Neutral Citation Number: [1999] EWHC 276 (TCC)
Case No. 1996 ‑ ORB ‑ No. 1079
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Date: 12th March 1999.
Before:
David Blunt Q.C.
Recorder and Deputy
BETWEEN:
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SCOTTISH MUTUAL ASSURANCE plc
Plaintiff
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JARDINE PUBLIC RELATIONS LIMITED
Defendant
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JUDGMENT

This is a claim for £30,173.77 for service charges under a lease (“the lease”), together with interest from 25th March 1996 at the rate provided in the lease in the event of non‑payment of monies due thereunder. The lease is dated 14th October 1992 and was made between the Plaintiff as landlord and the Defendant as tenant. It relates to premises forming part of the second floor offices at Waynflete House, 72/80 High Street, Esher. This is a three‑floor retail and office building with a flat roof. Under the lease the Defendant occupied part of the second floor. The lease was for 3 years from 29th September 1992, and therefore expired on 29th September 1995, whereupon the Defendant (who was not protected by Part II of the Landlord and Tenant Act 1954) vacated the premises.

The dispute relates to the Defendant's liability to pay through service charges towards the cost of works on the flat roof of the building. These works were carried out in 1995. The Plaintiff's claim is challenged by the Defendant on a number of grounds, which, stated shortly, are that:

(1)	A number of requirements need to be satisfied before a liability for service charges can arise, and that on the facts those requirements were not satisfied.

(2)	The procedures for payment had not been complied with.

In addition there are contentions, in the alternative, as to the quantum of the liability and as to the claim for contractual interest.

By the lease:

(a)	“the Demised Premises” extended only to internal finishings [3/4]. They did not extend to anything above the ceiling finishes.

(b)	“The Building” was defined as “the building and all other structures erected on the premises hereinbefore described known as Waynflete House...” [3/7].

(c)	“The Term” was defined on page 2 of the lease [3/7] as three years commencing 29th September 1992.

(d)	“The Rent” was stated to be £57,000 per annum.

(e)	The Plaintiff was given a six month rent free period, the obligation to pay rent only commencing on 25th March 1993. Rent was payable quarterly in advance on the usual quarter days [3/11].

(f)	“The Building Facilities” [3/8] were defined as including unlet parts of the building, including the structure.

(g)	“Default Interest” was defined as 3% above Royal Bank of Scotland base rate [3/9].

(h)	“The Landlord's Surveyor” was defined as the surveyor or managing agent for the time being of the landlord or an authorised employee of its property or investment department [3/9].

(i)	“Landlord Services” were defined as services set out or referred to in the Third Schedule [3/9].

It should be noted that the Definitions in the lease are prefaced by the words:

“In this Deed the following expressions shall have where the context so admits the 
	following meanings.....”

It is further provided [at lc] that:

“The paragraph headings and marginal notes shall not affect the interpretation hereof ... ”

The Landlord's covenants were set out in clause 5 of the lease. They were expressed to be “to the intent that the obligations may continue throughout the Term.” Three of the covenants were in respect of insurance? quiet enjoyment, and the avoidance of obstruction to the common parts. The fourth covenant (in sub‑clause (3)) was in respect of “Landlord 's Services” and was in the following terms:

“Subject to the payment by the Tenant of the rent the payments and the Service Charge reserved hereunder and provided that the Tenant has substantially complied with all the covenants and obligations on the part of the Tenant to be performed and observed to use its best endeavours to provide those of the Landlord 's Services as are set out in Part I of the Third Schedule” [Emphasis added]

Paragraph 1 of Part I of the Third Schedule included the following provisions:

''Particulars of Landlord's Services
Part I

1.	Maintaining repairing and (if necessary) renewing cleansing lighting heating carpeting repainting and redecorating and otherwise keeping in good and substantial condition (as appropriate)

(a)	the structure of the Building and in particular the roofs foundations balcony and structural beams and walls thereof

(b)	the boundary walls and fences of and in the curtilage of the Building
(c)	the forecourts roadways pathways and yard within the curtilage of the Building

(d)	the Parking Machines' main drive box and the supply of electricity to the Parking Machines.... ”

By clause 3 of the lease the Tenant covenanted with the Landlord “to the intent that the obligations may continue throughout the Term” inter alia

“(1)	Rents
To pay the rents hereinbefore reserved at the times and in manner herein provided....

(25)	To pay interest
Without prejudice to the Landlord 's rights of re‑entry and forfeiture to pa to the Landlord Default Interest on (a) any rent or other payments or any part hereof herein reserved and covenanted or provided to be paid in reimbursement by the Tenant and not paid within 14 days of the date on which the same shall become due and payable or (b) the tender of which shall properly be refused to be accepted on account of the reasonable belief of the Landlord that there is a breach of covenant or condition on the part of the Tenant such interest to be calculated from the day such payment became due and payable to the Landlord and to and including the date of actual payment,”

The provisions relating to Rent were to be found in Clause 2 of the lease and were to the following effect:

“(1)	Initial Rent and Revised Rent
FIRST commencing on the Rent Commencement Date and during the remainder of the Term the Rent to be paid by equal quarterly payments in advance on the usual quarter days in every year without any deduction.

(3)	Insurance Rent

SECONDLY by way of further rent payable within 14 days of written demand a sum or sums equal to the whole amount properly and reasonably attributable to the Demised Premises of the premium or premiums for:

(i) insuring and keeping insured the Building etc.”

Clause 4 of the lease set out the Tenant's obligations in respect of service charges, and because it is central to the principal issues in this case it would not be appropriate to attempt to abbreviate it. The full terms of that clause are as follows:

“4.	TENANT'S FURTHER OBLIGATIONS

Service Charge

The Tenant FURTHER COVENANTS with the Landlord from time to time and at all times during the term hereby granted to pay to the Landlord forthwith within 14 days of written demand as hereinafter provided a charge (hereinafter called the “Service Charge”) being a fair proportion fairly and reasonably determined by the Landlord's Surveyors of all amounts sums costs fees and expenses of each and every kind whatsoever which are from time to time or at any time hereafter during the Term reasonably! and properly expended incurred or expected to be so expended or incurred by the Landlord in relation to the Property computed upon the basis of providing an indemnity to the Landlord in respect of the services particulars of which are set out in the Third Schedule hereto PROVIDED THAT:

(1)	Certification

A Certificate in writing provided by the Landlord for this purpose showing the amount of the Service Charge shall for the purpose of this covenant be conclusive evidence of the amount so to be paid (save in the case of manifest error) but the Tenant shall be entitled at the joint expense of the Landlord and the Tenant to
receive details of how such amount has been calculated and to verify the same.

(2)	Payment

The Service Charge shall be certified and payable on an annual basis but a sum equivalent to one quarter of the estimated Service Charge for the year in question shall be paid in advance by the Tenant quarterly on the same dates as those upon which rent is due (or would before the initial “rent free” period be due) under this Lease and on the first rent payment date after the expiration of the year in question either (1) the Landlord shall repay or allow to the Tenant any overpayment or (ii) the Tenant shall pay to the Landlord the balance of any Service Charge owing in respect of that year as the case may be and the first payment shall be made on or before the grant and acceptance of this Lease.”

Before addressing the issues relating to the roof it is perhaps helpful to record how the parties in fact dealt with the service charges. As can be seen from the provisions of clause 4 of the lease, the mechanism for payment of service charges was that service charge accounts were to be prepared on an annual basis, but with quarterly contributions based on the estimated service charge for the year in question, payable in advance at the same time as rent (i.e. on the usual quarter days). There was then to be a balancing exercise on the first rent payment date after the end of the service charge year in question. The way the service charge provisions were operated under the lease was that the Defendant made payments on account based on an estimate, and that accounts were prepared to year ending 29th September, at some stage after that quarter day. The Defendant was then debited or credited with the appropriate balancing charge. The Defendant was also advised of the estimated service charge payable for the next year.

