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IN THE SUPREME COURT OF JUDICATURE No CCRTI 96/1069/G

Royal Courts of Justice

Strand

London WC2

Thursday, 22nd May 1997

B e f o r e:

LORD JUSTICE BROOKE

LORD JUSTICE WALLER

CARL PAYNE

First Plaintiff/Appellant

and

DEBRA WOODLAND

Second Plaintiff/Appellant

-v-

THE MAYOR AND BURGESSES OF THE LONDON BOROUGH OF BARNET

Defendants/Respondents

(Handed down judgment prepared by

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

MR ROGER HENDERSON QC and MR MARTIN SEAWARD (Instructed by Hodge Jones & Allen of London) appeared on behalf of the Appellants

MR ANDREW ARDEN QC and MR JONATHAN MANNING (Instructed by Controller of Legal Services, London Borough of Barnet, London) appeared on behalf of the Respondent

J U D G M E N T

(As Approved by the Court)

(Crown Copyright)

Lord Justice Brooke

This is the judgment of the court.

This was originally constituted as an appeal by the Plaintiff, Mr Cary Payne, against an order of Miss Marion Simmons QC, sitting as an Assistant Recorder, in the Willesden County Court on 3rd May 1996, when she struck out his action for damages against the Barnet Borough Council (“Barnet”) because the Particulars of Claim disclosed no reasonable cause of action and/or because the claim was frivolous or vexatious or otherwise an abuse of the process of the court. We have granted Mr Payne’s former wife, Ms Woodland, leave to be joined in these proceedings as a second Plaintiff in order to avoid any question of the proceedings failing because they are improperly constituted.

This action is all about 11 Wakeman House, which is a 2 storey maisonette owned by Mr Payne and Ms Woodland on the 2nd and 3rd floors of Wakeman House, on the Stonegrove Estate, in Edgware, Middlesex. The Stonegrove Estate, which consists of seven three-storey, four-storey or eight-storey blocks of flats, was built by the Defendants, the Barnet Borough Council (“the council”), in 1967. A prefabricated method of construction, involving the use of pre-cast concrete, was used when the flats were built. Although it had various names, such as the “Large Panel System”, or “Industrialised Building Construction”, we will refer to it as “LPS”. This type of construction gained notoriety in 1968 following the partial collapse of the Ronan Point tower block in East London after a gas explosion, and sixteen years later Parliament enacted the Housing Defects Act 1984 to give relief to those who had purchased homes built of particular types of industrialised building construction which do not feature in the present history.

Wakeman House itself is a low rise, three-storey block containing 16 flats. Mr Payne attaches importance to the history of the council’s dealings with Wakeman House since it was constructed, and We will therefore set out this history in chronological order before coming to the issues which are at the heart of this dispute.

On 11th February 1974 the council resolved not to offer most of their LPS properties for sale as part of the voluntary sales scheme they were running at that time. This was because they had received indications from estate agents that their valuations had to reflect the likelihood that Building Societies would restrict any advance for a mortgage for this type of property, and that their tenants might meet difficulty if they wished to sell their homes later on the open market. At the same time, however, the council decided to offer their properties in Wakeman House for sale, notwithstanding the fact that they were LPS properties, for terms limited to 80 years from the date of construction. In this context the council distinguished between the “sale of council houses of industrialised building construction" and the “sale of purpose built maisonettes in self contained blocks"'. There is no reference in the contemporary council minute to the method of construction used in building any of the properties in the second category, nor to any blight having been suffered by any of them. The period of 80 years was chosen because the council had been advised that after a building had been erected for about 80 years, consideration might have to be given to its re-building or rehabilitation. Wakeman House was included in the properties in the second category.

In February 1975, however, the council withdrew all their LPS properties, including those in Wakeman House, from their voluntary sales programme because of their low valuations, and problems which had arisen over obtaining mortgages, coupled with likely difficulties over resale. At that time the council was not allowed to sell council property at a price lower than what it had originally cost to build the property.

The Particulars of Claim in this action mentions concern expressed by the council’s housing committee in February 1978 at the considerable expense which they were incurring on their LPS properties in connection with their repair and maintenance. The following month the committee was advised that financial help was being sought from central government towards meeting this expense. At about this time it resolved to spend nearly £500,000 in replacing windows, renewing decorations and repairing spalling concrete on the Stonegrove Estate. In September 1980, however, the committee heard that its request for extra funding had been refused.

In the meantime, Mr and Mrs Payne had become the weekly tenants of 11 Wakeman House in 1979. They had been public sector tenants since 1978, and their tenancy soon became a secure tenancy under the provisions of the 1980 Housing Act. This Act gave secure tenants a new right to buy a 125-year lease of the flats they occupied if certain statutory conditions were fulfilled.

From 1984 onwards the council was concerned to inquire into the possibility that seriously defective concrete had been used in the construction of the buildings on the Stonegrove estate. They therefore commissioned a firm called Forbes Bramble Associates to report on the visible external defects. Mr Bramble, accompanied by a structural engineer, visited the estate one day, and in their report (“the Forbes Bramble report”), which is dated August 1985, they commented separately on the blocks on the estate in a number of different categories without identifying any of them. They described the three-storey and four-storey blocks as having been constructed with load-bearing panels at the gable ends, with the long elevations clad with spandrel or full height panels finished with a textured coating. There were walkways along the blocks at first or second floor levels, with bridge links to the staircase towers. They pointed out a clear danger that the structural constraints of the walkways had failed, apparently from a combination of thermal movements and corrosion, and they also set out a list of the defects in the concrete panels which were visible on an external inspection. They also mentioned a large number of vertical cracks in columns which might be due either to overstress or corrosion. They concluded that the externally visible areas of the buildings showed extensive defects in the building fabric, many of which had been superficially treated without any attempt having been made to remedy the underlying causes. They recommended that the council should undertake a planned investigation of the system design, followed by tests in situ and the exposure of certain areas, including both defective and intact areas. They listed the areas they recommended for investigation.

