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||Neutral Citation Number:  EWCA Civ 398
||Case Nos: 2005 1820 B2 & 2005 1820 (Z) B2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE SOUTHEND COUNTY COURT
His Honour Judge Yelton
||Royal Courts of Justice
Strand, London, WC2A 2LL
||11th April 2006
B e f o r e :
LORD JUSTICE WALLER
LORD JUSTICE LONGMORE
LORD JUSTICE LLOYD
|| TERENCE CARTER and JANE CARTER
||- and -
||JEFFREY COLE and JACQUELYN COLE
(Transcript of the Handed Down Judgment of
Smith Bernal WordWave Limited
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JOSEPH HARPER Esq QC and Miss CAMILLA LAMONT (instructed by The Beavis Partnership, CM2 7QA) for the Appellants
CHRISTOPHER CONEY Esq (instructed by D Fisher & Co, TN15 8BJ) for the Respondents
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Longmore:
- Wickham Grove is an area of land, comprising an apple orchard, two reservoirs and a spring at Wickham Bishops near Witham in Essex. It was owned by Mr and Mrs Carter who on 15th November 1996 leased a small portion of their land, containing the spring, for 20 years from 29th September 1996, to a company called Wickham Bishops Springwater Ltd ("SW") which was owned and managed by a Mr Geoffrey Chapman and has since operated a bottling plant on the premises. That land was on the further side of Wickham Grove from the main road entrance and the tenant had to cross the land retained by Mr and Mrs Carter to reach the land which it had leased. The means of access was a track which was suitable for lorries if it was kept in repair and has been referred to as "the roadway".
- Under the lease, the tenant its visitors and employees had the right to pass and repass over the roadway which provided access to the demised land. The landlord covenanted in clause 4(5) of the lease to maintain and repair the roadway, the tenant agreeing (clause 3(2)) to pay, as rent, 80% of all costs and expenses properly incurred by the landlord in so doing.
- Mr and Mrs Carter had erected a new house past which the roadway ran. For reasons irrelevant to this litigation they decided in 1999 to sell the house and the surrounding land and to move to Spain. Mr and Mrs Cole were interested in buying. In connection with the negotiations which eventually led to the sale to them, and to meet their requirements, the route of the roadway was altered so that vehicles going to and from the bottling plant would not pass close to the house. This was done in late 1999 or early 2000, before contracts for the sale to Mr and Mrs Cole were exchanged, on 12 June 2000. The new section of the roadway has been called "the northern roadway".
- By transfer of 23rd June 2000 Mr and Mrs Carter sold Wickham Grove to Mr and Mrs Cole excluding the land which was already let to SW. For the benefit of the land which they retained the Carters reserved a "Right of Way" relating to the "Retained Land" defined to mean the land for the time being in their ownership. The controversy central to this appeal stems from the phraseology of the reservation of this right of way. The Right of Way was hatched black on the Plan attached to the Transfer and the reservation of the Right of Way was described in clause 3.2 of the Transfer in these terms:-
"A Right of way for all purposes but only as regards the Right of way by commercial lorries at times permitted by the conditions of the Planning Consent relating to the Retained Land with or without vehicles whether of a commercial nature or otherwise over and along the right of way the cost [of] maintenance and upkeep of the Right of way being shared as to 80% by the Transferor and 20% by the Transferee such cost of maintenance to cover the cost of keeping the Right of way to a proper standard for commercial use and if necessary replacement thereof along the same route and each party doing as little damage as possible to the Right of way and [the] right of the Transferor to use the Right of Way being conditional except in the case of reasonable dispute as to costs [or] need [or] quality of maintenance of the Right of way upon their contributing the said percentage [to] the Transferee within 28 days of being requested to do so."
- The words in square brackets in the clause set out above are not in the original clause but the parties agreed that they needed to be inserted or substituted, as appropriate, in order to conform to what the parties did actually agree.
- Subsequent to the construction of the northern roadway and the transfer to Mr and Mrs Cole, the lease between the Carters and SW was varied by deed of 23rd July 2002 providing (inter alia) for the substitution of a new plan now showing the northern roadway in lieu of the old plan showing the old route.
