England and Wales High Court (Queen's Bench Division) Decisions

Holbeck Hall Hotel Limited (now known as Dawntime Limited), English Rose Hotels (Yorkshire) Limited (formerly Imfoss Limited and also formerly English Rose Hotels Limited) v. Scarborough Borough Council [1997] EWHC QB 355 (5th December, 1997)

IN THE HIGH COURT OF JUSTICE 1995 ORB 561 QUEEN'S BENCH DIVISION

OFFICIAL REFEREES' BUSINESS

HIS HONOUR JUDGE HICKS QC

 

BETWEEN

HOLBECK HALL HOTEL LIMITED

(now known as Dawntime Limited)

First Plaintiff

- and -

 

ENGLISH ROSE HOTELS (YORKSHIRE) LIMITED

(formerly Imfoss Limited

and also formerly English Rose Hotels Limited)

Second Plaintiff

- and -

 

SCARBOROUGH BOROUGH COUNCIL

Defendant

 

 

 

SUPPLEMENTARY JUDGMENT

 

 

Introduction

 

1. The principal judgment in this action ("the Holbeck action") and an action between Scarborough Borough Council as plaintiff and Geotechnical Engineering (Northern) Limited as defendant ("the GEN action") was handed down on 2 October 1997 subject to a reservation which was removed on 30 October 1997. In the GEN action it was ordered on 2 October 1997 that judgment be entered for the defendant with costs on the standard basis, to be taxed if not agreed. Entry of judgment in the Holbeck action and consequential matters were adjourned to an appointment to be fixed.

 

2. Yesterday, 4 December 1997, I heard submissions and gave rulings on a number of outstanding and consequential matters, as well as being informed of agreements reached between the parties on others. It was agreed that I should record the outcome in this supplementary judgment, including brief reasons for my rulings where appropriate and requested. That being the nature of this document it requires no formal handing down and is to treated as published today without further attendance.

 

3. I shall refer to the principal judgment handed down on 2 October 1997 as "the Judgment", and this judgment should be read in conjunction with it. Since I am now concerned primarily with the Holbeck action I shall refer to the parties to it simply by reference to their capacities, and to the defendant to the GEN action as "GEN".

 

 

 

Interest

 

4. Mr Darling for the Defendant, in my view rightly, did not pursue an argument foreshadowed in his written submissions that the fact that the Plaintiffs were insured against the losses which they claim as damages should result in a reduction in or elimination of the interest which would otherwise be awarded.

 

5. He did submit that since the Defendant accepts the Second Plaintiff's loss of profit until it commenced trading on a replacement site as a recoverable head of loss interest on the value of the hotel, another accepted head of loss, should not begin to run until that date. Mr Symons, for the Plaintiffs, argued to the contrary but I ruled in the Defendant's favour. In my view interest and recovery of lost profits are alternative ways of compensating a plaintiff for the fact that during the relevant period he had neither the lost asset nor the use of the damages assessed by reference to its value. Where damages are assessed as at the date of loss interest is the conventional means of compensation, but if the asset was profit-making and recovery of loss of profits is agreed as a recoverable head of damages that is plainly directed to making good the same deficiency (presumably more favourably to the plaintiff), and to allow interest as well would amount to double recovery. No authority was cited, but McGregor on Damages, 15th edition, paragraph 70, treats interest and damages for loss of profit as alternatives in such circumstances.

 

 

Costs

 

6. It is agreed that on the basis of my judgment the Defendant must pay the Plaintiffs' costs on the standard basis, to be taxed if not agreed.

 

7. Mr Symons invited me to find, for the assistance of the Court of Appeal, that had the Plaintiffs failed in the Holbeck action I would still have left the Defendant to bear its costs of the GEN action and the costs ordered against it in that action and would not have ordered the Plaintiffs to indemnify it against any part of those costs. I declined to make any finding either way on that point. It may plainly be helpful, should matters go further, for a trial judge to indicate what would have been his finding on some specific issue of fact on which he has heard evidence and argument, but which does not strictly require decision on the conclusions which he has reached on logically prior points. That is not the situation here. An appeal by the Defendant might be successful in one or more of a variety of different ways and for one or more of a variety of different reasons, so I am not addressing one specific issue already fought out and considered. Moreover I am not privy to any relevant knowledge which will not be equally accessible to the Court of Appeal; I have, I hope, found and recorded in the Judgment all the facts in both actions which will need to be considered on the sort of argument as to costs which is envisaged - certainly no shortcoming in that respect has been suggested to me.

