Legal Watch:Property Risks & CoverageJune 2015Issue 006

In this issue:

• Refusal of relief from sanctions

• No permission to amend claim

• No double recovery in neighbour case

• Freak accident or deliberate fire?

Contact usIf you would like any further information on the cases or articles featured in this issue, please contact:

Andrew WallenT: 020 7469 6286E: Andrew.Wallen@greenwoods-solicitors.com

Alison MatthewT: 0844 245 4312E: alison.matthew@plexuslaw.co.uk

Marise GellertT: 020 7469 6249E: Marise.Gellert@greenwoods-solicitors.com

IntroductionThis month we cover yet another case in which the court refused to grant relief from sanctions. Thanks go to Andrew Wallen for his article on Simon Cockell (t/a Cockell Building Services) v Martin which demonstrates the danger of leaving things to the last minute.

On the subject of leaving things to the last minute, we look at yet another decision made in the case of CIP Properties (AIPT) Limited v Galliford Try Infrastructure Limited, EIC Limited and others (previously featured in November 2014 and April 2015) where a late attempt to amend the claim was refused. Gary Wicks, a partner at Plexus Law, is acting for the third party, EIC Limited.

Thanks also go to Alison Matthew for her article on Raymond & Raymond v Young, a case which deals with an award of damages following a long campaign of harassment, trespass and nuisance by a neighbour.

Sticking with the subject of neighbours, we briefly look at the unreported case of Graves v Brouwer in which the Court of Appeal decision on a deliberately started fire claim is currently awaited.

National Annual Property Risks and Coverage Conference

A last thank you to all of those who contributed to making our second conference such a great success last month; the speakers, those who attended and those who did the hard work behind the scenes to organise the event.

Our own video presentation as to the impact of the Insurance Act 2015 was particularly well received. Instructive and rather more engaging than any ordinary ‘stand up’ presentation. We have now developed this into a complete training package for underwriters and claims handlers and, if any clients feel that a stimulating, engaging workshop as to the impact of the Act in 2016 delivered by us on an ‘in-house’ basis would be of

value, then we would be very pleased to arrange that. Please contact myself in the first instance.

Richard Houseago

Head of Property Risks and Coverage

01

Refusal of relief from sanctions

BackgroundFollowing a house fire the claimant (‘C’), a builder, was engaged by the defendant (‘D’) to carry out repair works. During the course of those works D became concerned about the level of cost and ordered C to stop work so that forensic accountants could investigate. It was concluded that C had overcharged by £238,000. C was prevailed upon to sign a document agreeing this, with D then obtaining a charge over C’s partner’s house.

Subsequently, C alleged that he had been forced, under duress, to agree to D’s course of action. C then alleged that he had in fact been underpaid in the sum of £242,000. C issued a claim to recover these monies. D counterclaimed for defective workmanship, alleging that his insurers would have to pay in the order of £1.6m to put right the works.

D’s counterclaim was very poorly pleaded, leading the court, at a hearing, to direct that it be re-pleaded “with the particularity to be relied upon at trial” by 21 January 2015. However, the primary focus of the hearing was to deal with an extensive application by D for specific disclosure as to whether C was in partnership with his father, which was to be heard as a preliminary issue on 23 January.

However, on 20 January, D indicated that he would be discontinuing his claim in respect of the partnership allegation, with the specific disclosure having not turned up any evidence in support of his allegation. D failed to serve his amended counterclaim. C’s solicitors wrote to D’s solicitors on more than one occasion seeking the amended pleading, but did not receive a response, leading them to issue an application for an unless order on 17 February. An order was made requiring D to serve the amended counterclaim by 20 March, failing which it would be struck out.

D’s solicitors sent the amended defence and counterclaim to C’s solicitors, by email on 20 March and purportedly to the court. Unfortunately, the court’s email address was mistyped, a mistake not noticed until the following week, meaning the

Simon Cockell (t/a Cockell Building Services) v Martin Holton [2015] EWHC 1117

document was not filed at court and the counterclaim was automatically struck out.

D applied for relief from sanctions on 25 March.

Ordinarily, the court would have granted such relief in circumstances where the only mistake was a mistyped email address. However, this was not the only error that had occurred and, further, C maintained that D would have to further amend its amended defence.