- The Carters and the Coles have now fallen out on the question of the repair of the roadway, as it is now constructed, which I shall call compendiously "the roadway" in the rest of this judgment. It is, as the judge pointed out, a curious dispute because it is not a case of either couple alleging that the other should do the repair; it is instead a claim by each couple that they each have a right to do necessary repairs and a consequential dispute about the standard of repair and when (if at all) a charge can be made to the other party for such repair. His Honour Judge Yelton in the Southend County Court decided that the standard of repair was to be "Design Case 3.2" as set out in the expert report of a Mr M P Hale of October 2004. That decision is not now appealed. He further declared (in paragraph 1 of his order) that neither couple had any obligation to the other to repair the roadway, (in paragraphs 2 and 3) that each couple had the right to repair and maintain the roadway and (in paragraph 8) that neither party could claim any contribution to the cost from the other until the work had been carried out. The Coles now appeal from this judgment asserting that, by reason of clause 3.2 of the Transfer Deed, they have the right to do the necessary repairs to the exclusion of the Carters and that, once they have an estimate of the cost, they can give the Carters a 28 day notice to pay 80% of that cost and in default of payment exclude both the Carters and their lessees from using the roadway. The expert concluded that the cost of repairing to Design Case 3.2 standard would be likely to be in the region of £185,000 plus VAT. One might be forgiven for thinking that the purpose of the appeal is to make continued bottling of the spring water uneconomic.
- The Law apart from clause 3.2 of the Transfer
Unsurprisingly the law about construction and repair of rights of way granted as easements has been settled for some centuries. The following propositions (all of which, in principle, are subject to any contrary agreement) were not controversial:-
(1) A grantor of a right of way ("the servient owner") is under no obligation to construct the way;
(2) The grantee may enter the grantor's land for the purpose of making the grant of the right of way effective viz to construct a way which is suitable for the right granted to him ("the dominant owner"); see Newcomen v Coulson (1887) 5 ChD 133, 143 per Jessel MR;
(3) Once the way exists, the servient owner is under no obligation to maintain or repair it, see Pomfret v Ricroft (1669) 1 Wms. Saunders (1871 ed) 557 per Twysden J, Taylor v Whitehead (1781) 2 Doug KB 745 and Jones v Pritchard  1 Ch 630, 637, per Parker J;
(4) Similarly, the dominant owner has no obligation to maintain or repair the way, see Duncan v Louch (1845) 6 QB 904;
(5) The servient owner (who owns the land over which the way passes) can maintain and repair the way, if he chooses;
(6) The dominant owner (in whose interest it is that the way be kept in good repair) is entitled to maintain and repair the way and, if he wants the way to be kept in repair, must himself bear the cost: Taylor v Whitehead (1781) 2 Doug KB, per Lord Mansfield. He has a right to enter the servient owner's land for the purpose but only to do necessary work in a reasonable manner, see Liford's Case (1614) 11 Co Rep 46b, 52a (citing a case in the reign of Edward IV) and Jones v Pritchard  1 Ch 630, 638 per Parker J.
- The arguments
On the facts of the present case Mr Joseph Harper QC for the Coles submitted:
(1) Mr and Mrs Cole had the right (but not any obligation) to repair the roadway to the standard required by the Deed of Transfer (Design Case 3.2);
(2) Mr and Mrs Carter had no such right because clause 3.2 of the Deed of Transfer had, on its true construction, deprived them of such right either completely or unless the Coles declined or failed to do necessary repairs;
(3) if Mr and Mrs Carter were entitled to repair at all, they could only recover 20% of the cost if they repaired to the standard Design Case 3.2;
(4) Mr and Mrs Cole could serve a 28 day notice on the Carters requiring them to pay 80% once they (the Coles) had identified an estimate for repair which they were prepared to accept.
Conversely Mr Christopher Coney for Mr and Mrs Carter argued:
(1) although the Coles were entitled to repair the roadway if they wished, so also could the Carters;
(2) although the Carters accepted they could only recover the 20% envisaged by clause 3.2 of the Deed of Transfer if they repaired to the Design Case 3.2 standard, they were entitled to repair to a lesser standard bearing the cost themselves;
(3) if the Coles intended to and did repair, they were not entitled to serve a 28 day notice requiring payment of 80% on the basis of any estimate but only after the work had been done.