Thus on the 30th November 1993 [2/8] Weatherall Green and Smith, the Plaintiff s managing agent, provided the Defendant with a statement for the year ended the 29th September 1993 [2/29] (claiming a contribution of £16,762.64. giving credit for payments on account of £11,500, and seeking a balancing payment of £5,262.64) together with a service charge estimate for the year ending the 30th September 1999. For the purposes of apportioning the service charges between tenants Weatherall Green and Smith analysed the various items of expenditure into categories and entered each category of expenditure in a separate schedule to be apportioned between the tenants in proportions which were judged to be appropriate to the particular category of expenditure to which the schedule related. Thus for the year ending 29th September 1994 the Schedule 1 items, which were items of common overheads such as the cleaning of common areas, window cleaning, lift maintenance and management fees, were charged to the Defendant at 50%, this percentage being calculated on an area basis. [2/27 and 2/85]. The Schedule 2 items which related to car park expenditure were charged to the Defendant at 39.88%, because both shops and offices benefitted, and the calculation was made on the basis of rateable values [2/85]. See also the Schedule at 2/176.

The reconciliation for the year ended the 29th September 1994 [2/27] was not provided in 1994, apparently as a result of delays by accountants, but it was provided at some time between the 6th January and 21st March 1995 (see 2/55 and 2/80).

The service charge estimate for the year ending the 30th September 1995 [2/302] was sent to the Defendant on the 6th January 1995. The reconciliation statement for that year [2/335] is dated the 3rd January 1996. There is an issue as to the date when it was sent to the Defendant but there is no suggestion that it was sent earlier than that date.

So for an expenditure on the roof is concerned:
(1)	the estimate for year ending 30/9/94 [2/38] included a provision for external decorations in the sum of £4,250 and external repairs in the sum of £4,080, including £3,500 for roof repairs.

(2)	the reconciliation statement for the year ending 29/9/94 [2/27] included a charge to the Defendant of £8,571.63 for external decorations.

(3)	The estimate for year ending 30/4/95 [2/302] included an allowance of £3.500 for external repairs.

(4)	The reconciliation statement for the year ending 29/9/95 included claims based on Roof Renewal Costs of £69,009.28, of which £27,520.90 is charged to the Defendant. [This is the principal component of the balancing charge of £30,173.77 on which this claim is based].

The witnesses called on behalf of the Plaintiff were Lindsay Macdonald, Donald Clark and Kevin Stephenson. Lindsay Macdonald is an Associate member of the Royal Institution of Chartered Surveyors and she is and at all material times was employed by the Plaintiff as a Property Management Surveyor. She was responsible for the management of the building at the material time. Mr Clark has now retired, but at the material time he was employed as a management surveyor by the Chartered Surveyors Weatherall Green and Smith who were the managing agents of the building from about July 1992. Mr Stephenson is a Fellow of the Royal Institution of Chartered Surveyors and a partner in the Stephenson Partnership. He inspected the roof of the building and provided a report to the Plaintiff which is dated the 6th February 1995.

The Defendant's witnesses were Elaine Rodrigues, the Defendant's Financial Director. Glen Gibson who was the Office Manager at the material time, and Andrew Chisholm, an Associate of the Royal Institution of Chartered Surveyors and a partner of Chisholm Nurser Partners who are chartered building surveyors and project managers. He inspected the building and provided the Defendant with a report in March 1995 and provided a further report which is dated the 29th September 1998.

According to Lindsay Macdonald, the Plaintiff bought the property in 1989 shortly after a refurbishment had been carried out to the upper floors. The property was disposed of in 1997. In March 1990 the two upper floor offices were let on a short‑term lease, with an agreement for a long lease, to Tuskar Resources plc. The retail accommodation on the ground floor of the property was let on long‑term leases commencing on the 25th December 1977 and expiring on the 24th December 1002. There retail accommodation comprised of three shops and there were three such leases.

Shortly after the commencement of the short‑term lease Tuskar advised the Plaintiff that they were in financial difficulties. In the event Tuskar surrendered the lease of the two office floors. Tuskar had instructed a firm of agents to obtain a sub‑tenant of part and agree terms with them. That tenant was the Defendant. The terms negotiated between Tuskar and the Defendant were agreed in respect of a new head lease as opposed to an under lease.

Initially (on behalf of the Defendant) someone called Janet McKenzie dealt with Weatherall Green and Smith with regard to the service charges and other related matters. She left the company in July 1994. After her departure. Elaine Rodrigues took over the financial aspects of her job which included dealing with Weatherall Green and Smith on matters arising from the Lease.

Apparently, prior to the Defendant moving in Janet McKenzie had (in a letter dated 20th July 1992) queried the state of repair of the roof as there seemed to be some evidence of water damage, e.g. wall paper was peeling and some ceiling tiles had damp stains. Other ceiling tiles were missing or broken. She was informed there had been some leaks but that these had been dealt with.

It is plain that there was an ongoing problem with the roof, at least from 1993. In paragraphs 4 and 5 of his witness statement (3/72 @ 73) Mr Gibson recounts:

“4.	With regards to the roof, I can recall a number of problems. Periodically, throughout the time from 1993 to the middle of August 1994, when the repairs started, damp patches were appearing on the ceiling and water was dripping on to the floor. The areas worst affected were the boardroom, reception area and in the ladies toilets, to the extent where we needed buckets to catch the water. Smaller areas of damp appeared all around the office. Each time this happened, I would telephone Weatherall Green and occasionally throughout the year, they would arrange for Andrew Kingston to make temporary repairs to the problems areas. Following persistent problems, it became obvious that these temporary repairs were not holding and further action needed to be taken.

5.	Around August 1994, work started on external redecoration and roof repairs. I was surprised at the timing because we were going through a very wet period even though it was August. During these repairs we experienced a huge amount of water crashing down mainly in the reception and boardroom area. We were told by Andrew Kingston that this was caused by the temporary covering collapsing. Computers were damaged and the carpet in the reception area was drenched. We had to get the carpets professionally cleaned and the stains which appeared on the boardroom table had to be repaired by a French Polisher,”

Precisely what works to the roof were carried out prior to August 1994 or during August 1994 is not clear. In June 1993 Weatherall Green and Smith obtained a quotation [2/1] from a firm of builders called Hopgood and Kingston which set out the latter's proposals for the execution of phased repairs to the roof. These did not include proposals for the renewal of the entire roof covering. Weatherall Green and Smith prepared a specification [2/4] for a proposed “Phased Programme of Roof Repairs” based on the builders specification and sent it to another builder to obtain a second tender. However the reconciliation statement for the year ended the 29th September 1993 (2/29) contains no explicit reference to the roof and included an expenditure of only £824.85 on external repairs. This suggests that very little work if any was carried out in 1993, and this in turn suggests that the problems experienced by the Defendant at this time were probably not very severe.

In June 1994 Weatherall Green & Smith obtained a further quotation from Hopgood and Kingston for works to the exterior of the building. The quotation [2/12] is dated the 6th June 1994 and is in the sum of £7,995 + VAT. Roof repairs were only one element of the proposed works and were described in these terms:

“Roof repairs ‑ remove all skylights, board over and asphalt to match existing. Apply limestone chippings.”

There was some debate before me as to the reference to “skylights” because Mr Clark was only able to remember one skylight, and none of the witnesses were able to identify on the photographs where the other skylights might have been. However, both Hopgood and Kingston's quotation dated the 3rd June 1993 [2/1] and Weatherall Green & Smith's specification of July 1993 [2/4] refer to “skylights” and indeed identify some as having aluminium frames and others as being wooden. Accordingly I conclude and find as a fact that there were originally a number of skylights in the roof.

Hopgood and Kingston's quotation of the 6th June 1994 (2/12) was sent to Lindsay Mcdonald by Mr Clark under cover of a letter dated the 27th June 1994. In that letter he stated inter alia

“....The roofing works are aimed at preventing water penetration and are not a comprehensive programme of remedial works.

The proposed scheme is a first‑aid measure only and not a long term solution to the prevailing defects. However, in view of the circumstances it may be more palatable for the tenant and more appropriate for the Scottish Mutual.”

The quotation was accepted on the 18th July 1994 [2/16B] and it appears that the works commenced on the 8th August 1994 [2/19] and lasted several weeks (2/20 and 2/21c). though these works did not, of course, relate solely to the roof.

On the 20th September 1994 Mrs Rodrigues wrote to Mr Clark recording the ingress of water during the roofing works. In the letter she stated inter alia as follows:

“I write with reference to the works which are currently being carried out to the roof above our offices.

