Courtwell Properties Ltd v Greencore PF (UK) Ltd [2014] EWHC 184 (TCC)

Case No HT-12-375[2014] EWHC 184 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 4 th February 2014
Before
MR JUSTICE AKENHEAD
Between
COURTWELL PROPERTIES LIMITEDClaimantGREENCORE PF (UK) LIMITEDDefendant
Stephanie Barwise QC (instructed by Shulmans LLP) for ClaimantJoanne Wicks QC (instructed by WH Lawrence) for DefendantHearing Hearing date: 24 January 2014
JUDGMENT
[1]It might have been hoped that the parties to this relatively uncomplicated leasehold dilapidations dispute, who had settled the case by acceptance of a Part 36 Offer, could have resolved the outstanding issue of costs without recourse to the Court. Instead, a one day hearing was called for to address an application by the Claimant for indemnity costs. The summary costs bills for this exercise total nearly £100,000 inclusive of VAT; both parties have deployed Leading Counsel. 12 witness statements have been lodged comprising some 120 pages of text and over 550 pages of exhibited evidence. There has been unavoidably more than 5 hours of judicial reading time. Whilst the Claimant is entitled in this case to come to Court and seek indemnity costs, what it can not be allowed to do is to act in a disproportionate way when it comes to present its application. It is noteworthy that the near £100,000 expended on this application would probably more than account for the difference between the Claimant’s indemnity and standard costs. The Background[2]Courtwell Properties Ltd (“Courtwell”) is the sub-lessee of long (125 year) leases on three blocks of industrial premises, Nos. 3, 4 and 6-8 Missouri Avenue, Salford. In effect, Greencore PF (UK) Ltd ("Greencore”) was the sub-sub-lessee to Courtwell in respect of each such demise. Greencore, having occupied the premises itself for some time, in turn had sub-let to Paramount Foods (“Paramount”) who used the premises as a bakery. Greencore’s sub-sub-leases expired on 1 October 2010 (Unit 4), 12 December 2010 (Unit 3) and 31 March 2011 (Units 6-8). In April 2010, Courtwell’s then surveyors prepared three schedules of dilapidations relating to alleged breaches of repairing and maintenance governments; the total remedial work cost was said to be £1,774,000.[3]Mr Guy, a building surveyor and Associate Director of CBRE, retained by Greencore, visited the site in September 2010 on two occasions and wrote to Beaumont Lord on 28 October 2010 saying: “…From these visits, it is clear that the current tenants have no intention vacating the units and indeed there is more evidence to suggest that they are staying in these units indefinitely. In this regard, if the tenant has no intention of vacating the premises and the terms under which they are now occupying the premises prove a commitment to the site, then your client will have incurred no loss of the units and there would be no claim. As such, we require the following information from you before we can conclude our initial responses. Can you please confirm:• Your client’s intentions for the units… Also, can you please confirm whether you have instructed the Landlord to carry out a Section 18 Valuation of the properties…”• Your client’s intentions for the units…[4]There being no response for over three months, Mr Guy wrote again on 10 February 2011 in similar terms. Again there was no response except that Courtwell’s solicitors wrote on 2 March 2011 to him saying that they would respond in due course. Greencore’s solicitors wrote on 12 April 2011 to Courtwell’s solicitors saying that:
“…we consider that the statutory cap on damages put in place by Section 18 (1) of the Landlord and Tenant Act 1927 will play a significant part in any claim that your client might seek to pursue. If it is your client’s intention to pursue a claim, it would be helpful (and appropriate) to set out now your client’s and Paramount Foods Limited’s intentions for the premises generally. We look forward to hearing from you in that respect, but, in any event, please provide copies of any correspondence (either before or after the lease expiry) date between your client and Paramount concerning Paramount’s continued occupation…”
[5]It seems to be the case that from about this time the lines, probably unnecessarily, began to be drawn between the parties because Courtwell’s solicitors replied:
“…it is not entirely clear to us whether Mr Guy is retained as a valuation expert or as an expert witness in the field of building surveying. Mr Guy has previously stated in correspondence, in his expert opinion, Section 18 (1) will apply and that goes further to state that his opinion is that there will be no loss whatsoever. We would anticipate that your client’s expert witness would not be so bold as to make such a statement without having given the matter full and proper consideration and therefore, it would appear that there is a fundamental difference of opinion between the parties…”