- Entitlement to repair
It is logical to consider the issue of entitlement to repair first. When the oral argument began, Mr Harper was inclined to accept and, indeed, to assert that his clients, the Coles, had an obligation to repair the roadway but as his submissions proceeded it became clear that his case was not that they were obliged to keep the roadway in repair but rather that they were entitled to do necessary repairs to the exclusion of the Carters who were only entitled to repair if the Coles did not. This is different from the common law position where both the servient and the dominant owner are entitled to repair if they wish. This difference could only arise if clause 3.2 altered the common law position. Mr Harper contended that it did.
- He submitted (and it was virtually common ground) that the relevant matrix against which clause 3.2 fell to be construed was that:
(1) the Carters as landlords had by the lease of 15th November 1996 demised the premises used as a bottling plant to SW on terms that required the Carters to maintain and repair the roadway and entitled them to recover 80% of the cost of doing so from SW; moreover SW as lessees had no right (whether pursuant to rights contained in the First Schedule to the lease or otherwise) themselves to repair that part of the roadway which was on the property of the Carters;
(2) the route of the roadway was already changed in that it no longer ran past the house which belonged to the Carters and was shortly to be transferred to the Coles;
(3) in practice, it was the tenant rather than the landlord who maintained the roadway since Mr Carter was spending more and more time in Spain;
(4) both the contract for sale to the Coles and the Transfer itself provided that the property was sold subject to the rights, exceptions and reservations contained in the Lease.
- Against that background one turns to the wording of clause 3.2 which I have set out in paragraph 4 above. It is fair to say, as Mr Harper emphasised, that the clause does not in express terms reserve the right to the Carters as transferors to maintain or repair the roadway. Until the sale, of course, they owned the land over which the roadway passed and they were the only people who could maintain and repair it. Upon the sale they reserved the right of way by clause 3.2, and there is nothing in clause 3.2 that removes or takes away the right concomitant with the right of way viz the right to maintain and repair the roadway. When one further remembers that under the lease the Carters had not merely the right but also the obligation to maintain and repair the roadway, it is fanciful to suggest that the wording of clause 3.2 was intended to remove the right to repair. If it did, the Carters would have the obligation to keep the roadway in good repair but no mechanism (other than the goodwill of the Coles) whereby that obligation could be performed. That cannot have been the intention of the parties.
- This conclusion is reinforced by two further factors. First, at the point in the clause where the maintenance and upkeep of the roadway is mentioned, there is provision for the cost
"being shared as to 80% by the Transferor [the Carters] and 20% by the Transferee [the Coles]".
Since the lion's share of the cost is to be paid by the Carters, reflecting precisely the amount payable to the Carters by SW under the lease, it is only sensible that the Carters should be entitled to do the work.
- The second factor is the inclusion in clause 3.2 of the phrase
"and each party doing as little damage as possible to the Right of Way".
That phrase contemplates either party doing the work, recognises the risk of damage to the right of way and expressly provides that it is to suffer as little damage as possible. That is only consistent with the right of the dominant owner to do necessary repairs. The judge wisely echoed this part of the clause, when making his declaration that the Carters had the right of repair, by adding the words
"doing as little damage as is reasonably possible and making good any damage done".
- Mr Harper relied on the fact that, whereas clause 3.2 made specific provision in its concluding words for the Transferee to request payment of the Transferor's 80% of the cost of repair from the Transferor, there was no equivalent provision enabling the Transferor to request payment of the Transferee's 20% to the Transferor. This is not surprising. The purpose of the last part of the clause is to make clear that the Transferor's exercise of the right of way is conditional upon the Transferor paying its percentage of the cost of repairs within 28 days of being requested to do so. In that context it needs to be spelled out that the Transferor must make payment to the transferee within 28 days of being requested to do so. Since there can be no comparable provision for conditionality if the Transferee does not make payment to the Transferor, since the Transferee's rights in relation to the roadway derive from its ownership of the servient land, there is no requirement for any express provision that the Transferee must pay its percentage of 20% to the Transferor. The obligation to make the payment is inherent in the provision in the central part of the clause that the cost of maintenance and upkeep of the right of way is to be
"shared as to 80% by the Transferor and 20% by the Transferee".
