Property Law Journal 526 April 2004

Use your powers wiselyPatrick Stell of FPD Savills argues that non-lawyers –such as surveyors – would be well-advised to consider the Pre-action Protocol and Part 36 of the CPR whendealing with dilapidation disputes

THE CPR AND SURVEYORS

W ith the introduction of theCPR in 1999 there was a sub-stantial fall in the number

of cases litigated, partly because the new rules empowered clients and non-lawyer professional advisers (egsurveyors) to settle disputes themselveswithout litigation, thereby saving legalcosts. Concepts embodied within theCPR such as the Pre-action Protocol andPart 36 offers made settling cases mucheasier. Whilst some disputes will alwayslitigate, Lord Woolf’s aim of reducingcosts and speeding up the litigationprocess has directly impacted on the role of the non-lawyer. The work of a

surveyor is thus now even more closelylinked to legal principles and procedure,particularly in areas such as dilapidationdisputes. Action (and non-action) at theearly stages can have lasting conse-quences – a point not understood by allsurveyors, even five years post-CPR.Much of their work is close to the incep-tion of a dispute, certainly before thelawyer is instructed, and often before theclient even realises there is a dispute.

The key aspects of the CPR for surveyorsToo many surveyors involved in dilapi-dation claims for landlords or tenants

still regard the rules of litigation as amatter that the lawyers deal with, onlyrelevant in the unlikely event that thedispute is not settled between them-selves at the pre-litigation stage. Such aposition can be dangerous. Even thoughvery few dilapidation claims are everlitigated (and even fewer end up attrial), surveyors must follow the rele-vant rules set out in the CPR.

The CPR have brought the whole lit-igation process back a stage. Previously,parties in a dispute at the pre-litigationstage could largely behave as theywished without fear of regulation. Nowparties and their professional advisers

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are bound by procedural rules thatgovern their behaviour at all stages of adispute. Many surveyors do not appre-ciate that they are empowered by theCPR to put opponents under intensepressure and thereby gain a significantcommercial advantage for their client.Opportunities are constantly missed.

The Pre-action ProtocolThe Protocol benchmarks the conduct ofparties and their advisers before courtproceedings, by reference to a very cleartimetable. Failure by a surveyor tocomply with the Protocol from the verystart of a dispute can be referred directlyto the judge subsequently. Most sur-veyors will be aware of the draftDilapidation Pre-action Protocol pro-duced by the Property LitigationAssociation. The Protocol is a specialistset of rules governing the timetable forthe exchange of information and contactbetween parties before litigation. Therecent RICS Guidance Note on dilapida-tion disputes (4th edition) suggests that:

Chartered Surveyors are encouraged touse [the draft Protocol] as a guide togood practice when addressing a termi-nal claim for dilapidations and to directtheir client’s attention to it.

The surveyor’s responsibilities arearguably even more onerous. The CPRPractice Direction relating to Protocolsstates that:

In cases not covered by any approvedprotocol, the court will expect the par-ties… to act reasonably in exchangingdocuments and information relevant tothe claim and generally in trying to avoidthe necessity for the start of proceedings.

This was confirmed by the LordChancellor’s Department, which pub-lished a paper entitled ‘A continuingevaluation of the Civil Justice Reforms’(August 2002), stating that:

The Practice Direction on Protocolsrequires parties to comply with the gen-eral spirit of the Protocols whatever thesubject of the claim.

The Protocol cannot be ignored – themessage is very clear!

Part 36The CPR comprises a total of 75 ‘Parts’,dealing with all civil litigation issuesfrom traffic enforcement to trial costs.Part 36 deals with offers by either side tosettle the issues at stake by way of anoffer, which is automatically ‘withoutprejudice save as to costs’. If the otherparty rejects that offer but fails to do

better at trial, there are serious costs andinterests penalties. Either party can makean offer at any stage but, importantly, theoffer can now be made before theclaimant (often the landlord in dilapida-tion disputes) issues court proceedings.

Pre-CPR, only the defendant couldmake an offer to settle (by way of a‘payment into court’), which had certainadverse costs and interest consequencesif wrongly rejected. Such a payment intocourt was only possible after proceed-ings were issued – ie often once the

dispute was at a fairly progressed stage,and certainly when lawyers wereinvolved as the principal advisersand/or negotiators. This meant thatpreviously it was a lawyer’s job, allow-ing the surveyor to be relatively safe inblissful ignorance. This has changed.With costs often running into tens ofthousands of pounds for a claim of just £100,000, the implications arepotentially serious. Under the CPR the surveyor representing the landlordor tenant has the opportunity (andarguably the obligation) to protect theirclient’s interests by making an earlyPart 36 offer well before proceedings are issued – if the circumstances are appropriate.

Since April 1999 the CPR have spefi-cally promoted such offers before casesare litigated, at a time when non-lawyers are often the principal adviser.Provided the clear rules of Part 36 arefollowed in respect of the terms of theoffer, the tactic should present no prob-lem for any surveyor. Since 1999insurance companies have saved sub-stantial sums through the timely use of

• The Property LitigationAssociation’s Dilapidation Pre-action Protocol can bedownloaded from:www.pla.org.uk/library.html.