Upon consideration by the court, it was believed that the amended defence did fall far short of being fully particularised as envisaged by the original direction. In addition to that, it was apparent that different versions of the witness statement made by D’s solicitors had been filed at court and served on C’s solicitors. The hearing was therefore adjourned and D’s solicitors were ordered to file an affidavit dealing with the discrepancies between the two witness statements. This was duly complied with, and the court accepted the explanation given, allowing it to move on to consider the proposed amended defence and counterclaim.

The court proceeded to work through each of the allegations contained within the counterclaim, relating to the building, including the roof, the chimneys, the gutters, windows and the electrical works. The court noted, in so doing, that all of C’s works had by then been stripped out leaving little of relevance for the experts to consider such that the only information available was that which was pleaded in the counterclaim.

The court considered this to be highly relevant as C could not instruct an expert until the amended counterclaim had been served. Therefore, given the work had been stripped out, it was all the more important that the pleading should set out D’s case in clear and detailed terms. The analysis undertaken by the court demonstrated that the amended counterclaim lacked clarity, was, in places, incoherent and generally fell far short of the degree of particularisation that would be expected at trial.

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The judgmentThe Court of Appeal in Denton v TH White Barnes Ltd [2014] EWCA 906 set out a three stage test to be applied when considering an application for relief from sanctions and the court therefore was bound to apply that test to this particular matter:

i) The seriousness and significance of the breach

The court reiterated that the amended counterclaim fell far short of what would be required at trial. The court went on to state that even if it was simply an application to amend a counterclaim where a trial was three to four months away, it would have still needed strong persuasion to allow it. C still did not know what case it had to meet and the court considered there was now simply insufficient time for C to do so. In essence where the trial date was set for July, there was a substantial difference between filing the amended counterclaim by 21 January, as originally ordered, and on 20 March.

The court concluded that this was not simply a technical breach that could be considered de minimis. D had been in breach of the original order for some two months, such that the breach was both serious and significant. Accordingly the court moved on to the second stage of the Denton test.

ii) The reason why default occurred

D’s solicitors had failed to set out the reasons for the default in the original application for relief from sanctions. It was only after the court ordered a witness statement to be filed subsequently that dealt with when D’s solicitors had received instructions and why the correspondence from C’s solicitors had been ignored. That witness statement indicated that there were issues in obtaining instructions from D’s insurers, but would not waive privilege on such reasons. It also suggested that there was confusion between D’s insurers and loss adjusters regarding who was to provide the information to the solicitors. The correspondence had been ignored, simply because there were no instructions to reply to it from D’s insurers.

The court held D’s insurers to have ultimate responsibility for the conduct of the litigation. The explanation offered by D’s solicitors was wholly unsatisfactory and D’s solicitors had simply not taken any steps to obtain the necessary information in good time from the insurers. Matters were left to the last minute and there was no explanation as to why it took D’s solicitors as long as it did to obtain the information necessary to plead the amended counterclaim.

iii) To evaluate all the circumstances of the case to enable the court to deal justly with the application

The court considered that this third stage really answered itself. Given the timescales, C would be irretrievably prejudiced were he required to meet the counterclaim in time for trial. Under CPR r.3.9 the court had to consider the need:

(a) for litigation to be conducted efficiently and

(b) to enforce compliance with rules, practice directions and orders

In relation to (a), were the court to allow the counterclaim to be advanced on the basis of the amended counterclaim that had been served would almost certainly cause the trial date to be adjourned. As to (b) D’s insurers were more than cavalier and had clearly shown no regard for the orders of the court.

Whilst depriving D’s insurers of a hefty counterclaim was no small thing, the court concluded that the insurers had “brought the prejudice on their own heads”. C had a claim for £1.6m hanging over him for over a year and the amended counterclaim remained manifestly defective. C had not contributed at all to the breach and the counterclaim was therefore to remain struck out. In order to limit the prejudice to D by striking out the counterclaim, the court did, however, permit D to use the amended defence and counterclaim, to a limited extent, as a defence to C’s claim.

...the insurers had “brought the prejudice on their own heads”.