In September 1987 the council appointed Galbraith Hunt and Partners, a firm of structural surveyors, to determine whether the problems they had encountered with the estate were merely a maintenance item, or whether they were indicative of a deep-seated problem arising out of design or workmanship defects when the estate was built. The Galbraith Hunt report became available in June 1988.

In the meantime the Paynes had served a notice on the council claiming to exercise their right to buy their flat, and the council in turn served a notice of the purchase price on them pursuant to what was by now Section 125 of the Housing Act 1985. Their offer was in due course accepted, and the Paynes completed their purchase of a 125-year leasehold interest in 11 Wakeman House on 8th August 1988. It was the events of this period, and the council’s alleged acts or omissions during the course of it, which formed the focus of the action and of the application before the assistant recorder. The Particulars of Claim were not issued, however, until December 1995, and a number of Mr Payne’s problems stem from the fact that the primary limitation period had by then expired.

Section 125 of the 1985 Act, as amended by the Housing and Planning Act 1986, prescribes what must be set out in a landlord’s notice of purchase price, which forms part of the Right to Buy provisions contained in Part V of the Act. Such a notice has to describe the dwelling-house in question, and state the price at which, in the opinion of the landlord, the tenant is entitled to have the lease granted to him (s 125(2)). It must also state the provisions which in the landlord’s opinion should be contained in the grant (s 125(3)).

For reasons which will become apparent, we must now set out in rather greater detail the evolution between 1980 and 1986 of the new statutory code which was concerned with issues connected with external repairs and the making good of structural defects.

There was originally no need for the landlord to say anything about service charges, repair charges or structural defects in his “notice of purchase price and right to a mortgage” (Housing Act 1980, s 10). In 1984, however, Parliament enlarged the scope of this notice by providing that:

“Where the notice states provisions which would enable the landlord to recover from the tenant service charges within the meaning of Schedule 19 to this Act ... the notice shall also state -

(a) the landlord’s estimate of the average annual amount (at current prices) which would be payable in respect of each head of charges, and

(b) the aggregate of the estimated amounts stated under paragraph (a) above; but there shall be disregarded for the purposes of any such statement any estimated amount stated under paragraph 17 of Schedule 2 to the Act.”

(Housing Act 1980 s 10(2A), as inserted by Housing and Building Control Act 1984, Schedule 11, paragraph 10).

Paragraph 1 of Schedule 19 to the 1980 Act defined ‘service charges’ as meaning the amount payable by the tenant of a flat as part of or in addition to rent which is payable, directly or indirectly, for services, repairs, maintenance or insurance or the landlord’s costs of management, and the whole or part of which varies or may vary according to what are called the relevant costs, an expression which is also defined in that paragraph. In this judgment we will use the expression “normal service charges” as meaning all these charges other than those attributable to repairs.

At this time it was Part III of Schedule 2 to the 1980 Act, as amended, which set out the terms of any lease which might be granted under these provisions. Paragraph 13(1A) of this schedule imposed on the landlord (a) an implied covenant “to keep in repair the structure and exterior of the dwelling-house and of the building in which it is situated (including drains, gutters and external pipes) and to make good any defect affecting that structure;” and (b) an implied covenant “to keep in repair any other property over or in respect of which the tenant has any rights by virtue of this schedule.” We will call the repairs referred to in these two paragraphs “ordinary external repairs” as distinct from making good structural defects.

We make this distinction because it appears to us that the draftsman of this schedule was well aware of the vexed problem in landlord and tenant law of distinguishing between a liability to repair and a liability to make good an inherent defect in the property demised (see Woodfall on Landlord and Tenant, Volume 1, paras 13.029-13.037 and the well-known cases there cited). In Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055 , for instance, this court held that a covenant by a tenant to keep demised premises in good and substantial repair did not impose any obligation on him to remedy a defect in the structure of the premises, whether that defect resulted from faulty design or workmanship, if it had been present from the time the building was constructed and had caused no damage to it. In the Housing Act scheme the landlord is fixed not only with the liability to keep the dwellinghouse’s structure and exterior in repair, but also with the liability to make good any defect affecting that structure. However, the requirements he must fulfil if he is to be able to pass on to the tenant any of the expense he may incur in meeting these liabilities are different in each case.

This is evident from a perusal of paragraphs 15-17 of that Schedule. After the 1984 amendments, these paragraphs provided, so far as is material:

“15(2) Where the dwelling-house is a flat, any provision of the lease ... shall be void in so far as it purports -

(a) to enable the landlord to recover from the tenant any part of any costs incurred by the landlord in discharging ... any obligations imposed by a covenant implied by virtue of paragraph 13(1A)(a) or (b) above ...

16 A provision is not void by virtue of paragraph 15 above in so far as it requires the tenant to bear a reasonable part of -

(a) the costs of carrying out repairs not amounting to the making good of structural defects;

(b) the costs of making good any structural defects falling within paragraph 17 below; or ...

17(1) A structural defect falls within this paragraph if the notice under section 10 of this Act -

(a) informed the tenant of its existence; and

(b) stated the landlord’s estimate of the amount (at current prices) which would be payable by the tenant towards the costs of making it good.

17(2) A structural defect falls within this paragraph if the landlord does not become aware of its existence earlier than 10 years after the lease is granted.”

