This judgment was handed down remotely at 10.30am on Thursday 27 February 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
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MR JUSTICE RICHARD SMITH
Mr Justice Richard Smith :
Background
- On 7 May 2024, HHJ Monty KC (Judge) gave judgment following the trial of a claim brought by the Respondent long leaseholders of various units in two blocks at a development in Liverpool known as Phoenix Place.
- The blocks are used for student accommodation. The First Appellant is the freeholder of the development and immediate landlord of each of the Respondents. The Second Appellant is the management company for the blocks.
- The dispute centred around liability for alleged disrepair to the windows in the blocks and, assuming such disrepair was found, whether the lessor or lessee was responsible for the related repairs.
- The Judge set out the background (at [4]-[11]) which I gratefully adopt in even more summary form.
- The windows had been installed by K2 Aluminium Systems Limited.
- As a result of problems with damp at the block since 2019, the Appellants' surveyor, Mr Mark Lee, attended site three times in 2021, leading to his report in September 2021 in which he concluded that:-
(i) the problems he identified were attributable to a poor standard of workmanship, particularly in relation to the supply and installation of the windows;
(ii) the defects present with the windows were likely to be the root cause of the issues experienced, including the excessive salt staining to the elevations, water ingress in and around the windows and failed glazed units; and
(iii) The particular problems identified following the removal of some windows to facilitate inspection were (a) no cavity closers or membranes to the window surrounds (b) defects with the frames (c) defective installation and (d) a number of failed window units.
- Service charge demands were made in December 2021 for the replacement of the windows in the blocks, amounting in aggregate to £4.8m.
- Mr Lee attended the blocks again in October and November 2022, producing an addendum report on 24 November 2022, reporting more failed window units.
- The Respondents' surveyor, Mr Christopher Sullivan, carried out his first inspection in December 2022, producing his report on 12 April 2023. He too reported damp issues but took the view that there was no disrepair. Although Mr Lee had recommended replacing all the windows, Mr Sullivan did not agree that this was required, considering some of the work recommended by Mr Lee to be improvement rather than repair.
- Following their exchange of addendum reports, Messrs Lee and Sullivan produced a joint statement on 27 November 2023, with each then producing their own report setting out areas of disagreement. The fundamental difference between them is that Mr Lee said that wholesale replacement of the windows is required, whereas Mr Sullivan said that the existing windows can be repaired at a much lower cost than replacement.
- There were four principal issues before the Judge, namely:-
(i) whether, as a matter of construction, the external windows were demised to the lessee under the terms of the relevant leases;
(ii) if so, whether there had been a breach of the lessee's repairing covenant in clause 4.2 of the lease, requiring the lessee to keep the property in a good state of repair and condition;
(iii) if so, whether the extent of remediation required was that proposed by Mr Lee or Mr Sullivan; and
(iv) whether the notices of wants of repair served on 31 May 2022 pursuant to clause 4.24 of the leases were valid.
- On the first issue above, the Judge found that the lessee was obliged to keep in repair the windows in the individual premises, with the lessor being obliged to do the same for the other windows in the block.
- On the second issue, the Judge concluded that none of the problems identified amounted to disrepair rather than construction or installation defects such that they did not engage clause 4.2 of the lease.
- On the third point, the Judge concluded that, if he was wrong about the absence of disrepair, he had no doubt that the required works were those suggested by Mr Lee, not the more limited works suggested by Mr Sullivan.
- On the fourth point, the Judge concluded that the notices were invalid, not merely because of the absence of disrepair but due to their insufficient particularisation as well.
Legal principles identified
- The second point above is most relevant to this appeal, as to which, the Judge set out (at [51]-[55]) the relevant legal principles as follows:-
(i) the obligation under clause 4.2 meant not only to repair but to put and keep in repair (Saner v Bilton (1877-78) LR 7 Ch D 815; Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716 CA) [51]);
(ii) whether this also requires a covenantor to make good an inherent defect in design is a matter of fact and degree, which largely turns on whether the carrying out of the works would amount to giving back to the covenantee a wholly different thing from that which was demised (Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12; McDougall v Easington DC (1989) 58 P & CR 201) [52]);
(iii) where there was no identifiable disrepair, a landlord would not be liable for the damage caused by condensation arising from a design defect (Quick v Taff Ely BC [1986] QB 809) [53]);
(iv) where building defects had existed since construction, and there had been no damage to or deterioration in the condition of the building, a repairing covenant did not require the defect to be eradicated, however the original defect arose (Post Office v Aquarius Properties Ltd (1986) 54 P & CR 61 [54]);
(v) it has been held that window frames which had rusted as a result of an inherent defect were out of repair, imposing an obligation on the landlord to repair them (Minja Properties Ltd v Cussins Property Group Plc [1998] 2 EGLR 52) [55]).
