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Lee v Birmingham City Council, Court of Appeal, 30 July 2008

29 August 2008
The issues

Costs – housing disrepair cases – housing disrepair protocol – whether Fast Track or Small Claims Track costs appropriate.

The facts

The Claimant, Mrs Lee, was a secure tenant of the Defendant Council. On the 16th August 2006 solicitors acting for her sent a letter of claim to the Council invoking the housing disrepair protocol, scheduling disrepair relied on and setting out when and how the tenant contended that the Council had been put on notice. It did not specify the amount of any consequential damages claim but it foreshadowed them by including complaints of increased heating bills, embarrassment and anxiety about the effect on her child’s asthma. The letter gave notice that the solicitors were acting under a Conditional Fee Agreement. The Council inspected the property within a week and carried out the majority of the repairs within a month. In April 2007 the Claimant began an action claiming consequential damages but making no complaint of any outstanding want of repair. There was therefore no claim for specific performance. The consequential damages were put in the bracket of £1,000.00 to £5,000.00.

The Council carried out the repairs without admission of liability, contending that it had not had sufficient prior notice. When proceedings were begun it pleaded this defence. The claim was allocated to the Small Claims Track. This was the appropriate track because CPR 26.6 provided that the Small Claims Track should be the normal claims track for any claim, including a claim by a tenant of residential premises against his landlord that, if there is a claim for specific performance, a tenant’s claim will be a Fast Track case if the cost of repairs or the consequential damages claim exceeds £1,000.00. If there was no specific performance claim then the ordinary rule in CPR26 would apply and the claim would be a Fast Track claim only if its overall value exceeded £5,000.00.

The Claimant sought an Order for costs on the Fast Track, at least until the date that repairs were completed. The Deputy District Judge refused to make that Order. The tenant appealed to the Judge, who made an Order in respect of pre-allocation costs, relying on CPR 44.9(2) and ordered that the costs incurred prior to allocation by both parties should be reserved for consideration by the Trial Judge at the conclusion of the claim. The Defendant Council appealed against that Order.

The protocol specifically provided that if a tenant’s claim was settled without litigation, on terms which justified bringing it, the landlord would pay the tenant’s reasonable costs or out of pocket expenses. These, in a guidance note, were defined as being legal fees or, in a Small Track claim (sic), out of pocket expenses incurred as a result of a claim. Out of pocket expenses were not defined, other than by way of example, to include loss of earnings and experts fees. The Claimant argued that the protocol could only be given sensible effect if the Judge’s Order was upheld and that such an Order was necessary to maintain access to justice. The Defendant objected, arguing that the writing of a letter under the protocol was not the bringing of the claim and that the claim occurred only when the action begun and that the CPR provisions were then clear.

The decision

The question for the Court of Appeal was whether, in order to make the Rules and the protocols operate in the manner in which it was intended, some Order for pre-allocation costs was necessary and, if so, what.

The answer to that question was clear. Since the introduction of the protocol, it was no longer the case that a claim was only made for costs purposes at least when, and if, litigation was begun. On the contrary, the protocol required a claim to be advanced initially in accordance with its terms under a warning that there was likely to be a costs penalty if it was not. The housing disrepair protocol was clear. Provided the claim was justified, it ought to be settled on terms which included the payment of the tenant’s reasonable costs and these costs were to be calculated according to the track which the claim would fall to if made by way of litigation. It was not possible to read the combination of paragraph 3.7 of the Housing Disrepair Protocol and guidance note 4.10 in any other way. If it were otherwise it would be open to a landlord, liable for repairs, to adopt a deliberate policy of omitting to repair until the protocol letter was received, but then repairing without admission of liability to ensure that any subsequent Court claim fell to the Small Claims Track. The wording of the Order ought to have been different. The Order made by the Judge would be replaced as follows:

“Pursuant to CPR 44.9(2), the Claimant shall have her costs in the cause on the Fast Track basis up to the 26th September 2006.”

In other words, she would have Fast Track costs of making the claim up to that date, if she won, and if she failed she would have nothing.

Comments

The Court of Appeal provided a little solace for the Defendant by commenting on the Claimant’s claimed costs to the date of the Allocation Questionnaire of £7,100.00, which they noted were base costs only. They took the trouble to say that, in the absence of any special factor, costs at that level looked vastly disproportionate and that, if they failed to be assessed, they would need to be scrutinised with care. They also commented, very much in passing, that it did not follow that the same level of success fee appropriate to litigation was necessarily appropriate to the making of the protocol claim.

Also intriguing is the comment that, for the purposes of costs, a claim is made when the protocol is invoked. Is that perhaps a quietly revolutionary comment? Whilst this case is specific in the context of the Housing Disrepair Protocol, one wonders what wider application that comment might possibly have. Might we be approaching a time when a Defendant might seek costs in such a situation?

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