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	England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Lazari v London & Newcastle (Camden) Ltd [2013] EWHC 97 (TCC) (31 January 2013) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2013/97.html Cite as: [2013] EWHC 97 (TCC), [2013] CP Rep 26, [2013] BLR 313

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		31st January 2013

 


Mr Justice Akenhead:

Introduction

1. This judgment addresses issues which arise in relation to the overriding objective in the Civil Procedural Rules and the extent to which a conditional order can be made pursuant to CPR Part 3.1 to require a defendant to pay money into court.

History

2. The Defendant, London & Newcastle (Camden) Ltd ("L&N") was and is the long leaseholder of a site at 30 Oval Road, London NW1. It seems to be a special purpose vehicle and part of the larger London & Newcastle property development group. L&N engaged consultants and contractors, Ardmore, to design and construct a substantial number of luxury flats and social housing at this site. By an agreement in writing dated 22 September 2010 made between L&N and Andrie Lazari, the Claimant, L&N agreed to complete the construction of Flat 42 ("the Flat") and to sell it to her on a long lease, the purchase price being £1.45 million. The Lease was dated 15 December 2010. Ms Lazari has not yet moved into the Flat as a result, as she asserts, of a continuing defect or problem which is or at least has been excessive overheating of her flat. Initially, L&N did not consider that there was any problem at all or at least which was its responsibility. Eventually, and upon receipt of a report by BRE, commissioned by her in late 2011, which identified a significant overheating problem, L&N initiated remedial works in or about mid-2012; the main problem appears to have been other hot heating pipes which run immediately under Flat 42 which cause overheating within the Flat. It seems that initially these were unsuccessful or at least not as successful as hoped for. Further work including commissioning and re-commissioning work was done in about September and early October 2012. However, that did not resolve the overheating problem and Ms Lazari, who has a medical condition which has resulted in her walking with crutches and with various access needs, was unable to move in following treatment which she had in mid-September 2012, she says as a result of the continuing and serious overheating problems.
3. She issued proceedings on 16 October 2012 following essentially what she regarded as the breakdown in the co-operation which she and her expert required from L&N and its consultant, Mr Dougan of Hoare Lea. Following a contested hearing on 24 October 2012 before Mr Justice Edwards-Stuart, he granted injunctions against L&N in effect requiring them to cooperate by providing access for Ms Lazari's expert (Mr Swainson) to inspect the remedial works in various parts of the mechanical installations and to carry out various tests and to provide relevant documents, plans and data germane to the original and remedial works. He ordered L&N to pay her costs of the application.
4. This order has, I understand, been complied with to a substantial if not full extent. It appears to be common ground that the temperatures within Flat 42 have fallen to below the maximum recommended as acceptable for premises such as this, although it remains unclear to Ms Lazari and those advising her whether this is attributable to the colder winter weather experienced over the last several months. They are of the view that the remedial work scheme, which had been agreed to between Mr Swainson and Mr Dougan, remains incomplete and that lack of completion leaves them with real concerns as to whether, when (and if) the weather improves as spring and summer draw on, there will still be overheating in the flat.

The Proceedings

5. Ms Lazari's Particulars of Claim, now amended, and supported by a Statement of Truth, identified the complaint:

"10. The Flat suffers from serious overheating such that it is too hot for the Claimant, or any other person, to live and/or sleep in the Flat. Temperatures in the Flat have generally been about 30 degrees Celsius (without any heating being on).

11. The source of the heat is from the Defendant's service pipes (and associated equipment) which are situated beneath floors of the Flat ("the Service Pipes").

12. The construction of the Flat and/or Development is inherently defective in that: there is inadequate insulation in the construction of the Flat to protect it from heat from the Service Pipes; further, or alternatively, the Service Pipes are themselves inadequately insulated and/or there is no adequate ventilation beneath the floors of the Flat to remove heat from the Service Pipes before the heat permeates through the floors of the Flat".

Paragraphs 13s 22 summarise the chronology broadly as set out above albeit that there are complaints that L&N was dilatory in getting on with the remedial works.

