioned expressly. He contends that the windows are self-evidently part of the exterior of the buildings and, so far as the sashes are concerned are made of wood. He submits that the judge's conclusion flies in the face of the language of the Lease. Counsel for the Company sought to uphold the judgment for essentially the reasons given by the judge.
31. In my view the judge was wrong on this aspect of the case too. I accept that by force of the words used in Part II of the First Schedule the windows were comprised in the demised premises. But, equally, they are an important element in the exterior of the building and its visual appearance. Such appearance is of concern to the lessees and occupants of all 17 dwellings so that it would be normal to find some standardised decoration obligation. To my mind the fact that they are so obviously part of the exterior of the buildings and in need of consistent redecoration is sufficient to recognise them as being "comprised and referred" to in clause 6(f). The fact that they are also properly described as woodwork confirms the construction I would put upon clause 6(f) even without that addition. The specific reference to windows in Part II of the First Schedule does not appear to me to be of any greater consequence than the express mention therein of drain pipes. The photographs clearly identify a metal drain pipe on the exterior of the Dower House. No one suggested that the liability to paint it did not rest on the Company under clause 6(f).
32. I turn then to consider the case for the Lessees in respect of clause 6(d)(i). This is only material in respect of the repair and renewal of the windows, including, presumably, the glass panes and the decoration of their internal surfaces. The contention for the Lessees is that these windows are part of "the main structure" of Marley House. No doubt in some contexts they would be, but the question in this case is whether they are part of the main structure for the purposes of clause 6(d)(i). In my view they are not.
33. Part II of the First Schedule points a contrast between what is included in the demised premises and what is excluded by the exception and reservation. The "doors and windows" of the relevant floors of Marley House are specifically included but "the main structural parts" are excluded. This suggests that the parties regarded the windows as something other than main structural parts. This is confirmed by clause 6. Decoration of the windows as part of the exterior is covered by clause 6(f). But though the main structure referred to in clause 6(d)(i) is expressly extended by the inclusion of items, such as gutters, which might not ordinarily be considered to be part of the main structure of a house, the windows are notable for the absence of any such express inclusion. In my view this omission is consistent with the general framework of the Lease and the distinction between sub-paragraphs (d)(i) and (f)
34. Thus the lessee is obliged to repair the windows as a whole (both woodwork and glass) under clause 5(a) but the Company is liable for the decoration of the exterior surfaces of the window frames. This leaves the Company liable to decorate any part of the main structure of the houses and buildings which are not part of the demised premises or, if they are, are not part of the exterior. Accordingly that part of clause 6(d)(i) has some application on my construction of the Lease as a whole.
35. There remains therefore the issue of estoppel by convention so far as the liability to repair the windows is concerned. The conclusions of the judge are findings of fact. It is suggested that he failed to give sufficient weight to the documentary evidence before him. The alleged omission rests on payment by the Company of one invoice in relation to the repair and redecoration of the dormer windows at South Marley, one of the other dwellings, submitted to and paid by the Company in September 2004. It is contended that the Lessees duly paid their due share of 14% of the total service charge. The conclusion of the judge in respect of this contention was expressed in paragraph 66 of his judgment in the following terms:

"Furthermore there has never been any settled agreement as to who is responsible for repair of these windows as opposed to decoration. True it is that Mrs Lauren [the company secretary of the Company and resident in the Cloisters South] agreed to the replacement of two of Mr Sanders [the lessee of and resident in Marley South] windows but it would be wrong in my judgment to find that this one occasion is so significant that it establishes some kind of precedent which fixes liability for all time in the future when Mrs Lauren admitted that it was a mistake. The overall context in this whole sad saga is one of doubt, uncertainty and lack of clarity."

Counsel for the Lessees points out that the judge omitted to mention the fact that the Lessees had paid their 14% of that cost.

36. I do not consider that such an omission can justify this court reaching a different conclusion to that of the judge in respect of what is essentially a question of fact. In the absence of any convention there can be no estoppel. Accordingly the claim for an estoppel by convention precluding the Company from denying a liability to repair the windows fails and the position remains as I consider is justified by the proper construction of the terms of the lease. For these reasons I would set aside paragraph 2(b) of the judge's order. Instead I would declare that the Company is liable to decorate the windows pursuant to clause 6(f) but not to repair them pursuant to clause 6(d)(i) of the Lease.
37. Given the history of this matter it seems possible that such a declaration may give rise to further disputes as to where the boundary lies between making good as part of redecoration and repair to the windows. We cannot determine that matter in advance. For my part I would accept the broad approach suggested by Mummery LJ in the course of argument, namely making good is what a decorator does; it will be a repair if it is necessary to engage a carpenter to do the requisite work.
The Gate
38. The circumstances relating to the gate appear from paragraph 73 of the judge's judgment where he recorded that:

"So far as the gate is concerned, this has been erected by [the Lessees] within their demise but across a right of way. It is located at the south eastern point on plan 3B...where the brown colouring meets the red."

The fact that the relevant plan is plan 3B(1) does not affect the judge's identification of the site of the gate. But it is relevant to note that plan 3B(1) does not have the brown colouring appearing on Plan 3B which might have been thought to denote a right of way. The judge noted that the Lessees had offered to keep the gate unlocked.

39. In paragraphs 73 and 74 the judge recorded the submissions of counsel for the Lessees and his conclusion in respect of them in these terms:

"73.....[Counsel for the Lessees] argues that although the gate does interfere with a right of way, first of all the right of way leads nowhere and no-one is inconvenienced by the gate, and secondly to be actionable an interference with a right of way needs to be substantial.