Last week, following part of the repairs being carried out on the roof, we had serious flooding in our offices which resulted in the carpets sustaining terrible stains and the ceiling tiles being badly damaged. At the weekend we had the carpets professionally cleaned, although a few marks still remain. Yesterday morning we arrived in our offices to discover that the roof was again leaking in 3 places and we contacted Hopgood Kingston who in turn contacted the asphalting company to let them know.

This morning, the asphalters have returned and found 3 cracks which they have now repaired. However, the inform us that there is a potential problem remaining with the area of roof concerned; the roof is evidently covered with small stones and this is gradually sinking into the asphalt which, they advise, could give rise to further leaks in the future. I am sure you appreciate that this gives me great concern. In the flooding last week, we were very fortunate that none of our equipment was damaged. As you are aware, we have a great deal of very expensive equipment which is vital to the running of our business and if any of this is damaged from leaking we will obviously suffer from the inconvenience and expense of repairs or replacement....

I believe the new ceiling tiles are currently on order. Some more of these however have now also been damaged from this weeks leak. We also have one area where the wallpaper has come away from the wall and I would be grateful if this could also be repaired, perhaps at the same time as the repairs to the washroom are carried out.

In closing I would like to say that we have been more than satisfied with the performance of Hopgood Kingston. Their workmen have been courteous and exceedingly helpful and have at all times been very conscious of not disrupting our business. The only problems we have had has stemmed from the asphalting of the roof (and the weather!) (and I would not want to sour your relationship in any way with Hopgood Kingston over these matters.”

This letter is of assistance since whilst the scope of the roof works remains uncertain it satisfies me and I find as a fact they were fairly substantial. I also find that the works involved the removal of a number of skylights, boarding over, asphalting and the application of chippings. I am also satisfied on the basis of paragraph 5 (see above) of Mr Gibson's witness statement that the works involved the removal of some elements of the roof covering and probably the use of temporary covering.

The reconciliation statement for the year ended the 30th September 1994 (2/27) contains no explicit reference to repairs to the roof, but it is to be inferred that those repairs represent a substantial proportion of the expenditure (under Schedule 1) of £8,571.63 for External Decorations. I note that in a letter dated the 31st March 1995 (2/117) Elaine Rodrigues asserted to Mr Clark that the Defendant “contributed nearly £4,000 last Year towards roof repairs....”. This was not disputed in Mr Clark's reply of the 10th April 1995 (2/193).

It is plain that the works carried out on the roof in August/September 1994 was not entirely successful in eliminating leaks and that there were three further incidents when leaks occurred and further repairs were executed.

A fax dated the 8th November 1994 [2/47A] from Hopgood and Kingston to Mr Clark referred inter alia to

“EMERGENCY REPAIRS TO ROOF, FOLLOWING WATER INGRESS IN 3 AREAS (THIS IS NEW WORK). PATCH AND MAKE GOOD WITH ASPHALT MASTIC. (THIS WORK HAS BEEN COMPLETED 07/11/984).
£740.00 + VAT.”

Further, a letter dated the 11th January 1995 (9/55A) referred to repairs carried out in three areas in the first week of December 1994 and to an emergency call on the 22nd December 1994 to attend to a leak through the roof to the common area outside the lift.

It seems that an access hatch to the roof was broken by lift contractors in January 1995. A Weatherall Green & Smith File Note dated the 27th January 1995 records:

“KLC received a phone call from Andrew Kingston on 19 January? 1995 to state that on completing repair works for the lifts, the lift contractors had broken the access . hatch in the roof. This had occurred through the restraining chains being removed which has resulted in the hatch requiring rebuilding and new glass.”

Another undated file note from someone called Kate and addressed to “Dave?” is as follows:

“Dave
‑ Had a phone call from Andrew K. Waynefleet house.
1.	Skylight totally broken ‑ has now been boarded up to prevent rain water entering.
2.	Approx 12 roof tiles ‑ blown of and lead flashing lifted up.
I instructed Andrew to proceed with repairs or it would lead to water ingress of further heavy rain.
Hope this is OK Kate.”

It is to be noted, however, that neither of these file notes record that there had in fact been any ingress of water as a result of the breaking of the hatch.

In the meantime, in circumstances which I will deal with in more detail below but which arose from concerns about the roof expressed by a prospective tenant of a vacant part of the building, the Plaintiff had, on or by the 20th January 1995, instructed Kevin Stephenson of The Stephenson Partnership to inspect the building and prepare a schedule of works together with a guide cost.

Mr Stephenson believes that he inspected the roof on the 31st January 1995 and I find as a fact that this is so. [There is an attendance note (2/53) of a Mr Wood which records a telephone conversation in which Mr Stephenson refers to having inspected the roof. That note is dated the 2nd January 1995. but I am satisfied that is in error and should have been the 1st February 1995]. Mr Stephenson prepared a Preliminary Report which is dated the 6th February 1995 together with a Brief Schedule of works. Pertinent extracts from this report include the following:

“During our inspection the following principal defects were noted.

3.1	The asphalt of roof covering is in a poor condition. There is evidence of ponding over a majority of the roof area, which indicates that the fall is inadequate. Patch repairs were visible in a number of areas.

3.2	The site is in a reasonably exposed area and many of the granular chippings have been displaced.

3.3	The lead flashings and lead cappings to the parapet wall are in a poor condition and patch repairs were evident throughout. No clips were observed to the flashings.

3.4	There are a number of missing and broken slates to the mansard roofs to the front elevation.

3.5	Wet rot was observed in the fascia boards, particularly the board to the far side of the south plant room....

3.6	The roof substructure was not examined during our inspection as this would have involved removing a section of asphalt, therefore we have made the assumption that the roof deck is formed from a solid concrete slab.....

3.8	The existing timber doors to the plant rooms are rotten.

3.9	Sections of the existing gutters are deformed and do not fall adequately....

3.11	Access to the roof is via an openable rooflight. The Georgian wired glass to the light is cracked. The weight system of supports which is designed to secure the rooflight is inadequate....

4.0	Recommendations
The flat asphalt roof is in a poor condition. Patch repairs have been carried out in the past, however this is not a long term solution as the falls to the roof are inadequate and there are a number of other defects as noted in Section 3. Therefore we recommend that the roof covering is completely replaced together with new lead cover flashings at parapet abutments and new guttering. A brief schedule of works has been included at Appendix A, and budget costs are detailed in Section 5.” 

In a letter dated the 1st March 1995 (2/78) Weatherall Green & Smith gave notice to all the tenants of the building of the intention to renew the roof covering and that major costs would be incurred.

Upon receipt of this letter the Defendant instructed Chisholm Nurser Partners, and as a result Mr Chisholm inspected the roof and prepared his own report. This was provided in March 1995. His principal conclusion was that whilst there were “isolated defects within the roof membrane and particular specific breakdown of the weathering details at perimeter junctions”.. it was “not necessary to remove and replace the entire roof membrane...” 

Correspondence ensued between the Defendant and Weatherall Green & Smith in which the former stated that there was no evidence of leaks since the patch repairs [see letter 31/3/95 @ 2/117] and the latter asserted that whilst the leaks might have temporarily abated this was something which was unlikely to last. [see letter 31/3/95 @ 2/84]. In the letter dated the 31st March 1995 Mrs Rodrigues stated:

“We contributed nearly £4,000 last year towards the roof repairs which, as mentioned, would appear to have been successful. It is hardly “good housekeeping” to spend money on repairs which would appear to have been successful and now to ask us to contribute substantially more in respect of the same item.

I cannot help thinking that the issue of replacing the roof is not entirely unconnected with the fact that my Company's lease expires shortly!”

In a reply dated the 10th April 1995 (2/123) Weatherall Green & Smith stated:

“2.	The fact there does not appear to be any current water leaks does not alter the condition of the roof: I agree there does seem to be a temporary remission of the problems but it is only a short time since Jardine's frequent telephone calls requesting action to remedy the persistent and serious water penetration problems.

3.	It is very easy to criticise in hindsight. The temporary works undertaken were done in good faith and in the sincere belief they would minimise expenditure for the tenants. Unfortunately deterioration of the structure has become more serious than envisaged and the severe weather conditions during the early part of this year have exacerbated the problem.