They did not respond to the query about their client’s intentions relating to the property until 4 May 2011 saying that they were not aware of there "in fact being any correspondence between our client and Paramount regarding their future intentions for the property". As appeared later, there was relevant correspondence including offers and counter-offers. They were told that Mr Guy was a building surveyor and that a valuation expert would be instructed later if necessary (see letter dated 17 May 2011 from Greencore’s solicitors).[6]For reasons which are not clear, in May 2011 Courtwell retained a new surveyor, Mr Firn, who prepared new schedules of dilapidations for each property, costed by a quantity surveyor. A Mr Clarke prepared a capital diminution valuation pursuant to Section 18.[7]Mr Firn and Mr Guy made contact in September 2011 and it is fair to say that the relationship between them was not good. I can not determine on the papers whose fault that was. I am certainly not in a position to determine whether Mr Guy or indeed Mr Firn were guilty of some form of professional misconduct. Part of the almost festering sore was whether or not Mr Guy had given advice about valuation in circumstances which, being a building surveyor and not a valuer, he was not in a position to give. Greencore’s solicitors tried to clear this up by letter dated 25 November 2011 to Courtwell’s solicitors from which time it must have been reasonably clear to all concerned that Mr Guy was not a valuer, that rightly or wrongly the assertion that there was no loss related to whether or not Paramount remained in occupation and that Greencore was not asserting as a matter of fact that there was no actual loss but that would be for the court to decide.[8]With no warning, Courtwell’s replacement solicitors sent a letter of claim purportedly pursuant to the Dilapidations Pre-Action Protocol on 26 June 2012 which contained the revised dilapidations schedules, a quantified demand and valuation reports for each unit. The quantum claimed, now based on capital diminution rather than the cost of remedial works, had come down to some £700,000. On 23 August 2012, they sent Greencore’s solicitors a reminder and asked to be told what Greencore’s position was.[9]Greencore’s solicitors responded in early September 2012 saying that, because the diminution measure was less than the cost of the works, it would be sensible for the valuers to meet to narrow issues and to "gauge whether the claim can be settled without the need for litigation". They asked for access for their valuer to inspect premises. Perhaps unsurprisingly, given the new schedules, the fact that they related to three properties and the impending August holiday period, Greencore and its professional team were unable to respond within the 56 day period mentioned in the Protocol.[10]Courtwell’s solicitors responded on 24 September 2012 repeating their apparent belief that Mr Guy had opined two years before that there was no loss and that there would therefore be little to be achieved by the valuers meeting going on: “In the absence of any response to the Schedules of Dilapidations and quantified demands within the timescale set out by the CPR protocol and our instructions are to press forward with the matter." They did not offer access to Greencore’s valuers to inspect the premises.[11]Greencore’s solicitors response dated 3 October 2012 doubtless ratcheted up what was becoming a poor relationship between solicitors by suggesting that Courtwell’s solicitors’ letter was "disingenuous, ignoring much of what we have told you previously"; they repeated what they had said earlier and confirmed that they had other individuals at CBRE as valuers. There was a detailed reply the following day to which there was a reply on 19 October 2012 which made it clear that there would be a response to the dilapidations schedules within the next two weeks. The two weeks estimate was not achieved.[12]Courtwell issued its proceedings in the TCC on 15 November 2012. Ms Barwise QC for Courtwell, who has only recently become involved, together with counsel for Greencore, Miss Wicks QC, have jointly prepared a helpful chronology and list of those involved which I adopt in an adapted form below:a. A. People involved Role Claimant Defendant Solicitors(1) Mace & Jones(2) Shulmans: Michael Watson, (1): Squire Sanders: W Lawrence (2) WH Lawrence: William Lawrence Counsel up to trial K Reynolds QC, (1) T Harry (2) J Davey and J Wicks QC Expert Building Surveyor (1) Mr Lord, Beaumont Lord (2) Keith Firn, Datum Building Surveyor (1) Chris Guy, CBRE (from Sep 2010-July 2013) (2) Oliver Thomas, CBRE (from July 2013) Expert Quantity Surveyor Andy Reynolds, Rider Levett Bucknall Guy Higginbottom, Faithful & Gould Expert Valuer