- Based on these authorities, the Judge identified (at [56]) the issue as "whether the damp problems are disrepair within the meaning ascribed to that word in the authorities, or whether they are design or installation defects which have not caused disrepair."
Review of expert evidence
- At [57]-[67], the Judge summarised the expert evidence in the case, noting first the eight issues identified in the expert joint statement, namely:-
(i) Moisture and condensation between glass panes;
(ii) Water penetration to the external walls of the building at ground floor level;
(iii) Silicone blocking integral drains within the frames, preventing effective draining of rainwater;
(iv) The windows missing membranes around the perimeter;
(v) The windows missing cavity closers;
(vi) The window sills being too narrow for their openings;
(vii) The incorrectly fitted window sills; and
(viii) The window sills being 150 mm in depth with an additional section and not from the same company as the window manufacturer.
- The Judge summarised Mr Sullivan's conclusion from his first report (12 April 2023) as follows:-
(i) the problems were there from the outset, the result of damage to the window units in transit to site or storage on site or faulty installation;
(ii) the property had some damp issues relating to poor design or workmanship, manifesting as damp patches to the external envelope and around some windows;
(iii) the so-called 'defects' are either wrongly claimed as defects or disrepair, the windows having been installed in accordance with their design and there having been no deterioration in the case of various window components, they are overstated, the extent of the remedial work is excessive (for all items) or even if a defect is present, there is no disrepair or, even if there is, only limited repair or replacement is required;
(iv) window replacement was not justified and wholesale provision of new waterproofing and insulation detail would, in the majority of cases, be contrary to the design and therefore improvement, not repair; and
(v) the required works are relatively minor.
- The Judge also summarised Mr Lee's conclusions in his first report (20 September 2021), namely that:-
(i) all the windows needed replacing, the issues he observed causing the deterioration of the building fabric and the main cause of the failed glazed units and water ingress;
(ii) the window sills and frames were, unusually, from different manufacturers;
(iii) window removal during inspection revealed the omission of cavity closers or membranes to the window surrounds, causing water ingress;
(iv) multiple issues were present with the frames and sills indicating poor workmanship, installation and incorrect materials use;
(v) with the number of failed units, it would be highly unusual for the issues to be attributable to faulty batches of glass - issues at the point of installation are much more likely;
(vi) the construction of the window frames themselves is not necessarily faulty but their installation along with incorrect sills, sealing of drainage holes, insufficient packers, no cavity trays or membranes and other defects strongly suggests that the issues experienced are as a result of sub-standard workmanship and incorrect use or omission of the correct materials; and
(vii) the defects noted and subsequent adverse issues are attributable to a poor standard of workmanship, particularly in relation to the supply and installation of the windows.
- The Judge also referred to Mr Lee's addendum report (24 November 2022). By then, there were 104 recorded failed units. Mr Lee concluded that the spread of sample windows inspected was such that he anticipated the poor standard and detailing to be consistent throughout the development. In his 7 July 2023 report, Mr Lee agreed with Mr Sullivan that the issues with the window installations had been present since the time of construction but that they were causing deterioration of the building fabric and were the main cause of the failed glazed units and water ingress.
Judge's conclusions on the defects
- Having summarised these aspects of their written evidence, the Judge stated (at [70]) that, overall, the experts were essentially agreed about the problems, but the fundamental difference between them was (i) whether what they observed amounted to disrepair (a question of law for him to decide) and (ii) what works were required. He considered that the best way to approach those problems was by reference to the joint statement, as to which, I set out in full the Judge's observations on the first two items since they are central to the present appeal. In relation to the first, moisture and condensation, the Judge found (at [72]-[74]) that:-
"Moisture and condensation
72. The alleged disrepair is the moisture between the panes of the glazed window units. Mr Lee says this is disrepair because "some of the prime objectives of a window is for the admission of light as well as thermal performance". This is an issue which has got worse over time (he describes it as "a progressive issue" [sic] [)]. He says that "one of the key contributing factors to the failure of the windows is the insufficient packing of the windows which was undertaken at the time of installation." Mr Sullivan says that it is not disrepair, because it only amounts to heavy misting, and in any event this is a design or workmanship issue.
73. When Mr Lee was cross-examined, he confirmed that the damage to the windows was the misting (the condensation) and the damage to the building was the damp insulation. He agreed that poor manufacture, transit, storage and installation were all possible causes of the problems, although he had not seen any evidence of poor manufacture. He said that his belief was that the spacers and packing were too thin and narrow to support the glazing, which he did not think was a manufacturing flaw. He thought the misting was more likely to be due to insufficient packers as the misting was mostly to the opening casement sections of the windows. He agreed that if that was right, the issue with the packers was an installation defect, but that in his view the seals have progressively failed over time. As to the silicone sealant, he agreed that it was a defect in installation, not disrepair, and similarly agreed that the problems with the cavity closers and the sills were also installation defects.
