In what is believed to be the first reported case on what constitutes “default” for the purposes of Section 106 Building Act 1984, the Supreme Court has held in Manolete Partners plc v Hastings Borough Council  UKSC 50 that a council is liable to pay compensation as a result of the exercise of its emergency powers under Section 78 Buildings Act 1984 to restrict public access to a pier because of safety concerns.
A long running battle has come to an end in relation to Hasting Borough Council pursuing a case of a dangerous structure inder section 78 / 77 Building Act 1984.
A borough council is facing a payout following the loss of a Supreme Court battle over compensation payable when the local authority used its emergency powers to close a pier.
Hastings Borough Council claimed it had retained “the moral high ground” as a result of the court’s ruling.
The case of Hastings Borough Council v Manolete Partners Plc  UKSC 50 arose out of the council’s exercise in June 2006 of its emergency powers to restrict public access to Hastings Pier. The council took the view that the pier was in a dangerous condition as a result of serious structural defects.
Manolete Partners PLC, the respondent in the Supreme Court, pursued a claim for compensation against Hastings for loss to business as a result of the emergency closure. Manolete had brought the claim as an assignee of Stylus Sports, which went into liquidation in late 2011.
Stylus had leased two units from the freeholder of the pier, Ravenclaw Investments Incorporated, and had operated a bingo hall and amusement arcade.
Two years before the emergency closure, Stylus had commissioned a structural engineering survey of the pier, which advised that urgent and future work, within a year, was required to prevent an unacceptable risk to the public.
Ravenclaw, which was responsible as landlord for repair and renewal of the pier structure, did not take action to remedy the defects identified. Nor did the borough council, and the pier remained open to the public.
In April 2006, a section of tension cord fell from the pier. This led the council to attempt, unsuccessfully, to compel Ravenclaw to take action, and to commission its own structural integrity report, which in June 2006 recommended immediate restrictions on access to the pier.
The local authority used its emergency powers under section 78 of the Building Act 1984, and in September 2006 obtained a court order under section 77, prohibiting public access to the pier until the necessary remedial works had been carried out.
Section 106 of the 1984 Act requires compensation to be paid for loss to a business resulting from emergency action, but only where the owner or occupier of the premises has not been in default.
Hastings BC alleged that Stylus had breached the Occupiers Liability Act 1957, which imposes a duty of care towards visitors, and the Health and Safety at Work Act 1974, which imposes a duty on an employer to ensure the safety of his employees and the safety of the workplace.
The council sought to rely on these alleged breaches to establish a “default”, thereby precluding Manolete from making a compensation claim under the 1984 Act.
The local authority’s defence was rejected by the Technology and Construction Court and the Court of Appeal, on the basis that the reference to “default” was limited to default in respect of obligations imposed by the 1984 Act itself.
Hastings took the case to the Supreme Court. However, the judges this week unanimously dismissed its appeal.
Giving the judgment of the court, Lord Carnwath said section 106 of the 1984 Act gave a right to compensation to a person who had sustained damage by reason of the exercise of the authority’s powers under the Act “in relation to a matter as to which he has not himself been in default”.
The judge said this required firstly, identification of the “matter” in relation to which authority had exercised its powers, and secondly, consideration of whether that was a matter “as to which” the claimant had been in default.
The relevant power was the power to take emergency action under section 78 of the 1984 Act, and the claim for compensation was limited to the period from the date of the council’s emergency closure of the pier until the court order in September 2006.
The “matter” which led Hastings Borough Council to take such emergency action was identified in a letter sent by the council to the tenants at the time, which was the state of the pier combined with fear of possible collapse from crowd-loading during the events planned for that month, in particular the risk of overloading in an emergency evacuation.
The trigger was not the general state of the pier or the specific repairs identified in the report commissioned by Stylus. Lord Carnwath said that whatever Stylus’ position towards its clients and employees, it was not “in default” as to the matter which led to the council’s exercise of its section 78 powers, and on that basis, Manolete was entitled to succeed in its claim for compensation.
The Supreme Court went on to address, although this was not strictly necessary to determine the council’s appeal, the issue of whether “default” in section 106 was limited to default under the 1984 Act itself, as this might impact on future cases.
Lord Carnwath found that the legislative history and the authorities under the predecessor statutes supported the conclusion that the default was not limited to the particular provisions of each statute, but extended to other forms of legal default. Concerns as to the wide scope of the factual inquiry did not arise if the inquiry was limited to the two-stage assessment.