• The RICS Guidance Note ondilapidation disputes can bepurchased at:www.ricsbooks.com.

• ‘A continuing evaluation of the Civil Justice Reforms’ can be accessed at:www.dca.gov.uk/civil/reform/ffreform.htm#part1.

Reference point

‘Even though veryfew dilapidationclaims are ever

litigated (and evenfewer end up attrial), surveyorsmust follow therelevant rules setout in the CPR.’

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Property Law Journal 726 April 2004

Part 36 offers in all types of civil dis-putes, often settling claims very early.Insurance companies have shown thattheir non-solicitor staff can make suc-cessful Part 36 offers to force earlysettlement. There is no reason why sur-veyors cannot do likewise, or at the very least make a recommendation totheir client’s lawyer that such an offer should be made if they feel unableor unwilling to draft the offer letterthemselves.

The letter making the offer mustcomply with various requirements (seebox). It is issued as a normal letter, not acourt form, but the author must be verycareful that all issues are clearly statedbecause the document could prove cru-cial several years down the line. Theoffer should be posted and faxed, withthe fax receipt kept on file.

The principle is perhaps bestdescribed by example: a landlord claims£100,000 from a tenant in respect of adilapidation liability arising at the endof a lease. The tenant assesses the claimand soon makes a Part 36 offer of£80,000 in accordance with the CPR. Ifat trial the judge awards the landlord£60,000 (ie less than the sum offered),there is a presumption that the landlordwill have to pay the tenant’s legal costsfrom the last date on which the landlordcould have accepted the offer – thiscould be very early on in the dispute ifthe tenant is well advised. Because thetenant will still have to pay the land-lord’s costs up to the date of the offer,the earlier the tenant’s offer is made, thegreater the risk for the landlord (despitethe fact that the landlord has actuallysucceeded in obtaining £60,000). How-ever, if the judge awarded £90,000 inthis example, the tenant would have noprotection and the landlord wouldrecover its costs on the usual basis withthe Part 36 offer irrelevant. Equally, aclaimant landlord can make a Part 36offer and the same principles apply inrespect of costs and interest. Thisreverse process is equally powerful. Theabove sanctions are extremely punitiveand costs orders are, of course, alwayssubject to the judge’s discretion.

Is there a risk of professional negligence?Despite the straightforward nature of thePart 36 offer, the level of understandingand utilisation amongst surveyors in-volved in dilapidation disputes is stillvery low. It is a powerful tool with

potentially costly consequences if theoffer itself, or the response, is poorlyjudged. The CPR have been with us since1999, with widespread discussion on thechanges to civil procedure since 1997. Asnoted above, surveyors involved indilapidation claims are, arguably, ob-liged to make these offers. Imagine theworst-case scenario, where a clientalleges that the surveyor has been negli-gent and asks:

Why didn’t you make a Part 36 offer assoon as you established your views onthe value of the claim? Proceedings havenow been issued which you could haveprevented. I want compensation.

Or alternatively:

You ignored a Part 36 offer from theother side and were in breach of the Pre-action Protocol. Will you compensate mefor the legal costs payable on my originalclaim and my costs in relation to my neg-ligence claim against you?

The RICS Dispute Resolution Facultystates clearly that ‘it is incumbent onChartered Surveyors to be aware of theCPR 1998’, arguably persuasive evi-dence for any professional negligenceclaim brought against a surveyor in theexamples above, or where a failure tocomply with the Protocol ran up unnec-essary expense for a client. As if tounderline the all-important nature ofthe CPR, the resulting professional neg-ligence claim is a civil dispute, makingit, too, subject to the CPR, leaving theunfortunate surveyor more time toponder the rules.

So what can the non-lawyer do? The answer is simple. The non-lawyershould know when to make a Part 36offer, what to do if they receive one, andhow to comply with the Protocol. Surv-eyors should consider an offer as earlyas possible in all dilapidations and otherdisputes, at the same time as complyingwith the Protocol. These are importantprocedures with potentially costly con-sequences for client and adviser if thetactics are not handled properly.

Patrick Stell of FPD Savills is a qualifiedsolicitor and chartered surveyor specialising in dilapidation disputes.

‘Despite thestraightforward

nature of the Part36 offer, the levelof understandingand utilisation

amongst surveyorsis still very low. Itis a powerful tool.’

As set out in Part 36.5, the offermust:

• Be in writing.

• State whether the offer relatesto the whole of the claim, orjust part of it. (It is possible to settle item by item. Forexample, in a dilapidationdispute, the costs forreplacement carpets can beremoved from any potentiallitigation by way of a Part 36offer on just that item, ifaccepted.)

• State that the offer is ‘Pursuantto Part 36 CPR 1998’.

• State that the offer is open forat least 21 days from the date itis made, and that after 21 daysit may only be accepted if theparties agree the liability forcosts or the court givespermission.

• Include an offer to pay theother side’s costs where theoffer is made by a defendant(generally the tenant in thecase of a dilapidation dispute).

Making Part 36 offers

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