Simon Cockell (t/a Cockell Building Services) v Martin Holton [2015] EWHC 1117

03

CommentIt is clear that this was a matter where there was a catalogue of errors by the defendant’s solicitors, not helped by the defendant’s insurers failing to provide necessary information and instructions on a timely basis. It is yet another example of a claim where things were left to the last minute and mistakes were made. Moreover, it highlights the necessity to take court orders seriously and to comply with them. The courts will, insofar as they can, refuse to adjourn trial dates, especially in the TCC, and sanctions will therefore be severe as a result of non-compliance.

04

No permission to amend claim In the case of CIP Properties (AIPT) Ltd (Claimant) V Galliford Try Infrastructure Ltd (Defendant) & (1) EIC Ltd (2) Kone Plc (3) DLG Architects LLP (4) Damond Lock Grabowski & Partners (A Firm) (Third Parties) [2015] EWHC 1345 (TCC) the claimant property owner applied, some eight months prior to the trial date, for permission to amend the particulars of its claim against the defendant building contractor in respect of alleged defects in its building.

BackgroundThe claim arose out of alleged defects at a large development on the site of a former children’s hospital in Birmingham and the claim against the defendant main contractors (‘G’) was based on the actual/estimated cost of remedial work, in the sum of £18m. G then issued third party proceedings against the architects and various of their sub-contractors.

The proposed amendments

The claimant sought to amend the particulars of claim and the lengthy schedules attached to it. The amendments were said to be ‘voluminous’ but the parties categorised them as follows:

i) Category 1 consisted of the amendments relating to the remedial scheme, and therefore the quantum of the claim

ii) Category 2 concerned the addition of further allegations of breach, which generally related back to the breaches already pleaded

iii) Category 3 concerned two new claims, one in respect of the car park smoke ventilation system, and one in respect of alleged defects in the roofs

The parties were able to reach agreement in respect of the amendments in categories 1 and 2, subject to a significant ‘shunt’ in the timetable leading up to the trial without the trial date being affected but the two new claims in category 3 were disputed. That new timetable left no room for manoeuvre.

The TCC judge described the case as having “an unhappy procedural history”. The pre-action protocol letter alleging several defects, including one affecting the car park ventilation system was sent in 2011. That complaint included a defect affecting the smoke ventilation system. However, when proceedings were issued in 2013, no complaint was made as to the smoke ventilation system.

At the Case Management Conference (‘CMC’) in October 2014 a timetable was set for a trial to be held in January 2016. At that CMC leading counsel then appearing for the claimant informed the court and the other parties that there were no plans to amend the claim. However it appears that, ever since that date, the claimant had been working on the detailed amendments, leading to applications finally being made in April 2015 to amend, seeking to add new claims regarding the smoke ventilation and alleged defects to the roof, on the basis that it had accidentally omitted the claims from its pleadings.

JudgmentIn summarising the background, the TCC judge reminded the parties that one of his concerns had been in relation to the costs already incurred and to be incurred in this case. There had already been a dispute in relation to costs management and in his view it was “critical that the trial date of 18 January 2016 be maintained” as any adjournment of the trial date would increase the costs significantly and any semblance of proportionality would then be lost.

“critical that the trial date of 18 January 2016 be maintained”Having listened to detailed and extensive argument on the law, the TCC judge summarised the correct approach, in his opinion, to the amendments, with reference to the authorities cited to him as follows:

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(i) The lateness by which an amendment is produced is a relative concept (Hague Plant Ltd v Hague and others [2014] EWCA Civ. 1609). An amendment is late if it could have been advanced earlier, or involves the duplication of cost and effort, or if it requires the resisting party to revisit any of the significant steps in the litigation (such as disclosure or the provision of witness statements and expert’s reports) which have been completed by the time of the amendment.

(ii) An amendment can be regarded as ‘very late’ if permission to amend threatens the trial date (Swain-Mason and others v Mills and Reeve LLP [2011] EWCA Civ. 14), even if the application is made some months before the trial is due to start. Parties have a legitimate expectation that trial dates will be met and not adjourned without good reason (Andrew Brown and others v Innovatorone PLC and others [2011] EWHC 3221 (Comm)).

