Lazari v London & Newcastle (Camden) Ltd

CPR 3.1 confers wide case-management powers which must be exercised to further the overriding objective, rather than to punish procedural default. The court may require a claimant or defendant to provide security under CPR 3.1, in addition to the powers under Part 25, but must consider access to justice, the party’s conduct, compliance with procedural rules and protocols, and the apparent strength of the case. The court should examine merits only to the extent necessary and should order security in clear cases. A payment-in condition under CPR 3.1(3) must attach to specific relief being granted; it cannot operate as a free-standing security-for-costs order. A payment into court may nevertheless be ordered under CPR 3.1(5) for unjustified procedural non-compliance, particularly where there is repeated default or want of good faith.

The claimant purchased a long lease of a flat from the defendant. The flat suffered serious overheating caused by defects associated with service pipes beneath it. The defendant carried out remedial works, but questions remained concerning their completeness and effectiveness.

The claimant applied for a conditional order requiring the defendant to pay £100,000 into court, with a sanction barring the defence if payment was not made. The application relied on the defendant’s procedural defaults, alleged lack of co-operation, financial position and emerging acceptance of responsibility for the basic defect. The central issues were whether CPR 3.1 and CPR 25.7 empowered the court to require payment into court, and what sum, if any, was justified.

1. CPR 3.1 gives the court wide powers to manage proceedings and further the overriding objective. Those powers supplement other powers under the Rules and the inherent jurisdiction. They are directed to securing the just, expeditious and fair conduct of litigation, not punishment, except insofar as CPR 3.1(5) addresses unjustified procedural non-compliance.

2. Following the principles in Olatawura v Abiloye [2002] EWCA Civ 998 and Huscroft v P&O Ferries Ltd [2010] EWCA Civ 1483, security may be ordered under CPR 3.1 in addition to Part 25. The court must remain alert to the risk of stifling a party’s claim or defence. Relevant considerations include procedural conduct, compliance with rules and protocols, apparent merits, the amount in dispute and incurred or prospective costs. The merits should be investigated only as far as necessary, and security based principally on weakness should be rare.

3. CPR 3.1(3) permits a payment-in condition only as a condition attached to specific relief being granted. It does not confer a general power to impose a free-standing payment-in order whenever the court makes procedural directions. The court’s power under CPR 3.1(5), directed to past unjustified non-compliance, is distinct.

4. The defendant had failed to co-operate with inspection and disclosure, served its defence late, made an unjustified without-notice application for an extension, and failed to provide a report required by an earlier order. Its counsel had also unequivocally accepted responsibility for the basic overheating defect, although other issues of liability and quantum remained disputed. The claimant therefore had a strong case for an interim payment and the defendant’s procedural conduct justified payment into court.

5. The court allowed the claimant to amend the application to rely on CPR 25.6 and 25.7. The threshold for an interim payment was met because the defendant had admitted liability to pay at least some damages and the claimant was likely to recover a substantial sum. An order under CPR 3.1(5), informed by CPR 25.7, was made for £30,000 to be paid into court within 14 days. The claimant received 75 per cent of the assessed costs of the application.

This was a first-instance application in the High Court. The judgment refers to an earlier order made by Mr Justice Edwards-Stuart on 24 October 2012 requiring co-operation and access in relation to remedial works.