Summary: Blue Manchester Ltd v North West Ground Rents Ltd [2019] EWHC 142 (TCC)

The claimant, Blue Manchester Limited ("BML"), occupied the Hilton Hotel in Manchester's Beetham Tower. BML successfully sued the defendant landlord, North West Ground Rents Limited ("NWGRL") under the repairing covenant in the hotel lease concerning the common parts.

A temporary fix was not sufficient to discharge NWGRL's repairing obligations. Instead, it was held that a permanent remedial scheme that satisfied the aesthetics requirement and design intent of the original construction of the building was required to comply with the repairing obligations.

The remedy of specific performance, compelling NWGRL to undertake a permanent remedial scheme, was awarded, together with damages.

The facts

Beetham Tower was completed by Carillion Construction Limited as the main contractor. In 2014, prior to going into liquidation in 2018, Carillion discovered that the sealant bond was failing in some of the shadow box units ("SBUs").

NWGRL had covenanted in the lease to keep the common parts in "good and substantial repair and when necessary to reinstate replace and renew where appropriate" and the SBUs formed part of the common parts.

A temporary fix was put in place by Carillion in 2014, which involved screw stitching pressure plates to the frame profiles. Whilst this held the panels forming the SBUs securely in position, this had aesthetic implications. No permanent remedial solution had been reached by the time that Carillion went into liquidation in 2018.

BML brought a claim against NWGRL to compel it to undertake a permanent remedial scheme.

The applicable law

Specific performance is a discretionary remedy which will only be granted where it appears to the Court to be just and equitable in all the circumstances, and it will only be awarded when damages are not an adequate remedy. Breach of an order for specific performance is punishable as a contempt of Court.

Arguments before the Court

Although other arguments were discussed in these proceedings, this article is limited to a discussion of the Court's decision regarding whether or not NWGRL was in breach of its repairing covenant with the temporary fix, and whether or not BML was entitled to an order for specific performance.

The decision

It was agreed between the parties that the temporary fix did make the SBUs structurally safe and that it would continue to do so for some time, although not indefinitely. However, it was noted that the temporary fix was originally intended to last no more than 3 years and this period had elapsed.

As a result, the Court concluded that the SBUs were not in good or substantial repair with the temporary fix and permanent remedial action was required for NWGRL to satisfy its repairing obligations. The Court also gave prominence to the negative aesthetic impact of the temporary fix and commented that there would have to be some compelling reason why BML should have to accept the temporary fix as a permanent repair.

The Court held that damages would not be an adequate remedy and ordered specific performance.

The Court determined that damages would not be an adequate remedy. If damages had been awarded, BML would simply be stuck with the temporary fix, or it would also need to consider undertaking the works itself with a view to claiming the costs of such repairs from NWGRL.

There was some uncertainty as to whether BML would be able to successfully recover such costs from NWGRL, as the SBUs were located in the common parts.

NWGRL was given a period of 18 months to comply with the order.

Our comment

It is noteworthy that the Court acknowledged the draconian nature of an order for specific performance in these circumstances but it still made the order.

It is undoubtedly relevant the BML was operating a Hilton Hotel and that the adverse aesthetic impact of the temporary fix was detrimental to the luxurious guest experience that it would wish the public to associate with the Hilton.

Although the decision has potentially significant consequences for NWGRL, they are pursuing Carillion and a design and build sub-contractor in separate proceedings, so they may be able to recover some of the losses if successful in those proceedings.