In regard to the timing of the works, this would make little difference concerning your leasehold interest. As is usual practice a Terminal Schedule of Dilapidations will be prepared and served on expiry of your lease. The schedule will identify among other things, a cost to remedy the dilapidated condition of the roof structure. At least in doing the work now you will be contributing to actual costs rather than an estimate.”

In the meantime the works had, on the 3rd March 1995, been put out to competitive tender, and the contract was awarded to a company called Bradford Watts Ltd. The contract utilised the JCT form of agreement for Minor Building Works which included the revisions up to and including March 1994. Works were commenced on or about the 9th May 1995. and were expected to last ten weeks, i.e. until the 17th July 1995. In the event, when the asphalt was removed it was found that there was not in fact any concrete roof slab, the asphalt being supported on timber beams and wood wool slabs. The falls were found to be inadequate and there were areas of back‑fall and of sagging. Work stopped whilst the problem was fully investigated, engineers were consulted and an appropriate solution devised. In the event the decision was made to correct the falls by introducing new timber firring pieces and then to reinstate the structures in accordance with the original decision, utilising the existing wood wool slabs. This was done. On the 8th October 1995 the works were certified (2/311) as having been practically complete on the 27th September 1995. The defects liability period expired on the 20th March 1996.

The date of the first certificate for payment to the contract is not clear, but the second certificate, which was issued on the 6th September 1995 (2/288) was in the sum of £40,000. A third certificate was issued on the 18th October 1995 (2/328). The valuation date was the 12th October 1995 and the sum certified was £52,983.00. This was the total of the contractor's final account. The total costs overall are reflected in a schedule which Mr Clark sent to Lindsay Mcdonald on the 15th November 1995, and were made up as follows:

Contractors final account	52,983.00	
		
Surveyors fees @ 10%	5,298.30	
		
Engineers fees	450.00	
	58,731.30	
		
VAT @ 17.5%	10,277.98	
	69,009.28	

As can be seen, the Defendant's liability under clause 4 of the lease was to contribute to expenditure incurred “in respect of the services particulars of which are set out in the Third Schedule...”, and the first contention advanced on behalf of the Defendant by Mr Hill-Smith was that the roofing works carried out in 1995 were not within the ambit of that Schedule. Mr Hill‑Smith's detailed arguments in relation to this point were summarised in his written closing submissions in the following terms:

“Were the Roofing Works within Schedule 3?

4.1	Scottish Mutual can only succeed in this claim if they show that the roofing works carried out by them were within the ambit of Schedule 3 of the lease. It is submitted that they were not within Schedule 3 for a number of distinct reasons.

4.2	In approaching Schedule 3, it is important to note that these constitute Landlord's Services. They represent services to be provided by the lessor to the lessee; see the use of the word “services” in clause 4 and the general description of the matters such as heating and lighting within para 1 of Schedule 3. They are matters to be provided by the lessor for the benefit of the lessee....

4.3	There was no disrepair of the roof to remedy. Hopkins Kingston had just carried out roofing works which had solved the problem for the time being.

4.4	The works involved were renewal of the roof. Para 1 of Schedule 3 provides that renewal is only justified if the renewal is “necessary”. In this context, “necessary” means “essential”. Some different wording could have been used e.g. “if the landlord so decides” (cf Norwich Union v British Rail 1987 2 EGLR 137 at p138K). In the context of this lease, the renewal of the roof was not necessary in order for the roof to perform adequately for the remainder of the term.

4.5	Moreover the landlord was only to carry out works “as appropriate”. The works here were not appropriate given the fact that the landlord had already started upon the phased programme (p117).

4.6	In any event, renewal of the roof cured inherent defects within the roof; the inadequate falls and the inadequate beams. This went beyond repair and it was never intended that the service charge account should pay for the curing of inherent defects.”

The second contention advanced on behalf of the Defendant by Mr Hill‑Smith was that the Defendant's liability under clause 4 of the lease to contribute to expenditure incurred in fulfilment of the Plaintiffs obligations in respect of the services referred to in Schedule J was limited to expenditure which was “reasonably and properly expended etc....”. and he submitted that the expenditure on the roof works in 1995 did not constitute reasonable and proper expenditure. I again quote from Mr Hill‑Smith's written final submissions:

“Was the Expenditure Reasonably and Properly Incurred?

5.1	The expenditure was not reasonably and properly incurred in any event for a number of reasons even if, which is denied, it otherwise falls within Schedule 3.

5.2	The expenditure was not reasonable given that:

(i)	The roof had only just been repaired.

(ii)	Jardines had the top floor and were the on/v party affected and did not wish the roof to be repaired.

(iii) Jardine's lease was coming to an end.

(iv)	Jardines had made clear that they did not wish to remain in the premises.

(v)	By the time the roof came to be repaired the worst of the weather was over; the remaining months of the lease were during the summer time.

(vi)	The carrying out of the works was bound to and did cause considerable inconvenience and disruption to Jardines.

5.3	Furthermore, it is denied that the work was done “properly” as required by clause 4.1. Scottish Mutual knew that they would not recover any part of the cost of repairing the roof from PDM and Scottish Mutual wish to load as much of the costs onto Jardines as possible. Scottish Mutual were in any event contractually obliged to carry out the work by 21 February before there was any discussion of the matter with Jardines. Scottish Mutual abandoned their previous staggered approach. In particular, Scottish Mutual expressed no interest in seeing whether the patch repairs were effective or the extent of any continuing problems with the roof “Properly” in this context must mean “bona fide in the interests of the tenant”. The work was done for the landlord's own private interests.”

Mr Hills' third contention in relation to this aspect of the case was expressed in his written final submissions in the following terms:

“Fair Proportion
6.1 Another way of arriving at the same answer is to say that the fair proportion which Jardines should have been asked to pay was nil since the work was done not for the benefit of Jardines but for the benefit of Scottish Mutual. Weatheralls carried out the apportionment but did so on a misconception in that it appears that Weatheralls thought that the disrepair to the roof could have formed part of a dilapidations claim.”

It is appropriate, when addressing the above contentions, to consider first the state of the roof in the first quarter of 1995. It is common ground that the roof was in a state of disrepair. This is evidenced by the report which Mr Chisholm produced on the 20th March 1995. That report recorded the following observations:

“2.0	ROOF SURVEY

Asphalt roof membrane

2.1	The membrane is for the most part obscured by solar reflective chippings but appears to be satisfactory. There is no widespread evidence internally of wholesale water penetration from defects to the roof covering.

2.2	There are a number of areas where the asphalt has been taken up and renewed. These areas are satisfactory and there is no surface breakdown of the renewed asphalt.

2.3	It is not possible without removing all the solar reflective chippings to confirm the precise condition of the membrane although we could conclude from the lack of wholesale water penetration internally that the asphalt is in fair condition.

2.4	There are a number of problems with regards to the roof falls. There is ponding water to the rear right hand corner of the property where the falls are inadequate and rainwater is not discharged from the flat roof. Moss and lichen growth is evident and there is staining from ponding water.

Perimeter Flashing

2.5	The front and side elevations have extended brickwork parapet copings with concrete single pitched coping stones. The copings are in good condition and no major defects were noted.

2.6	The asphalt is turned up at the junction with the front and side elevation parapet to form skirting upstands. These upstands are generally in poor condition and there is limited blistering and slumping of the asphalt to the front and right hand side parapets.

2.7	The asphalt skirtings are weathered with a lead cover flashing chased into the parapet brickwork with mortar pointing. The mortar is in fair condition generally and there is no widespread defect. There are isolated areas where the mortar is cracking and has become dislodged. These areas require repointing.

2.8	The lead flashings, however, generally are in poor condition. The surface of the lead is deteriorating and in a number of areas the lead is cracked.

2.9	At the rear of the property, asphalt is turned down over the eaves detail into the rear elevation half round UPVC gutter. The asphalt edge detail is in fair condition although there are isolated areas where small patch repairs have been undertaken. Additional repairs are required.

2.10	To the centre of the roof, the extended central core plant enclosure has asphalt upstand skirtings weathered with lead flashing. The lead flashing is in fair condition and the mortar pointing is satisfactory. There is limited slumping of the asphalt upstand.