Title to sue

 

7. Paragraph 21 of the Judgment leaves over, inter alia, questions "as to the party or parties to whom duties of the various kinds relied upon are owed". I was asked to rule whether the duty held in paragraph 58 of the Judgment to lie upon the Defendant was owed to the First Plaintiff, the freeholder, it being conceded by the Defendant that if owed at all it must be owed to the Second Plaintiff, the leaseholder in possession and hotel operator. I ruled that it was owed also to the First Plaintiff, and now give my reasons.

 

8. I start from what I understand to be the undisputed position that although a reversioner cannot always, as a person in possession can, sue in nuisance, he can do so if damage is done to his reversion. I cannot conceive of a plainer example of damage extending to the reversion than the effective destruction of part of the land by rendering it worthless. Precisely the same kind of damage is foreseeable, and needs to be guarded against, whether the obligation is one under the classical law of nuisance not to withdraw support or one of the Leakey type to exercise a "measured duty of care", and if that damage includes injury to the reversion the reversioner should be able to sue if the person in possession can do so.

 

9. Against that Mr Darling argues that the duties envisaged in the Judgment between those interested in adjoining properties are reciprocal and that the First Plaintiff would not have been a party to any such mutual obligations. Assuming for present purposes, without deciding, that it needs to be such a party I cannot see why it is not. I do not have to decide what would be the position where a reversioner is not involved in the appropriate remedial works but where, as here, he would have been (at least to the extent that his consent would have been required), I consider that any requirement of mutuality is fully met.

 

 

Form of judgment

 

10. The next question left over in paragraph 21 of the Judgment was "as to the heads and measures of the damages recoverable by each [Plaintiff]", but on the basis of my ruling in paragraph 7 above Mr Darling did not pursue any point that the total damages recoverable by the Plaintiffs in right of their separate interests might be less than those recoverable by a single freeholder in possession operating the hotel business. The parties have therefore agreed how damages should be apportioned between the Plaintiffs.

 

11. The heads of loss and amounts are also agreed, as follows:

 

Value of land, hotel, contents and stock ,1,471,500 Loss of profit 233,934

Expenses 61,221

Total 1,766,655

12. On the strength of those agreements Mr Symons applied for the entry of judgment in that total sum, plus interest and costs. Mr Darling objected, and I upheld his objection. I now give my reasons.

 

13. It is not in dispute that the agreement of the above figures has been reached on the basis that they represent the difference in monetary terms between the Plaintiffs' actual position and the position which they would have occupied had there been no slip. But the true measure of damages in tort is "that sum of money which will put the [plaintiff] in the same position as he would have been in if he had not sustained the wrong" (Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, at p.39). There must therefore always be a comparison between the plaintiff's actual position and that which he would have occupied had the "wrong" not occurred. In this case the "wrong" was not the slip but the Defendant's failure to fulfil its "measured duty of care". To put the same point in another way, the Defendant did not guarantee or insure the Plaintiffs against the occurrence of the slip. What needs to be established, and quantified financially, is what would have happened had the Defendant fulfilled its duty.

 

14. I am satisfied that the factual and other issues thus raised have not yet been adequately addressed. I must return later to the question when and how they should be resolved, but for present purposes it is sufficient that until they are there can be no money judgment.

 

15. Following this ruling it was left that counsel would endeavour to produce an agreed minute of order, with liberty to mention the matter at any time if my assistance were desired. The possibility of an interim payment was canvassed, and there is to be liberty to apply for an order in the absence of agreement.

 

 

Leave to appeal

 

16. Both parties intend to appeal on points of law, which they are free to do as of right. Each applied for leave to appeal against certain findings of fact.

 

17. The Plaintiffs' applications related to the following paragraphs in the Judgment:

 

72 - no withdrawal of support by steepness of slope;

73 - no withdrawal of support by obstructing drainage;

74-77 - no withdrawal of support by replacement of fill.

 

18. The Defendant's applications related to the following paragraphs:

 

7 - the history of earlier collapses;

81 - (i) the Defendant's awareness of the hazard to the Plaintiffs;

(ii) that the Defendant should have been aware;

91 - that the report conveyed the listed matters to the Defendant;

112 - that an assessment was needed of the danger to the Plaintiffs' land;

113 - the likely end result of proper investigation;

118 - the findings as to causation.

 

19. It was common ground that the criteria to be aplied in granting or refusing leave to appeal from an Official Referee are those appearing from the judgment of the Court of Appeal in Virgin Management Ltd v De Morgan Group plc (1994) 68 BLR 26.

