If a tree falls in a forest…

Regular readers of Hardwicke’s Property Newsletter are an erudite bunch. They will know that it was the English philosopher George Berkeley, in his 1710 work: "A Treatise Concerning the Principles of Human Knowledge" who posed the earliest version of the question: If a tree falls in a forest and there is no one to perceive it, does it make a sound? And like all close scholars of metaphysical philosophy, they will be thrilled to learn that a closely related question was posed to the Court of Appeal in the case of Moorjani v Durban Estates Ltd [2015] EWCA Civ 1252 shortly before Christmas.

The question was this: If a flat is in disrepair, but the lessee is not in occupation so as to suffer any discomfort, distress and inconvenience as a result of that disrepair, is he entitled to general damages for the loss attributable to that state of affairs? Or put the question as George Berkeley would have put it to his bewigged students: Does the inconvenience, distress and loss of amenity exist if there is no one present to experience it? 

The Facts

Mr Moorjani was the long leaseholder of a flat in a mansion block in Gloucester Place, London NW1. The lease, for 150 years, had been granted in 1977 at a premium of £19,000. It contained a completely unexceptional repairing and insuring covenant on the part of the landlord, the latter imparting the usual implied obligation to pursue any relevant claims arising from an insured event, and to apply any monies received from the insurers in effecting the necessary repair (Vural v Security Archives (1989) 60 P&CR 258). In 2005, Mr Moorjani’s flat suffered a flood from the flat upstairs, which caused considerable, but mostly decorative, damage to his flat. The managing agents assured him that they would deal with the repairs. They did so, but slowly, inadequately and incompetently, and Mr Moorjani was driven to engaging his own contractors to making good the deficiencies in the landlord’s repair works. At the same time the landlord was, as the trial judge found, in breach of his repairing covenant insofar as it related to the common parts of the block, which were dilapidated, shabby and dingy.

Mr Moorjani’s claim for reimbursement of his expenses incurred in remedying the disrepair in his own flat were settled. What remained was his claim for (a) loss of rental income of the flat, and (b) general damages in respect of the disrepair both of his own flat and of the common parts.

The difficulty was that Mr Moorjani was not in occupation of the flat during the relevant periods of disrepair, but was instead living rent-free with his sister. Nor was the flat let to anyone. This arrangement pre-dated the flood, and was completely unrelated to the disrepair, the trial judge having found in any event that the disrepair did not render the flat uninhabitable. It was simply for his own convenience that Mr Moorjani lived elsewhere. Consequently the trial judge found that he was not entitled to general damages arising from the disrepair, because his absence from the flat had not been caused by it, and since that absence meant that he was not present at the flat to experience the consequences of the disrepair, that head of loss had been avoided and did not need to be compensated for.

The question for the Court of Appeal was therefore nothing less than what the fundamental nature of the claimed loss was. If it was the impairment of a lessee’s property right, then it must occur whether the lessee is in occupation or not. If, on the other hand, it is personal inconvenience, discomfort and distress, then it can only occur if there is a person present to experience those things. If a tree falls in a forest.

The Analysis

The Court considered the leading cases on general damages for disrepair, from Hewitt v Rowlands (1924) 93 LJKB 1080, through Calabar Properties v Stitcher [1984] 1 WLR 287, to Wallace v Manchester City Council (1998) 30 HLR 1111 and Earle v Charalambous [2007] HLR 8. Certain dicta in those cases revealed underlying assumptions as to the nature of the loss for which general damages are intended to provide compensation, but the Court was at pains to stress that because they were assumptions rather than findings, each should be treated with caution. It was nevertheless a common thread running through each of those cases that general damages arose from a lessee’s failure to obtain what he bargained for, not from the wrongfulness of a lessor’s actions (or inactions) in imposing on the lessee a state of affairs which caused him inconvenience, discomfort and distress. In other words they were fundamentally contractual in nature. The inconvenience, discomfort and distress were not freestanding heads of loss giving rise to the right to damages. They were symptoms of interference with the lessee’s enjoyment of the asset, as a result of which the lessee does not receive proper value for the rent (interpreted broadly so as to include the premium in the case of long leases) he has paid for the defective premises.

It followed that it is not fatal to a claim for general damages that the tenant is not in occupation of the premises so as personally to suffer the inconvenience, discomfort or distress caused by the disrepair. But that is not to say that absence from the premises during the relevant period of disrepair is to be disregarded entirely. The Court found that it was a matter to be taken into account when considering whether the loss had been mitigated, and that this was so even where (as in Mr Moorjani’s case) absenting himself was not a decision taken deliberately so as to mitigate the loss caused by the disrepair, but one which was entirely unrelated, or indeed had occurred even before the cause of action arose.

Applying those principles to the case before them, the Court of Appeal allowed Mr Moorjani’s appeal against the trial judge’s decision to award nil damages in respect of the disrepair to his flat during the period during which it was vacant. Instead, they endorsed the (now well established) approach of taking the weekly rental value of the premises as the base line value of the asset in repair, being £550pw in this case. The trial judge had found that the nature of the disrepair in Mr Moorjani’s flat had diminished its amenity by 20% (a further small percentage had been found in respect of the disrepair to the common parts) a factual finding by which the Court of Appeal considered themselves to be bound. They nevertheless further discounted that figure by 50% to reflect the mitigation of loss effected by Mr Moorjani’s absence from the property, resulting in an award calculated as 10% of the weekly rental value of the flat, or £55pw.

Discussion

The value of Mr Moorjani’s claim was modest, belying the significance of the principle now established. Many residential properties, especially in London, have a much greater rental value. Those with the very highest values are often the ones whose owners live elsewhere, either periodically or more or less permanently, and are the sort of lessees who will flee to their Manhattan penthouse, Bahamian beachhouse or Klosters chalet at the drop of a defective ballcock. Their landlords should beware. When the ceiling collapses in their vacant Park Lane apartment it does make a sound. It echoes all the way to the Court of Appeal.