Princes House Ltd & Anor v Distinctive Clubs Ltd

A contractual notice clause may protect a landlord from liability for failure to repair, but it does not determine whether the repairing covenant has been breached. Where the landlord has independently known of the defect and has told the tenant that remedial works are intended, the landlord may waive the requirement for notice. The reasonable period for remedying the breach must be assessed in all the circumstances, including the landlord’s prior knowledge and the feasibility of completing the works. A landlord may patch a roof while preparing a proper replacement scheme, but continued patching ceases to satisfy the covenant once replacement is necessary and a replacement scheme has been prepared. Reasonable regard may be had to affected tenants’ convenience, but delay is unjustified where the works could reasonably have been completed earlier.

The landlords appealed against parts of an order made on 25 September 2006 by Mr Jonathan Gaunt QC, sitting as a deputy judge in the Chancery Division. The order awarded the tenant damages on a counterclaim for breach of repairing obligations concerning the roof of the BAFTA block, with the award extinguishing the landlords’ judgment for service-charge arrears.

The appeal concerned the construction of clause 5.5.2 of the lease, which required notice of a failure to provide services and an opportunity to remedy it within a reasonable time, and whether the judge had correctly found that the landlords should have completed the roof works by the end of 2003. A further issue concerned the proper assessment of damages.

1. Appeal dismissed. The landlords’ repairing obligation arose under clause 4.4 of the lease, read with paragraphs 2 and 3.1.7 of the Fourth Schedule. Breach existed independently of notice under clause 5.5.2 and occurred when the roof was out of repair and the landlords failed to carry out the necessary works. The court referred to British Telecommunications PLC v Sun Life Assurance Society PLC [1996] Ch 69 for the position absent contractual protection.
2. Clause 5.5.2 provided protection for the landlords. Its two cumulative conditions were that the tenant had notified the landlords of the failure and that the landlords had failed within a reasonable time to remedy it. The reasonable time depended on all the circumstances, including any prior knowledge by the landlords of the need for repair. The clause did not link the assessment of reasonable time to the date of the tenant’s notice.
3. The landlords could waive the benefit of the notice requirement unilaterally. Their agents’ communications in June and December 2002 informed the tenant that the roof required replacement and that works were scheduled for 2003. In those circumstances, it was no longer open to the landlords to rely on the first limb of clause 5.5.2.
4. The judge was entitled to find that, using all reasonable endeavours, the landlords could have completed the works by the end of 2003. The convenience of BAFTA, the immediately subjacent tenant, was a relevant consideration, but the evidence showed that BAFTA would have accepted works in summer 2003 had the landlords progressed their plans with sufficient urgency.
5. The landlords’ obligation could initially have been met by patching while a replacement scheme was prepared. By the end of 2002 a replacement scheme had been prepared and replacement was advised as necessary. Continued patching was therefore no longer consistent with the covenant. The damages award was upheld.

• Court of Appeal (Civil Division): appeal dismissed. The court upheld the relevant parts of the order made on 25 September 2006.
• High Court of Justice, Chancery Division: Mr Jonathan Gaunt QC, sitting as a deputy judge, awarded the tenant £237,809 including interest on its counterclaim and ordered the landlords to pay one half of the tenant’s costs.