 

20. Applying those criteria I refused leave in each instance.

 

 

Other matters

 

21. In paragraph 33 of the Judgment I left open the possibility of further submissions on the question whether obstruction of the percolation of underground water may amount to the actionable removal of support. On my findings of fact in paragraph 73 the resolution of that question is not necessary to a decision and in the event neither party has invited me to rule on it at this stage. I therefore express no further view except to note for future reference, should the point recur, that after a dearth of earlier English authority there is a very full discussion of this area of law by Mr Piers Ashworth QC, sitting as a High Court judge, in Home Brewery Co Ltd v William Davis & Co (Leicester) Ltd [1987] QB 339.

 

22. In paragraph 34 I left over the question whether a strict duty not to remove support can co-exist with a duty of care to maintain support. Again, neither party wishes me to take that question any further at this stage, and I do not do so.

 

23. In paragraph 153 I indicated that I should need further assistance before being able to decide whether the issue of frustration could be litigated or resolved otherwise than between the parties to the relevant contract, and in particular as between the Plaintiffs here, jointly, and the Defendant. On the concession by Mr Darling recorded in paragraph 10 above that issue no longer arises, and it was accordingly not pursued.

 

24. On my construction of the relevant covenants it was not necessary to decide in the Judgment how damages for breach of covenant would have been affected by the fact that the covenants related only to about half of the Plaintiffs' cliff frontage. I declined to carry that issue further at the present stage. It will arise only if I am reversed both (i) on the construction of the proviso to the covenants and (ii) as to the existence and breach of a Leakey type duty, and on balance I did not consider that the additional time and expense involved in settling it now on a hypothetical basis was justified.

 

25. There remains the question left over in paragraph 14 above as to when and how the issues what would have happened had the Defendant fulfilled its duty of care, and with what financial consequences, shall be resolved.

 

26. Having failed in his primary submission that no such issues arose Mr Symons argued in the alternative that I was in a position to decide them on the basis of the evidence already adduced at the trial. In particular he submitted that further evidence by such witnesses as Mr Turner and Mr Clements as to what the attitudes and actions of the Plaintiffs and the Defendant respectively would have been in hypothetical circumstances would be of little or no value. Without prejudging questions which may have to be answered later I am strongly inclined to be sympathetic with that approach, but it fails to address points which do need consideration and have not yet adequately received it.

 

27. My provisional view, without prejudice to further submissions at an appropriate time, was and is that had the Defendant fulfilled the duty under which it must for present purposes be assumed to have lain and carried out the investigations discussed in paragraph 113 of the Judgment, with the result there described, it would have informed the Plaintiffs. The Plaintiffs would, as stated in paragraph 124, have had to consider not only their own interests but also their concurrent duty to the Defendant. Both parties having both an interest in averting the threatened major slip and a duty (within the bounds established by Goldman and Leakey) to seek to do so the likelihood is that they would have agreed to co-operate in an appropriate remedial scheme, albeit after arm's length negotiations as to their respective contributions to the cost and any other terms needing to be agreed, such as whether there should be any re-alignment of their common boundary. I have already held in paragraph 54 of the Judgment that the scheme advanced by Mr Chamley and Professor Denness would have been appropriate.

 

28. My provisional view, further, was and is that findings as to the terms which would probably have been agreed should be based on an objective assessment of the parties' respective interests and of their negotiating strengths and weaknesses rather than on evidence of the kind deprecated by Mr Symons. Topics which would or might need to be considered include the financial positions of the parties (but only if on either side they could have been prayed in aid as a legitimate constraint on ability to pay), the relative contributions of the soil conditions on each side of the boundary (as then perceived) to the threat of collapse, and what each party had to lose from a collapse and gain from its prevention. In addition to what the Plaintiffs would on such an examination be found to have been likely to contribute there would also have to be taken into account any diminution in the value of the hotel which would have resulted from the remedial scheme and any loss of trade during its execution.

 

29. Some of these topics may already be adequately covered by evidence, but others plainly are not. There is, for example, no evidence on the valuation point, and as to the significance of the boundary in analysing the soil mechanics there is only my own computation reported at paragraph 54 of the Judgment, dealing with only one aspect of the forces at work and at only one cross-section of the site.

 

30. The preparation for and conduct of a hearing to determine these matters, if all were contested, would be quite expensive and time-consuming. If at the end of the appellate process my decision that the Defendant was under the relevant duty were reversed no such hearing would be necessary. I made it clear yesterday, therefore, that I was not disposed, as at present advised, to give directions for such a hearing until after any appeals have been determined. It is, of course, open to the parties to resolve these issues by agreement, as they have those dealt with in paragraphs 10 and 11 above, and if without complete agreement they narrow the dispute to a small compass and, for good reason, wish me to dispose of it earlier on a short appointment they are free to apply.

 

 

5 December 1997

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