Disrepair: where Birmingham v Lee, allocation and Part 36 collide.
Charlotte Davies (2007)discusses a recent disrepair case that was allocated to the Small Claims Track, despite work not having been completed. Charlotte acted for the Defendant, a local authority, that went on to beat a Part 36 offer. Below she talks through the impact that Birmingham v Lee [2008] EWCA Civ 891, the completion of works post-allocation, and a beaten Part 36 offer had on the costs orders made at the end of the trial.
It is often the case that when a landlord receives an Early Notification Letter or Letter of Claim, the necessary repairs to the property are promptly undertaken. This leaves a claim for damages only, which invariably leads to allocation to the Small Claims Track and what would, usually, result in fixed costs recovery only. The case of Birmingham v Lee [2008] decided that a disrepair claim begins at the start of the protocol and not with the commencement of litigation. The court has the power to award pre-allocation costs under CPR 44.9(2), which means that the award for costs to the Claimant can stretch back to the first protocol step, thereby protecting a Claimant in costs when the very threat of litigation is what resulted in the rectification of the disrepair. Costs from the first protocol step up to completion of works are then open to be awarded on the standard basis.
But what happens when a claim has been mistakenly allocated to the Small Claims Track at allocation stage? In a recent case, in which I acted for the Defendant local authority at trial, both sides had attended an allocation hearing and informed the court that all works had been completed. The claim was allocated to the Small Claims Track. However, for reasons which remain unclear, it later became apparent that a substantial amount of works had not in fact been completed and were not completed until many months later. Under Birmingham v Lee the Claimant would be entitled to costs up to date of completion of works. What effect did the mistaken allocation have on this?
To complicate matters yet further, a pre-allocation Part 36 offer had been made by the Defendant and at trial, that offer was beaten. We know that Part 36 does not apply to the Small Claims Track, but what of the period that Birmingham v Lee is deemed to apply?
Did I mention that there was also an interim application made by the Defendant in which it had been successful and costs had been reserved to the trial judge?
What did the Judge decide?
The starting point was that the Claimant would have been entitled to their costs from the first protocol step up to completion of works, pursuant to Birmingham v Lee. However, the Judge decided that, in this Claimant’s case, this could only extend to the point of allocation, at which point Small Claims Track rules applied. It made no difference that the allocation transpired to have been made under the false belief that works had been completed, or substantially completed. The matter had been allocated as such, and that was that. The effect of Birmingham v Lee was cut short by the allocation to the Small Claims Track. A lesson to Claimant representatives to get clear and up-to-date instructions on completion dates.
However, given the Defendant had beaten a Part 36 offer (made pre-allocation), it was entitled to its indemnity costs post-expiry, despite the Claimant ultimately winning the claim. The Part 36 consequences trumped Birmingham v Lee, but they did not trump allocation. As such, the Defendant - having anticipated this as one of the likely outcomes – had an indemnity schedule prepared covering the relevant period, and costs were duly assessed and awarded.
Whilst consideration was given to whether the Part 36 costs consequences could extend to the date of completion of the works, this was quickly - and properly - dismissed given: (a)the court had already decided that Birmingham v Lee could only apply up to allocation and after that Small Claims Track costs rules took over, and (b)if that was the case, the longer the works took, the better position the Defendant would be in as regards costs, which could not be right.
The Claimant would have been entitled to their standard costs from the first protocol step up to expiry of the offer, had the representative filed a relevant costs schedule on her behalf, which they - unfortunately - had not. This left the Judge with no option but to award the Claimant’s issue fee alone. As a side note, there was an expert’s fee incurred during this period and had the Claimant asked for this it would have likely been awarded, but they neglected to do so. Another less onto representatives to consider all potential costs outcomes and prepare schedules accordingly.
The final stage was to consider the costs post-allocation. Given Part 36 does not operate on the Small Claims Track, the Defendant’s entitlement to indemnity costs effectively evaporated, and given the Claimant’s success in the action, they were entitled to her Small Claims Track fixed costs incurred post-allocation. This was the hearing fee.
And what of the Defendant’s successful interim application? The application had been made post-allocation which, thankfully, made this decision rather more straightforward. Although a valiant attempt (if I say so myself) was made to argue for costs under CPR 27.14(2)(g), the Judge found that there were no grounds for a finding of unreasonable conduct and there was no order for costs on the application.
In summary, despite their success at trial, the Claimant walked away with a cost order for the issue fee and hearing fee only. There are a number of lessons that come out of this mind-bending tale of overlapping cost rules. Not least, that costs should not be an after-thought; where arguments could get complicated, consider all possible outcomes and prepare accordingly.
To discuss the issues identified above, or to instruct Charlotte on your disrepair matter, please contact her clerk Jamie Kyte on jamie@kbgchambers.co.uk.
