Morcom and Ors v Campbell-Johnson and Ors
[1955] 3 All ER 264[1956] 1 QB 106
(Judgment by: Hodson LJ)
Between: Morcom and Ors
And: Campbell-Johnson and Ors
Judges:
Denning LJ
Hodson LJ
Morris LJ
Subject References:
LANDLORD AND TENANT
RENT
Rent Restriction
Permitted increase
'Improvement' of house
Repairs
Flats
Substitution of modern one-pipe for worn out two-pipe drainage system
Substitution of single large water tank for separate tanks in each flat
Raising of area
Legislative References:
Increase of Rent and Mortgage Interest (Restrictions) Act, 1920 - (10 & 11 Geo 5 c 17), s 2(1)(a)
Case References:
Strood Estates Co Ltd v Gregory - [1937] 3 All ER 656; [1938] AC 118; 106 LJKB 752; 157 LT 338; 31 Digest (Repl) 667, 7660
Wates v Rowland - [1952] 1 All ER 470; [1952] 2 QB 12; 3rd Digest Supp
Rabbitt v Grant - [1940] IR 323; 31 Digest (Repl) 679, 2555
Lurcott v Wakely & Wheeler - [1911] 1 KB 905; 80 LJKB 713; 104 LT 290; 31 Digest (Repl) 363, 4953
Judgment date: 6 October 1955
Judgment by:
Hodson LJ
I agree. The landlords have spent some £25,000 on works in connection with Grey Coat Mansions, a block of flats in the city of Westminster, and they seek to claim an eight per cent increase of rent on £10,000 of it, on the basis that that £10,000 has been spent on improvements. They claim under the Increase of Rent and Mortgage Interest (Restrictions) Act, 1920, s 2(1), which reads:
"The amount by which the increased rent of a dwelling-house to which this Act applies may exceed the standard rent shall, subject to the provisions of this Act, be as follows, that is to say:
- (a)
- Where the landlord has since Sept. 2, 1939, incurred, or hereafter incurs, expenditure on the improvement or structural alteration of the dwelling-house (not including expenditure on decoration or repairs) an amount calculated at a rate per annum not exceeding eight per cent. of the amount so expended."
2 September 1939, was substituted for an earlier date by a later Act. [F1] The question for consideration on this appeal is whether the £10,000 is money spent on improvement or whether it is excluded by the words in brackets, which lay down that that is not to include expenditure on decorations or repairs.
The three heads of charge are the renewing of a drainage system, the renewing of a cold-water supply, and work in lowering the surrounding area. The first two items are the biggest. The first amounts to £5,200 in round figures, the second amounts to £4,600 in round figures, and the third amounts to £690.
In considering first of all the question of the drainage, the learned county court judge sought to be guided by what was said by this court in Wates v Rowland, in which it had to consider a section with which we are not confronted. In reading that case, as his judgment shows, he cited the argument of counsel as stated by Jenkins LJ rather than the expressions of Jenkins LJ which he made his own in the concluding part of his judgment. So that the learned county court judge, I think, was more concerned to consider whether or not what had been done with regard to this drainage was something better than what had been there before than whether it was something which satisfied the conception of improvement-an improvement going beyond repair. When one considers this somewhat troublesome question, it is obvious that all repairs, if well done, will in the majority of cases involve some improvement, particularly in the case of old property where modern methods have been introduced-modern systems of plumbing, improved systems of drainage, and so forth-where it would be foolish to replace them in their ancient condition in order to carry out the repair. In dealing with the facts of that case (to which my Lord has referred) in his judgment, Jenkins LJ said ([1952] 1 All ER at p 475):
"... the landlord has incurred expenditure, and I think he has certainly incurred expenditure on a structural alteration, that is to say, the addition of the further nine inches of concrete. He has also incurred expenditure on what is prima facie, according to the ordinary meaning of the word, an 'improvement', for on the evidence he has made the house, as regards its substratum and the system of construction of the floor and its foundations, very much better than they ever were before. Is there, then, any sufficient reason for holding that this expenditure is to be excluded from consideration on the ground that it was expenditure on repairs? In my judgment, the answer to that question is that up to a point the totality of the work done was work of repair. The tenant had a floor in the house when he went in, and clearly the house could not be said to be in good tenantable repair after the floor had become rotten. The replacement of a floor of some kind would, I think, therefore, fairly come within the description of 'repairs'. It would be making good a defect arising from the action of the water underneath the floor which had caused the floor to rot, and to that extent the expenditure, in my view, could not properly rank for the eight per cent. increase, and it is not contended that it should so rank. The landlord, however, did substantially more than merely provide a new floor. He made a structural alteration and an improvement, consisting of the laying of the additional concrete bed over the existing concrete, and that provided the house with a better substratum than it had ever had before in the shape of a solid concrete bed on which the new floor could be laid direct, thus getting rid of the disadvantage under which the house had laboured from the time it was built, consisting of the cavity beneath the floor into which, under the changed conditions brought about by the rise in water level, water could find its way."
