Gavin & Anor v Community Housing Association Ltd

A landlord retaining parts of a building adjoining demised premises is not ordinarily subject to an absolute duty to repair defects there. The relevant obligation is based on reasonable care, knowledge or notice of the defect, and a reasonable opportunity to remedy it. An express lease scheme allocating repair and insurance responsibilities may exclude both an implied repairing covenant and common-law liability. An insurance covenant requiring application of insurance monies to reinstatement may therefore leave no basis for implying a stricter obligation. A rent cesser clause must be applied to the case advanced at trial. Indemnity costs may be ordered without misconduct where exaggerated and inadequately defined litigation, coupled with refusal of reasonable settlement offers, takes the case outside the norm.

The appellants were tenants of commercial premises in London under two leases granted by the respondent housing association. The leases required the tenants to repair the demised premises and required the landlord to insure the premises and apply insurance monies to reinstatement, but contained no express landlord repairing covenant for retained parts of the building.

Water and sewage leaks from retained parts damaged the premises. The County Court found a limited breach of duty, awarded £100, rejected the tenants’ claim under the rent cesser clauses, declared the leases forfeited and ordered possession, mesne profits and indemnity costs. The tenants appealed on liability, rent cesser, damages, forfeiture and costs. The landlord cross-appealed against the £100 award. The central issues were whether the landlord owed an absolute or implied repairing obligation, whether the rent cesser clauses operated, and whether the costs order was justified.

1. Disposition. The appeal was dismissed. The respondent’s cross-appeal against paragraph 2 of the County Court order was allowed, so that the £100 damages award was removed. The orders for possession, mesne profits and costs remained effective. Permission to add grounds challenging the judge’s factual findings was refused.
2. Landlord’s liability. The line of authority beginning with Hargroves, Aronson & Co v Hartopp [1905] 1 KB 472 and including Cockburn v Smith [1924] 2 KB 119 established, for a landlord retaining adjoining premises, an obligation based on reasonable care rather than an absolute duty. The landlord must have knowledge or notice of the defect or damage and a reasonable opportunity to remedy it. The court treated the obligation as contractual in the circumstances, but held that its precise basis did not alter the effect of the leases.
3. The leases contained a comprehensive scheme for repair and insurance. Applying the necessity and business-efficacy approach in Liverpool City Council v Irwin [1977] AC 239, Gordon v Selico Co Ltd [1985] 2 EGLR 79, Gordon and Teixeira v Selico Co Ltd (1986) 18 HLR 219 and Adami v Lincoln Grange Management Ltd [1998] 1 EGLR 58, there was no basis for implying an absolute repairing covenant or additional common-law liability. The insurance covenant required the landlord to apply insurance monies to reinstatement. It was not necessary to improve that contractual allocation in favour of the tenants.
4. The rent cesser clause was not engaged. The tenants’ case at trial was that the premises had become wholly unfit for occupation or use, and both experts agreed that they had not. A partial-unfitness case not pursued at trial could not be advanced on appeal. The rent arrears therefore remained, the leases were validly forfeited on re-entry, and the landlord was entitled to possession and mesne profits.
5. Under the Civil Procedure Rules 1998, r 44.4(3), indemnity costs are exceptional because the circumstances must take the case outside the norm, but misconduct is not required. The exaggerated and inadequately defined claim, together with refusal of reasonable settlement offers, justified indemnity costs from the commencement of proceedings. The reserved interlocutory costs could properly follow the final result.

• Court of Appeal (Civil Division) — In [2013] EWCA Civ 580, the appeal was dismissed and the respondent’s cross-appeal against the £100 award was allowed.
• Central London County Court — HH Judge Cowell found only a limited breach of duty, awarded £100, declared the leases forfeited, ordered possession and mesne profits, and ordered indemnity costs.