Consortium Commercial Developments Limited v ABB Limited (30 July 2015)

first_imgEven though the lease expired over 4 years ago, the disrepair and failure to re-instate that existed at lease expiry has not been remedied and the case concerned the amount that should be awarded to the landlord in relation to such breaches of covenant. Such damages being limited by S.18 (1) of the landlord and Tenant Act 1927 to the diminution in value caused by the disrepair.By the time of the trial, the parties’ surveyors had agreed that the total costs of remedying the breaches of covenant came to £315,258.77 and that these works would take 12 weeks to undertake. The landlord claimed a further sum of £45,666.24 in relation to loss of rent and rates during this 12 weeks period based upon the previously passing rent of £160,000 per annum and rates at £728.60 per week.The expert valuers for the landlord and the tenant valued the premises in repair at £1.15millon and £775,000 respectively and, in disrepair, at £600,000 and £700,000 respectively.  Accordingly, it was the landlord’s case that the diminution in value was £550,000 whereas the tenant claimed that the diminution in value was only £75,000.Capella House was built in the early 1990s.  It is a detached single-storey glass-fronted building of just under 15,000 sq.ft.  It is a typical B1 hybrid business unit of its era and it is located on a business park on the fringe of the central business district of Milton Keynes. Buildings in the immediate vicinity are primarily used for warehousing or office purposes, whereas buildings somewhat closer to the Town Centre have been redeveloped for out-of-town retail purposes.The property was sublet in 2003 and, when the sub-tenant vacated about 4 years later, it paid the tenant a sum of £160,000 in relation to its dilapidations liabilities. The tenant then sought to relet the property in its unrepaired condition but it remained vacant for the remainder of the term and ever since.  When the lease expired in 2011, the market was weak and the property had very little prospect of being re-let whilst out of repair. However, the landlord did not want to fund the costs of the works without having first recovered the same from the tenant.  Furthermore, it took the view that it would make better sense to wait until the market improved and a better rent was achievable, rather than to incur the costs at this stage and then having to offer the premises at a low rent.In valuing the property, both valuers considered that the best price that would be obtainable would be by way of a sale to an intending owner/occupier rather than to an investor. Based upon what they considered to be relevant comparables, the valuers considered that the property had a rental value of £77.12 psf. (so far as the landlord’s valuer was concerned), and just over £52.00 psf. so far as the tenant’s valuer was concerned.  However, the Judge was critical of the approach of the landlord’s valuer and his lack of proper analysis. He also considered that the tenant’s valuer had not made appropriate adjustments to comparables to reflect the true rental value. The judge based his view of the correct value of the property in repair upon what he considered to be the best comparable. This had a rental value of £54.44 psf.  The judge adjusted this upwards to take account of the advantages that Capella House had over this comparable and he reached a value of just over £60.00 psf. which resulted in Capella House being valued in repair at £900,000.The judge then went on to consider the out of repair value and he accepted that it was not appropriate to approach this on a pound for pound basis i.e. he held a purchaser would not deduct from the sum of £900,000 the full cost of the repairs.The judge approached the calculation of the deduction for disrepair based on the amount a likely purchaser would factor in for works that it would want to undertake and, having considered comparable evidence, the judge considered that a purchaser would seek a reduction based upon £15.00 psf. which would equate to £225,000.  Accordingly, the judge concluded that the value of the property in disrepair was £675,000 and the diminution in value was £225,000.The judge then considered the claim for costs of some £15,000 for re-instatement works that had not yet been undertaken.  The judge concluded that these items did need to be carried out and would be undertaken eventually to help re-let the premises in good condition. Accordingly, the Judge allowed this claim in full. However, the judge was not sympathetic to the claim for loss of  rent and rates.  The Judge did not think it was correct to simply award rent and rates for 12 weeks just because the works would take that long.  The simple fact of the matter is that the property would have been extremely difficult to relet in 2011 in repair and the claimant could not prove that the disrepair had caused it any loss of rent and rates.Finally, the judge went on to consider the rate of interest the tenant should pay on the damages awarded.  The landlord claimed interest at 6% on the basis that the tenant should be penalised for having retained the sum of £160,000 from its sub-tenant and not having paid any sum at all to the landlord.  The Jjdge, though, considered it inappropriate to penalise the tenant and he awarded interest at what he regarded as a commercial rate of 2.5% above base rate i.e. 3% per annum.In conclusion, the landlord recovered approximately 40% of the amount it was claiming and the tenant paid just over three times the amount that it considered it was liable for.  It would seem likely that the parties’ total legal costs exceeded the amount of the damages awarded and it would be interesting to know who has to pay such costs i.e. whether either party successfully protected their position by way of a Part 36 Offer?Jonathan Ross is head of commercial property litigation at Forsters LLPlast_img read more