Surveyor Ian Clarke, Jones Lang LaSalle Garry Hicks, CBRE Sarah Gardner, CBREb. B. Chronology Date Event 1.1.10 Lease end date, Unit 4 20.7.10 Mace & Jones for C serve Schedules of Dilapidations on D prepared by Beaumont Lord Sept 2010 Mr Guy instructed as building surveyor for D 28.10.10 “No loss” letter, Mr Guy to Beaumont Lord 12.12.10 Lease end date, Unit 3 17.1.11 Shulmans instructed for C 10.2.11 “no loss” letter, Mr Guy to Beaumont Lord 31.3.11 Lease end date, Units 6-8 c.12.4.11 Squire Sanders instructed as solicitors for D 4.5.11 Mr Firn instructed as building surveyor for C 13.7.11 Mr Reynolds instructed as quantity surveyor for C 8.10.11 Mr Clarke instructed as valuation expert for C 26.6.12 C serves schedule of dilaps, quantified demand and valuation report 20.9.12 Mr Hicks inspects units 13.11.12 Particulars of Claim 15.11.12 Claim Form Issued 23.11.12 C serves proceedings; Claimant offers to Mediate 21.12.12 Defence 20.2.13 D’s Part 36 offer of £225,000 12.4.13 CMC: Stuart-Smith J- Directions given for agreeing costs budgets 17.4.13 D’s costs budget 19.4.13 C’s costs budget undated C’s submissions re costs budgets 23.4.13 D’s submissions re costs budgets 7.5.13 Order of Stuart-Smith J on costs budgets (handed down at PTR on 04.10.2013) C’s budget approved at £411,171 D’s budget approved at £285,860 15.5.13 Meeting between valuation experts 5 & 6.6.13 2-day expert witness meeting between building surveyors (Mr Firn and Mr Guy) 26.6.13 Meeting, Ms Gardner and Mr Clarke 3.7.13 D’s solicitor to C’s solicitor advising of need to change building surveyor expert 9.7.13 Mr Firn writes to Court 11.7.13 D’s application to change building surveyor and amend directions timetable 19.7.13 C’s application for specific disclosure relating to terms of appointment of expert witnesses 23.7.13 Order of Akenhead J: D is given permission to change building surveyor expert; dates in timetable extended. 13-14.8.13 2-day meeting of building surveyors (Mr Firn and Mr Thomas) 21.8.13 Meeting of valuers, Ms Gardner and Mr Clarke 28.8.13 Telephone discussion of valuers, Mr Hicks and Mr Clarke 30.8.13 Joint statement from QS experts 30.8.13 Joint statement from valuation experts 4.9.13 Mr Firn writes to Court 13.9.13 Mr Firn’s building surveyor expert report 13.9.13 Mr Thomas’ building surveyor expert report 19.9.13 Mr Reynolds’ QS expert report 20.9.13 Mr Higginbottom’s QS expert report 26.9.13 Mr Hicks’ valuation expert report 27.9.13 Mr Clarke’s valuation expert report undated Questions raised by C of Mr Thomas 3.10.13 Amended Particulars of Claim 4.10.13 Pre-Trial Review before Stuart-Smith J: D has permission to amend defence to recognise diminution in value; C has permission to file a letter/statement from its building surveyor expert commenting on any matters contained in draft joint statement attached to report of D’s building surveyor expert which are of concern to him 4.10.13 D’s Part 36 offer of £550,000 inclusive of interest 11.10.13 C’s Part 36 offer of £800,000 inclusive of interest 17.10.13 D’s Calderbank offer of £625,000 inclusive of interest 18.10.13 Amended Defence 23.10.13 C’s revised costs budget 23.10.13 Mr Firn’s Addendum Report 24.10.13 (09.59) Timothy Perkin and Thomas Webb of CBRE appointed as receivers of C by Nationwide Building Society 24.10.13 Meeting, C’s solicitor and Philip Odlum of D 25.10.13 Receivers resign 25.10.13 Notice of acceptance of Part 36 offer 1.11.13 Application for indemnity costs and to exceed costs budget 8.1.14 Application served on D’s solicitors by email (exhibits in post) 20.1.14 W/s of D in opposition to C’s application 22.1.14 w/s of C in response[13]So far as the pleadings are concerned, the Particulars of Claim were primarily predicated, damages-wise, upon capital diminution in relation to each property with minor claims being made for various costs and fees. The Defence attached responsive schedules (prepared by Mr Guy) in relation to the dilapidations schedules attached to the Particulars of Claim. In relation to the damages claimed it was denied “that any loss flows from any" established breach of covenant. That was supported by a statement of truth signed by Mr Lawrence of Greencore’s solicitors.[14]Mr Guy had to be replaced as the building surveyor expert because he moved firms and his new employers were unwilling to allow him to be deployed. He was replaced by Mr Thomas of CBRE in July 2013. Prior to this, there had been a fair amount of contact between Mr Guy and Mr Firn and the relationship if anything had deteriorated, with Mr Firn complaining that Mr Guy had not produced his 2010 survey notes. The tone of the email traffic can be seen in several from Mr Firn to Mr Guy: “Your email beggars belief…” (4 June 2013 18.00) Forgive my bluntness but what utter rot…you are being unduly reticent and have dragged your heels and such conduct frustrates timely progress and attendance to duties” (4 June 3013 21.41)[15]Mr Thomas and Mr Firn met on the usual without prejudice basis in August 2013 and it seems that, unfortunately, relations between them soured. They were unable to produce a joint statement because, although apparently good progress had been made towards a final draft, Mr Thomas wished to add a number of paragraphs which Mr Firn believed involved the introduction of "advocacy statements". Mr Firn wrote to the Court on 4 September 2013 explaining that the experts had been unable to meet the 31 August 2013 deadline for the production of joint expert statements.