At this stage of the Act’s evolution, therefore, Parliament was making provision for normal service charges, ordinary external repairs (including repairs to the structure), and the making good of structural defects in three different ways, viz:

(a) Normal Service Charges

The notice had to state the landlord’s estimate of the average amount currently payable under each head of charge, and the total amount payable (other than the estimated cost of making good declared structural defects).

(b) Ordinary External Repairs

These costs would be included among the service charge headings, but the landlord of a flat would only be entitled to require the tenant to bear a reasonable part of these costs.

(C) Making good structural defects

There was no obligation to say anything about these in the notice. However, if the landlord wished to pass on to the tenant any part of the cost of making good any structural defect of which he had become aware at any time earlier than 10 years after the lease was granted, he could only require the tenant to bear a reasonable part of such costs if the Section 10 notice not only informed the tenant of the existence of the relevant defects, but also stated the landlord’s estimate of the amount which the tenant would be liable to pay towards the cost of making them good.

These provisions were consolidated in Section 125 and Schedule 6 of the Housing Act 1985 (which converted the former paragraph 17 of Schedule 2 into a new paragraph 18 of Schedule 6 in a slightly different form).

In the Housing and Planning Act 1986 Parliament made further changes in this statutory scheme. The former provision about stating service charges in the notice was removed, and the following sub-sections (4) and (4A) were inserted in Section 125 in its place:

“(4) Where the notice states provisions which would enable the landlord to recover from the tenant

(a) service charges or

(b) improvement contributions

the notice shall also contain the estimates and other information required by section 125A (service charges) or 125B (improvement contributions).

(4A) The notice shall contain a description of any structural defect known to the landlord affecting the dwelling house or the building in which it is situated or any other building over which the tenant will have rights under the conveyance or lease. “

New Sections 125A-C were then added. In the present case we are not concerned with the new provisions about normal service charges or improvement contributions. In so far as they refer to the costs of ordinary external repairs and of making good structural defects, however, these new sections provide:

“125A (2) A landlord’s notice under section 125 given in respect of a flat shall, as regards service charges in respect of repairs (including works for the making good of structural defects), contain

(a) the estimates required by subsection (3), together with a statement of the reference period adopted for the purpose of the estimates, and

(b) a statement of the effect of -

paragraph 16B of Schedule 6 (which restricts by reference to the estimates the amounts payable by the tenant) and ...

(3) The following estimates are required for works in respect of which the landlord considers that costs may be incurred in the reference period -

(a) for works itemised in the notice, estimates of the amount (at current prices) of the likely cost of, and of the tenant’s likely contribution in respect of, each item, and the aggregate amounts of those estimated costs and contributions, and

(b) for work not so itemised, an estimate of the average annual amount (at current prices) which the landlord considers is likely to be payable by the tenant.”

The expression “reference period” is defined in Section 125C, and in the present case it was expressed to be a period which commenced within six months from 28th May 1987 (being the date of the landlord’s notice) and ended on 31st March 1993.

The 1986 Act also introduced a completely new set of provisions into Schedule 6, adding new paragraphs 16A-16D and substituting a new paragraph 18. Since the landlord’s notice now had to provide estimates of the likely costs in the reference period, the lease might now require the tenant to bear a reasonable part of the costs incurred by the landlord towards both ordinary external repairs and making good structural defects, but a cap was placed on the amount recoverable by the landlord under these heads during the reference period, limiting such recovery to the amounts shown in the notice as the tenant’s estimated contribution, together with an inflation allowance. The other provisions of the Schedule were tailored to fit in with this new scheme, and the former Paragraph 18 was replaced by something very much simpler.

The effects of these amendments, so far as they related to external repairs and making good structural defects, were therefore as follows:

Ordinary External Repairs

If the landlord wished to recover from the tenant any part of the expenses he incurred for ordinary external repairs during the reference period, he had to set out in the notice an itemised list of works, with the estimated likely cost set against each item, and/or a non-itemised estimate of the average annual amount likely to be payable by the tenant. Apart from an inflation allowance, the landlord could not recover more from the tenant during the reference period than the sums he set out in the notice.

Making good structural defects

The notice now had to contain a description of any structural defect known to the landlord affecting the dwellinghouse etc (s 125(4A)). Subject to this, the landlord’s ability to recover any part of the expenses he incurred for making good such defects during the reference period was governed by the same principles as governed his ability to recover the cost of ordinary external repairs.

Going back to the history of events, the Particulars of Claim aver that a surveyor visually inspected the property in May 1987, and that the defects he noted were set out in the Section 125 Notice which was served on Mr and Mrs Payne on 28th May 1987.

This notice stated that the market value of the property at 17th February 1987 was £32,000, that the Paynes were entitled to a 60% public sector tenancy discount, and that the purchase price to them was therefore £12,800. This price was for the grant of a 125 year lease from 1st April 1983 at £10 per annum ground rent. The letter ended by saying: “You should read this letter and the attached appendices very carefully as these documents set out the terms on which the Council is offering to sell your home. Please keep them in a safe place." Mr & Mrs Payne were told that if there was anything they did not understand they should contact a council officer (whose telephone number was given to them), who would be pleased to help them. The opening sentence of the letter, in printed capitals, told the addressee to show all letters, appendices, documents, and other information about buying their home to their legal adviser.

We need to refer to the appendices in some detail. Appendix 1 states:

“Inspections of your home have been made solely for the purpose of preparing a valuation and/or to enable the council to declare structural defects in accordance with the requirements of the 1985 Act, as amended. The information being provided does not amount to a representation or warranty, whether expressed or by implication, as to the condition of the structure or any other part of your home either at the time of inspection or afterwards. This disclaimer is equally applicable should the council subsequently leave all or a part of the purchase price outstanding on a mortgage of the property.