- Mr Harper's next point was that, if there was an entitlement on the part of the Carters to repair the roadway and charge the Coles for 20% of the cost, that was a positive obligation on the Coles as Transferees which could not run with the land. The consequence was that, if the Coles sold the land to a purchaser, that purchaser would not be bound to make the 20% payment (although he would benefit from the repair) and, probably, that the Coles would remain liable for the 20% (even though they would no longer be benefiting from the repair). This was said to contrast unsatisfactorily with the Carters' 80% obligation which ran with the land in the sense that if the Carters failed to make payment their right to use the right of way would be suspended. Such asymmetry could, it was said, not have been intended. I cannot accept this argument. There is, as I have said, no scope for any conditionality with respect to the Transferees' position. On any view they are only liable for 20% of the cost; they can, if they sell on to another purchaser, take a personal covenant from that purchaser by way of indemnity. Whatever they do about that, there is no reason why the obligation in the Transfer Deed to "share" the cost should not mean what it appears to say.
- There is thus nothing in clause 3.2 which expressly removes the Carters' entitlement to repair and much to support the view that not only do they have that right but they can also recover 20% of the cost from the Coles, at any rate if they repair to the required standard. The Coles' position would be more readily understandable, if they had an obligation to repair. But, after consideration, Mr Harper expressly disavowed any such obligation and it is, indeed, difficult to get any such obligation from the express words of the clause. But once it is clear that no such obligation exists, it is little short of absurd to say that the Carters have no right themselves to do something which they cannot compel the Coles to do.
- Mr Harper submitted that it was equally absurd to suppose that the Carters and the Coles were both entitled to repair. What would happen, he asked, if they both decided to repair at the same place at the same time? What would happen if the Carters began to repair at one end of the roadway and the Coles began at the other end? His solution to this dilemma was to say that, if the Carters had a right to repair, it was only to be exercisable in a "default" situation which he defined as a situation in which the Coles had decided not to repair. He was pressed to say how such a situation could arise if the Coles had no obligation to repair and he replied that clause 3.2 should be construed so as to contain some such words, after the provision for apportioning the costs, as:-
"if the Transferee is asked to maintain and keep up the Right of way, but declines to do so."
In my view, that would be to make a contract for the parties which they have not made for themselves. It is, no doubt, true that the courts have sometimes implied what may be called a "default entitlement" by allowing parties to enter on land and do work which the landowner will not do himself. Often that is when the landowner has an obligation to do work and it is in breach of that obligation. Nationwide Building Society v James Beauchamp (a Firm)  EWCA Civ 275 is an example of a case where a default entitlement was implied where one party (the purchaser of the land over which rights of way were to be granted both to the vendors, for the benefit of retained land, and to sub-purchasers for whom houses were to be constructed on the land sold) had an obligation to construct a road and another party (the vendor) had an express right to do so if the purchaser defaulted. Neither party did so, both becoming insolvent. The court held that the several sub-purchasers were entitled to do the work, as an incident of the rights of way granted to them. The distinction on the facts is that in that case there was an express obligation (on the purchaser) to do the work. Here there is none on either party.
- The common law has contemplated with equanimity the prospect that both the servient owner and the dominant owner have the right of repair. As the judge observed, disputes about repairing rights of way usually arise because neither party wants to repair, not because both parties are keen to do so for their own unneighbourly reasons. Clause 3.2 has not, in my view, changed the common law position.
- Naturally enough, the court inquired what would be likely to happen in the event that the judge's order was upheld. As between counsel, there was a measure of agreement on this; the standard of repair required by the judge's order was beyond the likely resources of the Carters who, if they repaired at all, would do so (as has happened up till now) by repairing holes in the roadway, as and when necessary, and thus be unable to recover any 20% contribution from the Coles. The Coles themselves would not wish to do the work of repair first and then attempt to recover 80% of the cost. Mr Harper's doomsday scenario is thus unlikely to occur on the ground.
- Time of entitlement to recover cost of repair
The judge held that neither party could claim any contribution from the other in respect of works carried out to the roadway until such time as they have carried out the work. Mr Harper submitted that this was wrong and that the Coles were entitled to make a 28 day request for payment from the Carters once they had decided what estimate to accept.
- What is to be shared between the Transferor and the Transferee, according to clause 3.2, is "the cost of maintenance and upkeep of the Right of way". That sharing cannot be implemented until the cost of repair has been incurred. In a normal repair case that cost will not usually be incurred until the work has been done because only then does the contractor have a right to recover his agreed remuneration. It is tempting, therefore, to uphold the judge and leave it at that.
