SIMMONS -V- CASTLE 10% UPLIFT APPLIES TO DAMAGES FOR BREACH OF REPAIRING COVENTANT: COURT OF APPEAL DECISION TODAY

June 21, 2022 · by · in Appeals, Damages

In Khan v Mehmood [2022] EWCA Civ 791 the Court of Appeal held that the 10% uplift in s.44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 applied to damages for breach of a repairing covenant.

“… it is not the case that claims for general damages for breach of repairing covenants have benefited fortuitously from the expansion of the declaration in Simmons v Castle. On the contrary, they fall squarely within its primary purpose”

THE CASE

The claimant landlord appealed an award of damages on two grounds.  The second of those grounds was that the trial judge erred in applying the 10% “Simmons -v- Castle” uplift to the damages award.

THE JUDGMENT OF THE COURT OF APPEAL ON THIS ISSUE

The Court of Appeal rejected the landlord’s appeal on this issue. Lord Justice Baker stating that this type of damages, without doubt, fell within the ambit if damages that are subject to the 10% uplift.

Discussion and conclusion on ground 2
    1. The basis for assessing the level of general damages for breach of a repairing covenant has been considered in a series of decisions in this Court. In McCoy & Co v Clark (1982) 13 HLR 87 (CA), damages were assessed by reference to a proportion of the rent. In Calabar Properties Ltd v Stitcher [1984] 1 WLR 287, on the other hand, the Court favoured a global award. At p297, Griffiths LJ observed:
“The object of awarding damages against a landlord for breach of his covenant to repair is not to punish the landlord but, so far as money can, to restore the tenant to the position he would have been in had there been no breach. This object will not be achieved by applying one set of rules to all cases regardless of the particular circumstances of the case. The facts of each case must be looked at carefully to see what damage the tenant has suffered and how he may be fairly compensated by a monetary award.”
    1. In Wallace v Manchester City Council (1998) 30 HLR 1111, having found that there had been breaches of a repairing covenant in a secure tenancy of a house let by a local authority, the trial judge had made a global award of general damages for distress, inconvenience and disruption in lifestyle. The tenant’s appeal on the grounds that she should have made an additional award in respect of the diminution in value of the tenancy with reference to the rent paid was dismissed. This Court dismissed the appeal. In his judgment, Morritt LJ summarised the previous authorities and at pages 1120-1 set out his conclusions in four propositions:
“First, the question in all cases of damages for breach of an obligation to repair is what sum will, so far as money can, place the tenant in the position he would have been in if the obligation to repair had been duly performed by the landlord. Secondly, the answer to that question inevitably involves a comparison of the property as it was for the period when the landlord was in breach of his obligation with what it would have been in if the obligation had been performed. Thirdly, for periods when the tenant remained in occupation of the property notwithstanding the breach of the obligation to repair the loss to him requiring compensation is the loss of comfort and convenience which results from living in a property which was not in the state of repair it ought to have been if the landlord had performed his obligation …. Fourthly, if the tenant does not remain in occupation but, being entitled to do so, is forced by the landlord’s failure to repair to sell or sublet the property he may recover for the diminution of the price or recoverable rent occasioned by the landlord’s failure to perform his covenant to repair ….
Obviously the tenant cannot claim damages in accordance with the third proposition for periods occurring after the sale or sub-lease referred to in the fourth. To that extent … those two heads are mutually exclusive. This case is concerned with the proper application of the third proposition, not the fourth. Thus the question to be answered is what sum is required to compensate the tenant for the distress and inconvenience experienced because of the landlord’s failure to perform his obligation to repair. Such sum may be ascertained in a number of different ways, including but not limited to a notional reduction in the rent. Some judges may prefer to use that method alone … some may prefer a global award for discomfort and inconvenience … and others may prefer a mixture of the two. But in my judgment they are not bound to assess damages separately under heads of both diminution in value and discomfort because … those heads are alternative ways of expressing the same concept.
It follows that in my judgment [the trial judge] was right when he said that diminution in the value of the property in relation to the amount of rent paid is not a separate head of damage.”
    1. Morritt LJ made two further observations:
“First … expert valuation evidence is not of assistance when assessing the damages in accordance with my third proposition. The question is the monetary value of the discomfort and inconvenience suffered by the tenant. That is a matter for the judge …. Secondly, a judge who seeks to assess the monetary compensation to be awarded for discomfort and inconvenience on a global basis would be well advised to cross-check his prospective award by reference to the rent payable for the period equivalent to the duration of the landlord’s breach of covenant. By this means the judge may avoid over- or under-assessments through failure to give proper consideration to the period of the landlord’s breach of obligation or the nature of the property.”
    1. This approach has been followed by this Court in subsequent cases. In Shine v English Churches Housing Group [2004] EWCA 434, [2004] HLR 42, the judgment in Wallace was described (at paragraph 94) as “plainly the leading case on the subject”. At paragraph 104, the Court (Wall and Keene LJJ) said:
