CPR Reform: How Jackson will impact lease renewal proceedings

CPR Reform: How Jackson will impact lease renewal proceedings

Published:

Author: Kate Barry

The 'Jackson Reforms' herald a new era in the management of and procedure for civil litigation.

To a great extent, however, we have no real idea of what this new era may bring, particularly in the area of 1954 Act lease renewals. However, on the face of it, there is a possibility of substantial impact. This note highlights three key areas which are likely to affect how lease renewals are conducted.

Proportionality and costs management

The new emphasis on proportionality of costs to the value of actions may create difficulties in low rental value renewals. That costs are reasonable and/or reasonably incurred will not necessarily mean they are regarded as proportionate and therefore recoverable. However, the Courts will look at a number of issues, including the sums in issue, the value of non-monetary relief, complexity of the claim and conduct of the paying party. Parties to the renewal claim must therefore look beyond rental value; for example, tenants must illustrate the commercial, economic and social value of their business at the premises.

The new rules on costs budgeting for claims issued on or after 1 April 2013 raise more practical issues. Prior to the first CMC in proceedings, parties will be required to prepare costs budgets setting out the estimated legal costs, including all disbursements, to trial. These budgets will be subject to Court approval, if they cannot be agreed between the parties, and failure to file may result in a party being unable to recover any costs above Court fees.

However, lease renewals claims are often brought in order to engage the other party in the renewal or as a result of a landlord's refusal to extend the statutory deadline for issue. In these circumstances, the true nature and extent of the matters in dispute are unclear. Should a party therefore budget for the worst case scenario that there are multiple factual and valuation disputes and take the risk that the budget is challenged for lack of proportionality? Or do parties take a more conservative approach and risk later having to apply to adjust the budget? Is there a middle ground where parties budget conservatively, but build in multiple contingencies?

For the time being, clients and practitioners will have to approach these decisions on a case by case basis and test the waters with the Courts. The position will be clearer if parties seek to narrow as many issues as possible between them prior to issuing proceedings, or at least prior to service. This will allow for more accurate scoping of the costs.

Inevitably, this new budgeting procedure will increase costs at the CMC point, not only the preparation of the budgets, but also the costs of challenging an opponent's budget or having your own budget challenged, including attendance at any hearings. Recoverable costs of this element of claims are limited to the greater of £1,000 or 1% of the total budget.

Case management

As well as managing costs, the Courts will take a more robust approach to case management. Sanctions for non-compliance with directions may be imposed more readily and possibly more frequently at the Court's own volition, rather than waiting for other parties to complain. There will be a greater burden on non-compliant parties when seeking relief from any sanctions.

Traditionally, parties to lease renewals have taken something of a laissez faire approach to directions, agreeing informal deferrals or ignoring them entirely. In the majority of cases, this has no bearing because the new lease is agreed before the matter goes anywhere near a trial. However, this deliberate non-compliance could see parties penalised on a more regular basis. None of the sanctions are new, but the Courts are encouraged to actively monitor compliance with Court orders and impose sanctions, which could range from barring witness or expert evidence, costs penalties or strike out of claims/defences.

Parties will therefore need to give far greater consideration to case management directions, their capacity to comply, the costs of compliance and potential costs (risks) of non-compliance. If a party seeks a tight timetable as a tactic to press a renewal forward, for example, it needs to be confident that it can comply if necessary.

Where a matter is listed for its first CMC on or after 9 April 2013 (irrespective of when it was issued), the parties must submit proposed directions to the Court by no later than 7 days before the hearing. There should be a genuine attempt to agree the directions and parties are obliged to refer to the published model and standard directions. There are no specific model directions for lease renewal proceedings.

New disclosure procedure

Where a matter is listed for its first CMC on or after 16 April 2013 (irrespective of when it was issued), there are new procedures for disclosure. No less than 14 days prior to the CMC, each party must file a report (verified by a statement of truth) to include brief descriptions of what disclosable documents exist/may exist/may be relevant and details of location (and storage, if electronic), as well as estimating the costs of dealing with disclosure.

Along with the disclosure report, each party is also required to state the proposed form of disclosure order it considers appropriate to the case. This should be discussed and, if possible, agreed with the other party or parties to the proceedings and those discussions should take place no later than 7 days before the CMC.

There is a menu of disclosure order options, including standard disclosure (as already exists) disclosure on an issue by issue basis and dispensing with disclosure. In many renewal cases, dispensing with disclosure may be appropriate, but at the point of the first CMC, the parties may not know the extent of what matters will be in dispute by the point of trial and, therefore, what disclosure will be relevant. This is another factor which should encourage parties to consider and narrow issues in dispute at any early stage, so that it is possible to determine the extent of disclosure required.