[16]Mr Clarke met with Mr Hicks and/or his assistants on four occasions between May and August 2013 and they did produce a joint statement within the court timetable but it did not address specifically what each was saying in relation to the actual differences between them on the final capital diminution figures. On 27 September 2013, valuation export reports were exchanged with Mr Clarke supporting a figure some £200,000 higher than had been pleaded by Courtwell and Mr Hicks accepting in effect a capital diminution of £212,000.[17]As can be seen from the Chronology above, the case settled in October 2013 about a week before the due trial date because Greencore accepted the Courtwell Part 36 offer dated 11 October 2013 which, although e-mailed on that date was not formally served until some four days later. This Application[18]No adequate explanation has been provided by Courtwell or its solicitors as to why its application for indemnity costs, although issued on 1 November 2013, was not served until 8 January 2014. It may be reasonably inferred from the sheer volume of supporting evidence and from the summary cost bill provided by the solicitors for the work that preparation of the statements took a very long time. Nothing particularly turns on the lateness save that when, unsurprisingly, Greencore took some time to provide its responsive evidence and serve it on 20 January 2014, Courtwell’s solicitors wrote via e-mail to the Court raising the possibility of an adjournment and the fixing of a two-day hearing. My e-mail response was:
“This was a claim for just over £700,000 which was settled belatedly for £800,000. The Claimant issued its application for indemnity costs and for an order that it could depart from its costs budget on 1 November 2013. One day was set aside for the hearing on 24 January 2014. For reasons which are not clear, the three witness statements supporting this application, dated 30 December 2013, 1 January 2014 and 8 January 2014 were obviously not served until some date I assume in the first two weeks of January. The Defendants have today served five witness statements. I would be reluctant to adjourn this long-standing fixture, particularly since the TCC lists are full until June. I would be most reluctant on a proportionality basis to allow two days of court time to deal with applications such as these. I can however see that the Claimant should have the opportunity to respond to the Defendant’s latest statements and that for the sake of good order that would need to be done by no later than 9 am on Thursday to enable all parties to prepare for the hearing on Friday.”
They were able promptly to provide their responsive statements on the evening of 22 January 2014[19]Having accordingly had sufficient time to read and digest the substantial amount of documentation evidence provided and assisted as I was by the extremely helpful and focussed skeleton arguments of Leading Counsel from each side, I indicated to the parties that in the interests of proportionality the oral hearing could be tailored down to 2½ hours. Each Counsel was able to accommodate this.[20]Essentially, Courtwell’s arguments seeking to justify the imposition of indemnity costs order come down to three or arguably four grounds:(a) failure on the part of Greencore to comply with the Dilapidations Pre-Action Protocol,(b) failure on the part of Greencore to mediate,(c) the maintaining of a positive denial of there being no loss, and(d) the conduct of Greencore’s experts. I will address these arguments and the challenges to them in the Discussion part of this judgment. The Law[21]CPR Part 36.10 deals with the costs consequences of a Part 36 offer:
“(1) Subject to…paragraph 4(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the cost of the proceedings up to the date on which notice of acceptance was served on the offeror… (3) Costs under paragraphs (1) and (2) of this rule will be assessed on the standard basis is the amount of costs is not agreed. (4) Where- (a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or (b) a Part 36 offer is accepted after the expiry of the relevant period, if the parties do not agree the liability for costs, the court will make an order as to costs.”
