Costs—Pre-action protocol—Housing disrepair

Court of Appeal, Civil Division; Thomas, Hughes and Rimer LJJ; 30 July 2008

A tenant with a justifiable claim for disrepair brought in accordance with the pre-action protocol should recover his costs, even where the landlord promptly undertakes the repair rather than disputing the claim.

Jay Luba QC and Tony Watkin (instructed by McGrath & Co) for the tenant. Guy Mansfield QC and Kerry Bretherton (instructed by Legal and Democratic Service, Birmingham City Council) for the landlord.

The tenant was a longstanding secure tenant of the defendant local housing authority. In August 2006, solicitors acting for the tenant sent to the landlord a letter of claim, invoking the housing disrepair protocol. The local authority inspected the property within a week and, within a month, had carried out the majority of the repairs.

Following negotiations, proceedings were initiated by the claimant seeking not specific performance but consequential damages of between £1,000 and £5,000. It was agreed that the action fell to be allocated to the small claims track, pursuant to CPR 26.6(3). In her allocation questionnaire, however, the claimant sought an order for costs on the fast track until at least the date that the repairs had been completed. The judge declined to make that order.

On the tenant’s appeal, an order was made in relation to pre-allocation costs. The judge, relying on CPR 44.9(2), ruled that “the costs incurred prior to allocation by both parties shall be reserved by consideration by the trial judge at the conclusion of the claim.” The local authority appealed. The issue arose as to what order, if any, should be made as to pre-allocation costs in a case where there was a pre-action protocol applicable requiring a tenant to give early notification to his landlord that a claim was being made, rather than to commence immediate proceedings, but where, on receipt of that notification, the landlord promptly carried out the repairs.

The court ruled:
The judge gave two reasons for his order. (i) The claimant ought not to be treated differently because she followed the protocol. (ii) Such an order was necessary if the legal advice which tenants such as the claimant in the instant case needed was to be available in the market. The tenant mirrored those reasons in her submissions.

For the authority it was contended that the judge’s order was wrong because: (i) it amounted to an attempt to re-write the CPR allocation and costs rules; (ii) the writing of a letter under the protocol was not the bringing of a claim; a claim occurred only when an action was begun, and the CPR provisions were then clear; (iii) the protocol was designed to encourage settlement; (iv) there was no proper evidential basis for deciding the case on access to justice grounds.

The authority drew attention to CPR 27.14(2)(g). Rule 27.14(2) was the rule which limited the costs recoverable in a small claims track case. Broadly, the effect was that little if anything was recoverable by way of the cost of legal advice or representation. Subparagraph (g) did make recoverable: “(g) such further costs as the court may assess by the summary procedure and order to be paid by a party who has behaved unreasonably.”

The exercise of the power under 27.14(2)(g) was not the answer to the justice of the cases under consideration. First, to categorise a failure to settle on particular terms as unreasonable conduct would open up wide questions with ramifications for other forms of litigation, and there had been no argument on the point.

Second, the investigation of whether an offer of settlement was reasonable or not would require the trial of the case, which would be quite inconsistent with the objectives of the protocol, and indeed of the CPR generally.

His lordship held that the answer to the question was clear. Since the promulgation 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 references to costs contained in the protocol clearly demonstrated that the object of the protocol was to achieve settlement of disrepair claims without recourse to litigation. Its object was 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.

Deliberate policy
Without some order as to the earlyincurred costs, it would be open to a landlord who was in law liable for want of repairs to adopt a deliberate policy of omitting to repair until the protocol letter was received, but then of repairing without admission of liability 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. That very possible scenario illustrated 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 was necessary if the protocol was not to operate as a means of preventing recovery of reasonably incurred costs.

The tenant who had a justifiable claim for disrepair needed legal assistance in advancing it. He had to initiate it in accordance with the protocol. If the effect of the claim was 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.

What was necessary in a case of the instant kind was that the claimant should, providing she was 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.

The appeal would be allowed to the extent of varying the judge’s order to one which showed now what the costs consequences would be if the claimant succeeded in her claim.