(iii) The history of the amendment, together with an explanation for its lateness, is a matter for the amending party and is an important factor in the necessary balancing exercise (Brown; Wani LLP v Royal Bank of Scotland PLC and another [2015] EWHC 1181 (Ch)). In essence, there must be a good reason for the delay (Brown).

(iv) The particularity and/or clarity of the proposed amendment then has to be considered, because different considerations may well apply to amendments which are not tightly-drawn or focused (Swain Mason; Hague Plant Ltd v Hague and others [2014] EWCA Civ. 1609; Wani).

(v) The prejudice to the resisting parties if the amendments are allowed will incorporate, at one end of the spectrum, the simple fact of being ‘mucked around’ (Worldwide Corporation Ltd v GPT Ltd and another [1998] WL1120764), to the disruption of and additional pressure on their lawyers in the run-up to trial (Bourke and another v Favre and another [2015] EWHC 277 (Ch)), and the duplication of cost and effort (Hague Plant) at the other. If allowing the amendments would necessitate the adjournment of the trial, that may be an overwhelming reason to refuse the amendments (Swain Mason).

(vi) Prejudice to the amending party if the amendments are not allowed will, obviously, include its inability to advance its amended case, but that is just one factor to be considered (Swain Mason). Moreover, if that prejudice has come about by the amending party’s own conduct, then it is a much less important element of the balancing exercise (Archlane Ltd v Johnson Controls Ltd [2012] EWHC B12 (TCC)).

He then proceeded to deal with the two amendments in turn, on the basis that one was an argument that had been raised in pre-action protocol correspondence and one was not.

The smoke ventilation amendment

The judge formed the view that this was a late amendment because permission was sought for it at a time when pleadings were closed and disclosure had been completed. It mattered not that it was still eight months to the trial. Permission for it would threaten the trial date.

He was of the view that the position in respect of the car park ventilation system had clearly been reconsidered after the pre-action protocol stage, because it was put into a completely different form when the claim was pleaded in the proceedings. The only fair inference must be that, whilst the whole issue was being reconsidered, somebody decided that the smoke ventilation claim should not be pursued. This is not a situation where a sentence or a paragraph of the original claim was simply missed out; the whole item was deliberately changed for the purposes of the litigation.

He noted that a large team of lawyers and experts were said to have combed through the defects case to enable them to plead the case properly. This was evident from the earlier costs management hearing.

Even if the claim was accidentally omitted, it was clear that the claimant realised that omission in October/November 2014, possibly earlier, and yet no application to amend was made until April 2015. No explanation had been given for that delay.

The amended claim was not, as the judge described it “tightly drawn” and it was “crying out for further particularisation”.

06

The principal prejudice to the defendant and additional parties was that the trial date would be lost. Whilst there would be prejudice to the claimant, any such prejudice was the claimant’s own fault.

An argument was raised by the claimant that if the amendment was refused, they could just issue fresh proceedings but the TCC judge was far from convinced this was the case, bearing in mind it appeared that the claimant had apparently chosen not to pursue this part of the claim earlier, despite having been in a position to do so for some time and took the view that this potentially amounted to an abuse of process (Henderson v Henderson [1843] 3 Hare 100).

On that basis, permission to amend in respect of the smoke ventilation claim was refused.

The roof defects amendment

The arguments in this regard were slightly different, as no claim had previously been made for the roof defects. However, it was clear that the problems with the roofs were known months before the proceedings were issued in October 2013, so there was no reason why the claim in respect of the roofs was not included in the original claim.

The problems were certainly known (and known to be extensive and substantial) by September 2014, which was still prior to the CMC in October 2014 when leading counsel for the claimant indicated there were no amendments to be made to the claim.

In the judge’s view the claimant had “without explanation or justification, allowed itself the maximum possible time to make its new claim, thereby ensuring that the defendant and the relevant additional parties have insufficient time to respond to it within the existing timetable”.