74. What [Counsel for the Lessees] ignores in my judgment is an important maxim of equity namely that 'he who comes to equity must come with clean hands'. I find that Mr Patrick installed this gate knowing that the path was a right of way and in defiance of all other residents at Marley. It is yet another instance of his cavalier and high-handed behaviour which has sadly contributed to an unpleasant atmosphere existing at Marley for a long time. In my judgment he has not come to this court with anything like clean hands."

The judge indicated that he would accept an undertaking to remove the gate within a reasonable time, failing which he would grant an injunction requiring its removal.

40. Counsel for the Lessees submits that the judge was wrong for no fewer than seven separate reasons. It is not necessary to deal with all of them, two will suffice. The first is that there is no sufficient evidence that this gate, which was erected by the Lessees on the demised premises, was over the site of a right of way vested in the Company or any one of the other 16 lessees. As counsel for the Company admitted the reservations contained in the fourth schedule to the lease did not purport to reserve to MDL or those deriving title under it any right over this part of the demised premises. Though plan 2B did indicate a path over the land coloured brown, to which the judge referred in paragraph 73 of his judgment, there was no indication on plan 3B or 3B(1) that that way extended over the demised premises. Rather, the obvious inference is that the Lessees were entitled to a right of way over that path coloured brown for the purpose of gaining access to the demised premises from the car park. Be that as it may, there was no claimant to the counterclaim in whom any right of way was vested sufficient to complain of any interference to it.
41. Second the judge's reliance on the equitable maxim of clean hands was wholly misplaced. The lessees were relying on their own leasehold title to the land on which they erected the gate. They were not seeking equitable relief and there is no similar maxim of equity whereunder a legal right may be lost by conduct such as the judge described. In my view the judge's conclusion in relation to the gate was plainly wrong. Accordingly I would set aside paragraph 2(c) of his order.
Costs
42. In the light of his conclusions the judge ordered the Lessees to pay 85% of the costs of the Company of the action. If the other members of the Court agree with my conclusions the Lessees are likely to invite us to revisit the question of liability for the costs of the action and, no doubt, will seek an order for all or some of their costs in this court. But the Lessees remain concerned that the Company may seek to recover its costs, including any costs it is ordered to pay to the Lessees, as part of the sums recoverable from the lessees as a whole under clause 5(b) of and the Fifth Schedule to the Leases. Were it to do so the Lessees might find themselves repaying to the Company 14% of the costs of the Lessees that the Company has been ordered by this court to pay.
43. By an application notice issued on 17th September 2007 the Lessees have sought an order under s.20C Landlord and Tenant Act 1985 or the inherent jurisdiction that the costs of the Company of and incidental to these proceedings are not to be regarded as relevant costs in determining the amount of any charges payable under the terms of its lease. By s.20C(3):

"the court or tribunal to which the application is made may make such order on the application as it considers just and equitable in the circumstances."

44. The subsection has been considered in a number of reported cases. It is sufficient to refer to one of them, namely, Iperion Investments Corpn v Broadwalk House Residents Ltd [1995] 2 EGLR 47. In that case Peter Gibson LJ, with whom Staughton and Waite LJJ agreed, considered that Parliament must be taken to have had in mind the case where a tenant has been successful in litigation against his landlord and yet the costs of the proceedings are within the service charge recoverable by the Landlord. He considered that the Landlord should not "get through the back door what has been refused by the front".
45. Counsel for the Lessees submits that that principle should be applied in this case by means of an order under s.20C declaring that the costs of the Company of and occasioned by this action and appeal, including any costs it is ordered to pay to the Lessees, are not to be regarded as relevant costs to be taken into account in determining the amount recoverable by the Company from the Lessees under clause 5(b) and the Fifth Schedule to the Lease.
46. Counsel for the Company did not suggest that the statutory provisions on which the Lessees rely do not enable the court to make the order they seek. He submitted that the jurisdiction should not be exercised lightly as its exercise involves interference with a legal right of the Company. In addition he reminded us of the criticisms made by the judge in relation to certain conduct of the Lessees.
47. For my part I would make the order sought by the Lessees, recognising that its effect will depend on what order for costs is made after judgment has been given. The costs of the proceedings both here and below are within the discretion of this court. The conduct of the parties is one of the factors to be taken into account in its exercise, cf CPR r.44.3(4)(a). This court should aim to do complete justice in the matter of costs. It follows that the order sought is necessary to the achievement of that aim.
Summary of Conclusions
48. For these reasons I would:

(1) allow the appeal and set aside paragraphs 1, 2(a), (b) and (c) and 3 of the order of the judge;

(2) declare that:

(a) the Company is liable to maintain, repair, decorate and renew the main structure of the Chapel Cloisters,

(b) the Company is liable to decorate the windows pursuant to clause 6(f) but not to repair them pursuant to clause 6(d)(i) of the Lease;

(3) order that the costs of the Company of and occasioned by this action and appeal, including any costs it is ordered to pay to the Lessees, are not to be regarded as relevant costs to be taken into account in determining the amount recoverable by the Company from the Lessees under clause 5(b) and the Fifth Schedule to the Lease.

In consequence the undertakings given to the court by the Lessees, as set out in paragraph I of and the schedule to the Judge's order, will be discharged.



Mummery LJ

49. I agree.

Arden LJ

50. I also agree..