Accordingly, Jenkins LJ in a judgment with which the other members of the court concurred, held that the expenditure, consisting of a structural alteration in the shape of the concrete work, should be considered as expenditure on improvement, and not be excluded from consideration as being an expenditure on repairs.
That is a clear illustration of the way the court has dealt with this question. I think it is clear that what one has to look at is whether there has been the provision of something new rather than the replacement of what was there before. In Wates v Rowland, the Irish case of Rabbitt v Grant ([1940] IR 323) was considered and also the earlier case in this court of Strood Estates Co Ltd v Gregory to which reference has already been made. Those cases concerned premises where earth closets had been taken away and the pits used with them had been filled in, and water-borne drainage had been put in their place. It was thought in Wates v Rowland, and the earlier case of Strood Estates Co Ltd v Gregory, that that class of case was rightly regarded as one of an improvement and not of a mere repair. But the substitution of one water-borne form of drainage for another seems to me to be an entirely different thing, which comes under the heading of repair. In my judgment, guidance is to be obtained from the case concerning covenants to repair of Lurcott v Wakely & Wheeler ([1911] 1 KB 905) in which there were three covenants: a covenant to keep in good condition, a covenant to keep in thorough repair, and a third covenant to repair. The observations of Fletcher Moulton LJ on that are relevant. When he came to the third covenant to repair, he said ([1911] 1 KB at p 918):
"Here there is a duty to perform an operation. No doubt, if you thoroughly repair, it will put the house in a good condition and in a state of thorough repair. But it is plain that the word 'repair' refers to the operation to which the defendants bind themselves to have recourse. For my own part, when the word 'repair' is applied to a complex matter like a house, I have no doubt that the repair includes the replacement of parts. Of course, if a house had tumbled down, or was down, the word 'repair' could not be used to cover rebuilding. It would not be apt to describe such an operation. But, so long as the house exists as a structure, the question whether repair means replacement, or, to use the phrase so common in marine cases, substituting new for old, does not seem to me to be at all material. Many, and in fact most, repairs imply that some portion of the total fabric is renewed, that new is put in place of old. Therefore you have from time to time as things need repair to put new for old."
In the beginning of Buckley LJ's judgment there is the following passage (ibid, at p 923):
"'Repair' and 'renew' are not words expressive of a clear contrast. Repair always involves renewal; renewal of a part; of a subordinate part ... Repair is restoration by renewal or replacement of subsidiary parts of a whole. Renewal, as distinguished from repair, is reconstruction of the entirety, meaning by the entirety not necessarily the whole but substantially the whole subject-matter under discussion."
Even taking into account the comment made by counsel for the landlords that that was a case dealing with a covenant to repair and must not be taken as necessarily being the last word on what can be said about repairs under the Rent Restrictions Acts, nevertheless I think that it is a guide as to what has to be taken to be a repair.
Taking the premises as a whole, in my judgment this change-over from the old system of water-borne drainage to the new was quite clearly a repair, and there is no room for any other conclusion on the construction of this Act. The primary facts are not in dispute. The facts, as summarised by my Lord, are substantially agreed between the parties. There is no dispute as to what was done. Distinguished surveyors were acting on behalf of the landlords, and what they have done, no doubt, was well done and done on the best possible advice. Nor, indeed, is there any question on any inference of fact, since the learned judge drew no inference of fact. The only question is whether the facts which have been agreed in this case amount to the making of an improvement or whether they are covered by the more limited word "repair". I think that the drains (which have occupied the greater time in argument in this court), come within the heading of repair. The change-over of the water system again was a necessary repair, and I think nothing was done which can take the case out of the class of repair into that of improvement.
In considering whether or not anything is an improvement, it seems to me plain that it must be looked at objectively from the point of view of the reasonable tenant because it provides for the landlord obtaining an increase of rent from a tenant-eight per cent on the amount expended. It seems to me to follow that whether or not there is an improvement for which an increase can properly be made ought to be looked at from the point of view of the proposed or existing tenant of the dwelling-house in question.
The third head of charge, work in lowering the surrounding area, has also given me considerable difficulty, because that was clearly an improvement, and indeed it has not been otherwise contended. The only question is whether it is an improvement of the dwelling-house. To revert to the language of the section, the expenditure has to be on the improvement or structural alteration of the dwelling-house. If structural alteration is considered, and one asks: "What has to be structurally altered?", the answer must be "the dwelling-house itself". The question is whether the word "improvement" is also limited to the dwelling-house itself. I think that it must be conceded that there may be works carried on away from premises which could be regarded as improvements of the dwelling-house. But the question in this case is whether there is any evidence which can justify the conclusion that the lowering of this area, which was outside the body of the flats, was an improvement of any of these dwelling-houses which constitute the parts of this block of flats. I am not satisfied on the evidence that there is any material on which the court can so hold. Therefore, I think that the appeal must be allowed in toto, and that the landlords have failed to qualify under s 2 of the Act of 1920.