2.11	There are a number of penetrations through the roof membrane for vents and these all appear to be weathered satisfactorily. There is no evidence internally to suggest widespread failure of these weathering details.

2.12	The solar reflective chippings throughout the roof are infested with moss growth. New chippings should be provided and evenly distributed throughout the roof.

Central Core Roof Plant Room

2.13	......The felt is in good condition and no defects were noted......

2.16	The roof access roof light is defective. The glass dome has cracked and should be replaced and the decorations to the frame should be renewed.”

These observations were in general consistent with those made by Mr Stephenson following his inspection at the end of January 1995. though additionally Mr Stephenson also noted in his report that there were a number of missing and broken slates to the mansard roofs and that there was some wet rot in fascia boards and in the doors go the plant room.

In paragraph 10 of her witness statement Mrs Rodrigues asserted:

“Immediately after the works had been completed in August/September 1994 until the works began for the roof replacement was a period when we had no problems with the roof. The weather was fairly wet but the repairs seemed to be holding.”

This was plainly incorrect and she did not support it in her oral evidence, but she maintained that the Defendant had no roof problems after Christmas 1994.

Glen Gibson's witness statement, at paragraph 5, contained a similar error, but he, too, corrected it in his oral evidence.

In cross‑examination Lindsay Mcdonald agreed that by the end of March 1995 she had had no reports of leaks in the roof since the turn of the year. Mr Clark did not provide any evidence that the roof was leaking after the end of 1994. Mr Stephenson referred to the internal water staining in the Defendant's offices and other evidence of the ingress of water which he observed. However, he agreed that he saw no evidence that water was still penetrating the building at the time of his visits to the property in 1995. In his oral evidence in relation to the roof he stated that he could not say there were no cracks in the asphalt where the ponding had occurred because to be able to say this it would have been necessary to remove the chippings. He stated that he could say that there were some cracks in the asphalt but that he would not say that there were many. Mr Chisholm stated in his oral evidence that when he inspected the property he did see evidence that water penetration had taken place (i.e. the staining of the ceiling grid and tiles beneath the soffit). He said that the majority of the stains, as recorded on the photographs which were produced, were adjacent to the perimeter walls and he inferred that these were the result of defects at the perimeter of the roof. However he stated that he saw no evidence of that the water penetration was still continuing.

On the basis of the above evidence I find as a fact that in the first quarter of 1995 the roof was in need of repair in that there were the defects identified by Mr Chisholm and Mr Stephenson which I have referred to above. Therefore I also find that there was a potential for further water penetration in the future. I also find as a fact that there had been no leaks through the roof since Christmas 1994. There is in fact no evidence that any leaks occurred prior to the commencement of the disputed works in May 1995.

The original specification for the works which were actually carried out are summarised in paragraph 4.1 of Mr Chisholm's report dated the 29th September 1998 as follows:

•	Erect temporary roof over all flat roof areas
•	Strip off existing asphalt roof covering to all flat roof areas
•	Remove existing lead flashings
•	Remove defective tank room and lift motor room doors and door frames Remove plastic gutters and downpipes
•	Remove plywood sheets, debris and roof and allow for replacement rooflight
•	Repair existing screeded roof deck and ensure new screed provides adequate falls
•	Lay new two coat mastic asphalt roof finish to all flat roof areas
•	Solar protection to be provided by granual chippings throughout
•	Provide new lead flashings to perimeters and internal junctions
•	Provide new handrail and guard‑rail along new walkway
•	Provide new rainwater goods
•	Provide new tank room and lift motor room doors
•	Miscellaneous repairs to mansard roofs and isolated decoration work”

This specification was supplemented by a requirement to introduce firring pieces along the top of the Tecton beams which were found to have deflected. Mr Stephenson's evidence was that the beams had been designed so that they themselves would provide a fall but that because of the deflections resulting from the under‑design of the beams the falls were no longer effectively provided. I accept that evidence. It follows that the inherent defect was the inadequacy of the load‑bearing capacity of the beams, and not the omission of any falls in the roof at the original design or construction stages.

In a letter to Mr Clark dated the 30th August 1995 [2/274] Chisholm Nurser Partners asserted that:

“The Stephenson Partnership have confirmed that following their investigations of the Local Authority Building Control Officer the roof does not appear to have been constructed as designed and we are now concerned that there may be inherent defects in existence which form the background to the problematic roof membrane which has resulted in the wholesale roof replacement current ongoing.”

The Stephenson Partnership responded in a letter dated the 5th September 1995 as follows:

“The roof construction “as built” does not significantly differ from the drawings of the roof held by the Local Authority. The roof is of a recognised lightweight construction, i.e. timber/Tecton beams and a woodwool slab deck, finished with a mastic asphalt waterproof membrane therefore your concern regarding the possibility of inherent defects being present in the roof construction is excessive and unfounded.”

This was not challenged before me and I find as a fact that the only “inherent defect” in the roof was the under‑design of the Tecton beams as set out above.

Whether, in the context of repairing covenants in a lease, works (including works to remedy an inherent defect) go beyond “repair” and amount to “renewal” is a question of fact and degree in every case ‑ see Ravenseft Properties v Davstone (Holdings) [1980] QB 12: McDougall and Another v Easington District Council [1984] 1 ‑ EGLR 93. However, as Hoffman J (as he then was) observed in Post Office v Aquarius Properties [19851 2 EGLR 105 at 106 “....the question of degree which has to be answered is not necessarily the same....” and in “...the end ....the question is whether the ordinary speaker of English would consider that the word “repair” as used in the covenant was appropriate to describe the work which has to be done.”

In the present case the Tecton beams and the wood wool slabs were re‑used. They were not replaced or renewed. Other elements of the roof (e.g. the asphalt, flashings etc.) were renewed. Nevertheless I am satisfied that whilst parts of the roof were renewed the roof taken as a whole was not, and I find that the effect of the works which were carried out was to repair the roof and not to renew it. In those circumstances Mr Hill‑Smith's subsidiary argument that because (so he contended) these were works of “renewal” they had to be “necessary” does not arise.

I turn now to Mr Hill‑Smith's further contention that the words “as appropriate” in clause 1 of Schedule 3 of the lease qualified the preceding words so that, for example, in the present case the obligation in respect of repairs was limited to carrying out “appropriate” repairs, thus, in effect importing into that provision a requirement of reasonableness.

It is to be noted that clause 4 of the lease includes requirements of reasonableness, and accordingly it does not seem to me that there would be any particular reason for including that requirement in Schedule 3 as well. It seems to me that the words “as appropriate” are included in Schedule 3 in recognition of the fact that certain provisions of the generality of clause 1 are not apt to be applied to all of the succeeding provisions. For example, it would be inappropriate to consider “lighting” the “sewers, drains etc.” mentioned in subparagraph (e). For these reasons, therefore, I reject the construction which Mr Hill‑Smith has sought to place on the words “as appropriate”.

By way of summary, therefore, I reject Mr Hill‑Smith's first contention and in particular my conclusions are that the roofing works carried out by the Plaintiff in 1995 were within the terms of Schedule 3: the roof was in a state of disrepair prior to the execution of the works: neither the works required to overcome the effect of the inherent defects in the roof nor the totality of the works carried out went beyond “repair”, and the works did not involve the renewal of the roof: the words “as appropriate” did not import the meaning contended for by Mr Hill‑Smith.

In relation to the Defendant's second contention it is appropriate at the outset to review both the options which were available to the Plaintiff in terms of repairs to the roof and the factors which lead the Plaintiff to decide in favour of the extensive works which, in the event, were carried out.

As has already been noted, the Plaintiff's plan in 1993 and, initially, in 1994. was based upon Hopgood Kingston's appraisal of and quotation for the roofs. [2/1]. This did not contemplate the renewal of the entire roof covering but involved piece‑meal but not insubstantial repairs phased (so Mr Clark agreed in evidence) over a period of years. Although at one stage in his evidence Mr Clark stated that this plan was never implemented because it was constantly subordinated to other emergency repair, he later conceded that the works carried out in August 1994 were a part of the planned phased works though their execution at that date was not in accordance with the order of the original phasing. In her oral evidence Lindsay Macdonald confirmed that in 1993 and 1994 the Plaintiff was pursuing a programme of phased repairs to try and spread the cost although she knew then that the replacement of the entire roof would be the most satisfactory solution.