- On no view can Mr Harper's submission (that the Coles can recover 80% of whatever estimate they decide to accept) be correct. At the stage of accepting estimates, the Coles will not have incurred the cost of repair. The most that can be said is that, on accepting an estimate, they will have incurred an liability to pay whatever sum is finally due to the repair contractor. That is not a "cost", let alone "the cost", of repair. Mr Harper submitted that it should be, because the Coles then have the credit risk viz the risk that they will be liable to the contractor but that the Carters either cannot pay or will not pay, making it necessary for the Coles to sue them with all the delay and uncertainty which any litigation entails. The word "cost", however, is not an apt word for dealing with credit risk because it is a word with a recognised meaning of incurring a (usually quantifiable) liability.
- Although the contention put forward by the Coles cannot be right, I am a little uneasy about the judge's formulation. It is not in every possible case of repair that the cost of that repair will be incurred only when the work is complete. If there were an agreement for work to be paid for in stages (as there often is in ordinary construction contracts) it might be that the cost of repair would be incurred partly at one time and partly at another. The concept of the cost being "shared" between the parties would then, in my judgment, carry with it the idea that it should be shared as and when a payment became due to the contractor. The difficulty is to formulate an appropriate declaration without knowing the terms of any repair contract. For my part I can only suggest that instead of the words "as they have carried out the work" in paragraph 8 of the judge's order there be substituted the words
"or times as sums due in respect of such works become payable"
So that the paragraph as a whole will read:-
"It is further declared for the avoidance of doubt that neither party may claim any contribution in respect of the works carried out to the roadway until such time or times as sums due in respect of such works become payable."
It does not seem that any submission was addressed to the judge on this point in favour of any intermediate possibility between the Coles' contention of the acceptance of an estimate and the opposite extreme of the work having been done. Save for this comparatively minor amendment to paragraph 8 of the order, I would uphold all other parts of the judge's order and dismiss this appeal.
- At the end of the oral hearing, Mr Harper renewed an application for permission to appeal the judge's order as to costs viz that the Carters should pay 70% of the Coles' costs subject to detailed assessment. We refused that application on the ground that the judge's order was well within the ample discretion accorded to him. I mention that for completeness but also to record that, as presently advised, I would not regard the comparatively minor amendment which I would propose to make to the judge's order as a justification for re-opening the question of the allocation of the costs before the judge.
Lord Justice Lloyd:
- I agree with everything in my Lord's judgment, and would dismiss the appeal, other than to vary paragraph 8 of the judge's order as proposed by my Lord, and would dismiss the application for permission to appeal in respect of the order for costs.
- The most striking feature of this case, as he says, is that the Coles, who are entitled to a contribution of 80% towards the cost of the maintenance work, seek to insist on having control over what is done, when, by whom and to what standard, and to exclude the Carters from any part other than paying 80% of the cost in advance, when the Carters are the only parties who have undertaken any obligation to carry out works of repair and maintenance, by their covenant in the 1996 lease.
- At the outset of this litigation the Coles sought to distance themselves from the lease and its terms. But the sale to them was not only made expressly subject to the rights reservations and exceptions in the lease so far as they affect the land sold, but the transfer contained two unusual clauses relating to the lease. By one (the second of the rights granted under the heading "Rights granted for the benefit of the Property") the Coles were given the right to call on the owner of the land the subject of the lease to supply a copy of any lease and deed of variation in relation to the land retained by the Carters. By the other the Carters covenanted to enforce the tenant's covenants in any such lease and deed of variation, upon any reasonable request by the Coles. (The second of those two obligations, though included in the transfer under the heading "Restrictive covenants by the Transferor", is a positive covenant and could only be binding as a matter of contract between the original parties, and it may not be altogether clear that the first could either. Certainly the second would not pass with the land so as to make the obligation binding on successors in title of the Carters.) In those circumstances, it is not surprising that, on behalf of the Coles, Mr Harper accepted that the terms of the lease, most relevantly the landlord's obligation to repair the roadway and the tenant's obligation to contribute 80% of the cost so incurred, are among the facts relevant and admissible in construing the contract for sale between the Carters and the Coles and the transfer by which it was completed.