In your own interests, it is suggested that you should obtain a structural survey report carried out by a suitably qualified surveyor. Usually a building society's surveyor will, for an additional fee, provide this as an extra service when carrying out the mortgage survey.”

Appendix 2 states, so far as is relevant:

"STRUCTURAL DEFECTS (FLATS)

As a result of visually inspecting the block and your dwelling the following defects in the structure have been noted. These items are likely to need attention and this will probably be within 10 years of the grant of the lease. By notifying you now the Council will be able to recover your contribution towards the reasonable costs of carrying out the remedial works.

An estimate of the current cost of remedial work for your home is given. Please note these costs are NOT included in the service charges estimate enclosed with this offer. Some structural works are programmed to take place during the Reference period and are included in the estimated repairs and costs given in Paragraph.

See items listed below.

IMPROVEMENT AND REPAIR ESTIMATES

As required by s 125(A) of the Housing Act 1985 I list below the works of repair and improvement proposed in the Reference Period commencing within 6 months from the date of this Notice and ending on 31st March 1993.

Also given, at current prices, are the estimated costs for the work and the amounts you are likely to contribute. The average annual amount you are likely to be required to pay for any non-itemised works is also based on current prices.

Repair Total Estimated Cost Estimated Contribution

1 External decorations £9,600 £600

2 Investigate structural components £4,500 £20

3 Assume structural repairs required £28,000 £1,750

4 Works to roof £20,000 £1,250

5 Remedial structural work to public

walkways £12,000 £50

6 Work to stone roofs £1,200 £50”

Possible environmental improvements were then mentioned at the end of the list under the heading “IMPROVEMENTS”.

In the autumn of 1987 the Paynes read a report in a local paper about structural defects in the Stonegrove estate. A neighbour had also told them that she had been told by the council that no sales were to go through whilst a report was being made into these defects. Mrs Payne therefore wrote to the council on 18th October, asking them to let her know what was happening and, if there were any structural defects, how this would affect the people who were waiting to buy these flats. The council replied nine days later. In response to her query about the defects they said:

”I regret I can do little other than to refer you back to my offer dated 28 May 1987. You will note that the repairs estimates in Appendix 2 of this offer refer amongst other things to investigation into the structural components. When some conclusion has been reached and a scheme of repairs drawn up you will be notified. In the meantime I can only advise you to seek your own professional advice, and inform you that it is not true that sales are not being completed on the Stonegrove Estate.”

They added that since Mr Payne had only recently become self-employed, it was likely that they would not be able to offer him a mortgage. The Paynes therefore turned to the Halifax Building Society instead. The society’s valuer valued the property at £45,000, and after describing the property and the basis of his valuation in his report, which was dated 14th January 1988, the valuer added:

“We are aware this system built method of construction is not acceptable to some building societies and other lending institutions and there could, therefore, be difficulty in arranging mortgage finance and resale in the future... There are indications of reinforcement showing through some of the concrete panels together with spalling concrete and it is possible that some of the panels will need making good or replacing in the not too distant future. In addition some of the joints between the panels may need waterproofing. Damp staining was noted to the panels at the head of the walls. We were unable to gain access to the main roof but if the covering is of asphalt and the original then it will probably need some attention or replacing in the not too distant future...”

At the foot of the Report is a box headed "Important - Notes for Applicants.” Within this box is included the following advice:

"If you are not satisfied with the condition of the property or consider that you would now like a more detailed survey for your own protection you should consult a surveyor on your own account.

YOU ARE RECOMMENDED TO DO THIS. The valuer who prepared the report and valuation for the Society may be prepared to undertake a private survey on your behalf and the Society will be pleased to put you in touch with him for this purpose."

The council consulted Mrs Payne by letter on 18th April 1988 about the cost of redecorating the previously painted surfaces, and any associated repairs, being work which they intended to carry out to the block in 1988-89. This letter was written in compliance with the council’s obligations under the Landlord and Tenant Act 1985, and nothing turns on it in relation to the matters we have to decide.

In June 1988 the council received the report from the structural engineers which they had commissioned the previous September (“the Galbraith Hunt Report”). This report identified the different blocks by a number or letter code, but there was no evidence before the court which linked any block to its code. The report concluded that the construction was satisfactory in terms of normal every day use, and that it conformed with the standards that prevailed when it was built. There was, however, an on-going maintenance problem. The consultants’ brief had required them to recommend alternative remedial schemes to the structure and external cladding, and to set out the costs, time scales, and advantages and disadvantages of each. They said that such schemes might vary from total refurbishment and upgrading to merely carrying out first aid repairs. They had not been instructed to consider the demolition and sale of the site, which would have been one possible option. The three options they proposed for the estate were a minimal one, costing £80,000, which had an expected life of 5-10 years; an intermediate one, costing £100,000, with an expected life of 10 years; and a scheme which would provide a longer, relatively maintenance-free life of over 20 years, which would cost £570,000.

On receipt of this report the council’s head of building services wrote an analysis of it in September 1988, in which he concluded that the major cost problem would be the necessary cosmetic treatment which would have to follow the repairs. This was to be investigated. Other known problems which would be dealt with as part of the same package would be the roofs, the drains, the ventilation units and the TV aerial systems. He expressed pleasure at the finding that the structure was sound and stable, although repairs were required.

The Paynes had completed their purchase of a 125-year leasehold interest on 8th August 1988. The discounted purchase price of £12,800 was paid with the help of a 100% mortgage from the Halifax Building Society. The sale was on the terms contained in the council’s original notice. In her judgment the assistant recorder set out Mr Payne’s evidence about this transaction, and about the events that followed.