In the Autumn of 1994 a new factor emerged, and that was the prospect of obtaining a tenant for the first floor of the building which floor was then vacant. It is clear that in Esher at that time it was difficult to let office space, and quite naturally the Plaintiff was anxious to let all the available space. The prospective tenant was a company called PDM Communications Ltd (“PDM”). PDM instructed a surveyor, JW Reading, who inspected the building and prepared a report [2/36] which is dated November 1994 and was shown to the Plaintiff. This report was critical of the roof, referred to “current problems being suffered by the top floor tenants” (i.e. the Defendant), and summarised the position in the following terms:

“Realistically, this roof requires a thorough overall to the extent, in my opinion of actual re‑covering although this could be done by leaving the existing asphalt in place and overlaying with additional insulation and high performance felt. ”

In negotiations with the Plaintiff PDM sought assurances in respect of the roof. The documentation shows that in due course the Plaintiff had to agree not only to exempt PDM from making any contribution to the cost of roof repairs but also (on the 16th February 1995: 2/72 and 2/74) to carry out “necessary remedial works to the roof including replacement of roof covering and essential ancillary works.”

The position at the end of 1994 had been reflected in a letter which Lindsay Mcdonald wrote to PDM on the 20th December 1994 [2/51] in which she stated:

“As indicated at the various meetings on site we are anticipating investigating the extent of any repairs required to the roof and undertaking those which we consider are necessary. As agreed, your company will not be responsible for any of the costs involved in this exercise.”

It was after this that Mr Stephenson was instructed by the Plaintiff. In his oral evidence he stated, and I accept, that he was asked to inspect the roof and report on the repairs which would be required to put it in a good state of repair. He said, and I accept, that he was not told that there was a prospective tenant who had been raising queries about the condition of the roof, and that he had no knowledge of the terms of any of the leases. His assessment was that to provide a proper roof membrane it was the right time to do a proper repair, and that it was not worth carrying out more patch repairs. This was his recommendation [2/64].

In his oral evidence Mr Stephenson did not suggest that the more limited repairs suggested by Mr Chisholm could not have been done or were impractical. His view was simply that they would not provide a long‑term solution. Mr Chisholm's position was not very different. He agreed that it was not unreasonable to replace the roof covering in the context of a need to obtain a long‑term solution. Nevertheless, when asked what his advice would have been to a prospective purchaser of the property he said that it would have been that the roof requires repairs and in the long term should be renewed.

At the relevant time, therefore, the options open to the Plaintiff was two‑fold, one providing a short‑term solution, the other a long‑term solution. It is common ground that the former would be less costly than the latter.

As already indicated once the Defendant had been informed of the Plaintiff's intentions Mr Chisholm was instructed. The substance of his advice was communicated to Mr Stephenson in a letter dated the 30th May 1995. The effect of it had already been communicated to Mr Clark by Mrs Rodrigues in a letter dated the 21st March 1995 [2/80]. In his report dated the 29th September 1998 Mr Chisholm stated:

“5.3	Given the lack of reported leaks since September 1994 and the limited areas of patching of the existing roof membrane we were of the opinion that with perimeter and general patch repairs and remedy of those specific weathering defects to perimeters in particular highlighted by our report on the flat roof it would be possible to prolong the life of the weatherproof membrane.

5.4	We published our concerns, as aforementioned, to the landlord 's representatives regarding the requirement to replace the roof membrane in its entirety and we also requested confirmation from Stephenson Partnership of what alternative remedial measures they had considered in light of the extent of the defects. The landlords failed to produce results of a thermographic or other survey of the roof to confirm the extent of water penetration and relied only on reports of widespread roof leaks and stained tiles internally which are largely due to historic leaks which previously had been patch repaired.....”

6.5	There was no reported water penetration via the roof following repairs in 1994 and the roof membrane was not therefore in continuing need of repair. We argue therefore that it was not necessary to renew the roof and localised repairs could hale been carried out at a lower cost which would hale provided adequate weatherproofing for a further period.”

It was suggested that the Plaintiff opted for the long‑term solution and timed the works to be completed before the expiry of the Defendant's term with the specific objective of being able to obtain from the Defendant a significant contribution towards the costs. Lindsay Mcdonald denied that, and Mr Stephenson denied that he was instructed to ensure that the works were completed by the 29th September 1995. There is no doubt that the Plaintiff was aware that the Defendant did not wish to hold over or enter into a new base at the end of the term ‑ see Mrs Rodrigues's witness statement para 12 and her letter dated 18.1.95 [2/56]. My findings in relation to these suggestions are that the Plaintiff opted to carry out the extensive works that they did because if they had not agreed so to do PDM would not have entered into the lease which was under negotiation. I further find that but for the need to satisfy PDM the Plaintiff would have continued to attend to the roof for at least the foreseeable future on some such basis as they had been prior to the interest of PDM. That this is so is to be inferred from the fact that at no time prior to the commencement of the works in May 1995 was there any reason to conclude that the repair work which had been done in 1994 was not effective, from the fact that the Plaintiff had spent not insubstantial sums on the roof work in 1994 all of which would become wasted expense if the entire root covering were to be replaced shortly after such works and from the fact that as a consequence there was absolutely no reason other than the interest of PDM for the Plaintiff to depart from its policy of carrying out short‑term repairs and embark on a policy of carrying out long‑term repairs. In short, the policy of short‑term repairs had not been shown to be ineffective. However, I further find as a fact that once the Plaintiff had set out to satisfy PDM's requirements in relation to the roof the Plaintiff was anxious to complete the necessary works before the Defendant's term expired, the objective being to recover from the Defendant as substantial a contribution as possible towards the costs. Though Mr Stephenson may not have been explicitly instructed to secure the completion of the works by the 29th September 1995 he accepted that he was aware of the date when the Defendant's tenancy was coming to an end and that the tenancy was not being renewed. He would not have needed to be told that the Plaintiff was likely to be interested in having the works completed by that date. Lindsay Mcdonald also accepted that she would have been aware of these matters.

Mr Bickford‑Smith, on behalf of the Plaintiff, referred to a number of authorities and in particular relied upon a dictum of Scott J (as he then was) in Plough Investments Ltd v Manchester City Council [1984] 1 EGLR 244. In that case the landlord had covenanted “During the ......term to repair and maintain and keep the exterior of the Building including the external walls, roofs etc....in good and substantial repair”. In relation to that covenant Scott J commented at p.247 M:

“The landlord's .........repairing obligation is, although nominally an obligation, in a sense also a right. If it were simply an obligation, then, presumably, the three tenants of the building could choose to release the landlord, in whole or in part, from that obligation. But the provision is not, in my view, simply, or even mainly, for the benefit of the tenants. It is also a provision for the benefit of the landlord. It enables the landlord to keep its building in repair at the tenants' expense. If the repairing obligation had been imposed on the tenant, the tenant would have been entitled to decide on the manner in which it would be discharged. Provided remedial works were sufficient to discharge the obligation, the landlord could not require a different type of repair to be effected. Under these leases, however, the relevant decisions regarding repairs to the exterior are to be taken by the landlord. If reasonable remedial works are proposed by the landlord in order to remedy a state of disrepair for the purposes of its fifth schedule obligation, the tenants are not, in my judgment, entitled to insist that cheaper remedial works be undertaken. Miss Williamson accepted that the landlord's decisions had to be reasonable ones. The tenants, after all, have to pay for the fifth schedule repairs. But I accept Miss Williamson's point that the tenants are not entitled to require the landlord to adopt simply a minimum standard of repair. Provided proposed works of repair are such as an owner who had to bear the cost himself might reasonably decide upon and provided the works constitute “repairs” within the meaning of that word in the fifth schedule covenant, the tenant is not, in my judgment, entitled to insist upon more limited works or cheaper works being preferred. I agree with Miss Williamson that the landlord cannot be limited to a minimum standard of repair only.”