74. I have no doubt that the condensation is not disrepair when applying the principles set out in the authorities. The experts seem to agree that these are design or installation defects which have caused the problem. This is not disrepair."
- In relation to water penetration to the external walls, the Judge found (at [75]-[77]) that:-
"Water penetration to external walls
75. Both Mr Sullivan and Mr Lee agree that this is caused by construction defects.
76. Mr Sullivan says that recently installed air vents appear to have resolved the problem, whereas Mr Lee says that there is continued staining and damage to internal finishes (and some of this was visible on the photographs in the trial bundle).
77. In my judgment, the staining and the damage to the finishes is not disrepair. Mr Lee said that this amounted to damp insulation. It is not damage to the condition of the building. I do not agree with the proposition that it is disrepair because there is water penetration where that has been caused by an installation defect and there is no evidence of disrepair only loss of amenity (damage to the finishes)."
- The Judge also found that the six other problems identified in the experts' joint statement (silicone blocking the drains, missing membranes, missing cavity closers, narrow sills, incorrectly fitted sills and sill depth) were all installation defects, not disrepair, concluding overall (at [85]-[87]) that:-
"85. None of the problems identified amount to disrepair. They are all construction/ installation defects. None of them engage the obligations in clause 4.2 of the Lease.
86. Even when one looks at the problems with the windows in the round, it is plain that the experts' view is that the problems are installation-related. I do not accept that there is any evidence of disrepair.
87. If I am wrong about any of that, I have no doubt that the works which need to be done are those suggested by Mr Lee, and not the more limited works suggested by Mr Sullivan. I thought Mr Sullivan's suggestion that the works could be done by individual repairs to the affected areas was unrealistic as it did not take into account in particular the increasing number of units which have demonstrated condensation and the need for scaffolding rather than the use of individual "cherry pickers". I was more impressed with Mr Lee's extensive testing of the windows, and his conclusions about the extent of the works needed to remedy the problems are to be preferred."
- After quoting the relevant excerpts from Mr Lee's report dated 7 July 2023 (at [5.0.3]-[5.0.6]), the Judge then considered whether the works identified by the former fell within the scope of Schedule D, Part 1 to the lease (and therefore recoverable under the service charge provisions), concluding that:-
"88. This covers "cleaning, maintaining, decorating, repairing, and replacing where beyond economic repair the Block".
89. It is clear in my judgment, on the basis of the expert evidence, that works are required to remedy the defects in design or construction. As a matter of principle in my view the costs would be recoverable through the service charge if they are works of repair or replacement where economic repair is not possible.
90. Ms Bretherton says that this obligation is more extensive than an obligation to keep in repair, and she rightly points to the authorities I have summarised above as supporting the view that there are rights of replacement where an item is beyond repair. That is also clear from the wording of the obligation itself.
91. However, in my judgment, the starting point is that there has to be disrepair. If there is disrepair, there is an obligation to put it into repair, or if that is not an economically viable option, to replace.
92. Since I have concluded there is no disrepair, only design and/ or construction defects, I agree with Mr Upton that the obligation is not engaged, and the cost of any works which the Defendants want to carry out cannot be recovered through the service charge.
93. Standing back, it seems to me that this was a building which the Defendants inherited with all its construction defects, and it is not permissible to pass on the costs of remedying those defects to the lessees.
94. I cannot see how the works can be works of maintenance either. Without disrepair, this clause is not engaged."
The Judge's Order
- Having reached the various conclusions in the judgment, the order dated 21 May 2024 (Order) records the following declarations:-
1. The windows in the Claimants' units at Phoenix Place, 5 Prince Edwin Street, Liverpool L5 3AA ("the Development") are demised by the Claimants' leases.
2. It is the responsibility of: (1) each individual leaseholder to maintain and keep in repair the windows in the individual units in the Development and (2) the responsibility of the Second Defendant (as the management company) to comply with repairing covenants in relation to the Block which includes all windows and frames.
3. The obligations under Schedule D Part 1 cover the block and if any works to all of the windows, including those demised to the lessees, fall within those obligations the costs are recoverable from the leaseholders by the service charge.
4. The notices dated 31 May 2022 served by the First Defendant on the Claimants on or around 31 May 2022 ("the Notices") are invalid and of no effect.