He was at that time 43 years old. He had gone on working in the building trade until May 1990 when he became disabled with a bad back. He had never worked on any concrete buildings or had any experience of large panel systems, and neither he nor his wife had had any previous experience of the private rented or housing markets. They had wished to improve themselves and their accommodation, and they were mainly interested in buying cheaply so that they could sell on at a profit as soon as the discount repayment period of 3 years permitted. They would then put down a deposit on a better place. He had taken the view at the time they bought the property that they could not lose. He had in mind in this context the discount they were receiving, and contemporary newspaper reports about house price rises. He was particularly interested in the price and the discount, but he had read the whole of the offer letter and its appendices. He had noticed the warning in Appendix 1 about representations and warranties and the advice about obtaining a structural survey. He decided not to get one because he assumed that the council would tell them about any structural defects and that they were just covering their backs. He wanted to save money, and he knew that other tenants had obtained mortgages to buy similar flats and so he thought the block must be all right. There were about 14 flats in their block, and about a third of them were either already owner-occupied or their tenants were in the process of exercising their right to buy. He had read about the right to apply to the district valuer to determine the price, but he had no problem with the price quoted. He understood the service charge estimates were intended to cover a five year period and to be a maximum sum. Since he did not intend to be there for five years, he was not too concerned about service charges. He thought the estimates of his contributions to repairs and improvements were reasonable at about £750 per year, and the section 125 notice did not alert him to any structural defects or anything wrong with the flat or the block. He thought that any works to the structure could only be to their advantage because they would add to the value of the flat on resale.

As to the Halifax valuer’s report, he thought the defects he had listed were works one would expect in the way of regular maintenance. He had noticed the valuer’s warning about the resale difficulties associated with these system-built methods of construction, but he thought this was just a general comment about this type of construction, and not a specific warning about this block. He believed that the problem could not be all that serious if the Halifax were prepared to give them a mortgage. He admits that he ignored this warning, which he reads very differently now with the benefit of hindsight.. At the time he thought it was the valuer covering his back with a general warning, and he did not take it seriously. He is sure he would have read it very differently if the council had described the defects of which it was aware and had warned him of the potential resale difficulties. He also believes that the valuation survey would have been different in the light of that information. He knew nothing about the problems associated with the flats’ method of construction, and he was unaware of any problems affecting them.

From late 1991 works were carried out to the buildings on the estate. Mr Payne describes major building works from about October 1991. Scaffolding was up and around the block, and there was a lot of drilling. He says the works were very disruptive, and he realised they were more than ordinary maintenance. He started to be suspicious about the extent of the defects at this time, but says he did not realise that the council had known about the defects all along. Once the works had been completed, Mr & Mrs Payne sought to sell their property, and they then learned that prospective purchasers could not obtain mortgage finance. At the end of 1992 Mrs Payne wrote to the Department of the Environment about the resale problem which these flats presented to those who had bought them. On 3rd February 1993 the Department replied that ministers were concerned about the difficulties that leaseholders of LPS flats had experienced in selling their homes. It asked for evidence of any case in which an office of a lending institution appeared to be applying a blanket ban on mortgages for flats on a particular estate. The evidence does not reveal whether Mrs Payne replied to this letter.

Nor is it at all clear from the papers before the court what the council actually did about the repairs to Wakeman House and the remainder of the Stonegrove Estate. When Mr Payne’s expert visited the estate in early 1994 he said that it was apparent that a comprehensive repair scheme had been executed which should extend the life of the blocks, with minimum routine maintenance. All the blocks had obviously been the subject of extensive remedial works in the recent past, all structural columns and cladding panels being in a fully-repaired pristine condition under a new protective coating, and all joints between cladding panels displayed newly-applied sealant.

Mr Payne’s claim in this action is based on the contention that the council misled him and his wife in four main ways. They were led to believe that the execution of structural repairs was likely in the near future, whereas it was certain. They were led to believe that the council did not know that the structural components were defective, but were budgeting for a preliminary investigation and only assumed that works would be required thereafter, whereas in fact they knew full well that they were defective and that works would be required, and they could have listed the defects. They were led to believe that the property was worth £32,000 in February 1987, whereas it was likely to have been unsaleable on the open market and no value could therefore have been placed on it. And finally they were led to believe that the council were not aware of any structural defect that would necessitate recurring major repairs in order to prevent major parts of the building from falling down, whereas in fact the council knew of such long term consequences for this sort of construction. Mr Payne’s claim for damages and/or rescission of the contract of sale is founded on allegations of misrepresentations, material non-disclosure, breach of statutory duty and negligence. In addition to joining issue on all these assertions and pleading contributory negligence, the Defendants asserted that Mr Payne’s claim was statute-barred. Mr Payne by way of reply admitted 25% contributory negligence and relied on Sections 14A and 32 of the Limitation Act 1980 in response to the plea of limitation.

It was against this background that the council applied for an order that the action be struck out because the claims were statute-barred. Alternatively they sought to strike out the claim based on common law negligence.

The assistant recorder held that Mr Payne could not rely on either Section 14A or Section 32 of the Limitation Act, and she therefore struck out the claim as not being properly arguable. Mr Payne appeals against her judgment on both these issues. The council in turn, by way of a Respondent’s Notice, challenges the assistant recorder’s willingness to accept that Mr Payne had an arguable cause of action in negligence, and asserts an additional ground for upholding the judgment on the limitation issues.

We will consider first Mr Payne’s claim that he is arguably entitled to rely on Section 32 of the Limitation Act 1980. He would be able to do so if he could show that the Defendant had deliberately concealed from him any fact relevant to his right of action. If so, the limitation period would not start to run until he could have discovered the concealment with reasonable diligence. It is also necessary to bear in mind in this context the provisions of Section 32(2) of the Act, which provides that deliberate commission of a breach of duty in circumstances where it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in the breach of duty.

