Birmingham City Council v Lee

In a housing disrepair claim governed by a pre-action protocol, the claim for costs arises when the protocol claim is advanced, not only when proceedings are issued. If the landlord repairs after receiving the protocol letter, removing the specific-performance claim and causing the later damages claim to fall within the small claims track, the court may order reasonable pre-repair costs on the fast-track basis under the Civil Procedure Rules 1998. The order prevents compliance with the protocol from depriving a justified claimant of costs and guards against manipulation. It should ordinarily specify the period and be conditional on liability. Later costs remain governed by the allocated track, and all recoverable costs remain subject to proportionality.

The appeal arose from a housing disrepair claim by a secure tenant against Birmingham City Council. After receiving a protocol letter, the Council carried out most of the repairs. The tenant then issued proceedings claiming consequential damages only, valued between £1,000 and £5,000. The parties accepted that the damages-only claim fell within the small claims track.

A Deputy District Judge declined to make a special costs order. On appeal, His Honour Judge MacDuff QC reserved pre-allocation costs for consideration at trial under CPR 44.9(2). The Council appealed, raising the interaction between the housing disrepair protocol, track allocation and pre-allocation costs.

Disposition. The Court allowed the Council’s appeal only to the limited extent of varying the costs order. The appeal otherwise failed.

1. Track allocation. Under the special housing-disrepair rule in Civil Procedure Rules 1998 CPR 26.6(1)(b), the presence of a live claim for an order requiring repairs can affect allocation. Once the repairs had been completed and no specific-performance claim remained, the ordinary monetary rule applied under CPR 26.6(3), making the damages-only claim a small-claims case.
2. Effect of the protocol. For costs purposes, the claim was advanced when the tenant invoked the protocol. The protocol’s structure showed that a justified claim should be settled with reasonable costs calculated by reference to the track that would have applied while the repair claim remained live.
3. Pre-allocation costs. Under CPR 44.9(2), read with CPR 44.11 and Practice Direction paragraph 15.1, the court could make an order protecting reasonable costs incurred before allocation. The court’s powers in that period were not confined by the special costs rules of the allocated track.
4. Appropriate order. The preferable order was that the claimant have costs in the cause on the fast-track basis up to 26 September 2006, the date by which the repairs were completed. That entitlement was conditional on establishing liability. Costs incurred after that date remained governed by the small claims track. If liability failed, the claimant would receive no costs.
5. Alternative arguments. The unreasonable-behaviour provision in CPR 27.14(2)(g) was not a satisfactory general solution, since determining whether settlement conduct was unreasonable would require a trial and undermine the protocol. Nor was there a sufficient evidential basis for deciding the issue by reference to access to justice or the funding of such claims.

Costs guidance. Fast-track costs remained subject to proportionality and careful assessment. The Court left the recoverability and level of any success fee open, and stated that solicitor-prepared schedules were not automatically reasonable where comparable work could be done more cheaply by a building or surveying professional.

• Court of Appeal (Civil Division), [2008] EWCA Civ 891: allowed the Council’s appeal to the limited extent of replacing the order with a conditional fast-track costs order up to completion of the repairs.
• Birmingham County Court: His Honour Judge MacDuff QC allowed the tenant’s appeal from the Deputy District Judge and ordered that pre-allocation costs be reserved for consideration at trial under Civil Procedure Rules 1998 CPR 44.9(2).
• Deputy District Judge: declined to make a special order for pre-allocation costs.