Once again, the judge took the view that the proposed amendment lacked proper particularity; that the defendant and additional parties would be prejudiced by the need to move the trial date (which he said was the “single

the claimant had “without explanation or justification, allowed itself the maximum possible time to make its new claim, thereby ensuring that the defendant and the relevant additional parties have insufficient time to respond to it within the existing timetable”. most important factor militating against allowing this amendment”); that the delay in making the allegations was wholly the responsibility of the claimant and finally, that there was a prima facie case that the roof defects claim would also be caught by the rule in Henderson v Henderson particularly because of the sheer length of time this roof leak problem had been apparent to the claimant but was not the subject of a formal claim.

On that basis, this amendment was also refused.

CommentNotwithstanding it was still some eight months before the trial, the judge took the view that this was a very late amendment. Whether the position would have changed, had a more detailed explanation been given for the delay and had the amendment been pleaded in more detail, is not clear but it is clear that the history of this case would not have helped the situation.

07

The lesson to be learned from this case is to ensure that all possible elements of the claim are presented and pleaded as soon as possible and if subsequent amendments do need to be made to the pleaded case, they should be notified to the other party/parties, set out in as much detail as possible and any application to amend should be made as early as possible, to reduce any arguments in relation to prejudice.

08

Is it right for a court to make an award of damages for the diminution in value of a claimant’s property caused by nuisance, despite also granting a permanent injunction restraining the defendants from further acts of nuisance? May the court also make an award for distress and loss of amenity in addition to the award for diminution in the value of the property? These were the key points considered in the decision of (1) Peter James Raymond (2) Lesley Raymond v (1) Steven Frederick Young (2) Fiona Young [2015] EWCA Civ 456.

BackgroundMr and Mrs Raymond (the appellants) owned a cottage and Mr and Mrs Young (the respondents) owned the adjacent farmhouse. The farmhouse had originally been owned by the first appellant’s father but it was subsequently purchased by the respondents as a holiday home.

The respondents pursued a claim in nuisance to trial. During 12 days of oral evidence and 22 witnesses as to fact, the court heard that the first appellant had a “deep-seated aversion to those wealthy enough to afford a second home” and over a period of 40 years he and his family were responsible for “continuous acts of harassment, trespass and nuisance” against the respondents motivated by his resentment against the respondents’ acquisition of the farm as a weekend home.

The court found in the respondents’ favour and awarded damages of £155,000 for diminution in the value of their property, a total award of £3,600 for trespass and obstruction and a (composite) award of £20,000 for various acts of nuisance, which included damages for distress and loss of amenity. The court also awarded aggravated damages of £5,000 and indemnity costs.

The appeal The decision was appealed to the Court of Appeal on the basis that it was argued that the court was wrong to have made an award for diminution in value because the injunction was sufficient to prevent any future acts of nuisance. The award of indemnity costs was also appealed.

The appellants also argued that there was no evidence that the respondents would wish to sell their property in the foreseeable future and therefore damages in respect of loss of value of the property were unfounded.

Judgment on the appeal on the damagesThe Court of Appeal dismissed the appeal and upheld the judgment of the lower court in respect of the diminution in value. It held that it was correct to award damages for diminution in value to the property, as the appellants’ conduct was clearly not transitory. The grant of a permanent injunction was not likely to be treated by a prospective purchaser as a guarantee that they would not be subjected to the same treatment. The benefit of the injunction was personal to the respondents and would end on a sale of the property, such that any purchaser was faced with the prospect of having to bring fresh injunctive proceedings.

The grant of a permanent injunction was not likely to be treated by a prospective purchaser as a guarantee that they would not be subjected to the same treatment.

No double recovery in neighbour case

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However, the Court of Appeal found that it was wrong to make a separate award for £20,000 for loss of amenity, in addition to the award of £155,000 for diminution in value, as that amounted to a double recovery, as the sums were effectively alternate methods of calculating the diminution in the value of the respondents’ property and if damages were awarded for loss of capital value (as was the case here) then damages for loss of amenity should be excluded.

It was also not appropriate to make separate awards of damages for distress as opposed to loss of value, as that was still a double recovery, because damages for distress were not recoverable separately in nuisance. In the lead judgment, Lord Justice Patten said:

“The consequences in terms of personal distress or discomfort which the claimant may experience as a result of the nuisance are, as I have said, simply part of the assessment of the claimant occupier’s loss of amenity.”