Deliberate concealment of a cause of action is, in its origin, a species of equitable fraud. In other words, a person is not to be entitled to rely on a limitation defence if it is unconscionable to allow him to do so because he has deliberately concealed facts relevant to the plaintiff’s cause of action. In London Assurance v Mansel (1879) 11 Ch 363 Sir George Jessel MR said at p 370:

“Concealment properly so called means non-disclosure of a fact which it is a man’s duty to disclose, and it was his duty to disclose the fact if it was a material fact.”

For a statutory authority like a council to be guilty of deliberate concealment the act complained of must be attributable to someone who can properly be regarded as its “directing mind” or “somebody in the position of its brain” (see Meridian Global Funds Management Ltd v Securities Commission [1995] 2 AC 500: John Henshall (Quarries) Ltd v Harvey [1965] 2 QB 233). No such person is identified in Paragraph 4 of the Reply, but Mr Henderson QC argues that sufficient is pleaded there to entitle his client to discovery to see if he can find documents which would enable him to set up a positive case in this regard. He points out that it is accepted by Mr Arden QC that it was arguable that the Section 125 Notice did not contain a description of all structural defects then known to the council. He further submits that there are simply no documents so far available showing what decision was taken and whether, for example, a deliberate decision was taken.

Mr Henderson contends that there were three relevant failures by the council on which Mr Payne’s right of action is based - a failure to describe structural defects that were known to them, a failure to advise him of the high recurring cost of maintenance, and a failure to advise him of the potential difficulties of resale. He relies heavily on the council’s failure to describe in their Section 125 Notice the defects that were known to them having regard to the Forbes Bramble report, and he contends that the assistant recorder was wrong to limit herself to a consideration of the third of these failures alone.

We do not derive any assistance from the earlier history of this estate. The fact that in the mid-1970s, at the time of another fall in property values, the council withdrew their Stonegrove properties from their voluntary sales scheme throws no useful light on the events more than ten years later under a compulsory scheme conducted on different terms. And the fact that in the late 1970s the council was also concerned about the repair and maintenance costs is merely illustrative of the reasons why they were anxious to engage outside professional help in the mid-1980s to advise them whether there was something fundamentally wrong with the structure, or whether it was simply a repair and maintenance problem.

At the heart of the present dispute is the Forbes Bramble report. Mr Henderson contends that if the council, in compliance with its statutory duty under Section 125(4A) of the 1985 Act, had listed the defects as recorded in that report, Mr and Mrs Payne would have acted very differently. In Paragraph 11 of the Particulars of Claim it is pleaded that if the council had properly described the structural defects in the way they are listed in that report, then Mr Payne would not have bought the property for £32,000 or at all. Instead he would have sought a redetermination of the price, commissioned his own structural survey, and made further inquiries whereupon he would have discovered that the property may have been unsaleable. It is also pleaded that the Halifax would not have advanced a mortgage had they known of the full extent of the structural defects.

Mr Arden accepts for the purposes of this application that his clients ought to have described the structural defects of which they were aware, in addition to setting out the estimated costs of putting them right, although he was careful not to commit himself to identifying exactly which defects should have been so described. But he argues that their failure to do so had no causal connection with the loss Mr Payne suffered, because there was not in fact any lurking defect in the design or the structure of the kind Messrs Galbraith Hunt were instructed to investigate, and his clients gave Mr Payne accurate notice of the likely repair and redecoration costs associated with the defects which they should have listed. In the absence of any such fundamental structural defects, one valuer had valued the maisonette at £32,000 in February 1987 and another at £45,000 in January 1988. Both valuers would have been able to see the surface defects, and Mr Payne was willing to absorb the cost of putting them right within the profit he hoped to make on resale at the end of the three-year period for which he had to retain ownership. He had been warned by the Halifax valuer of the fact that some lenders did not like lending on this type of property, and what was at the heart of Mr Payne’s difficulties was the fact that when he wished to sell the property market had plunged and the lack of enthusiasm by mortgage lenders for lending on this type of property was now well nigh universal.

In order to analyse the merits of these rival contentions it is of course necessary to look at the statutory framework within which they are set. In this statutory scheme Parliament has imposed certain obligations which the landlord must perform if a tenant serves a notice requiring him to grant a 125-year lease at a low rent of the property he occupies. But for these statutory requirements, the ordinary principles of caveat emptor would apply, and it would be the obligation of the tenant to satisfy himself, whether by his solicitors’ inquiries and searches or by commissioning his own survey, about the condition of the premises he was to acquire.

It is quite clear that as the scheme evolved Parliament decided to impose on the landlord a greater obligation than would otherwise have existed to tell the tenant in advance about four matters. The first two are normal service charges and improvements, and nothing in this case turns on either of them. So far as the third - ordinary external repairs - is concerned, Parliament eventually decided that it should require the landlord to tell the tenant what he should expect to pay during the initial reference period in one of two ways: by stating a sum which represented the average annual amount spent on such repairs, and/or by furnishing an itemised, costed list of repairs, no doubt when a specific repairs project was in the offing. In either event the tenant would know what his maximum liability for such repairs would be (subject to an inflation uplift) during the reference period.

So far as the fourth item is concerned, it is clear, in our judgment, that the Parliamentary intention was in essence the same. The tenant was to receive advance notice of his likely liability during the reference period in respect of making good structural defects known to the landlord. The landlord had a continuing liability to make good such defects during the entire currency of the lease, but he could not recover any expenses he might incur in this regard during the reference period unless he gave the requisite notice.