- Clause 3.2 (the second of two clauses so numbered in the relevant part of the transfer) is concerned to achieve several things. The first is to reserve the right of way and to define the extent to which it may be used. This is, first, "for all purposes" and "with or without vehicles", including commercial vehicles, but, secondly, it is subject to a limitation as regards commercial lorries, namely to use it only at times permitted by the terms of the planning permission. The second purpose is to regulate the incidence of the cost of maintenance and upkeep of the roadway. In this regard the clause does two things, above all: it defines the parties' respective shares of the cost ("the cost … being shared" etc.), and it defines the standard of maintenance to the cost of which the parties are to be required to contribute ("a proper standard for commercial use and if necessary replacement"). Then it imposes the requirement that each party shall do as little damage as possible to the roadway. Lastly it makes the Transferor's right to use the reserved right of way conditional on payment to the Transferee of its 80% contribution to the cost of maintenance, as well as qualifying the conditionality of the exercise of the right in case of reasonable dispute as to the amount demanded.
- This last part of the clause takes advantage of principles associated with the judgment of Upjohn J in Halsall v Brizell  Ch 169 and more fully discussed by Megarry V-C. in Tito v Waddell (No 2)  Ch 106 at 289 to 303. As Longmore LJ has said, if the Transferee makes a demand authorised by the clause, then, subject to the reasonable dispute proviso, the Transferor must pay the 80% due within 28 days, and if he does not, he cannot thereafter exercise the right of way unless and until he has paid. As between the present parties, this mechanism is not the Transferees' only remedy, if the earlier words in the Claimant are construed as a contract to contribute to the cost. But once either parcel of land has passed into other hands, the burden of the contractual obligation will no longer be enforceable against the successor in title, and this technique provides the only method of giving any party a sanction to ensure that a contribution due is paid, if the other is not willing to share the cost. It cannot be applied the other way round, so as to limit the rights of the servient owner.
- In agreement with Longmore LJ, it seems to me that the words "the cost of maintenance and upkeep of the Right of way being shared as to 80% by the Transferor and 20% by the Transferee" do constitute an agreement by each of the parties to the transfer to pay such proportionate contributions to relevant costs incurred by the other. Mr Harper's argument to the contrary is based on two propositions. The first is that it does not fit with the later provisions of the clause imposing conditionality as regards payments due from the Transferor. However, the reason for that provision being unilateral and not reciprocal is that it cannot, of its nature, be imposed on a mutual basis. To infer from the one-sided nature of this sanction provision (which cannot be imposed bilaterally) that only the Transferee was to be entitled to call for contributions seems to me to be a case of making the tail wag the dog. The primary provision is that which appears earlier in the clause. The words about conditionality provide the only available way of overcoming the difficulty that the obligation to contribute cannot, merely as a matter of contract, be made to pass to successors in title. It is therefore an ancillary provision, and one which is inherently limited. I cannot accept that an inference can properly be drawn from this to the effect that the earlier words do not impose a mutual obligation to contribute.
- Mr Harper's second point is linked, namely that it is not to be supposed that the clause would impose a contractual obligation the burden which could not pass to successors in title, and which, at least in theory could be binding personally on the parties even after they have parted with the land. I do not see why that assumption should be made. True it is that this is an unsatisfactory area, in which proposals for the reform of the law were made as long ago as 1965 by a committee appointed for the purpose, and reiterated in 1985 by the Law Commission, but nothing has been done by legislation, and not even the House of Lords, judicially, has felt able to change the position: see Rhone v Stephens  2 AC 310. In those circumstances parties and conveyancers have to work within the limitations of the law as it stands. It does not seem to me senseless to include a contractual provision as between parties which is intended to lay down the basis of a relationship which may have to last through several changes of ownership even though later owners may choose to take advantage of their absence of legal liability and refuse to contribute to cost incurred by the other party. It is not the only provision in the transfer which is only binding as between the parties themselves.
- In the present case, of course, at any rate during the subsistence of the lease, the transferors' liability to maintain the roadway under their covenant in the lease underpins the situation and provides some assurance that they will not neglect it entirely. The dispute giving rise to the litigation, however, is as to the standard to which the maintenance is to be carried out. The transferees have an interest in the road being properly maintained, even if they use most of its length only to a minimal extent. But the transferors, or rather their tenants, have the real interest in the state of the road, since their lorries use it all the time.
