Dilapidations claim: Civil Procedure Rules

19 January 2016

Paul Greatholder examines best practice in bringing a dilapidations claim using the Civil Procedure Rules

---

The law relating to dilapidations covenants and the impact of section 18 of the Landlord and Tenant Act 1927 is well explored. Significant changes in the law arising from new cases, legislation or guidance are painstakingly scrutinised.

However, outside substantive law, there is merit in considering best practice in bringing a dilapidations claim, and identifying possible pitfalls.

The RICS Dilapidations guidance note, paragraph 7.1. states: 'A surveyor dealing with a dilapidations claim should be aware of the Civil Procedure Rules'.

The Civil Procedure Rules (CPR) govern how a claim should be conducted. Dilapidations claims have their own protocol, drafted by RICS and the Property Litigation Association in 2000 as a guide to best practice, and revised in 2006 and 2008. It became part of the Court rules on 1 January 2012.

In common with other CPR protocols, it encourages the parties to:

• exchange information
• consider alternative dispute resolution
• try to resolve their dispute without the need for proceedings.

A quick word count reveals that the words 'surveyor or valuer' appear 22 times. By comparison, 'solicitor or lawyer' do not appear at all. This suggests that the courts view the role of a surveyor as of fundamental importance.

Paragraph 1.5 of the protocol allows that compliance in substance is the important thing, and the courts are not likely to be concerned with minor or technical shortcomings. That said, paragraph 8.1 contains a warning that the courts will take into account the extent of the parties’ compliance when making orders about who should pay costs.

Litigation costs

The case of Courtwell v Greencore in 2014 is illuminating. This began as a dilapidations case, but the decision was widely reported after the judge was highly critical about how the litigation was run.

The amount claimed by the landlord was agreed shortly before trial. The parties disagreed about who should pay the costs of the litigation up to that point. The landlord submitted that the behaviour of the tenant’s team had been so unhelpful that it (the landlord) should recover a much larger than normal percentage of its substantial legal costs.

One of the grounds on which the court can make such an order is non-compliance with a court protocol.

But what the judge actually found was:

'The landlord did not comply with either the words of the protocol or the spirit ... The inflexibility and lack of cooperation was apparent on both sides ... The suspicion and ill-feeling between the experts did not help. It would be wrong to award indemnity costs.'

So the effect of the landlord’s advisers’ combative approach was that the judge was not impressed and the landlord lost a very valuable advantage.

The CPR encourage parties to litigation to make early and realistic settlement offers by imposing sanctions if such offers are unreasonably rejected.

There is a general right to make a 'without prejudice except as to costs offer'. Known as a Calderbank offer, they are useful because they are completely flexible. However, while they can be very persuasive in the eyes of a court when deciding whether someone has litigated unreasonably, they do not bind a court.

Part 36

There is merit in considering best practice in bringing a dilapidations claim, and identifying possible pitfalls

Part 36 offers were created by the CPR. They are, like Calderbank, offers but if successfully made the court should have no discretion on whether to make a generous award in relation to legal costs.

The general effect of either party making a Part 36 offer is that if it is accepted within 21 days (as well as settling the case) the claimant will have the certainty of having some legal costs paid by the defendant. If either party makes a Part 36 offer and the recipient does not accept it, but then at trial does not ‘beat’ the Part 36 offer, they will be ordered to pay additional legal costs (sometimes interest too) on a punitive basis.

The problem with Part 36 offers is that they are inflexible. For example, an automatic consequence of a defendant making a Part 36 offer (which in dilapidations claims usually means the tenant) is that it is committing to meet the legal costs of the claimant landlord up to the date the landlord accepts the offer.

It is virtually impossible accidentally to get a Part 36 offer right, whereas it is very easy to get it wrong, as the very large number of cases on the issue evidences. Therefore, careful thought needs to be given to mechanics and effect of the offer.

Paul Greatholder is a Partner at Russell Cooke

Further information

• Related competencies include Legal/regulatory compliance
• This feature is taken from the RICS Building surveying journal (December 2015/January 2016)