Dilapidations – Award of damages – Costs – Claimant landlord obtaining damages in respect of dilapidations on termination of lease – Claimant seeking costs – Whether award just exceeding defendant’s CPR 36 offer providing basis for departing from general rule on costs – Claim allowed in part
The claimant landlord sought damages for dilapidations against the first defendant on the termination of a lease. In December 2011, the first defendant made an offer of £1m which was not accepted by the claimant. In May 2013, the court made an award in favour of the claimant in the sum of £900,000, limited by section 18(1) of the Landlord and Tenant Act 1927 to the value of the diminution of the reversion. In addition, the claimant was awarded the agreed cost of schedules together with interest totalling £1,058,768.00: [2013] EWHC 1161 (TCC); [2013] PLSCS 109.
The court was then asked to consider the issue of costs. It was agreed that there had been no offer under CPR 36 which had any automatic costs consequences. The claimant argued that there was no reason to depart from the general rule that it should be entitled to its costs in full against the first defendant.
If interest was added to the sum of £900,000 and £20,320.40 up to 13 January 2012, the last date of acceptance of the CPR 36 offer, the sum awarded to the claimant exceeded the CPR 36 offer by £3,637.90, representing a very small percentage of the sum offered. Therefore the court considered whether to apply the principle that, where there was an offer under CPR 36 which was nearly but not quite sufficient, if the other party rejected that offer outright without any attempt to negotiate, it might be appropriate to penalise the second party in costs: Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC); [2008] PLSCS 256.
Held: The claim was allowed in part.
(1) Under CPR 44.2(4), in deciding what order to make the court had to have regard to all the circumstances including: (a) the conduct of all the parties; (b) whether a party had succeeded on part of its case, even if that party had not been wholly successful; and (c) any admissible offer to settle made by a party which was drawn to the court’s attention, and which was not an offer to which costs consequences under CPR 36 applied.
(2) The principle in Multiplex no longer applied to CPR 36 and should not be applied as a special “near miss” rule through CPR 44.2(4)(c). If there was an unreasonable refusal to negotiate then that was a matter which came within the circumstances which the court could take into account under CPR 44.2(4)(a). A “near miss” offer could not generally add anything to what otherwise would be conduct in the form of unreasonable refusal to negotiate. To do so would seek to base an exercise in discretion on offers which neither party made at the time but which, with the benefit of hindsight, one party should have made and the other party should have accepted. In any event this was not a case where the fact that the defendant made an offer under CPR 36 which was inadequate, albeit by a very small margin, and that the parties did not thereafter negotiate and reach an agreement or put in CPR 36 offers which were effective meant that the court should depart from the general principle in CPR 44.2(2)(a) that the unsuccessful party would be ordered to pay the costs of the successful party: Johnsey Estates (1990) Ltd v Secretary of State for the Environment, Transport and the Regions [2001] EWCA (Civ) 535; [2001] 2 EGLR 128 considered.
(3) In the present case, the CPR 36 offer, which was very near to but still below the sum awarded to the claimant, should not affect the costs order. This was not a case where the offer should be treated as having similar costs consequence to a successful CPR 36 offer nor should it lead to a different costs order because, on the facts, there was no unreasonable refusal to negotiate by the claimant. It was not a case where the court should enter into speculation as to what might, or should have happened as a result of negotiations. The defendant had failed by a small margin to make a CPR 36 offer which provided it with the costs protection it was seeking.
(4) In those circumstances it fell to the court to assess costs by reference to the other factors in CPR 44.2(4)(a) and (b). Significant costs were spent in relation to the claimant’s assertion that it intended to carry out the works, on which issue the claimant failed and for which the defendant was entitled to an order for costs in its favour. In addition there was a small element of costs which should properly be awarded in favour of the defendant in relation to its success on the issues which remained and the court determined on the schedule of dilapidations. Otherwise, the defendant had not properly undertake a pre-action process to make it clear what their case was on the schedule of dilapidations and diminution in value. However, in the event that did not have a costs impact but rather neutralised a number of points made by the defendant in relation to the claims for dilapidations and diminution in value put forward by the claimant. Taking account of all the circumstances, the appropriate order for costs was one which reduced, by a percentage, the order for costs in favour of the claimant. In all the circumstances, the defendant would be ordered to pay the claimant 80% of its costs to be assessed on a standard basis, if not agreed.
Judith Jackson QC (instructed by Thomas Eggar LLP) appeared for the claimant; Nicholas Dowding QC and Elizabeth Fitzgerald (instructed by Shulmans LLP) appeared for the defendants.