5. The Claimants are not liable under their leases to pay any costs incurred by the Defendants in the preparation and service of the Notices or in contemplation of forfeiture in respect of the breaches alleged in the Notices or the application to the First-tier Tribunal (Property Chamber) dated 16 August 2022 made by the Defendants under section 168(4) of the Commonhold and Leasehold Reform Act 2002 for a determination that a breach of a tenant's covenant in all of the leases of units at the Development has occurred.
6. The Claimants are not in breach of clause 4.2 of their leases.
7. On the basis that the court has found that the windows are not currently in disrepair the replacement of the windows and all related works as set out in Appendix 1 to the report by Mr Mark Lee of Kershaw Surveyors dated 20 September 2021 and Appendix F of Mr Lee's report dated 2 February 2024 are not works within the meaning of paragraph (a) of Part 1 of Schedule D to the Claimants' leases (or any other provision in that Schedule) and accordingly, if those works were carried out, the Claimants would not be liable to contribute towards the costs of those works through the service charge.
- In addition, the Appellants were ordered to pay the Respondents' costs and to make an interim payment on account of costs of £140,000 ([9]-[10]).
The Grounds of Appeal/ Respondent's Notice
- The Appellants sought permission to appeal against paragraphs 4-7 and 9-10 of the Order on the following two grounds advanced by the Appellants, namely:-
Ground 1
"The learned judge erred in law in finding that there was no disrepair to the building:
(1) The learned judge should have found that the sealant surrounding the windows was in disrepair and/or that the triple glazed units were in disrepair because they failed when the sealant broke over time and so released the argon gas originally in the windows and which was designed to be contained in the windows. The window units were designed to operate with the gas and were in disrepair when it failed just as windows designed to operate with a vacuum are in disrepair when the vacuum fails.
(2) The fact that the disrepair caused condensation (which is not of itself disrepair Quick v Taff Ely BC [1986] QB 809) could not negate the disrepair to the sealant and/or glazed units. The misting to the glazed units was evidence of the disrepair; the misting was not itself the disrepair.
(3) The learned judge placed undue or improper weight on the suggestion that the defects originated with design faults and errors. The relevant principles were correctly cited by the learned judge at Paragraph 52 [sic] judgment but not correctly applied by the learned judge. The evidence the judge accepted was that the sealant had failed over time causing units to be blown and the judge should have found that it was therefore irrelevant that the damage arose from an inherent defect unless repairs to rectify this led to giving back something entirely different, which, on the facts of this case, as held by the learned judge, it did not.
(4) The learned judge erred in law in concluding that the water penetration to the building was not disrepair. The damp was absorbed in the insulation and manifested itself by showing staining. Damp walls is disrepair. The learned judge should have held that: the water ingress was caused by a number of problems with the windows including [sic] fact that they were blown, the defect with packing, silicone blocking the internal drains within the window frames, a failure to properly seal the windows and defective sills and/or that the disrepair to the windows and surround is causing and or contributing to the water penetration."
9. As for Ground 2:-
"The learned judge erred in law in awarding Rs 100% of their costs in circumstances in which A1&2 had succeeded on a number of issues significant both in the litigation and the long term contractual relationships between the parties. The learned judge should either have made no order for costs, on the basis that the respective success of the parties on balance justified no order of costs or made a percentage reduction in costs awarded to Rs. The learned judge erred in law in making no reduction in costs, even taking into account the very broad discretion conferred on him.
In the event that the appeal on Ground 1 succeeds A1&2 will seek the costs of the appeal and the proceedings from Rs and this secondary ground of appeal will be academic."
- On 2 July 2024, Leech J granted permission to appeal on both grounds albeit, in light of a concession by the Appellants, not in relation to paragraph 4 of the Order.
Respondent's Notice
- The Respondents also lodged a Respondent's Notice dated 15 July 2024 in which they stated that:-
"In the event that the Appellants' appeal is allowed and the appeal court finds that one or more of the defects amounts to 'disrepair', the Respondents wish to challenge the lower court's finding at [87] that "if I am wrong about any of that, I have no doubt that the works which need to be done are those suggested by Mr Lee, and not the more limited works suggested by Mr Sullivan."
- The Respondents accept that this was not a 'conventional' Respondent's Notice in that they were not cross-appealing or arguing that the Order below should be upheld for additional reasons. Nevertheless, if the Appellants' appeal were to be upheld, it would be necessary for the Court to consider what to do about paragraph 7 of the Order. If disrepair in the seals were found, it is plain from the evidence of Mr Lee that all that needs to be done is to remove the windows and replace these and the inadequate packers, work that can be undertaken internally to the property without the need for scaffolding and at significantly lower cost.