Part 36.9 makes it clear that a Part 36 offer "is accepted by serving written notice of the acceptance on the offeror”. (a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or (b) a Part 36 offer is accepted after the expiry of the relevant period,[22]So far as indemnity costs are concerned, there are numerous authorities which address the circumstances in which these may be ordered. A helpful if not absolutely exhaustive summary was given by Mr Justice Coulson in Elvanite Full Circle Ltd v Amec Earth & Environmental (UK) Ltd [2013] EWHC (TCC): 16. The principles relating to indemnity costs are rather better known. They can be summarised as follows:(a) Indemnity costs are appropriate only where the conduct of a paying party is unreasonable "to a high degree. 'Unreasonable' in this context does not mean merely wrong or misguided in hindsight": see Simon Brown LJ (as he then was) in Kiam v MGN Ltd[2002] 1 WLR 2810.(b) The court must therefore decide whether there is something in the conduct of the action, or the circumstances of the case in general, which takes it out of the norm in a way which justifies an order for indemnity costs: see Waller LJ in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson[2002] EWCA (Civ) 879.(c) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. But the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may well lead to such an[23]To this can be added a number of other specific and general points:(i) The discretion to award indemnity costs is a wide one and must be exercised taking into account all the circumstances and considering the matters complained of in the context of the overall litigation (see Three Rivers DC v the Governor of the Bank of England [2006] EWHC 816 (Comm) and Digicel (as above).(ii) Dishonesty or moral blame does not have to be established to justify indemnity costs (Reid Minty v Taylor[2002] 1 WLR 2800).(iii) The conduct of experts can justify an order for indemnity costs in respect of costs generated by them (see Williams v Jervis [2009] EWHC 1837 (QB)).(iv) A failure to comply with Pre-Action Protocol requirements could result in indemnity costs being awarded.(v) A refusal to mediate or engage in mediation or some other alternative dispute resolution process could justify an award of indemnity costs. Discussion[24]There is no doubt, and it is accepted by both parties, that the Court is left with a discretion under CPR Part 36.10(4) because, technically, the Part 36 Offer from Courtwell, although sent to and received by Greencore’s solicitors more than 21 days before the trial, it was not formally served until 4 days later because Greencore’ solicitors were not then authorised to accept service by e-mail. But for that, Courtwell would have been limited by the rules to standard costs. I do not regard this as a determining factor because the Court would have had an unfettered discretion with regard to indemnity costs if for instance the offer had not been accepted and it had had to produce a judgment after a contested trial.[25]The Court in this case has not adjudicated upon the issues in the case and has not heard the witnesses, expert or otherwise. It is therefore difficult at least to form a view as to what any judgment might have produced although it is likely in the light of the eventually exchanged expert evidence that there would have been judgment in a six-figure sum for Courtwell.[26]In considering the complaints about the conduct of Greencore’s experts, it is extremely difficult for the Court also to reach any sensible or indeed fair conclusion about the factual issues arising on this application, particularly relating to whether and to what extent either or even both sides’ experts behaved badly, discourteously, incompetently or without sufficient regard to the professional standards applicable to their respective professional disciplines. There have been some relatively serious charges laid particularly by Mr Firn in his voluminous evidence in this case, against Mr Guy and Mr Thomas; they include charges of unprofessional conduct and of disingenuity (i.e. lack of honesty and candour). One of the problems, although no privilege point is taken, is that all experts’ discussions are and were here required to be on a “without prejudice” basis and the experts were entitled to assume that their communications, oral or in writing, would not be subjected to scrutiny by the Court; whilst that would not excuse dishonesty or unprofessional conduct, it would or could explain why matters were not challenged in a way that they might have been if it was known that judicial scrutiny was to follow. It would broadly be wrong at least in this case to decide that such charges are established on the basis of the written evidence, particularly when Courtwell’s evidence is challenged and indeed criticisms are raised against Courtwell’s witnesses and evidence. All the Court can do is to form an informed impression as to conduct of the sort complained about.[27]What is clear is that Mr Firn and first Mr Guy and later Mr Thomas did not get on; that is at the very least unfortunate. Which if any of them was to “blame” for this can not readily be established as there are numerous conflicts in the written evidence. On the face of the contemporaneous evidence, for instance, one could be forgiven for forming the view that Mr Firn’s approach was hectoring, uncompromising and angled towards undermining the credibility particularly of Mr Guy, based on a view that he (Mr Firn) was almost invariably right and the other experts were wrong, evasive and disingenuous; against that, it is at least possible that the other experts were not as helpful and open as they might have been. It is possible for instance that Mr Firn was always right and Messrs Guy and Thomas were in the wrong. I can not decide these types of matters given the state of the evidence. An example is an extensive and almost tortuous exchange between Mr Firn and Mr Guy about Mr Guy’s unwillingness to produce for (or at) meetings between them the latter’s original survey notes of the