PROVING THINGS 57: LEASE SAID SOONEST MENDED: CLAIM FOR SUBSTANTIAL DAMAGES FAILS (AND GUESS THE REASON)
This series often looks at cases that have floundered at trial – usually because of the absence of basic evidence to prove a litigant’s case. This can be seen again in the judgment of Mr Stephen Furst QC in Car Giant Limited -v- the Mayor and Burgesses of the London Borough of Hammersmith  EWHC 197 (TCC). (I did not anticipate that this series would cover so many cases, or be so regular – what that says about the state of civil litigation is for others to judge).
“These all might be good explanations but none of them are supported by evidence; I cannot assume those matters particularly where, as was common ground, the burden of proving the diminution in value rests on the Claimants.”
The judgment sets out where there was no evidence to support the claimants’ case. The claimants claimed for the cost of work to be carried out in the future. There was:-
- No explanation as to why work had not been carried out (six years after the end of the lease).
- No evidence that the outstanding works were important or substantial (the fact the properties had been let suggested the opposite)
- No evidence that the reversion had been diminished by the failure to carry out the work.
- No evidence that it was the claimants’ financial position that prevented the work from being carried out.
- No evidence that there was a “rolling programme” of repairs.
- No evidence that the claimants were holding back expenditure because the defendant was withholding payment.
- No evidence to support the sum claimed for the preparation of a schedule (the evidence supported a smaller sum).
- No evidence to support a claim for professional fees.
The claimants brought an action for dilapidations at the east of a lease. The lease came to an end in February 2011. It was agreed that there were breaches of the repairing covenants. It was also common ground that damages were to be assessed by reference to the diminution of the value of the reversion attributable to those breaches. The claimants asserted that the diminution of the value was £500,000. Both sides called experts and the judgment contains a detailed assessment of the arguments. However the most interesting aspect of the judgment (from our point of view) is where the judge considers the claimants’ case in relation to the evidence called.
The judge reviewed the expert evidence and then considered the correct approach.
“The correct approach
“The first step is to identify what works the tenant should have done and then to establish the breaches and what remedial work is necessary to remedy them. The landlord’s interest is then valued as at the date of termination of the lease on two bases: first, on the assumption that the premises are in the state they should have been in if the tenant had performed his covenant; and secondly on the basis that the premises are in their actual state and condition. The difference between the two valuations is the damage to the reversion. Damages cannot exceed this amount.”
In this case the works that should have been done by LBHF and therefore the breaches of the repairing covenants have been agreed, as has the cost of so doing. Where this work has been carried out the authorities establish that this cost is prima facie evidence or a very real guide to the damage to the reversion. (See Dilapidations: The Modern Law and Practice, 2013 -14 by Dowding and Reynolds, paragraph 30-15.) Equally where the landlord can establish that he really intends to do the repairs then in practice the burden of proving that the damage to the reversion is less than the cost of the works may shift to the tenant (Hill & Redman’s Law of Landlord and Tenant (December 2016) at paragraph A).
“The failure to carry out the repairs would clearly be an indication that the repairs were not necessary as the landlords claimed. Put another way, whether sums were actually spent on doing repairs is relevant to the question whether the repairs were necessary or not. If they were not necessary, damage to the reversion could not be inferred from them. But even where the repairs had not been carried out there could be other explanations for the failure that could satisfy the judge that the indication was not well-founded, as where the landlord decides not to repair the property himself but proceeds to sell it at a lower price than he could have obtained if the repairs had been remedied.”
In this case both propositions apply, some work has been carried out and some work has not. I see no reason why I should not accept that, as regards the work in fact carried out, this represents or is equivalent to a diminution in value in the reversion. For the reasons I have already given I calculate this as £93,635, in respect of the vacant units, plus £71,647 for the occupied units, plus £5,491 in respect of drainage; a total of £170,773. I reduce this sum by the amount that the hypothetical purchaser might reasonably assume would be recoverable from the “holding over” tenants i.e. £10,000 as assessed at paragraph 27 above. However this figure has to be increased to allow for financing; once again I allowed £25,000 but this was calculated on the assumption of a budget cost of about £500,000. Taking account of the actual costs expended, I would reduce the financing costs to £5,000. Thus in my view the diminution in value which can properly be deduced from the fact that the Claimants have in fact carried out repair works to the value of about £170,000 is £166,000 (i.e. £165,773 rounded up).
As regards the work not carried out, no explanation has been put forward by the Claimants as to why such work has not been done, some six years after the Valuation Date. No evidence has been called to suggest that such work will ever be carried out and I have no evidence before me to suggest that those outstanding works are serious or substantial; indeed to the contrary, the fact that the units have been let at a market rent suggest that what is outstanding is minor or unimportant. It would seem to me therefore that I cannot deduce or assume that this further element of cost should be taken into account in arriving at the diminution of value.
There is no other evidence before me to suggest that notwithstanding these outstanding repairs the reversion has been diminished by an amount equivalent to or to be derived from the cost of remedying these remaining defects. Mr Outterside’s valuation makes no special assumption in this regard, he merely assumes that the hypothetical purchaser would derive a value based on remedying all the defects. I see no reason to make such an assumption since Car Giant’s actions and inaction after the Valuation Date throw light upon the value of the reversion at that date. (See Dilapidations: The Modern Law and Practice, 2013 -14 by Dowding and Reynolds, paragraph 30-37.)