- The Appellants argued that any appeal is an appeal against an order, not a reasoned judgment. Even if the appeal were allowed on Ground 1, the effect would not be an order to carry out the work identified by Mr Lee. The Judge has found that the prior notices were defective, a finding not challenged on appeal. In any event, the Respondent's Notice identifies no error of law behind this finding of fact, in relation to which, the Judge clearly preferred Mr Lee's evidence not Mr Sullivan's.
- Finally, the parties did not argue Ground 2 before me but agreed that this aspect of the appeal should be left for my determination on the papers.
Window disrepair – Appellants' arguments
- The Appellants say that confusion may have arisen in this case as a result of the Respondents' line of cross-examination of Mr Lee, the Respondents putting to him that the water ingress problem at the block was a design or construction issue rather than one of disrepair. The Appellants say that this is a false dichotomy. Even if the underlying cause of a problem is construction or design related, there may yet be disrepair, as here with the failed window units. Indeed, the Appellants took me to Mr Lee's unchallenged evidence as to the increasing number of failed or 'blown' sealed units, rising from 30 recorded failures in September 2021 to 160 by February 2024. As Mr Lee also explained in cross-examination (as recorded by the Judge (at [73])), his view was that window units had failed due to insufficient packers being installed at the same time as the windows, causing the seals around the windows to break over time and, therefore, the progressive increase in condensation and misting.
- Although the original cause of the problem was faulty installation and in that sense an inherent defect, the Appellants took me to Ravenseft (as had also been considered by the Judge (see [52])) and the consideration in that case (at [17]-[21]) of the prior authorities, including Lister v Lane [1893] 2 QB 212, Wright v Lawson 19 TLR 510 and Sotheby v Grundy [1947] 2 All ER 761, to the effect that it is always a question of degree, including with respect to inherent defects, "whether that which the tenant is being asked to do can properly be described as a repair, or whether on the contrary it would involve giving back to the landlord a wholly different thing from that which he demised" (Ravenseft at [21C]).
- In relation to the Judge's finding (at [74]) that the condensation was not disrepair, the Appellants took me to Quick. In Quick, the Court of Appeal rejected the tenant's claim that the landlord was in breach of its repairing covenant in relation to a house which suffered appalling condensation due to the lack of insulating material facings in the window lintels and the cold single-glazed metal windows. In that case, the landlord's covenant to repair was merely to keep the structure and exterior of the house in good repair which would only come into operation if there had been some damage to the structure and exterior needing to be made good. Although the condensation came about principally from the effect of the warm air in the rooms on the cold surface of the walls and windows, there was no evidence of physical damage to those windows or lintels as opposed to the decorations (for which the landlord was not responsible) and the wooden window surround (easily cured by replacing the defective lengths of wood). Since there was no evidence that the windows and lintels were in any different state from when the tenant took up the lease and, therefore, no damage to the subject matter of the covenant, there was no disrepair. The question of whether it would be reasonable to remedy a design fault when doing the repair (as had arisen in Ravenseft), therefore, did not arise.
- In this case, the Appellants say that the Judge fell into error (at [72]-[74]) in describing their case as being that the moisture or condensation constituted the relevant disrepair. Rather, the Appellants' case was that the disrepair was the failure of the seals to the gas-filled glazed units which no longer functioned as they should in terms, for example, of their thermal or translucent qualities. The condensation between the panes is merely evidence of that disrepair. In this case, the position was different from Quick which involved mere condensation and no damage to the windows or lintels the subject matter of the covenant. The disrepair here was the failure of the seals and the glazed units. Quick did not establish that condensation could not be evidence of disrepair or occur as a result of disrepair or be present when there was disrepair.
- Moreover, it was irrelevant that the seals failed because of installation faults identified by Mr Lee, namely the failure to pack the windows resulting in the subsequent movement and breaking of the seal around the units; whatever the original cause of the defect, the material point was that the condition of the seals and the window units had deteriorated over time and were, therefore, in disrepair. As Ravenseft made clear, repairing covenants can require a covenantor to make good an inherent defect so long as this did not involve giving back to the covenantee a wholly different thing from that which was demised. The Judge made no such finding, in fact, going on to conclude that, if he was wrong in finding no disrepair, the replacement works identified by Mr Lee were appropriate.
- Accordingly, the Judge fell into error by focusing on the wrong issue (condensation), creating a false dichotomy between the cause of the problem (installation) and the resulting disrepair in the form of the failed seals and glazed units, and wrongly treating the cause as determinative of the matter.
