What is Birmingham v Lee about? And is it all that is cracked up to be?

I am showing my age here but I remember litigating many housing disrepair cases in the days before pre action protocols. The emphasis was on issuing proceedings quickly. We would send a brief ‘letter before action’, to the landlord, who was normally to the local council, setting out the issues. We would demand action with 7 days.There would normally be no response and we would immediately issue proceedings.

All of this changed with the arrival of pre action protocols and, in particular, the Housing Conditions Protocol. One aim of the protocols is to rein in the early issue of court proceedings. There is now a process to be followed involving a letter of claim and a 20-day response period. If a tenant issues proceedings too soon, there are costs penalties. In effect there is now a compulsory gap between the letter of claim and the issuing of court proceedings.

In the meantime, there are also rules dealing with the allocation of claims. Most Housing Lawyers will be familiar with CPR 26.6. The effect of this is best described by Hughes LJ in Lee v Birmingham City Council (see below) –

‘The effect of that is: providing there is a claim for specific performance a tenant’s claim in a disrepair case will be a fast-track case if either the cost of repairs or the consequential damages claim exceeds ￡1000. If on the other hand there is no specific performance claim, the ordinary rule in CPR 26.6(3) applies and the claim will only be a fast-track claim if its overall value exceeds ￡5000’ (now ￡10k)

All of this creates a problem for those advising tenants.

A letter of claim might be sent in a case which ticks all of the boxes for CPR 26.6. The landlord might then carry out the required work quickly. This is then followed by a refusal to pay costs on the basis that we now have a small claim. So, what started out as a reasonable, fast track case is now at risk of notional costs only. This is a consequence of the enforced gap.

Which brings us to Lee v Birmingham City Council [2008] EWCA Civ 891, a case that has been around for a long time but which is still largely misunderstood. Mrs Lee was a tenant of Birmingham City Council (BCC). The case started out as a simple housing disrepair claim. A letter of claim was sent by her solicitors. Shortly afterwards, the council did the work. At the time of the letter, the case was suitable for the fast track. Following the works, it was a small claim. There were then negotiations about damages. BCC refused to pay anything more than small claims costs. Proceedings were issued. The claimant made an application for an order that she be entitled to costs on the fast track, at least until the date repairs were completed.

The dispute was all about costs. In effect the claimant’s argument was that the protocol enforced a delay between writing the letter of claim and issuing the proceedings. By complying with the protocol, a tenant was prejudiced because a fast-track claim could become small claim leaving the tenant with little or no recoverable costs. The District Judge refused the application and decided that it was a small claim. On appeal HHJ McDuff reserved the question of costs to the trial judge but did make some helpful observations –

‘... solicitors in the community would not be prepared to take on these cases, saying to the claimant who came in through the front door; "I can't help you, because we have to follow the protocol - Birmingham City Council may well come in and do the repairs before we are allowed under the protocol to issue, and if they do that we go on to small claims track and we will be unremunerated for this work and will be looking for you to pay it". That in my judgment cannot be right. " ‘

And so to the Court of Appeal. It is worth noting that the amount of costs involved was low. The work had been done relatively quickly. But it was an issue of general importance.

The Court of Appeal overturned HHJ McDuff and found that he was wrong to reserve the issue to the trial. Hughes LJ said –

‘’Without some order as to the early-incurred costs, it would be open to a landlord who is in fact and in law liable for want of repairs to adopt a deliberate policy of omitting to repair until the protocol letter is received, but then of repairing without admission of liability so as to ensure that any subsequent court claim fell to the small claims track. The result of that would be that fast track costs which would otherwise have been due to the tenant would no longer be payable.

We do not say that this is what has happened here; it may well not be. But that very possible scenario illustrates the necessity for some order in relation to the costs of advancing the protocol claim. Moreover, quite independently of the possibility of any such deliberate manipulation of the process by a landlord, such an order is necessary if the protocol is not to operate as a means of preventing recovery of reasonably incurred costs.”?

The central point was –

“… it is no longer the case that a claim is only made (for costs purposes at least) when and if litigation is begun. On the contrary, the protocol requires a claim to be advanced initially in accordance with its terms, under a warning that there is likely to be a costs penalty if it is not … Its object is very clearly that, provided the claim was justified, it ought to be settled on terms which include the payment of the tenant's reasonable costs: and costs calculated according to the track which the claim would fall to if made by way of litigation.”

Mrs. Lee was entitled to costs ‘in the case’ on the fast-track basis up to the date the repairs were completed. This was an important decision in relation to recoverable costs where work is done following a protocol letter. But there still needs to be great care. She did not receive any costs of the main action at that stage It was "costs in the case". Liability was disputed. She still had to win the claim to get anything. Hughes LJ again –

“That means that if she wins, she will have fast-track costs of making the claim up to that date. If she fails, she will have nothing”

The costs of winning would be limited. For the remainder of a contested action it would be small claims only. In other words there are still tough decisions to make if you find yourself in this position. If you issue a claim, and it is contested, you might get standard fast track costs to the date work was done. But after that you are stuck with almost nothing.

That is why I ask if Birmingham v Lee is all that it is cracked up to be. If there pre action costs are high, of if the prospects of settlement are high then it can be a helpful negotiating tool. But you need to factor into your risk assessment, the total costs that you might recover.

I have recenty presented a webinar on the subject of costs in Housing Conditions cases including Lee. A recording is available for a modest fee! DM me for details or email [email protected]