The Supreme Court judge said the Court of Appeal’s conclusion that the council had no defence in principle to the claim for compensation was correct, not because, as they so held, there was no default under the 1984 Act, but because it was not Stylus’ default which led to the council’s emergency action.
Lord Carnwath emphasised that this did not limit the issues which could be taken into account by the arbitrator in assessing the level of compensation payable. The arbitrator may take account of Stylus’ statutory and common law responsibilities to its clients and employees, the structural condition of the pier and the implications it would have had for the continuation of business quite apart from the effects of the emergency action, the judge said.
Responding to the ruling, Cllr Peter Chowney, Leader of Hastings BC, said: “Although we are obviously disappointed to lose the appeal, we absolutely believe it was the right thing to do.
“The Supreme Court recognised that the Building Act as interpreted by the ‘lower’ courts was too strict, and they have effectively widened the application of what ‘in default’ means. Although this might seem a technical point, it is an important one and one which will in future help councils faced with the same dilemma.”
Cllr Chowney added: “The judgment also recognises that the council can argue that any compensation must take into account the fact that the pier was in a poor structural condition. We will robustly challenge any large compensation claims, we do not think that the taxpayers of Hastings should have to pay significant sums of public money when all we have ever done is act in the best interests of public safety.
“We believe that we acted entirely correctly when we closed the pier. Our engineers told us it was dangerous with crowd loadings, and it would have been foolhardy to allow large events to go ahead.”
It is easy to feel sympathy for the local authority in this case (which was acting to protect the public from a very dangerous pier) but in the long view, the decision may benefit local authorities. Although the specific facts of this case rendered the local authority liable for compensation, the Supreme Court has actually widened the interpretation of the Act – thus, preventing any defence to be brought merely on the basis that there has been no default under the Act itself.
Furthermore, the Supreme Court also emphasised that issues such as the structural condition of the pier and the impact this would have on its business could be taken into account when assessing the amount of compensation payable; thereby creating another outlet for local authorities to limit their damage when acting in the public interest.
This article is based in part on the Supreme Court’s press summary of the case – Courtesy of LGLawyer
South Gloucestershire Council has lost a tree roots case it had argued would expose local authorities to unjustified compensation claims were it unsuccessful.
In Burge & Anor v South Gloucestershire Council, the Upper Tribunal (Lands Chamber) has found against the council and awarded the claimants compensation of £25,000.
The case concerned South Gloucestershire’s refusal to allow the felling of an oak tree covered by a tree preservation order, despite its roots having been found to have damaged the foundations of a resident’s conservatory.
South Gloucestershire argued that the conservatory had been so badly built that it would have failed anyway.
It also contended that the claimants’ loss was not reasonably foreseeable when felling consent was withheld in 2010.
The tribunal said it was already known by then that the oak was causing significant damage to the conservatory’s foundations and “we do not consider that the council comes anywhere near satisfying us that further loss or damage to the claimants was not reasonably foreseeable at that date”.
South Gloucestershire argued that, were it to lose: “Anyone would be entitled to erect an inadequate building near a protected tree contrary to all industry guidance and when damage is caused by that tree and the local authority refuses to grant consent to fell the tree they are liable to pay damages in any and all events”.
But the tribunal said the tree had not been protected when the conservatory was built in 2003.
Protection arrived only in 2008 and consent to fell the tree was refused in 2010. “We do not see how it can sensibly be argued that the claimants have sought from the outset to use the compensatory machinery available to those affected by TPOs to their personal advantage and the disadvantage of taxpayers generally,” it ruled.
A South Gloucestershire spokesperson said: “We are disappointed with the tribunal’s decision and are currently considering our options
Courtesy of LGLawyer
This judgement was handed down by the Supreme Court on the 13th July 2016 and looks at the obligations under section 11, Landlord & Tenant Act 1985.
BACKGROUND TO THE APPEAL
By a lease dated 28 April 2006, the freeholder of a block of flats in Runcorn (“the Building”) let Flat 10 in the building for a term of 199 years from 1 January 2006 to Mr Kumarasamy (“the Headlease”). The Building is accessed by a paved pathway (“the paved area”) which leads to the main entrance door which opens onto a front hallway (“the front hallway”).
On 2 April 2009, Mr Kumarasamy granted Mr Edwards a subtenancy of the Flat for a term expiring on 5 October 2009 (“the Subtenancy”). The Subtenancy included a grant of “the right to use, in common with others, any shared rights of access, stairways, communal parts, paths and drives” of the Building. Under the Subtenancy, Mr Edwards was under an obligation to repair the Flat, excepting items which Mr Kumarasamy was responsible to maintain.