Window disrepair - Respondents' arguments
- In response to the Appellants' criticisms of the Judge's approach, the Respondents made a number of general points:-
(i) As recorded by the Judge (at [72]), Mr Lee's evidence, as reflected in the joint statement and in oral evidence, was that condensation itself constituted disrepair, albeit the Respondents accept that this was not how the Appellants had put their argument at trial;
(ii) Rather, the question was whether the defective window seals amounted to disrepair. That narrow issue also arises on the present appeal, the Appellants framing the Judge's suggested error of law in the first three paragraphs of Ground 1 by reference to their suggested progressive failure;
(iii) The Appellants' reference to 'failed' glazed units is misleading. As Mr Sullivan explained in his written evidence, it is the seal which, if pierced, damaged or poorly formed will allow moisture to enter the cavity between the panes of glass. The glass itself is not affected other than by water vapour. It is therefore only the seal which should be questioned as defective, damaged or deteriorated. The Respondents do not dispute that the seals were defective but they do not agree with the Appellants as to when or how this occurred;
(iv) The conclusion (at [74]) that the condensation was not disrepair and that design or installation problems caused the defect needs to be considered in light of the Judge's review of the evidence. The Judge considered (at [72]-[73]) Mr Lee's evidence as to the installation of insufficient packers and the progressive failure of the seals over time but he made no finding of fact in relation to either;
(v) In fact, the Judge went on in his reasons for refusing permission to appeal to find that faulty seals did not amount to disrepair: "[i]f (as I found) the condensation was something which went wrong in the manufacture or installation of the windows, the blown windows (even if caused by faulty seals) did not amount to disrepair when applying the legal principles summarised in my reserved judgment";
(vi) The Respondents say that they are entitled to have regard to those reasons too even though not expressed in the judgment itself, particularly where, as both parties agree, the Judge did not express himself as comprehensively as he might otherwise have done; and
(vii) Moreover, in the course of submission by the Appellants at the consequentials hearing on 20 May 2024, the Judge expressed himself in terms of the defect being present from the outset and that he had not accepted at trial the Appellants' argument in relation to the progressive failure of the seals.
- The Respondents also identified a number of specific reasons why they said there had been no finding as to the deterioration and failure of the seals over time:-
(i) The Judge's exposition of the legal principles was correct, unsurprisingly so given that there was no dispute about them. As such, there was no misapprehension on the part of the Judge that (i) for there to be disrepair, there must be some deterioration in the condition of the subject matter of the covenant and (ii) where such deterioration has occurred, it can still be disrepair if the underlying cause is an inherent defect;
(ii) To the same end, the Judge asked himself the correct question (at [56]), namely "whether the damp problems are disrepair within the meaning ascribed to that word in the authorities, or whether they are design or installation defects which have not caused disrepair."
(iii) As noted, the Judge made no findings of fact (at [72]-[73]) as to the progressive failure of the seals. He simply recited part of the related expert evidence. There was a conflict between Mr Lee and Mr Sullivan as to what caused the seals to be compromised, when that occurred and, therefore, whether there was deterioration at all;
(iv) Although Mr Lee's evidence as to the progressively increasing misting of the windows was not challenged, it does not follow that the failure of the seals was installation-related or that it occurred progressively. Condensation may not appear immediately;
(v) Mr Sullivan's firm belief in cross-examination was that the windows were either manufactured poorly or damaged while they were put in place. Mr Lee too admitted of the possibility of one of multiple causes, with him describing the insufficient packing of the windows as one of the "key contributing" factors to the failure of the windows (as cited by the Judge at [72]);
(vi) The Judge did not prefer the evidence of Mr Lee save in relation to what remedial works were required (at [68] and [87]); and
(vii) At trial, the Respondents accepted that any deterioration after installation would be disrepair (including in the cross-examination of Mr Lee) such that any criticism that they somehow took the Judge down the wrong path is misconceived.
- Given these matters, the Respondents say that the natural interpretation of the Judge's finding that there was a design or installation defect (at [74]) is that the seals were defective at the point of installation. Although not explicit in his judgment, this is clear from the discussion on permission to appeal and the references there to the defect or fault being present from the outset. However, if they are wrong about that and there has been progressive failure of the seals, the Respondents accept that this would constitute disrepair.
Water penetration to external walls
- The Appellants also took issue in paragraph 4 of Ground 1 with the Judge's finding (at [77]) that there was no disrepair as a result of the water penetration. Although the Judge found that the staining and damage to the finishes is not disrepair, the damp was absorbed in the insulation and manifested itself by showing staining. Damp in walls is disrepair, the water ingress having been caused by the various problems with the windows, including the defect with packing, silicone blocking the internal drains within the window frames, a failure properly to seal the windows and defective sills. The disrepair to the windows and surround is causing and/ or contributing to the water penetration.
