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Costs in disrepair cases

Small claims track or fast track costs

Effect of protocol

Birmingham City Council v Lee
[2008] EWCA Civ 891

Summary

This is an important case on costs. The tenant used the Pre-action Protocol for Housing Disrepair Cases. The works were done before litigation and the claim was subsequently only for damages, limited to a sum which made the claim suitable for the small claims track. That claim was disputed. The Court of Appeal held that the appropriate order for costs was that the tenant should have her costs in the cause on the fast track basis up to the date the repairs were done – as opposed to small claims costs or reserving the costs.

Facts

The tenant (claimant) using the pre-action protocol made a complaint of disrepair to the council (defendant). The council inspected the property within a week, and within a month had carried out the great majority of the repairs sought at a cost, on its evidence, of £265. This was done without admission of liability. The proceedings were not begun for several months. As the work had been carried out, the claim was simply for damages, which were put in the bracket £1000 - £5000. In its defence the council denied liability on the basis that it had no sufficient prior notice of the want of repair and disputed quantum.

As there was no claim for specific performance the appropriate track was the small claims track – rather than the fast track. However, the tenant sought in her allocation questionnaire an order for costs on the fast track "until at least the date that repairs were completed". The deputy district judge declined to make that order. On the tenant's appeal the circuit judge ordered as follows:
    "The court orders pursuant to CPR 44.9(2) that the costs incurred prior to allocation by both parties shall be reserved for consideration by the trial judge at the conclusion of the claim."
The judge made this order because he considered that the tenant ought not to be treated differently because she followed the protocol. He also thought such an order was necessary if the legal advice which tenants such as this claimant needed is to be available in the market. Further, he thought the costs should be reserved because unless the tenant succeeded on the prior notice point, the claim would fail altogether and the council would be liable for neither damages nor costs.

Issue

This was stated by Hughes LJ in the following terms:
    "There is a pre-action protocol applicable under the Civil Procedure Rules to such cases. It requires the tenant to give early notification to the landlord that a claim is being made, rather than commence immediate proceedings. The question which we have to consider arises where, on receipt of that notification, the landlord promptly carries out the repairs. If he does, that will remove from the tenant's claim in the court action subsequently brought any application for specific performance of the repairing covenant, but will, very often, leave outstanding in that action only a claim for consequential damages. It may often be the case that if the landlord had not carried out the repairs, and thus the tenant had sued for specific performance as well as for consequential damages, the effect of the Civil Procedure Rules ("CPR") would have been that the action was allocated to the fast track. By contrast, if the action is for the consequential damages alone, because the repairs have now been done, the action will very often fall to be allocated to the small claims track. The issue for us is this: what, if any, order ought to be made in such a case as to pre-allocation costs? In particular, ought some order to be made which reflects the fact that until the repairs were carried out the tenant's claim (notified under the protocol) was for specific performance as well as for damages, and would potentially have been for allocation to the fast track?
    The question is, as it seems to us, whether in order to make the rules and the protocol operate in the manner which must be intended, some order for pre-allocation costs is necessary, and if so, what?"
Decision

Hughes LJ at paras 33 and 34:
    "Since the promulgation of the protocol it is no longer the case that a claim is only made (for costs purposes at least) when and if litigation is begun. On the contrary, the protocol requires a claim to be advanced initially in accordance with its terms, under a warning that there is likely to be a costs penalty if it is not. The references to costs which are contained in the protocol … clearly demonstrate that the object of the protocol is to achieve settlement of disrepair claims without recourse to litigation. Its object is very clearly that, provided the claim was justified, it ought to be settled on terms which include the payment of the tenant's reasonable costs: and costs calculated according to the track which the claim would fall to if made by way of litigation. …
      Without some order as to the early-incurred costs, it would be open to a landlord who is in fact and in law liable for want of repairs to adopt a deliberate policy of omitting to repair until the protocol letter is received, but then of repairing without admission of liability so as to ensure that any subsequent court claim fell to the small claims track. The result of that would be that fast track costs, which would otherwise have been due to the tenant, would no longer be payable. We do not say that this is what has happened here; it may well not be. But that very possible scenario illustrates the necessity for some order in relation to the costs of advancing the protocol claim. Moreover, quite independently of the possibility of any such deliberate manipulation of the process by a landlord, such an order is necessary if the protocol is not to operate as a means of preventing recovery of reasonably incurred costs. The tenant who has a justifiable claim for disrepair needs legal assistance in advancing it. He must initiate it in accordance with the protocol. If the effect of the claim is to get the work done, then providing that the landlord was liable for the disrepair the tenant ought to recover the reasonable costs of achieving that result."
    However, the Court of Appeal did not like the idea of reserving the costs. Such orders are generally to be discouraged.
      “Preferable, we think, is an order which shows now what the costs consequences will be if the claimant succeeds in her claim. If that is done, the parties know where they will be, subject to liability, and that ought to facilitate settlement. What is necessary in a case of this kind is that the claimant should, providing she is right about liability, recover the reasonable fast-track costs of advancing the claim by way of letter under the protocol, and thus getting the work done. In this case the work was completed by 26 September 2006."
    The following order was therefore made:
      "Pursuant to CPR 44.9(2), the claimant shall have her costs in the cause on the fast track basis up to 26 September 2006."
    Comment

    Although the Court of Appeal made that order it did remind practitioners that the costs "must still be proportionate to the amount of work in question."

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