Agricullo Ltd v Yorkshire Housing Ltd

A landlord’s contractual right to recover legal and surveying costs depends on the wording of the lease. A clause referring to costs connected with forfeiture proceedings under section 146 of the Law of Property Act 1925 does not extend to consensual negotiations and supervision of repairs after a tenant serves a counter-notice under section 1(3) of the Leasehold Property (Repairs) Act 1938, where no forfeiture proceedings are in existence or contemplation and leave has not been obtained. Leave to claim damages under section 1(5)(e) requires genuinely special circumstances and a just and equitable case. An admission of breach and difficulties caused by the claimant’s own litigation choices did not satisfy that threshold.

Agricullo appealed against HHJ Langan QC’s dismissal of its claim against its tenant, Yorkshire Housing Limited, for £30,006.08 under a repairing covenant and clause 9.3 of the lease. Four heads of claim concerned solicitors’ costs, surveyors’ costs and building work, pursued as a contractual debt. A fifth head concerned loss of rent and was accepted to be a damages claim requiring leave under the Leasehold Property (Repairs) Act 1938.

The appeal concerned whether clause 9.3 covered costs incurred after the tenant served a counter-notice under section 1(3), despite the absence of leave to bring forfeiture or damages proceedings. It also concerned whether special circumstances under section 1(5)(e) justified leave to pursue the loss-of-rent claim.

The appeal was dismissed. Permission to appeal on the loss-of-rent issue was refused.

1. Construction of clause 9.3. The clause was professionally drafted and its general words linking costs to specified steps did not detach those costs from the proceedings identified in the clause. Section 146 of the Law of Property Act 1925 concerned forfeiture and enforcement of a right of re-entry. The qualifying costs therefore had to be linked in a real way to forfeiture proceedings.
2. After Yorkshire Housing served its counter-notice under section 1(3) of the Leasehold Property (Repairs) Act 1938, no proceedings existed and none could be taken without leave. The correspondence, negotiations and surveyors’ supervision concerned a consensual method of securing repairs. The fact that the work was an alternative to forfeiture, and was encouraged by the section 146 notice, was insufficient. Those costs fell outside clause 9.3. The judge’s construction was correct.
3. Leave under section 1(5)(e) required both special circumstances and a just and equitable basis for granting leave. The conditions had to be assessed when the application for leave was made. An admission of breach and of the notice’s validity was an ordinary circumstance and was made after the claim had begun.
4. The claimant’s lack of an effective remedy was substantially self-created. By choosing negotiation and allowing the repairs to be completed, it could no longer rely on ground (a), which concerned the immediate need to remedy a breach. The circumstances did not take the case out of the ordinary. Landmaster Properties Limited v Thackeray Property Services Limited [2003] EWHC 959 illustrated the exceptional circumstances which could justify leave, but did not assist on these facts.
5. A separate contractual right to enter and carry out repairs could have permitted recovery of repair costs as a debt without leave, as illustrated by Jervis v Harris [1996] Ch 195. Agricullo had not pursued that route. Lord Justice Hughes and Lord Justice Ward agreed with Lord Justice Patten.

• Court of Appeal (Civil Division): dismissed Agricullo’s appeal and refused permission to appeal on the loss-of-rent issue: [2010] EWCA Civ 229.
• Leeds County Court: HHJ Langan QC dismissed the claim and refused leave to pursue the damages claim under the Leasehold Property (Repairs) Act 1938. The claim number was 6HG 01733.