- The Respondents say that the Judge correctly held (at [77]) that damp insulation is not damage to the condition of the building, an unimpeachable decision in light of Aquarius Properties which held that ground water ingress to a basement to the extent the water stood ankle deep on the floor for some years was in not itself damage or deterioration such that there was no disrepair. Likewise, the Respondents say that the Judge correctly held that staining and damage to the finishes was not disrepair rather than damage to the internal decoration of the units, not being deterioration to the subject matter of the covenant (in this case, the window frames), relying to that end on Quick.
- In any event, whether there was damage to the fabric of the building and/ or internal decoration of the units was not in dispute. The dispute was whether the windows were demised to the Respondents, whether they were in breach of clause 4.2 of the lease by reason of their disrepair and whether they were liable to contribute to the replacement of the windows and related works as works within the meaning of paragraph (a) of Part 1 of Schedule D to the leases.
Ground 1 - moisture and condensation/ failed seals – discussion
- I address first the Appellants' main point under Ground 1 as to the failed seals and glazed units. As to the latter, although the Respondents took issue with the characterisation of the glazed units as themselves having failed, it seems to me that the loss of gas therefrom and resulting deterioration in terms of their diminished thermal properties can, in principle, constitute disrepair, and that this is not limited to the physical failure of the seals.
- As to the Judge's treatment of the matter, taking his cue from the first "alleged issue" identified in the experts' joint statement, his focus was on the moisture and condensation and its increasing manifestation through misting between the glass panes. Noting the experts' apparent agreement that design or installation defects caused the problem, the Judge concluded that, when applying the principles set out in the authorities, the condensation was not disrepair. Although it seemed to me (differently from the position in Quick) that the condensation here did detrimentally impact the subject matter of the covenant, such that the condensation between the window panes might in principle constitute disrepair, the Appellants did not argue this before me. Nor, as the Respondents accepted, did they do so below. I therefore need say nothing further about it save to note, as the Judge did (at [73]), Mr Lee's acceptance in cross-examination that the damage to the windows was the misting. However, such testimony did not, in my view, prevent the Appellants from arguing, as they did, that the relevant disrepair for the purpose of clause 4.2 of the leases was the progressive failure of the window seals and units, an argument supported by other aspects of Mr Lee's evidence.
- In his reasoning (at [74]), the Judge stated that "I have no doubt that the condensation is not disrepair when applying the principles set out in the authorities. The experts seem to agree that these are design or installation defects which have caused the problem. This is not disrepair." The Appellants argued that this showed that the Judge had fallen into error by treating the presence of inherent defects as preclusive of a finding of disrepair. His overall conclusion (at [85]) was to the same end, the Judge stating that "[n]one of the problems identified amount to disrepair. They are all construction/ installation defects." The Respondents said that this merely reflected the Judge's finding that the relevant disrepair in this case had already occurred at the point of construction or installation, not that he considered such defects incapable, in principle, of giving rise to disrepair at all. Even though the Judge framed correctly (at [56]) the overarching issue for decision, I agree that, on its face, this reasoning could suggest (erroneously) that the presence of inherent defects excludes the possibility of a finding of disrepair. The experts' joint statement by reference to which he framed his decision on the disrepair issue is itself framed in somewhat binary terms in terms of "[i]s this a design/ construction defect or is it a deterioration?" The difficulty is that the Judge made no specific finding as to the nature and cause of the particular defect responsible for the condensation problem. As such, it was difficult to discern the basis on which the Judge reached the decision he did (at [74]).
- The Judge did note the experts' agreement that these were design or installation problems. I do not consider it a strained reading to say that he accepted their evidence at that level of generality at least. As such, it would also appear that the Judge did not accept, for example, that these problems arose from the manufacture, transit and storage of the window units as had been suggested to, and accepted as a possibility by, Mr Lee (although the form N460 does refer to manufacture). However, it is still not possible to say from the Judge's acceptance of the presence of a design or installation defect how and why, as is common ground occurred, the seals failed. The Judge clearly noted (at [73]) Mr Lee's views as to the issue with the packers (an installation defect) and as to progressive seal failure. However, that was not Mr Sullivan's view. Although not specifically considered in the judgment, Mr Sullivan's evidence appeared to be that the problem more likely arose in the manufacture of the windows or through damage to the seals at the point of installation.
- As to the Respondents' reliance on what was said in the context of the application to the Judge for permission to appeal, they referred me to English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409 and Greenwich Millennium Village Ltd v Essex Services Group plc and others [2014] 1 WLR 3517 concerning the possible elaboration of the court's reasons for its decision. In my view, the situation in those cases was somewhat removed from the Respondents' reliance here on certain oral exchanges at the consequentials hearing and on the brief form N460, neither of which, when considered in full, seemed to shed much light on the matter in any event.