buildings. Mr Firn explained forcefully that it verged on the unprofessional for Mr Guy not to produce them. Mr Guy said that he did not produce them because he understood that disclosure had not then occurred and he was concerned based on his dealings to date that Mr Firn might in effect misuse them. This seems at least arguably to have been blown out of all proportion by Mr Firn at the time. Given the impasse, it might well have been sensible to knuckle down to do what they were both charged with which was to go through the extensive schedules of dilapidations, and decide what dilapidations, remedial works and remedial costs they agreed or disagreed about, which was largely a mechanistic exercise. Another example was Mr Firn’s continuing concern if not preoccupation over almost two years with whether Mr Guy was or had been on a contingency fee basis of remuneration; my impression is that this was completely irrelevant to what Mr Firn had to do. An example relating to Mr Thomas who replaced Mr Guy and the almost angry complaints made by Mr Firn at the time and in his latest statements is the argument about the draft joint statement which, although largely agreed up to a certain point, was ultimately not agreed. The suggested inference is that, for almost nefarious purposes or subject to improper influence from client/solicitor or others, Mr Thomas went back on his near agreement by calling for various additions. Mr Firn was unbending in his refusal to allow any agreement if it contained Mr Thomas’ latest suggestions because he says that they involved “advocacy suggestions”. An example was Mr Thomas’ suggested draft that “if the flues are removed the plant and equipment beneath will be unable to function”. I can not conclude that Mr Thomas was acting as an advocate; he says that he added to the draft statement because he had reflected on the draft and thought that changes should be made. Even if Mr Firn thought that he was being an advocate, the joint statement could still have been finalised with Mr Firn’s comment that he believed that Mr Thomas’ statement was wrong for whatever reason he wished to advance; the statement is, after all to contain what the experts both agree and disagree about. Ms Barwise QC in oral argument placed most reliance upon criticism of Mr Hicks the Greencore valuer expert but I will address that in addressing the assertion that the “no loss” defence was hopeless.[28]I am not satisfied that Courtwell has established that there has been such poor conduct on the part of Greencore’s experts as to begin to justify an indemnity costs order; this is largely because I can not decide on clearly disputed versions of events and numerous meetings that they behaved badly.[29]I now turn to the complaint that there was a non-compliance with the Pre-Action Protocol. The Dilapidations Pre-Action Protocol came into effect on 1 January 2012, although it was preceded by a voluntary protocol upon which it was based. Relevant parts are:
“1.2 This protocol sets out conduct that the court would normally expect prospective parties to follow prior to the commencement of proceedings. It establishes a reasonable process and timetable for the exchange of information relevant to a dispute, sets standards for the content and quality of schedules and Quantified Demands and, in particular, the conduct of pre-action negotiations. 1.5 Where the court considers non-compliance, and the sanctions to impose where it has occurred, it will, amongst other things, be concerned about whether the parties have complied in substance with the relevant principles and requirements and is not likely to be concerned with minor or technical shortcomings (see paragraphs 4.3 to 4.5 of the Practice Direction on Pre-Action Conduct). 2.1 The protocol’s objectives are: 2.1.1 to encourage the exchange of early and full information about the dispute; 2.1.2 to enable the parties to avoid litigation by agreeing a settlement of the dispute before proceedings are commenced; and 2.1.3 to support the efficient management of proceedings where litigation cannot be avoided. 3.1 The landlord should send the tenant a schedule in the form attached at either Annex B or C. It should set out what the landlord considers to be the breaches, the works required to be done to remedy those breaches and, if relevant, the landlord's costings. 3.2 Breaches should be separated into relevant categories e.g. repair, reinstatement, redecoration etc. They should be listed separately in the schedule and should (where appropriate) identify any notices served by the landlord requiring reinstatement works to be undertaken. 3.3 Schedules should be sent within a reasonable time. What is a reasonable time will vary from case to case, but will generally be within 56 days after the termination of the tenancy. 3.4 The landlord may send a schedule before termination of the tenancy. However, if it does so, at the termination of the tenancy: 3.4.1 confirm that the situation remains as stated in the schedule; or 3.4.2 send a further schedule within a reasonable time. 3.4.1 confirm that the situation remains as stated in the schedule; or 3.4.2 send a further schedule within a reasonable time. 4.2 The Quantified Demand should: 4.2.1 set out clearly all aspects of the dispute, and set out and substantiate the monetary sum sought as damages in respect of the breaches detailed in the schedule as well as any other items of loss for which damages are sought. It should also set out whether VAT applies… 4.2.3 be sent within the same timescale for sending the tenant a schedule (see paragraph 3.3 above); and 5.2 The tenant should respond to the Quantified Demand within a reasonable time. This will usually be within 56 days after the landlord sends the Quantified Demand. 5.4 The Response should be endorsed either by the tenant or, where it is prepared by a surveyor, by the tenant’s surveyor. In endorsing the schedule, the tenant’s surveyor should have regard to the principles laid down in the Royal Institution of Chartered Surveyors’ Guidance Note on Dilapidations.”
