On the Ninth day of Christmas...
...Today Malcolm Worrell from Irwin Mitchell’s Real Estate Disputes team looks at how the scales of justice tips further towards residential tenants since Khan v Mehmood EWCA [2022] EWCA Civ 791
In a review of important property cases in 2022, the case of Khan v Mehmood EWCA [2022] EWCA Civ 791 must be amongst the top 12 given its addition to the increasing armoury of residential tenants, and another pitfall of which residential landlords should be aware.
The weapon in question is a 10% uplift on tenants’ damages for disrepair compensating for loss of amenity (as opposed to the simple monetary loss).
The Claims
The landlord, Ms Khan, brought a claim against the tenant, Mr Mehmood, for possession and rent arrears, which Mr Mehmood, the tenant, defended but also counterclaimed for damages in respect of Ms Khan’s failure to keep the property in repair, pursuant to s 11 Landlord and Tenant Act 1985.
With focus on the tenant’s Counterclaim, it should be noted that “damages” can be categorised into:
a) ‘general damages’ which compensate for non-monetary harms, including ‘loss of amenity’, ‘physical inconvenience and discomfort’ and ‘mental distress’; or
b) ‘special damages’ which compensate for quantifiable monetary losses.
Damages for ‘disrepair’ can include both general and special damages as disrepair can cause loss of amenity as well as specific quantifiable losses.
The difference is important in this case as only general damages could be subject to a 10% uplift pursuant to the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”), then subsequently held to apply to general damages in all civil cases in the Court of Appeal case, Simmons v Castle ([2012] EWCA Civ 1039, [2012] EWCA Civ 1288, [2013] 1 WLR 1239).
The First Instance Court Decision
The District Judge originally hearing the case, in the absence of representation for Ms Khan, dismissed the possession claim and awarded damages for disrepair, which were categorised as ‘general damages’, calculated as 50% of the rent for the relevant period (from 2007 to 2014) during which the disrepair had subsisted, to which the District Judge applied the 10% uplift.
Worthy of note is the fact that the tenant had claimed damages for buying more expensive cooked food whilst the cooker was not working, which is theoretically quantifiable as special damages, but in the absence of documentary evidence as to quantum, the District Judge simply included it with the general damages, thus allowing it to be subject to the applied 10% uplift.
Ms Khan failed on appeal against against this decision to the Circuit Judge so appealed again on this uplift point to the Court of Appeal.
The Court of Appeal decision
Ms Khan challenged the period over which the damages had been awarded between 2007 and 2011 on the basis that the Tenant had only been a lodger of the main tenant during that time, which was a factual point, the Tenant having admitted the commencing the Tenancy as Tenant in 2011, but more importantly, Ms Khan invited the Court of Appeal to depart from Simmons, arguing that the uplift was only ever designed to be applicable in tortious contexts like personal injury where damages were ascertained by reference to guidelines or tariffs, not by a notional rent reduction, which could better account for factors like inflation by itself.
On the uplift point, the appeal was dismissed by the Court of Appeal, which had allowed the Housing Law Practitioners Association to intervene and make representation on applicability of the 10% uplift in housing disrepair cases, with Baker LJ saying “ CFAs play an important role in assisting tenants to bring claims for breach of repairing covenants. Such claims are therefore manifestly within the category of cases for which the 10% uplift was specifically intended, by way of compensation for the success fee which the claimant tenant’s lawyer is entitled to be paid by his client but which, following LASPO, cannot be recovered from the defendant landlord. The need to secure funding for claims in the post-LASPO environment was integral to the recommendations in Jackson Report and the declaration made by this Court in Simmons v Castle. The arguments put before this Court on behalf of the HLPA demonstrate that it remains a very important consideration in this category of litigation.”
It must be noted that whilst the Court of Appeal held that tenants claiming breaches of repair covenants do “fall squarely” within this purpose, as they can often only afford to pursue litigation under CFAs, it is not a condition of the uplift that the tenant must actually have a CFA in place, but applies generally to claimants for general damages for disrepair.
So What Can Residential Landlords Do?
Other than trying to ensure properties are properly maintained in the first place and not letting the situation persist for too long, if threatened with a disrepair claim, Landlords should calculate the cost-effectiveness of defending the claims and consider negotiating a settlement bearing in mind that potential damages will be 10% higher than might previously have been the position before Khan.
Also, outside of disrepair, landlords should be wary of the 10% uplift applying to any claims against them where the tenant is claiming general damages including loss of amenity, given that the reasoning in Khan would appear to apply equally to any such claim.
