The Cost of Disrepair Claims Some Good News

The cynical view of disrepair claims is that they can be more about costs than repairs. It is not unusual to be faced with very large claims for costs from tenants’ solicitors even in cases where damages are low. Conditional Fee Agreements can be used to fund claims that otherwise would never have been made. The success fees, the insurance premiums and the enquiry reports on top of the solicitors and surveyors fees add up to a lot of money. Money that otherwise could have gone towards maintaining the housing stock.

There is some good news for landlords in a decision handed down on 25 March 2004 from the Supreme Court Costs Office. In Bowen v Bridgend County Borough Council & Others the court ruled on costs claims in 11 disrepair cases. The tenants’ solicitors in all 11 cases were P D Associates, a firm well known to many defendant landlords.

All the cases were funded by Conditional Fee Agreements claiming a 100% success fee and supported by an after the event insurance policy issued by Fastrack Indemnity Ltd. That company went into administration in November 2003. The claims followed a familiar pattern. The CFAs were signed by tenants in August, September or October 2001. There was then a delay of about 10 months before a letter of claim was issued. The 11 cases were settled before trial and the claims for costs averaged about £8,000, including the success fee and the insurance premium.

The judgement gives an insight into how these disrepair claims were processed. Instructions came to P D Associates from CMS Investigations Ltd. They had already interviewed the tenants. As a result of this first interview CMS sent a questionnaire completed by the tenant and a video to P D Associates. The solicitors then sifted the cases into 3 categories, “yes”, “no” or “further information required”. The “no” cases were returned to CMS and P D Associates declined to take them further. The “further information required” cases would be reconsidered when additional information was supplied.

The “yes” cases were sent back to CMS and one of its representatives then made a second visit to the tenant. If willing to proceed, the tenant then signed a CFA with P D Associates, an insurance proposal to Fastrack Indemnity and an application for a finance agreement to First National Bank to pay for the disbursements. At the second meeting the person from CSM read out a 2 page document intended to provide the information required by the CFA Regulations to be given to the intending claimant. The CFA was then forwarded to P D Associates who contacted the tenant by telephone and went through a checklist form of advice. The solicitors then wrote to the insurers to incept the insurance policy and to the Bank to set up the finance.

The costs judge, Master O’Hare, has given a very detailed and considered judgement that goes into the background of the claims.

In summary, the main points of the decision are as follows:

• The CFAs were in breach of the Regulations and unenforceable
  The information given by the CMS representative on behalf of P D Associates was wrong because it put the responsibility for considering the insurance arrangements on the tenant and falsely suggested that the tenant was already bound to take out an insurance policy with Fastrack. The tenants were told that P D Associates were unable to discuss other legal expenses policies. In some respects the information given to tenants made no sense.
  These failures had a materially adverse effect upon the proper administration of justice. The solicitors “steered these Claimants into litigation which has caused them and the Defendant to incur unnecessary or unreasonable expenses. The solicitors knew or should have known that this scheme would be disadvantageous for their clients. The solicitors knew or should have known that litigation under this scheme was run in a disproportionate way. The solicitors knew or should have known that some of the costs they claim in successful cases are improper”. The judge could not have made his views much clearer than this.
• No reasonable claimant properly advised would have chosen this method of funding in preference to Legal Aid
  The test was whether the tenants acted reasonably in instructing a solicitor on CFA terms with insurance rather than instructing a legal aid solicitor. The choice made to participate in the Fastrack scheme was unreasonable. “P D Associates had not shown themselves to be adept at conducting housing disrepair cases”. The tenants should have been advised to rely upon legal aid.
• If CFAs enforceable the success fee would be 25%
  The success fee claimed of 100% could not reasonably be justified. The assessment of the success fee is a value judgement. In all the circumstances a reasonable success fee to take account of the risk element would be 25%.
• Costs of £4,000 incurred before allocation were plainly disproportionate
  It was unreasonable to incur base costs exceeding £1,000 excluding VAT before sending off a letter of claim. The tests to be applied were necessity as well as reasonableness.
• Fees paid to Fastrack Litigation Services Ltd. for a housing report and video disallowed
  A fee of £475.88 related to work done by CMS representatives. The tenants were not contractually bound to pay these fees. The work would have been done whether or not the tenant had decided to proceed with the claim.

The outcome of the judgement is that all P D Associates’ profit costs and some of the disbursements have been disallowed. Even if the judge had held that the CFAs were enforceable the costs payable would have been limited not to exceed £1,000 together with the costs of the assessment hearing. A mighty blow against the claimants in these 11 cases and a decision that holds out some encouragement for defendant landlords facing large claims for costs.

The time for the tenants to appeal the judgement does not start to run until 17 May 2004. We may not have heard the last of these 11 cases but whatever happens the decision must be the cause of great concern to the disrepair industry.

« Back to Newsletter archives