[30]It is clear that Courtwell did not comply either with the words of the Protocol or the spirit. It did not serve its Schedules of Dilapidations or Quantified Demands within the 56 days or a reasonable time after the end of the termination of the tenancies. There is no real excuse; having dispensed with its first surveyors for no obviously good reason by early 2011, Mr Firn took almost 18 months to produce his version of the Schedules. There has been no effort to excuse this dilatoriness, albeit that it may well not have been the fault of Mr Firn personally. The whole object of timely production of the Schedules is so that contemporaneous checking can be made by both sides of the state of the buildings concerned. There is no excuse for the final 5-6 weeks delay before the Pre-Action Protocol letter of 25 June 2012 following its earlier production by Mr Firn.[31]The background to the service of the Schedules and Quantified Demands is simply that Mr Guy and Mr Firn had already fallen out and there was a lack of trust between them. For no obviously good reason, Mr Firn and Courtwell’s solicitors insisted on maintaining an assertion that Mr Guy had professionally unjustifiably given valuation advice; it was and became clear that he had not. This was clear from his 18 October 2010 and 10 February 2011 letters themselves. They had ignored Greencore’s requests for evidence about Courtwell’s intentions with regard to Paramount. They had, I assume unwittingly, misled Greencore about the important contacts that Courtwell had had with Paramount by saying that the solicitors were unaware of correspondence between Courtwell and Paramount.[32]Out of the blue, Courtwell’s solicitors served the three substantial Schedules of Dilapidations on 26 June 2012 on Greencore’s solicitors. It was an aggressive move. It was up to 14 months late. Commonsense would suggest that they should have sent the Schedules several months before proceeding with the Protocol letter. It was bound to be a case in which Greencore and its professional team would need substantially more than 56 days to respond. Whilst it is true that Greencore’s solicitors did not expressly make that point, they did suggest in early September 2012 that Greencore’ experts should be permitted to inspect; that request was simply ignored by the Courtwell team, which was not helpful. Courtwell’s solicitors rejected the sensible idea that the valuation experts meet; that was also not helpful because the Quantified Demand for the first time had accepted that capital diminution claim was the proper basis of evaluating Courtwell’s financial entitlement. It was clear at least by October 2012 that Greencore was trying to respond to the Protocol documentation. The detailed schedules eventually attached to the Defence shows that a substantial amount of work had been done and I am not surprised that it took some months.[33]I have formed the view that with regard to non-compliance with the Protocol, there was fault on both sides. The inflexibility and lack of co-operation was apparent on both sides. The suspicion and ill-feeling between the experts did not help. It would be wrong to take it into account in deciding whether to award indemnity costs.[34]In relation to mediation, the parties never mediated, which is at least unfortunate. The service of the Claim in November 2012 was accompanied by an offer to mediate. It would be fair to say that Ms Barwise QC for Courtwell (properly) did not “major” on this ground for indemnity costs. The correspondence shows that over the next 5 months the parties’ solicitors actually were reasonably co-operative about the idea but Greencore wanted to have disclosure of documentation about what Courtwell’s intentions had been and which had passed between it and Paramount. This suggestion was not strenuously resisted, albeit Courtwell’s solicitors were reluctant to give early disclosure of this part of its client’s documentation. In early April 2013, Greencore’s solicitors suggested a form of expert determination or early neutral evaluation by reference to a barrister on what seemed to be an important issue then emerging, namely whether the valuation could take into account the fact that Paramount had gone into administration in October 2012 or should be based on what was known or intended at the end of the tenancies. They wrote also “without prejudice save as to costs” on 9 April 2013 in this context that their client was not inclined to increase its Part 36 Offer made in February 2013, saying that “mediation is not appropriate now, but may become so in due course”. Courtwells’ solicitors came back the following day saying that they were prepared to mediate but did not agree to a reference to a barrister. No further steps were taken by either party to further the idea of mediation.[35]I doubt whether mediation would have succeeded then or even later. Disclosure was not to come until June and by then the relationship between the building surveyors was very poor. Mr Firn was reluctant to negotiate. In the light of all this history, the failure to mediate is not a factor to justify the award of indemnity costs.[36]The final ground relied upon to justify indemnity costs is the pleading and maintenance of a “no loss” defence by Greencore in circumstances in which it is suggested that Greencore and its legal and expert team must or should have known or realised that it had no such defence. It is an easy jump to make in a case such as this to assert that because eventually Greencore settled at £800,000 inclusive of interest it must have known at the start that its defence was weak or non-existent. The settlement is explicable for the reasons given by Greencore’s witnesses in this case that, broadly, it was known by October 2013 that the Defendant would “lose” because its valuation expert had accepted a diminution of just over £200,000 but there was a pragmatic and commercial appreciation that there were risks which Greencore did not want to bear.