Here, the distress suffered by the respondents was reflected in the damages awarded for diminution in value. On that basis, the damages were reduced by £20,000. The awards for damages for trespass and obstruction and the aggravated damages were unaffected and allowed to stand.

Judgment on the appeal on the indemnity costs The appellants asked the Court of Appeal to consider whether the award of indemnity costs was wrong in principle because, they argued, it should only be awarded when the court disapproved of the paying party’s conduct of the litigation, not the conduct which is the subject of the litigation. The appellants argued that, if indemnity costs were awarded based on the paying party’s conduct overall, then virtually every losing defendant would be required to pay indemnity costs.

The Court of Appeal upheld the order for indemnity costs on the basis of the appellants’ conduct in the litigation. Lord Justice Patten stated that it was right that indemnity costs were generally awarded when the paying party had conducted the litigation in a way which the court regarded

as ‘unjustified’. Here, the first instance court had found that the appellants had pursued unrealistic claims and assertions during the litigation. Their case remained throughout that the allegations made against them were unfounded or invented and they raised them as part of a defence which was false, with no prospect of success.

On that basis, the Court of Appeal saw no grounds for interfering with the decision to award costs on an indemnity basis.

CommentThe court has discretion as to costs pursuant to CPR Part 44 and it will have particular regard to (amongst other things) the conduct of all the parties both before and during the proceedings; whether the parties attempted to resolve the dispute; the value of the claim and the importance of the matter to all parties.

Here it is clear that the paying party raised claims and assertions and maintained a defence knowing them to be untrue throughout and that is exactly the type of litigation conduct that indemnity costs are there to penalise.

010

Freak accident or deliberate fire?The decision of the Court of Appeal is currently awaited in the unreported case of Graves v Brouwer, on the question of whether a homeowner should be held responsible for fire damage to his neighbour’s property, as a result of fire, started by him to destroy confidential documents, that spread to the neighbouring property.

BackgroundThe defendant/respondent, Mr Brouwer, started a small fire in the alleyway next to his property, in order to burn confidential documents. He asserted that the fire was “small and controlled” and he had set it in the concrete alleyway intentionally, as he believed there was no risk of it spreading from there.

Mr Brouwer claims he did his utmost to control the fire and doused the ashes with his garden hose. Shortly afterwards smoke was seen coming from the roof of the neighbouring property. He immediately sprayed his garden hose onto the roof eaves to try and extinguish the fire and shouted to the neighbours to get out of the property.

The property sustained substantial damage, requiring the neighbours to be out of their home for eight months.

The case went before the Central London County Court in July 2014, where the judge found that a flying ember must have started the fire next door and that it was a “freak accident” for which Mr Brouwer was not responsible and that he had taken all reasonable steps to extinguish the fire.

As her claim for the reinstatement cost of the property was unsuccessful, Mrs Graves was ordered to pay Mr Brouwer’s costs.

The appealMrs Graves has appealed the decision on the basis that Mr Brouwer should be held liable for the fire and resulting damage.

It appears that Mr Brouwer’s counsel has challenged the first instance finding that the fire started by Mr Brouwer started the house fire.

The case went before the Court of Appeal in April and judgment was reserved.

Comment Clearly this was a fire that was started deliberately but the fire was started in the alleyway between the properties and was not, therefore, a fire started on the defendant’s land that spread to the claimant’s land, so it is arguable that the authorities in that regard do not automatically apply. The defendant will still have a duty to take reasonable care and it appears that issue is at the heart of this appeal.

It is not known whether this was a subrogated recovery claim but this will presumably become clear once the appeal judgment is to hand.

We will report further as soon as the judgment has been handed down, assuming the case is not settled in the meantime!

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The information and opinions contained in this document are not intended to be a comprehensive study, nor to provide legal advice, and should not be relied on or treated as a substitute for specific advice concerning individual situations. This document speaks as of its date and does not reflect any changes in law or practice after that date. Plexus Law and Greenwoods Solicitors are trading names of Parabis Law LLP, a Limited Liability Partnership incorporated in England & Wales. Reg No: OC315763. Registered office: 12 Dingwall Road, Croydon, Surrey CR0 2NA. Parabis Law LLP is authorised and regulated by the SRA.

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