- Accordingly, I remain of the view, notwithstanding Mr Harper's submissions, that the clause does include a contractual obligation on each party to contribute the stipulated proportion to maintenance costs incurred by the other. It is not in issue that, as the judge decided, this obligation only applies if the work is done to the standard specified in the clause, and there is no challenge to the judge's decision as to what that standard is.
- For those reasons, and for those given by Longmore LJ, it seems to me that the judge was right to decide that both parties were entitled to carry out works of maintenance and repair to the roadway, and that each is liable in contract to contribute the relevant proportion to the cost of such work done by the other, so long as the work is done to the specified standard.
- The remaining point concerns the operation of the conditionality provision at the end of the clause. For the Appellants Mr Harper argued that his clients could demand the 80% contribution as soon as they had decided on an estimate to accept, regardless of when any money would be payable by them to the contractor. He submitted that this is the only way in which his clients could be safeguarded from the credit risk which they would otherwise incur, if they entered into a contract with a builder to do the work, under which they would become liable to pay sums from time to time, or even only at the end of the work, and would have no assurance that the transferors would pay their 80% share. I agree that this is a risk that they would face. On the other hand, if Mr Harper is right the transferors could be called on to pay at the outset, and possibly even before contract, and long before any sums became payable under the contract. It might turn out that less was payable, for one reason or another (e.g. because of defects in the quality of the work as carried out). In any event, if the work was substantial (and the cost indication of £185,000 suggests that it could well be) there might well be provisions for stage payments on certificate, a payment on substantial completion subject to a retention, and a final adjustment after a retention period of, say, 6 months. Thus the final sums due from the employer might not become payable for many months after the estimate, so that, if Mr Harper were right, the transferors would have had to have paid long before the transferees were liable to pay the contractor. That cannot have been intended.
- I can accept Mr Harper's proposition that the terms of the conditionality are not altogether satisfactory from his clients' point of view, unless they were entitled to demand payment in advance. But the consequences of such entitlement would be so unsatisfactory for the transferors that it cannot be the right interpretation of the clause.
- Even if the judge's alternative, of no liability to contribute until the work had been done, is too far in the opposite direction, and if the true reading, as Longmore LJ says, is that a demand can be made which will require the Transferor to pay as and when the Transferee is liable to pay under the contract for the maintenance work, the Transferors' position is not wholly secure. The Transferor may assert a dispute as to the costs of the work (too high a quotation, or perhaps too onerous terms financially if, for example, payment was required unusually early), the need for the work (is the roadway really in such a bad condition as to require the work to be done?) or the quality of the work (it does not need to be done to so high a standard, or it has not been done to the standard required by the contract). If this can be said to be a reasonable dispute, the Transferee will not, or not immediately at any rate, be able to assert its remedy of preventing the use of the roadway, and the Transferee may therefore be out of pocket as regards the 80% for some considerable time, until the dispute has been resolved, or shown not to be a reasonable dispute.
- Mr Harper submitted that some at least of the issues which might be the subject of a dispute ought to and would arise before the contract was entered into, and that, for that reason, the clause should be construed as justifying a demand in advance. I agree that disputes might arise early, but they might also arise later, for example as to the quality of the work done, or as to cost elements, for example the cost charged for extras or variations. I cannot accept that the possibility of grounds for dispute arising early is a sufficient reason to construe the clause as permitting a demand for payment in advance. What I would accept is that points of this kind demonstrate that this provision is far from being an altogether satisfactory and reliable way for the transferees to be sure of recovering 80% of their expenditure even as it falls due for payment to the contractor. That seems to me to provide yet further support for the proposition that the presence of this provision in the clause does not justify a reading of the clause as giving only the Transferees the right, or the primary right, to do the work, or even the only right to claim contribution. The conditionality provision is limited in its ambit, and is not as well drafted as it might have been. Thus not only would the tail be wagging the dog, but it is a decidedly weak and inadequate tail.
- For those reasons, in addition to those given by Longmore LJ, I agree that the appeal should be dismissed, except for the minor variation of paragraph (8) of the order. I have nothing to add on the question of the costs order made by the judge.
Lord Justice Waller:
- I agree with both judgments.
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