“we accept that the guidelines helpfully set out by Morritt LJ in Wallace v Manchester City Council are not to be applied in a mechanistic or dogmatic way, and whilst we equally accept that there will be cases in which the level of distress or inconvenience experienced by a tenant may require an award in excess of the level of rental payable, we take the view that the plain inference of Morritt LJ’s judgment, and the figures identified in the case itself, demonstrate that if an award of damages for stress and inconvenience arising from a landlord’s breach of the implied covenant to repair is to exceed the level of the rental payable, clear reasons need to be given by the court for taking that course, and the facts of the case – notably the conduct of the landlord – must warrant such an award.”
    1. In Moorjani v Durban Estates Ltd [2015] EWCA Civ 1252 [2016] 1 WLR 2265, Briggs LJ (with whom the other members of the Court agreed) observed that the loss caused to a lessee by a period of disrepair to leasehold premises attributable to a landlord’s breach of covenant consisted in the impairment to the rights to amenity afforded to the lessee by the lease of which discomfort, inconvenience and distress were only symptoms. As to the assessment of damages, he said (at paragraph 40):
” … the court is entitled and, I would say, obliged to temper the rigour of those rules which seek to implement the compensatory principle which lies at the heart of the law of damages, where particular circumstances make it just to do so…. In particular circumstances, as was acknowledged in the Shine case … this may admit quantification of damages in excess of the current rental value …. In other cases, it seems to me perfectly legitimate to treat the particular circumstances of the claimant lessee as tending to reduce rather than aggravate his damages, and not merely where the relevant conduct consists of what may conventionally be described as mitigation.”
    1. These citations illustrate the flaws in the claimant’s principal argument on the present appeal that, because general damages for breach of a repairing covenant are conventionally calculated by reference to a notional reduction in rent as opposed to a tariff or set of guidelines, the 10% uplift should not be applied. In some types of claim, the level of damages is assessed by reference to a tariff to “ensure consistency in awards and promote settlement of disputes” (McGregor on Damages, 21st edition, para 52.008). But there is nothing in the judgment in Simmons v Castle to suggest that the declaration should be confined to cases where damages are assessed by reference to a tariff. The Court could have confined it to such cases but conspicuously did not do so.
    1. The calculation of general damages for loss of amenity, of which discomfort, inconvenience and distress are the symptoms, is a matter for the judge, without expert valuation evidence. As Griffiths LJ observed in Calabar Properties v Stitcher, “the facts of each case must be looked at carefully to see what damage the tenant has suffered and how he may be fairly compensated by a monetary award.” Furthermore, as Morritt LJ observed in Wallace v Manchester City Council, damages are not invariably calculated by reference to a notional reduction in rent but may alternatively be expressed as a global award or a combination of the two. Even where the rental value is used as the basis for calculation, the particular circumstances of the tenant may lead to either an increase or a reduction in the quantification. For that reason, the fact that taking a notional reduction in rent as the starting point may sometimes (though not invariably) incorporate an adjustment for inflation is no justification for excluding such damages from the scope of the uplift.
    1. In any event, it is not the case that claims for general damages for breach of repairing covenants have benefited fortuitously from the expansion of the declaration in Simmons v Castle. On the contrary, they fall squarely within its primary purpose. As the Court observed in the second judgment in Simmons v Castle at paragraph 27:
“… the primary purpose of the 10% increase in damages would be to compensate successful claimants, as a class, for being deprived of the right which they had enjoyed since 2000 to recover success fees from defendants, in cases where a claimant was funding the legal costs of pursuing his or her claim by a CFA.”
A claimant for damages for breach of a repairing covenant manifestly falls within that class. As demonstrated by the statement and submissions on behalf of the HLPA, CFAs play an important role in assisting tenants to bring claims for breach of repairing covenants. Such claims are therefore manifestly within the category of cases for which the 10% uplift was specifically intended, by way of compensation for the success fee which the claimant tenant’s lawyer is entitled to be paid by his client but which, following LASPO, cannot be recovered from the defendant landlord. The need to secure funding for claims in the post-LASPO environment was integral to the recommendations in Jackson Report and the declaration made by this Court in Simmons v Castle. The arguments put before this Court on behalf of the HLPA demonstrate that it remains a very important consideration in this category of litigation.
    1. The decision to extend the 10% uplift to all civil claims was made after careful consideration. It is true that the Court anticipated that there may be cases where it was not clear whether the 10% increase is to apply which would have to be dealt with on their merits if and when they arise. In granting permission to appeal in this case, Newey LJ identified this as one of those cases. Having considered the arguments, however, I have reached the clear conclusion that there is no good reason why general damages for breach of a repairing covenant should be excluded from the 10% uplift authorised in Simmons v Castle. On the contrary, for the reasons identified above, there are good reasons why such damages should attract the uplift.
    1. Although the general damages were expressed as including losses incurred in having to purchase cooked food on occasions after the cooker in the property had been condemned, for which special damages could have been claimed but for the absence of documentary evidence, I see no justification for making any consequential deduction from the Simmons v Castle uplift. The fact is that the loss was subsumed into the general damages for loss of amenity. In any event, no basis for deduction has been advanced, and the sum to be deducted would surely be de minimis.
  1. For those reasons, I would dismiss the second ground of appeal.
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