On 1 July 2010, Mr Edwards was taking rubbish from the Flat to the communal dustbins, when he tripped over an uneven paving stone on the paved area. He suffered injuries as a result and issued proceedings against Mr Kumarasamy contending that his injury was caused by Mr Kumarasamy’s failure to keep the paved area in repair, in breach of covenants implied into the Subtenancy by section 11(1)(a) and 11(1A)(a) of the Landlord and Tenant Act 1985 (“the 1985 Act”).
At first instance Deputy District Judge Gilman accepted Mr Edwards case and awarded him £3,750 in damages. Her Honour Judge May QC allowed Mr Kumarasamy’s appeal on two grounds: (i) the paved area was not within the ambit of the section 11 covenant; and (ii) even if it had been, Mr Kumarasamy could not have been liable as he had no notice of the disrepair. The Court of Appeal allowed Mr Edwards’ appeal, disagreeing with Judge May on both grounds. Mr Kumarasamy now appeals to the Supreme Court.
The Supreme Court unanimously allows Mr Kumarasamy’s appeal. Lord Neuberger gives the leading judgment, with which the other Justices agree. Lord Carnwath also gives a short judgment.
REASONS FOR THE JUDGMENT
This appeal raises three questions, all of which must be answered in the affirmative for Mr Edwards to succeed on the appeal [14-16]:
(1) Whether, in the light of the wording of sections 11(1)(a) and 11(1A)(a) of the 1985 Act, the paved area can be described as part of the exterior of the front hall;
(2) Whether Mr Kumarasamy had an “estate or interest” in the front hall for the purposes of section 11(1A)(a);
(3) Whether Mr Kumarasamy could be liable to Mr Edwards for the disrepair in question notwithstanding that he had had no notice of the disrepair in the paved area before Mr Edwards’ accident.
Section 11(1) of the 1985 Act, which implies into certain leases of dwelling-houses a covenant by the landlord to keep in repair the structure and exterior of the dwelling-house, applies to the Subtenancy. Where the dwelling-house only forms part of a building, section 11(1A) provides that the covenant has effect in relation to any part of the building in which the lessor has an estate or interest . It is not possible, as a matter of ordinary language, to describe a path leading from a car park to the entrance door of a building as part of the exterior of the front hall of that building . Such a wide reading would be difficult to reconcile with the wording of section 11(1A)(a), particularly the limitation to “the building”, and the specific extension to cover “drains, gutters and external pipes”, which supports a natural reading of the term “exterior” .
As to the second question, Mr Kumarasamy was granted a right of way over the front hall and, as a matter of property law, a right of way over land constitutes an interest in that land . The argument that Mr Kumarasamy cannot be said to have interest in the front hall since the Subtenancy had effectively deprived Mr Kumarasamy of any practical benefit in the easement so long as it continued is rejected . As to the third question, there is an established rule that a landlord is not liable to repair premises which are in the possession of the tenant and not of the landlord, unless and until the landlord has notice of the disrepair (“the rule”) . Where a landlord agrees to repair the structure and exterior of a flat, the rule would apply but only to the extent that the structure is included in the demise and the tenant is accordingly in possession of that part of the structure [39-40].
The subsequent question is whether the rule can be invoked when a landlord has covenanted with a tenant to repair the structure but is not in possession of the structure, for example because he has let it to another tenant . In such a case, the landlord is not normally entitled to notice in such circumstances [42-42]. The rule only applies to property in the possession of the tenant .
In view of this analysis, Mr Kumarasamy’s submission that, in every case where a tenant relies on a covenant implied by section 11, a landlord could not be liable until they had notice of the disrepair, even where the landlord is undoubtedly in possession of the property, is rejected [44-46].
The present case is concerned with the application of a landlord’s repairing covenant to property which is not in the possession of either the landlord or the tenant. The application of the reasoning upon which the rule is based justifies the conclusion that the landlord’s obligation to repair the paved area is only triggered once he has notice of any disrepair for which the tenant would seek to make him liable . While it is true that Mr Kumarasamy has the right to use the common parts as against the freeholder, he has effectively lost that right for the duration of the Subtenancy to the tenant, Mr Edwards . It is true that the tenant does not enjoy exclusive possession of the common parts, but he is present on them every time he comes to or leaves the flat  and has the best means of knowing of any want of repair in them .
Full Judgement can be downloaded from here