- In light of the above, I accept that the Judge fell into error in focusing on the condensation as the subject matter of the alleged disrepair rather than the window seals and units and therefore in not addressing how the matter had been argued below. Given the difficulty of discerning the nature of the design or installation issue which the Judge considered to be responsible for these problems and how the Judge expressed his conclusions, I also accept that he may have fallen into error by treating installation defects as incapable of giving rise to disrepair. I would therefore allow the appeal on this aspect of Ground 1.
- Having reached that view, I have considered whether this Court should make its own findings based on the evidence as to the nature and cause of the relevant defects. For example, the suggested correlation between the increasing number of misted window units over time and the progressive failure of the window seals seemed a meaningful one. However, that is an intuitive response, reached at some distance from the related expert evidence and, no doubt, its various nuances revealed during trial. I have therefore come to the view, reluctantly, particularly given the ultimate outcome below, the likely cost of re-visiting these issues and the need to do so quickly, that the appropriate course is to remit to the matter to the Judge for his further consideration.
Ground 1 - water penetration - discussion
- I can deal more briefly with the water penetration issue, as to which, the Judge noted Mr Lee's view that disrepair was present in the form of damp insulation. However, he did not agree with the proposition that it was disrepair because there was water penetration caused by an installation defect. Moreover, there was no disrepair as opposed to loss of amenity in the form of staining and damage to the finishes.
- Damp issues perhaps arise most commonly in connection with a landlord's covenant to keep the structure and exterior in repair. In that context, the Court has held that a landlord may be liable where the damp arises from a breach of covenant (ie: damage to the structure or exterior) or where the damp has itself caused such structural or external damage, leading in turn to the damp of which complaint is made. A landlord is not liable under the covenant merely because there is very serious damp in the demised premises (Southwark LBC v McIntosh [2002] 1 E.G.L.R. 25 (at [3]-[4]), citing Quick).
- Mr Lee's opinion in the joint statement was that "…this is attributable to the missing membrane around the windows", also referring to the poor installation of the windows generally. In their appeal skeleton, the Appellants identified specific window defects of which complaint was made at trial (including insufficient packing) as the cause of the water ingress. However, it seemed to me that this put matters somewhat more highly than Mr Lee's evidence, particularly given the manifestation of the damp in the insulation. In any event, the Judge found for the majority of those defects, including the missing membranes specifically highlighted by Mr Lee in this context, that there was no disrepair, findings not challenged on this appeal. As such, I see no basis for re-visiting the Judge's finding in relation to the damp issue. I would therefore not allow the appeal on this aspect.
Respondent's Notice
- As for the Respondent's Notice, as noted, the Respondents candidly accepted that they were not cross-appealing or arguing that the Order below should be upheld for additional reasons. Even though this appeal is limited to two items of disrepair, and I have found that only one of them should be re-visited, having considered carefully the Judge's findings (at [87]) with respect to the scope of works required, it seems to me that he was entitled to come to the view he did on the evidence and that it discloses no error of law. Nor does it seem to me that the Judge's view would be vitiated by further findings he might make in light of this appeal. The Respondents' reliance on the Upper Tribunal case of Tedworth North Management Limited (and another) v Miller (and others) [2016] UKUT 522 (Lands Chamber) did not seem to advance matters given the different facts present in that case. Accordingly, even if it were open to the Respondents to challenge this paragraph of the judgment, I see no reason for this aspect to be re-visited either.
Ground 2 - costs
- Given the prospect of further findings with respect to the failed seals and window units, I am satisfied that the costs of the claim should also be remitted. The Judge described the issue of disrepair as the central issue in the case. It seems to me that any further findings, particularly on one as potentially significant as the failed seals and glazing units, might lead the Judge to re-visit his approach to the appropriate costs order. I should say, however, that I would not otherwise have acceded to Ground 2. On the basis of the Judge's findings, and despite the Appellants' success on some issues, his conclusion that the Respondents were the successful party overall, and that that they should receive their costs without reduction, was well within the wide discretion afforded to him in this context.
Conclusion/ disposal
- Accordingly, I allow the appeal to the extent indicated above. Given that there is no dispute that the window seals and (in the sense described above) the glazed units failed, I remit to the Judge the question of the nature and cause of those defects, including whether such failure was progressive. I also remit those aspects of his decision potentially implicated by the answer to that question, as reflected in paragraphs 5-7 and 9-10 of the Order (which paragraphs I will set aside). If the Central London County Court can accommodate the expedition of the further proceedings necessary to dispose of these issues, I would encourage it to do so. However, like the Judge, I would also encourage the parties to seek to resolve this dispute.
- In the meantime, I invite the parties to seek to agree a draft minute of order to give effect to my judgment and to agree any consequential issues arising. If they are unable to do so, I will hear from them in writing in the first instance.