This. Mr Bickford‑Smith contended, is an analogous case: the covenant is intended to enable the landlord to keep its building in repair at the tenant's expense, and that where there are several possible ways of remedying the defect all of which might be advised by a competent surveyor as a reasonable method of repair the choice between them is the for the party who is under the obligation to provide the service ‑ Post Office v Aquarius Properties [1986] 2 EGLR 105 (first instance) Plough Investments v Manchester City Council [1989] 2 EGLR 244 at 247M. McDougall v Easington District Council [1989] 1 EGLR 93 at 95K. Minja Properties v Cussins Property Group and Others [1998] 2 EGLR 53. Mr Bickford-Smith contended that the purpose of the relevant provisions in the present case was to enable the landlord to maintain his building as a capital asset, and that the landlord must choose between short‑term and long‑term repairs on the basis of what was reasonable having regard to the building. What needed to be considered, he submitted, was whether, having regard to that purpose, these repairs were “such as a reasonably minded building owner might undertake” (to quote the words of Kennedy J in Postel Properties Ltd v Boots the Chemist [1996] 2 EGLR 60 at 63E).

Mr Hill‑Smith pointed out, correctly, I think, that the dictum of Scott J relied upon by Mr Bickford‑Smith was strictly obiter. I merely remind myself that the effect of every lease will depend upon its own terms, and note that in Plough Investments the leases were long leases, that in each case the tenants had enjoyed the benefit of the landlord's covenant for in excess of 10 years, and that when the legal proceedings were begun there were apparently 7‑8 years still to run. By contrast in the present case the lease was for 3 years only and was admitted on the pleadings to be outwith the provisions of the Landlord and Tenant Act 1954 Part II ‑ something which must have been agreed between the parties from the outset. Vis a vis the Defendant the Plaintiff's obligation so far as the provision of services were concerned were limited in time to the period of the (short) term. In those circumstances I have no doubt and find as a fact that the Plaintiff would not have been in breach of the its obligation to the Defendant if it had opted for the more limited repairs suggested by Mr Chisholm. But it seems to me that one can go further than that. In my judgment, in the context of this short lease, the provisions relating to service charges were inter alia to enable the landlord to comply with his repairing obligations (partly) at the tenant's expense. Those obligations were to use his best endeavours to provide the services of inter alia “maintaining and repairing etc, the structure of the building including the roofs” during the short (i.e. three year) period of the term. In my judgment this lease does not entitle the landlord to charge to the tenant the cost of carrying out works suitable for the performance of his obligations over a period of twenty or more years when such works are not necessary for the fulfilment of those obligations over the actual period to which they relate.

In the present case, of course, the Defendant is only one of a number of tenants. The leases relating to these other tenancies were not before me, but there was evidence that they were for 25 year terms expiring on the 24 December 2002. In those circumstances it might well be that the three other tenants would be unable to resist contributing fully to repairs of a long‑term nature, but it does not follow from that that the Defendant is bound to be treated in the same way.

In my judgment, vis a vis the Defendant, the totality of the amounts expended by the Plaintiff on the works to the roof was not “reasonably and properly expended or incurred” because those works went significantly beyond what was required for the performance of the Plaintiff's obligations to the Defendant in respect of the condition of the premises, because considerable monies had been very recently expended upon short‑term repairs and there was no evidence that these had been ineffective, and because there was no evidence of any continuing leakage and there was therefore no pressing need to commence long‑term repairs prior to the end of the Defendant's term (which end was imminent).

I also consider that there is a further reason why the totality of the amount expended on the works to the roof was not “reasonably and properly expended or incurred” namely that the long‑term repairs were undertaken, and the Plaintiff's policy of a phased programme of more limited repairs was abandoned, nor for the purposes of fulfilling the Plaintiff's obligations to its tenants but for the purposes of satisfying the requirements of a prospective new tenant, namely PDM.

The evidence of Mr Chisholm was that the repairs effected by the Plaintiff included certain elements of the work which he considered would have been appropriate for repairs of a short‑term nature, and he quantified part at least of what such short‑term repairs would have cost e.g. the cost of replacing the flashings. The items or elements of the works which Mr Chisholm considered appropriate for short‑term repairs are identified in the Scott Schedule [3/53] and in his Report dated the 29th September 1999. In my judgment vis a vis the Defendant it would have been reasonable for the Plaintiff to expend money on short-term repairs because even though the roof was not leaking in the first half of 1995, it was in a state of disrepair and had a potential to leak. Therefore I find that in respect of these items or elements of the works the monies spent by the Plaintiff were amounts “reasonably and properly expended or incurred”, and the Defendant is liable to make a proportionate contribution thereto. The proportion suggested on behalf of the Defendant is one of 39.88%, and no other being contended for I find that to be the appropriate proportion.

If those findings are based upon a wrong construction of the words “reasonably and properly expended ......or incurred by the Landlord in relation to the Property...” so that the totality of the expenditure on the roof works does in fact fall within that provision I would hold that the determination of the “fair proportion” to be contributed by the Defendant should reflect the shortness of the term and all the other considerations which I have referred to above when concluding that the totality of the expenditure was not “reasonably and property expended or incurred”.

On this basis a “fair proportion” might, for example, be calculated by reference inter alia to the expected life of the roof (25‑30 years ‑ see 2/178) and to the unexpired period of the term. A calculation along these lines might result in a very small contribution on the part of the Defendant. However, this was not explored in evidence or argument, and therefore it would be inappropriate for me to assess a “fair proportion” on that basis. On the material before me in my judgment a “fair proportion” of the totality of the expenditure would be 39.88% of the costs arising from those elements or items of the works which Mr Chisholm identified as being appropriate in the context of short‑term repairs and which I have referred to above.

In relation to this alternative finding it is necessary to consider the Certification provision in Clause 4(1) of the lease, and to consider also the document which is purported to certify the service charges alleged to have become due from the Defendant for the year ended 29th September 1995

Mr Bickford‑Smith submitted that this provision was purely procedural, and that whilst the existence of such a certificate would be conclusive evidence of the amount to be paid (save in the case of “manifest error”), the absence of such a certificate would not prevent the Plaintiff from recovering service charges. I accept this submission.

The date of service of the document purporting to certify the service charges [2/335] is in issue. Leaving aside any questions relating to service, it seems to me that in any event it could not be effective for the purposes of Clause 4(1) of the lease since it does not in terms certify the amount of the Service Charge but only the amount of the total expenditure in respect of the supply of services to the entirety of the building. Even if this were incorrect it seems to me, and I find, that the calculations of the Defendant's contributions are manifestly in error because the apportionment does not take account of the shortness of the Defendant's term, of the shortness of the unexpired period of the term, of the fact that the substantial monies had only just been expended on short‑term repairs which were not known to be ineffective, or of the fact that the works which had been carried out in 1995 had been executed not for the purpose of fulfilling the Plaintiffs obligations to the Defendant but for the purpose of satisfying the requirements of the prospective tenant PDM. Vis a vis the defendant, these works were as Mr Hill‑Smith stated, not for the benefit of the Defendant but for the benefit of the Plaintiff. It follows that in my judgment the document under discussion could not be conclusive evidence of the amount of the Service Charge to be paid.

As noted above, Mr Hill‑Smith submitted that the apportionment reflected in the document discussed in the last paragraph was carried out “on a misconception in that it appears that Weatheralls thought that the disrepair to the roof could have formed part of a dilapidations claim.”

This relates to a paragraph in the letter written to Mrs Rodrigues by Mr Clark on the 10th April 1995 [2/123], which was in the following terms:

“In regard to the timing of the works, this would make little difference concerning your leasehold interest. As is usual practice a Terminal Schedule of Dilapidations will be prepared and served on expiry of your lease. The schedule will identify, among other things, a cost to remedy the dilapidated condition of the roof structure. At least in doing the work now you will be contributing to actual costs rather than an estimate.”

This plainly does reflect a misconception, since the Defendant had no repairing obligation in respect of the roof. However, there is no evidence that this misconception informed the apportionment reflected in the document which is at 2/335 which is, of course, dated the 6th January 1996.

I turn now to the issues relating to the payment procedures. Mr Hill‑Smith s submission is that the mechanism for collecting service charge payments were not followed so that no sums are due. His detailed written submissions were as follows:

“7.2	The opening words of clause 4(1) provide that the payment obligations shall continue “from time to time and at all times during the term hereby granted” indicates that the service charge obligation only runs for as long as the lease term continues. These words are clear and qualify the tenant's obligation to pay. These words mean that in the final year, the lessor is not able to collect the final balancing charge from the lessee and the lessor has to be contended with the estimated charges. This has no effect on a lessee's possible entitlement to a refund at the end of the final year under clause 4(2). The effect of this wording may indeed be to prevent the loading of expenditure in the final year.