The Parliamentary history shows that Section 125(4A) originated from a mere drafting alteration. Paragraph 18(3)(a) of Schedule 6 of the 1985 Act as originally enacted expressly preserved the right of the landlord to recover a reasonable part of costs incurred in respect of a structural defect of the extent of which the landlord informed the tenant in the Section 125 notice. The draftsman of the 1986 Act did not include the new Section 125(4A) in the changes to the 1985 Act he introduced in Section 4 of the 1986 Act, which substituted the new subsection (4) and inserted the new Sections 125A-C and the major changes to Part III of Schedule 6. Instead it came in by way of the “minor and consequential amendments” section, Section 24, coupled with paragraph 3 of Schedule 5 (which is itself headed “Minor Amendments”). Although the new section undoubtedly has the effect of imposing on the landlord an unqualified obligation to give notice of any relevant structural defect known to him, whether or not he wishes to recover from the tenant any part of the cost of putting it right, it is hard to discern in this parliamentary history a change in the normal relationship between the parties prior to the grant of a long lease as significant as that for which Mr Henderson contended.

It is in our judgment also clear that the courts should not import into this statutory scheme any common law duty of care which did not previously exist in this sort of context. The relationship between landlord and tenant or between vendor and purchaser of a long leasehold interest have never been treated as giving rise to the kind of special relationship discussed by the House of Lords in such recent decisions as Caparo Industries plc v Dickman [1990] 2 AC 605; White v Jones [1995] 2 AC 207; or Spring v Guardian Assurance plc [1995] 2 AC 296. If, as the statutory scheme evolves, Parliament decides to impose any additional duties on landlords, as it did between 1980 and 1986, then it will be for Parliament, with a much deeper well of information on which to draw, to consider what the nature and extent of any such additional duty should be. It is not in our judgment appropriate for the courts to intervene in a delicately constructed statutory scheme of this kind by imposing new obligations where none previously existed. In X (Minors) v Bedfordshire CC [1995] 2 AC 633 Lord Browne-Wilkinson emphasised that the answer to any question as to whether a common law duty exists, and if so what is its ambit, must be profoundly influenced by the statutory framework within which the acts complained of were done, and the present case is in our judgment an excellent example of what he had in mind. In Blake v Barking and Dagenham LBC [1996] EGCS 145 Douglas Brown J held that it was not just or reasonable to impose a duty of care on a local authority in connection with its statement of its opinion as to price in a Section 125 Notice. Although the reasons for that decision, and in particular the availability of access to the district valuer as an arbiter of the price, do not apply in connection with the landlord’s obligations under Section 125(4A), that case is another good example of the courts’ reluctance to upset the balance of the relationships created by the new statutory scheme. It was of course common ground before us that if a landlord’s notice contained an actionable misrepresentation, then the tenant would in an appropriate case have a viable cause of action for damages for misrepresentation pursuant to Section 2(1) of the Misrepresentation Act 1967.

We go back, therefore, to the different items contained in the Forbes Bramble report, bearing in mind that the statute makes a distinction between “repairs” to the structure and exterior of 11 Wakeman House and of Wakeman House generally, and what are variously called “defects affecting that structure” (paragraph 14(2)(a)) of Schedule 6) and “structural defects” (paragraphs 16A(1)(a) and 16B(1) of the Schedule and Sections 125(4A) and 125A(2) of the Act), which the landlord is under an obligation to make good, as opposed to an obligation to repair. The concept of repairing a structural defect is not one which is contained in this Act.

The council’s Section 125 Notice identified “works to roof”, “remedial structural work to public walkways” and “work to stone roofs”, and it furnished a total estimated cost of these works, together with an estimate of the contribution payable by Mr and Mrs Payne. In our judgment, only the second of these items of work might include “structural defects”. Notice was given of them and the Paynes were invited to inquire whether there was anything in the notice they did not understand. In our judgment it is not properly arguable on the face of the documents before us that the council made any non-disclosure in relation to this aspect of the notice. As we have already observed, if the council did carry out any of these works in the reference period they would be limited in what they could recover from the Paynes to the amounts set out in the notice, together with an inflation allowance.

The item “External decorations” did not feature in Mr Henderson’s submissions, and controversy was therefore centred on the two remaining items in the Section 125 Notice:

“2. Investigate structural components and £4,500

3. Assume structural repairs required £28,000”

The estimated contribution of Mr and Mrs Payne was to be £20 and £1,750 respectively.

There can be no doubt, in our judgment, that the way this third item was phrased left a great deal to be desired. The council knew that they were likely to have to carry out at least some of the repairs listed in the Forbes Bramble report, but the Section 125 Notice merely suggested that it would be prudent to assume that if the investigation of the structural components revealed anything untoward then an item of £28,000 should be budgeted for any repairs to the structure that might be found to be necessary.

There is at present no clear evidence that at the time of serving the Section 125 Notice, or at any subsequent time prior to the execution of the lease, the council did in fact know of any structural defects (other than the structural defects in the public walkways). It is, of course, knowledge, not suspicion about a possibility, that is required before the obligation of disclosure under Section 125(4A) of the Act can have any effect. What is disclosed by the Forbes Bramble report are a number of items where repairs to the structure and exterior of the blocks on the Stonegrove Estate were likely to be needed. Whether the misalignment of panels, or the gaps between panels, or the cracks in columns, owed their origins to “defects affecting the structure” which the council would have to “make good” was a matter which would not be known until Galbraith Hunt completed their investigations.

The expression “assume structural repairs required” is, however, a troublesome one. On one interpretation it could be an umbrella phrase including not only repairs to the structure (according to the ordinary meaning of the word “repairs”) which had already been identified by the Forbes Bramble report but also the making good of any structural defects which Messrs Galbraith Hunt might call for. On another interpretation it might refer only to the latter. Neither leading counsel was concerned to make distinctions between these two concepts. It may be that in these circumstances that the phrase should be interpreted as covering the total estimated cost of any work in either category, assuming that the council did carry out any such work, after receiving the Galbraith Hunt report, during the reference period. The sums mentioned in the notice would of course provide an upper limit to what the council could recover during this period.