Read More →

OFT’s credibility is in tatters following the failed BA price-fixing trial

first_img Julian Joshua is a cartel specialist partner at Howrey The ignominious collapse last week of the first contested prosecution by the OFT for the cartel offence (section 188 of the Enterprise Act 2002) in the BA ‘Fuel Surcharge’ trial may seem like a farce, until you recall that four entirely innocent defendants had their lives blighted for four years. The OFT wanted the cartel offence, designed to punish individuals who ‘dishonestly’ fixed prices to ‘send a message’. Last week’s debacle certainly sent a message but it wasn’t the one the OFT intended. After the directed verdict of ‘not guilty’, the defendants walked from court with their ‘reputations unsullied’, while the OFT’s credibility is deservedly in tatters. Now locked in an unseemly tiff with Virgin Airlines and threatening to withdraw its whistleblower immunity, the OFT also faces demands from BA to cancel the civil fine it agreed to pay in July 2007. Once the dust has settled, what lessons can be learned? First, justice was a big winner. Defendants charged with the offence in future – if that ever happens – should have no doubt as to the fairness of the judicial process if they go for trial. The ‘undisclosed’ evidence that sunk the prosecution case would probably never have come to light if the defence had not fought tooth and nail at every turn. The OFT must conduct a rigorous self-assessment of its capacity to handle complex trials. How could it have effectively farmed out the crucial task of document disclosure to lawyers representing Virgin, the only other party in the cartel? The OFT’s contacts with its own witnesses were also filtered through batteries of Virgin lawyers. Case selection must be more consistent. Last year the OFT ducked the challenge after widespread bid-rigging was uncovered in the construction industry. A more unsuitable case for the first test run of the cartel offence than BA is hard to imagine. Had they ever been called upon to judge the ‘honesty’ of the accused according to normal moral standards, how would the jurors have viewed the ‘get out of jail free’ card handed to Virgin executives? One can only charitably assume the OFT’s judgment was clouded by the prospect of BA scalps and what it likes to call a ‘high impact outcome’. The OFT’s leniency programme, which grants blanket immunity to self-confessed criminals, needs urgent review. How can the prosecution rely as witnesses of the truth on those who have had to admit they were dishonest themselves? Leniency makes investigators lazy. More effort should be made to detect cartels by old-fashioned police methods. Cartels always leave a paper trail. Indeed, to get whistleblowers though the door at all, there must be a credible risk of being uncovered by other means, or else everyone will soon work out that if nobody talks, everybody walks. It is also clear that, for the cartel participants themselves, leniency is no panacea. From Virgin’s perspective, what may once have seemed a smart competitive move to ‘rat out’ a rival at no risk to itself – apart from lawyers’ fees – could well turn out to be a spectacular own goal. Not only could it now risk being fined itself for the alleged BA cartel; ironically it now has the finger pointed at it by Cathay Pacific alleging a totally different cartel, albeit one strenuously denied by Virgin. Immunity applications tend to set off a chain reaction, and applicants should be sure they have uncovered all their own exposure before rushing in to denounce a competitor. For its part, BA might regret its hurry to settle with the OFT and admit a civil infringement in 2007. Lawyers in ‘leniency’ cases should not be overawed into thinking that rolling over is the only viable defence strategy. Lastly, the cartel offence itself is in the frame. There is a good case for criminalising cartels, but this was not the way to do it. ‘Dishonesty’, inserted in the act by the OFT to send a ‘seriousness’ message, remains untested before a jury. It may never be. After this fiasco, the offence must be a prime candidate for David Cameron’s ‘bonfire’ of useless legislation. last_img read more

Read More →