7.3	Further the wording of clause 4(2) makes it plain that any balance due from the tenant after the end of the year must be claimed by the landlord prior to the next rental payment after the year end (i.e. on 25th December 1995) because it is on that date that the tenant is required to make the necessary payment.

7.4	Clause 4 also requires that the demand be certificated. This is not an option given to the lessor. If there is no proper certification, the claim must fail (Finchbourne v Rodrigues 1976 3 All ER 581).

7.5	A certificate was served here but after proceedings were commenced. This is not good enough; it is not possible to resurrect an action which is not properly constituted at the outset. There is no evidence to support the pleaded date of about 10 January 1996.”

7.6	There has been no waiver of the requirement as to timing or certification. In order to constitute waiver, reliance has to be shown. Moreover, the lessors did not serve a demand in the format of e.g. p28 until 1997.”

I do not consider that the words “and at all times during the term” qualify the obligation to pay “from time to time”. Mr Hill‑Smith's construction might be correct if the conjunction “and” bad been omitted so that the wording read “from time to time at all times during the term”. However, the inclusion of the conjunction “and” indicates to me that the subsequent words are not qualifying words but words of particularisation or emphasis. I therefore reject the contentions set out in paragraph 7.2 of Mr Hill‑Smith's written submissions.

Nor do I consider that there is no mechanism for the collection of any balance of the Service Charge after the end of the term. The words “rent payment date” are not defined in the lease. However the dates for the payment of rent are the usual quarter days. Accordingly a date can be “a rent payment date” even after the end of the term even though no rent is actually payable. In my judgment therefore, since the lease expired on the 29th September 1995 the parties' “balancing” obligations in respect of the Service Charge arose on the next date upon which during the lease the rent would have fallen due, namely the 25th December 1995. Even if this was wrong, I have no doubt that the parties would in law be required, on the basis of an implied term, to account to each other within a reasonable time.

In relation to the suggestion that the demand for a Service Charge should be certificated I have been referred by Mr Bickford‑Smith to the decision of the Court of Appeal in Universities Superannuation Scheme Ltd v Marks and Spencer PLC [1999] EG 158. That is a case which, of course, turned upon the particular terms of the lease under consideration but it does provide an example of where “certification provisions” were found to be “mere machinery” and of where the rights of the parties were capable of ascertainment independently of that machinery.

In my judgment the provisions of sub‑clauses (1) and (2) of clause 4 of the lease are “mere machinery”: the primary obligation to pay is set out in the general words preceding those sub‑clauses, and the sums made payable thereby are not specified as being required to be certified sums.

It follows that in my judgment it is immaterial whether or not the certificate pleaded by the Plaintiff (i.e. the document dated the 6th January 1996 at 2/335) was served before the commencement of this action because in my judgment neither the existence of such a certificate nor its service is a pre‑condition to the liability of the tenant under the lease. Further, I have, of course, already held that that document was not an effective certificate for the purposes of clause 4(X) of the lease.

Insofar as a written demand was a condition precedent to the Defendant's liability that requirement was pleaded in paragraph 2 of the Statement of Claim and its alleged fulfilment was implied by the breach of covenant pleaded in paragraph 5 of thereof. In evidence Mr Clark told me that invoices relating to the charges contained in the disputed “certificate” had been sent to the Defendant before issue of the “certificate” I infer and find as a fact that such invoicing preceded the dale when these proceedings were commenced.

The remaining issues between the parties relate to Quantum and Interest. Mr Hill‑Smith's argument on Quantum was set out in his written submissions in the following terms:

“8.1	Even if all the previous arguments fail, the amount of the relevant expenditure recoverable from Jardines through the service charge is limited to specific liabilities incurred by the landlords during the currency of the lease. The amount due from the landlords to Bradford Watts during the currency of the lease was the sum due on the first two interim certificates but did not include the sum due on the third interim certificate (which post‑dated the end of the lease) nor the retention. (Capital and Counties Freehold Equity Trust v BL plc 1987 2 EGLR 49). The reference to expenditure “expected to be incurred” in clause 4(1) is a reference to the fact that under the terms of the service charge provisions, expenditure is to be estimated for the forthcoming year.”

This contention arises from the fact that the tenant's liability under clause 4 of the lease is to pay a fair proportion “....of all amounts sums......which are from time to time or at any time hereafter during the Term reasonably and properly expended incurred or expected to be so expended or incurred.....”

Mr Bickford‑Smith's response is that the sum specified in the third certificate was in respect of an expense which had been “incurred” even though not certified or paid during the term, or alternatively it was a sum “expected to be so expended or incurred.”

I reject the alternative argument because the word “so” plainly imports the entirety of the preceding provision including the words “during the Term”. I agree with Mr Hill‑Smith's submission that the words “expected etc.” are included to lay the foundation for payments in advance during the term.

Mr Bickford‑Smith's principal contention raises a nice point in relation to the significance of the certification process under JCT‑style forms of contract. This point has been a matter of controversy for many years ‑ see Northern Regional Health Authority v Derek Crouch Construction Co. Ltd [1984] QB 644 and Beaufort Developments (NI) Ltd v Gilbert‑Ash NI Ltd. and Others [1998] 2 WLR 860.

I am aware of no authority on this point in so far as it relates to the relevant JCT Minor Works Form and no submissions were made to me on this point. [For this reason either party is at liberty to make further submissions to me if they so wish prior to the pronouncement of this judgment]. Having reviewed the Form in the light of the House of Lords decision in the Beaufort Case I am of the view that the payment certificates provided for in clause 4 thereof are not in any sense conditions precedent to liability: they are merely part of the machinery for the administration of the contract: in my judgment the employer s liability to pay for works done under the contract arises from the performance of the works and not from the certification process.

On the facts of the present case and on the evidence of Mr Stephenson I am satisfied that the works to the roof in question were practically complete and therefore had been substantially executed by the 27th September 1995. It follows that the Plaintiff's liability to pay for those works had accrued during the currency of the term of the lease. In my judgment it is immaterial that actual payments were still outstanding at the end of the lease. This would apply not only in relation to the monies still not certified but also in relation to retention monies. I therefore reject Mr Hill‑Smith's contention that the monies certified on the 18th October 1995 [2/321] should be left out of account.

The final issue arises from paragraph 8.2 of Mr Hill‑Smith's written submission, which is in the following terms:

“Furthermore, it is denied that Scottish Mutual are entitled to contractual interest should all the above arguments fail. Clause 3(25) of the lease only applies during the currency of the lease itself and not to obligations arising after termination. This is made plain by the opening words of Clause 3 which provides that the tenant covenants with the landlord “to the intent that the obligations may continue throughout the Term as follows” ”[Emphasis added]

Mr Bickford‑Smith contended that Clause 3(25) applied to all sums due under the lease whenever they became due: liability under the lease and liability to pay interest in the event of failure to pay in accordance with the lease were correlative.

It seems to me that Mr Bickford‑Smith's submission begs the question which has to be answered. Examination of the lease shows that (as I have found) the parties might be under a liability to make payments to each other after the termination of the lease and that such liability e.g. to pay the balance owed in respect of the Service Charges might arise after such termination. Nevertheless the words of Clause 3 upon which Mr Hill‑Smith relies are in my view clear, and they show that liability to pay interest and to make other payments under the lease are not correlative. If there was any doubt, as a result of ambiguity (though I do not think there is any ambiguity), it would have to be resolved in favour of the Defendant. In my judgment, therefore, the Plaintiff is not entitled to “Default Interest”.

I was invited by counsel to defer any final assessment as the issue of Quantum until after I had decided the points of principle, so that I might then be provided with further assistance, particularly in relation to the Preliminaries elements of the roof works. Accordingly I will hear further submissions on this point and also any further submissions that there may be in relation to the quantification of Interest, as to the appropriate Order to be made, and as to costs.

Before concluding this judgment it is appropriate to express my thanks to both Counsel for the considerable assistance which they provided to me throughout the hearing.

David Blunt Q.C.
Recorder and Deputy
Judge of the Technology and Construction Court