Birmingham City Council v Lee [2008] EWCA Civ 891 concerns claimant’s costs incurred while following the disrepair pre-action protocol.
It is not uncommon for a landlord to do repairs after an early notification letter, or letter of claim, but pre issue (not that common, but not uncommon). This leaves the claim as for damages only. Where repairs are outstanding, the small claims limit is £1000 in damages or cost of works. But a damages only claim hits the usual £5000 limit. There are the small claims unavailability of costs consequences, and there is no public funding for small claims. Thus, doing the repairs would often kill a disrepair claim. In the meantime, costs would have been racked up following the protocol steps – which are necessary, with a potential costs penalty for not doing so.
Lee decides that, given the nature of the protocol, a claim begins at the start of the protocol steps, not at the commencement of litigation. Pursuant to CPR 44.9(2), the Court has the power to make a costs order for pre-allocation period, unrestrained by the limitations of whatever track the claim is allocated to.
Where a claim at pre-action protocol stage would be a fast-track claim (works not done), the Court can make an order that the Claimant have their costs, up to the date of the works being done, at the fast-track rate. This is still subject to establishing notice, liability etc., so will likely be ordered as costs in the cause.
The Claimant should apply for such a costs order with allocation questionnaires.
Now, although this leaves the claim ongoing as a small claim, with the remaining costs issues that this implies, it does mean that:
a) the principle is established for the purposes of negotiating costs in settlements, even pre-issue. There is the stick of a threat to issue and seek the costs order to use.
b) depending on the specifics of the case, it may be possible to continue a case that was initially publicly funded on a CFA basis, once it turns into a small claim. The statutory charge for the pre-action period should be covered by the pre-action fast-track costs order, meaning that the client’s damages won’t vanish into the statutory charge. But that is going to take careful evaluation of the client’s benefit.
In the last 5 years I’ve only had 3 disrepair claims actually fight, and they were all between private parties, so apologies if this turns out to be a sily question.
How will the following scenario play out?
(a) pre-action letter sent – CLS funding for tenant
(b) landlord does the necessary works – CLS funding for tenant
(c) claim issued – CLS funding for tenant
(d) allocated to the small claims track – CLS funding stops
Now, all those costs remain “in play” and at fast track rates (see Birmingham CC v Lee) with liability for costs to be determined at the end of the trial. But, as the claim is now a small claim, CLS funding has stopped. How is the claim funded after this? A CFA won’t work will it, due to the limited powers of the court to make costs awards on the small claims track?
J
Public funding wouldn’t last further than stage b. One couldn’t amend the certificate to issue if it was clearly going to be a small claim.
CFA could work – not on the usual understanding that loser pays costs, but in a CFA the costs are the Claimant’s responsibility anyway, just usually recovered from the Defendant. So it would be possible, if the client was to benefit sufficiently, to arrange a CFA against future damages.
Usually this is not attractive for anyone concerned, for obvious reasons, but where the alternative is, for example, to see settlement damages swallowed up by the statutory charge because of D’s refusal to meet pre-action costs, it may be.
If the only reason for small claims litigation was D’s refusal to meet the pre-action costs and in view of this judgment, one could also seek summary costs award in small claims on the basis that D had behaved completely unreasonably.
Thanks – that makes things slightly clearer. So, in effect, the claimant tenant agrees to pay the costs out of their damages, less the pre-issue costs, which should be recovered on the fast track basis from the defendant? Hmm… that seems quite close to a contingency fee (in effect, if not in substance)
Well, a CFA is close to a contingency fee, except it is legal ;-)
Ha! :-)
There’s nothing, in principle, wrong with a CFA where there could be no expectation of recovering costs, *provided* that the CFA is entered into on the usual basis, i.e. costs only recovered on a particular outcome and then with an uplift.
That would mean, in practice, that the costs would come out of the Claimant’s damages, but that does happen anyway in many cases.
Where it differs from a contigency fee is that costs payable to Claimant’s solicitors under the CFA are not determined by the level or size of the damages (eg as a percentage of them).
Of course there is nothing wrong with capping costs at a percentage of the damages (we have the Fatortame litigation to thank for this) nor varying that cap depending on the level of damages received.
Does the principle in Birmingham City Council v Lee 2008 cover pre-action costs in a retrospective disrepair cases?
**By retrospective disrepair case, I mean, cases where the disrepair no longer exists but the tenant has suffered a significant amount of disrepair and there was a breach of (including, but not limited to) Section 11 L&T 1985.**
If you mean where the claim is damages only right from the start, and is for historic disrepair, no it doesn’t. The point in Lee was that the claim would have been fast track due to the extant disrepair, up to the point the works were done. So a pure damages only claim would have to be worth fast track from the start.
Hi, I’m very curious about a case I’m considering right now…
The claim is against a landlady for nearly 3 years of disrepair.
The claim is not for work to be carried out as the landlady has given Section 21 notice to tenant.
The claim is for £1000 personal injury, and £8999 for damages (belongings and inconvenience)
Some work has been carried out for repairs, but not all of it ( the two major causes of disrepair have not been dealt with.)
Can this be pursued via the small claims track?
We can’t give advice on individual cases, I’m afraid.
Hi Can you help with a query?
If a case would have had a specific performance element at the outset but the cost of the work is under £1000 and the estimate of damages is less than £1000 can they still get fast track costs up to the repairs being completed as it would only have been a small claim if issued on day 1?
Works are completed following the letter of claim and expert reports costing £800 and damages would only be for a short period for damp to one wall say for 1 year, then could they claim any costs? Would it depend on the damages assessed by the court at the end of the hearing?
Would depend on allocation, surely. If allocated to small claims and nothing has changed (including outstanding works) arguably always small claim.