I should add that it was suggested by the Claimants’ Counsel that the explanation for the Claimants not carrying out some of the works was lack of finance and/or not wishing to disturb the unit holders in occupation and/or that there was a rolling programme of repairs and/or that it was not unreasonable to hold back expenditure when LBHF was resisting payment. These all might be good explanations but none of them are supported by evidence; I cannot assume those matters particularly where, as was common ground, the burden of proving the diminution in value rests on the Claimants.
In addition to the diminution in value, the Claimants claim the fees for the preparation and service of the schedule, claim summary and drainage report in the sum of £21,416.25. The only evidence I have on these heads of claim is as referred to in Mr Lenson’s report where he identifies the sum of £13,125 as being the cost of the preparation of the schedules.
Interest is claimed pursuant to s.35A of the Senior Courts Act 1981. It is common ground that the interest calculation should start from the Valuation Date. This seems to me a somewhat generous concession on the part of LBHF since the Claimant was not “out of pocket” as at that date and appears to have expended sums carrying out repairs over a number of months or years. Nevertheless in the absence of evidence and in the light of the concession, interest is to run from the Valuation Date.
I have no evidence as to the particular circumstances of the Claimants. I assume that they are normal commercial organisations and probably net borrowers although I have no evidence as to the rate of interest that they paid. In those circumstances I think simple interest at 1% above Base Rate is appropriate.”
RELATED POSTS: THE PROVING THINGS SERIES
- Proving things 1: Civil Evidence Act notices will not cut it
- Proving things 2: evidence to support a claim for damages must be pitch perfect.
- Proving things 3: the complete absence of evidence means the court will not speculate
- Proving things 4: Witnesses who just aren’t there.
- Proving things 5: witness statements and failing on causation.
- Proving things 6: “That’s what I always do” & proving causation.
- Proving things 7: If you don’t prove a loss you don’t get an order.
- Proving things 8: a defendant must prove that a failure to wear a seatbelt made a difference.
- Proving things 9: the role of experts
- Proving things 10: “He said, she said”: the difficulties of recollection.
- Proving things 11: Lies, damn lies and…
- Proving things 12: That oral contract is not worth the paper its written on.
- Proving things 13: Loss, there was no loss.
- Proving things 14: proving mitigation of loss
- Proving things 15: damages and evidence: going back to College
- Proving things 16: if you don’t prove it you don’t get it.
- Proving things 17: Heads of damage that were “entirely bogus”
- Proving things 18: Damages; Car hire; Proof & Summary Judgment
- Proving things 19: prove service or you could be caught out.
- Proving things 20: allegations of improper conduct have to be prove
- Proving things 21: when the whole process of investigation is flawed
- Proving things 22: damages, mitigation part 36 (and bundles).
- Proving things 23: serving important evidence late
- Proving things 24: Damages & the “But for test”: when it gets really complexProving things 24: Damages & the “But for test”: when it gets really complex
- Proving things 25: Attempts to smuggle in witness statements do not help (and carry no weight).
- Proving things 26: distinguishing between what you can remember and what you now think you did.
- Proving things 27: Burdens of proof, hearsay evidence and… attempted murder.
- Proving things 28: make unwarranted personal attacks and use a “mud-slinging” expert: that always ends well.
- Proving things 29: Make sure the witness evidence deals with the relevant issues
- Proving things 30: Office Gossip Proves Nothing: The importance of the source of information and belief.
- Proving things 31: witnesses tend to remember what they want to remember.
- Proving things 32: Damages claim struck out as unsustainable: application to amend refused.
- Proving things 33: causation and the burden of proof in claims against solicitors.
- Proving things 34: There is no primer for scuttlers: when your ship doesn’t come in.
- Proving things 35: Reconstruction, documents & memory.
- Proving things 36: credibility and contemporaneous documents.
- Proving things 37: An approach to damages that was “fundamentally deficient throughout”.
- Proving things 38: Proving inability to pay on a security for costs application.
- Proving things 39: You can spend £10 million in costs and still not prove your case.
- Proving things 40: No evidence – no loss.
- Proving things 41: Proving damages – you are not going to get a second bite of the cherry.
- Proving things 42: silence does not prove inducement.
- Proving things 43: How the Court decides: a Primer.
- Proving things 44: Findings of Fact, Walter Mitty and Witness Training.
- Proving things 45: If you can’t prove loss the defendant is going to get summary judgment.
- Proving things 46: Late theories advanced by experts rarely help.
- Proving things 47: Fire in the loft: it wasn’t the mouse man at all.
- Proving things 48: valves, floods, models and causation.
- Proving things 49: it is difficult to prove damages when the opinion evidence in your witness statement has been struck out.
- Proving things 50: to prove breach of contract you first have to prove that there was a contract.
- Proving things 51: No evidence of loss – no damages
- Proving things 52: Solicitor’s negligence action fails on all counts: no negligence and no loss.
- Proving things 53: dishonesty some of the times doesn’t mean dishonesty all of the time.
- Proving things 54: getting £2 in damages after claiming £15 million.
- Proving things 55: I’ll say it again: No evidence – no damages.
- Proving things 56: A judge will not speculate when things could have been proven.