[37]I do not consider that the denial of loss in the Defence was such that it can be described as “out of the norm in a way which justifies an order for indemnity costs”. It needs to be looked at in the context of proceedings which had been rushed into by Courtwell following their non-compliance with the Protocol (see above). There had been no disclosure by Courtwell at that stage. There was an arguable case that in effect no prudent landlord such as Courtwell would ever consider repairing or reinstating much of the alleged dilapidations and changes made when Paramount was likely to stay there as a tenant. It could all legitimately have been considered as a matter of degree and, if many of the alleged dilapidations were found to fall into that category, the Section 18 valuation could (reasonably arguably) be nil or very much lower than claimed. I see no reason to disbelieve the evidence of Mr Lawrence that the Defence was the product of “input from both Mr Guy and Mr Hicks, in consultation with [him] and our then Counsel…” (Para. 27 of statement). I find it implausible to hold that all four of these people acting in concert or even individually acted in an unprofessional and possibly even dishonest way. The Defence was not so implausible in this regard that no legal and professional team should have put it forward. It is not implausible that the “no loss” defence was a joint view, the grounds for which were contributed to by the experts, solicitors and Counsel.[38]Ms Barwise QC suggested that she could not criticise the professional conduct or integrity of Counsel or Mr Lawrence but reserved her primary criticism for Mr Hicks. Her primary point was that Mr Hicks was equivocal in his witness statement about his involvement at the time. He said at Paragraph 7 of his statement that the valuation points pleaded in the Defence were based on “discussions which he had had with his colleagues from the Manchester office, especially Sarah Gardner”, going on to say, like Mr Lawrence, that there was input from the lawyers and comments from Mr Guy. She put the point as high as saying that Mr Hicks had acted in an unprofessional way which no reasonable valuer should have done. I can not decide that even by inference or on an impressionistic basis. Interestingly, there is no such evidence from Mr Clarke supporting such a charge.[39]It follows from the above that in my view and discretion this is not a case for indemnity costs on any or any combination of the factors relied upon by Courtwell.[40]One miscellaneous factor (about which there was a disproportionate amount of evidence, albeit limited argument) revolved around the belated appointment by Courtwell’s bank of receivers, who happened to be CBRE personnel, albeit employees other than the CBRE experts. There was then in the 48 hours prior to the acceptance of Courtwells Part 36 Offer a somewhat bizarre series of events with the receivers suggesting that in effect Courtwell’s solicitors were no longer instructed and a meeting in Dublin taking place between the solicitors at which the ramifications of the receivership were discussed. Courtwell’s problem with its bank was sorted out within hours, the receivership was rescinded, its solicitors remained in place and the case settled shortly thereafter. Ms Barwise QC properly accepted that she could not establish any conduct which would impact on her client’s indemnity costs application. Conclusion[41]Courtwell’s application for indemnity costs is refused but it will have, as Greencore accepts, its costs of the litigation assessed on a standard basis.[42]I have to say that, if Courtwell had succeeded, I would have been minded seriously to reduce its costs to reflect my serious concerns about the proportionality of the £42,000 costs bill (ex VAT). In cases where the parties have settled through the Part 36 procedure or otherwise but leave the judge to decide costs, particularly where indemnity costs are claimed, parties must act in a proportionate way. There can be few if any cases in which there should in effect be a trial of all or some of the settled issues in the case. Where the indemnity cost application depends on evidence which is likely to involve material conflicts of evidence, the applicant party needs to think long and hard about whether it is appropriate to pursue the application. The advent of new Counsel for the Claimant in this case did produce a more measured approach than the original application suggested might be pursued. The perceived need to rely upon (initially) three substantial witness statements and hundreds of pages of documents might have sent a warning signal that it was at best likely to be a difficult application to succeed upon, at least on all the grounds and facts relied on.

order

see, for example, Wates Construction Ltd v HGP Greentree Alchurch Evans Ltd[2006] BLR 45. (d) If a claimant casts its claim disproportionately wide, and requires the defendant to meet such a claim, there was no injustice in denying the claimant the benefit of an assessment on a proportionate basis given that, in such circumstances, the claimant had forfeited its rights to the benefit of the doubt on reasonableness: see Digicel (St Lucia) Ltd v Cable and Wireless PLC[2010] EWHC 888 (Ch).”

Cited in 8 later judgments