Eileen O’Grady, barrister
Hammersmatch Properties (Welwyn) Ltd v Saint-Gobain Ceramics and Plastics Ltd and another
Dilapidations – Award of damages – Costs – Claimant landlord obtaining damages in respect of dilapidations on termination of lease – Claimant seeking costs – Whether award just exceeding defendant’s CPR 36 offer providing basis for departing from general rule on costs – Claim allowed in partThe claimant landlord sought damages for dilapidations against the first defendant on the termination of a lease. In December 2011, the first defendant made an offer of £1m which was not accepted by the claimant. In May 2013, the court made an award in favour of the claimant in the sum of £900,000, limited by section 18(1) of the Landlord and Tenant Act 1927 to the value of the diminution of the reversion. In addition, the claimant was awarded the agreed cost of schedules together with interest totalling £1,058,768.00: [2013] EWHC 1161 (TCC); [2013] PLSCS 109.The court was then asked to consider the issue of costs. It was agreed that there had been no offer under CPR 36 which had any automatic costs consequences. The claimant argued that there was no reason to depart from the general rule that it should be entitled to its costs in full against the first defendant. If interest was added to the sum of £900,000 and £20,320.40 up to 13 January 2012, the last date of acceptance of the CPR 36 offer, the sum awarded to the claimant exceeded the CPR 36 offer by £3,637.90, representing a very small percentage of the sum offered. Therefore the court considered whether to apply the principle that, where there was an offer under CPR 36 which was nearly but not quite sufficient, if the other party rejected that offer outright without any attempt to negotiate, it might be appropriate to penalise the second party in costs: Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC); [2008] PLSCS 256.Held: The claim was allowed in part. (1) Under CPR 44.2(4), in deciding what order to make the court had to have regard to all the circumstances including: (a) the conduct of all the parties; (b) whether a party had succeeded on part of its case, even if that party had not been wholly successful; and (c) any admissible offer to settle made by a party which was drawn to the court’s attention, and which was not an offer to which costs consequences under CPR 36 applied.(2) The principle in Multiplex no longer applied to CPR 36 and should not be applied as a special “near miss” rule through CPR 44.2(4)(c). If there was an unreasonable refusal to negotiate then that was a matter which came within the circumstances which the court could take into account under CPR 44.2(4)(a). A “near miss” offer could not generally add anything to what otherwise would be conduct in the form of unreasonable refusal to negotiate. To do so would seek to base an exercise in discretion on offers which neither party made at the time but which, with the benefit of hindsight, one party should have made and the other party should have accepted. In any event this was not a case where the fact that the defendant made an offer under CPR 36 which was inadequate, albeit by a very small margin, and that the parties did not thereafter negotiate and reach an agreement or put in CPR 36 offers which were effective meant that the court should depart from the general principle in CPR 44.2(2)(a) that the unsuccessful party would be ordered to pay the costs of the successful party: Johnsey Estates (1990) Ltd v Secretary of State for the Environment, Transport and the Regions [2001] EWCA (Civ) 535; [2001] 2 EGLR 128 considered.(3) In the present case, the CPR 36 offer, which was very near to but still below the sum awarded to the claimant, should not affect the costs order. This was not a case where the offer should be treated as having similar costs consequence to a successful CPR 36 offer nor should it lead to a different costs order because, on the facts, there was no unreasonable refusal to negotiate by the claimant. It was not a case where the court should enter into speculation as to what might, or should have happened as a result of negotiations. The defendant had failed by a small margin to make a CPR 36 offer which provided it with the costs protection it was seeking.(4) In those circumstances it fell to the court to assess costs by reference to the other factors in CPR 44.2(4)(a) and (b). Significant costs were spent in relation to the claimant’s assertion that it intended to carry out the works, on which issue the claimant failed and for which the defendant was entitled to an order for costs in its favour. In addition there was a small element of costs which should properly be awarded in favour of the defendant in relation to its success on the issues which remained and the court determined on the schedule of dilapidations. Otherwise, the defendant had not properly undertake a pre-action process to make it clear what their case was on the schedule of dilapidations and diminution in value. However, in the event that did not have a costs impact but rather neutralised a number of points made by the defendant in relation to the claims for dilapidations and diminution in value put forward by the claimant. Taking account of all the circumstances, the appropriate order for costs was one which reduced, by a percentage, the order for costs in favour of the claimant. In all the circumstances, the defendant would be ordered to pay the claimant 80% of its costs to be assessed on a standard basis, if not agreed.Judith Jackson QC (instructed by Thomas Eggar LLP) appeared for the claimant; Nicholas Dowding QC and Elizabeth Fitzgerald (instructed by Shulmans LLP) appeared for the defendants.Eileen O’Grady, barrister