We are certainly of the clear overall view that Mr Henderson’s submissions are founded on a fundamental misunderstanding of the statute. Parliament has required the landlord to tell the tenant of any structural defects, meaning defects affecting the structure which require making good, as opposed to ordinary items of repair or maintenance, and there is at present no clear evidence that the council was aware of any such defects. This is, after all, what they commissioned Messrs Galbraith Hunt to find out. The purpose of Sections 125A-125C of the Act is to enable the tenant to identify his maximum potential liability for the charges or contributions mentioned in those sections, neither more nor less. There is no wider obligation of disclosure. The tenant, like any other purchaser of an interest in land, has to carry out his own searches and inquiries in the usual way.

This is, however, a strikeout application, and actions can only be struck out in these circumstances where it is clear and obvious that in law the claim cannot succeed ( X (Minors) v Bedfordshire County Council [1995] 2 AC 633 per Lord Browne-Wilkinson at p 740H). Mr Arden has conceded, for the purposes of the present application, that it is arguable that there were structural defects known to his clients which should have been described in the Section 125 Notice. In these circumstances it appears to us that it would be wrong, at a pre-discovery stage, to hold that there is not an arguable case that a breach of statutory duty or misrepresentation in this respect caused loss to the Plaintiff, that the council deliberately concealed a relevant fact (viz that they knew of such structural defects), that an appropriately senior officer of the council was a party to such concealment, and that the Plaintiff could not have discovered the concealment with reasonable diligence. We are extremely doubtful whether the Plaintiff will succeed in due course, but this is no reason to shut him out at this stage. We should make it clear, however, that discovery on these issues must be kept within reasonable bounds, and that a trawl through the council’s papers going back to events before the enactment of the compulsory “right to buy” provisions contained in the Housing Act 1980 would be wholly inappropriate.

One of the reasons why we differ from the assistant recorder is that in our judgment the Particulars of Claim do reveal the existence of a financial claim for damages on the basis that the Paynes paid more for their flat than they would have paid but for the misrepresentations or breach of statutory duty. The pleader has claimed as damages the difference between the price paid (£32,000 including discount) and the value of the property in February 1987 in the light of proper disclosure (nil). We do not consider that that claim is properly arguable as it stands, since two different valuers valued the flat in the boom years of 1987-8 as worth £32,000 or more, and there were no latent defects of which they were unaware, but the pleading could always be amended in the light of this judgment, and as a matter of principle it would not, in our judgment, be right to strike the action out altogether merely because this court is very sceptical as to whether what is left of it represents an economically viable claim. The judgment of Mr Kenneth Rokison QC, sitting as a deputy high court judge, in Iron Trade Mutual Insurance Company Ltd v J K Buckenham Ltd [1990] 1 All ER 808 shows, correctly, that an action should not be struck out if the evidence adduced on a strikeout application shows, as it does here, that there are factual issues which are properly to be determined on the limitation questions raised in the pleadings. In the present case such issues go not only to the questions arising under Section 32(1)(b) of the Limitation Act which we have already discussed, but also, if that sub-section did not apply, questions arising under Section 14A of that Act - for example, in this context, not only the question when Mr Payne had sufficient knowledge of the material facts to enable him to commence proceedings, but also, since it was agreed before us that he should not be bound by the admission of contributory negligence contained in his Reply, the questions raised by Section 14A(10) of the Limitation Act. Both these questions warrant the giving of oral evidence by the Plaintiffs before a judge could safely reach a conclusion of fact on them.

So far as the arguments founded on Section 14A of the 1980 Act are concerned, these only come into play if Section 32(1)(b) would not provide a defence (see Section 32(5)). In such circumstances that section would have furnished a potential defence to Mr Payne’s claim based on negligence, but in our judgment this claim is not properly arguable for the reasons we have already given. Mr Arden did not, however, seek to contest the assistant recorder’s view that it would furnish a defence to the claim founded on the Misrepresentation Act 1967, and we are not now called to make a decision on this point.

For this purpose Mr Payne would have to show that he did not acquire the knowledge required for bringing an action for damages in respect of the relevant damage until a period six years before the date on which these proceedings were issued. In this context the live issue is whether he had knowledge of “the material facts about the damage in respect of which damages are claimed” (s 14A(6)(a)), a phrase defined as meaning “such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment” (s 14A(7)). For the purposes of these provisions a person’s knowledge includes knowledge which he might reasonably have been expected to acquire from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek (s 14A(10)).

It appears to us, for the reasons we have given, that these questions, too, raise issues which ought to be tried at the trial of the action, and it is not appropriate to divide them off to be tried as a discrete preliminary issue. This is because the trial judge would have to consider, in the light of the guidance given by this court about the meaning of the Housing Act 1985, whether the Section 125 Notice did in fact contain any actionable misrepresentations, whether such misrepresentations did induce the Paynes to enter into the lease, and if the answer to both these questions is “yes”, what, if any, damage they have suffered as a result. If the answer to all these questions disclose that the Plaintiffs have a viable cause of action apart from the Limitation Act, then it will be necessary for the judge to decide the issues that arise under Section 14A of that Act.

For these reasons, the appeal is allowed. On the Respondents’ Notice we direct that the plea based on common law negligence contained in Section 12 of the Particulars of Claim and any other pleadings consequential on that plea be struck out. The effect of this direction on the pleadings as they stand at present will be a matter on which the court is willing to hear submissions from counsel, if agreement cannot be reached on the form of the order the court should make.