6. Paragraph 23 pleads breaches of contract by the Defendant and breach of the Defective Premises Act 1972 with complaints that the Flat is not and never has been ready for occupation or fit for habitation, that the design and/or construction of the Flat and of the overall Development is inherently defective, that L&N has failed to take adequate steps to remedy the defects within a reasonable time or at all and that L&N had denied Ms Lazari and her expert appropriate access to the floor void beneath the Flat and to the Common Parts.
7. Although, as will be seen, no Schedule of Loss was initially served with this pleading, Paragraph 24 identified heads of loss, including lost mortgage interest, lost interest income, other costs attributable to there being a premature certificate of substantial completion (such as rent, service charges, council tax and utility costs), costs of alternative accommodation, expert fees and an ongoing capital diminution stigma which will remain even after remedial works have been completed. She also claimed general damages for loss of amenity, inconvenience and distress. She indicated that a schedule of loss would be provided in due course.
8. As indicated above, the parties then went to court in relation to Ms Lazari's application for orders requiring L&N to cooperate in relation to the remedial works and to allow Mr Swainson access and the like. She was successful in that respect.
9. This pleading having been served on or about 1 November 2012, the Defence was due on or about 15 November 2012. On 12 November 2012, L&N's solicitors, Fladgate, wrote to Ms Lazari's solicitors, Charles Russell, referring to the schedule of loss, asking whether the schedule would be served shortly "in which case it would be sensible for service of the defence to await the schedule" and seeking confirmation that the service of the defence could await the service of the schedule. No answer having been received a reminder was sent on 16 November 2012 which led to a response on 19 November 2012 from Charles Russell:

"…we asked you to confirm whether your client admitted liability on 26 October 2012 but you have not responded on this point.

If your client admitted liability then we agree that the defence can wait until we have served the schedule of damage as the only matter if a dispute will be quantum. If your client is not admitting liability then we do not agree to the defence being filed following the service of the schedule of damage as we would need to know now on what basis your client is seeking to defend liability".

10. On 21 November 2012, Fladgate indicated that its clients did not admit liability and that the claim form did not comply with CPR Rule 16.3. Again it requested that the schedule of loss be served prior to service of the Defence, failing which, further information and an extension of time the service of the Defence would be sought.
11. On Friday, 23 November 2012, Fladgate sought on behalf of L&N on a without notice basis an extension of time for service of its Defence until 14 days after the schedule of loss was served. My order dated 26 November 2012 ordered that the Defendant should serve its defence no later than 6 December 2012 whilst the Claimant should provide the best particulars of loss and damage by 13 December 2012. The order wrongly (but obviously so) referred to 2013 rather than 2012 but this was corrected within about 24 hours. Whilst I addressed this on a without notice basis for pragmatic reasons, I gave each party permission to apply to vary the order but neither party has sought to do so. I was not impressed with the suggestion that the Defence could await the provision of the schedule of loss.
12. The Defence, served on 6 December 2012, explains that L&N was neither the contractor nor the designer and that this factor explains some of the apparent delay in dealing with the defect. The Defence accepts that there was what L&N called a "latent" defect "in that service pipes in the ceiling void underneath part of the Claimant's Flat…were not adequately ventilated and heat transferred through the Floor slab into the Claimant's Flat". Whilst accepting that the "Flat was hot", L&N asserted that this did not "render the Flat, which was designed to be air-conditioned, uninhabitable" and that Ms Lazari ought reasonably have "moved into the Flat when her works were completed in July 2011 and made use of the air conditioning or natural ventilation to reduce and/or minimise the heat". It asserted that it was not responsible for the delays. It argued that the defect was not such that substantial completion was not achieved on 15 December 2010 and/or was not properly certified as having been achieved". The Defence is arguably equivocal in that it does not unconditionally admit any liability: there is a general traversal in Paragraph 1 of the whole of the Amended Particulars of Claim and in Paragraph 24 which addresses Paragraph 23 of Ms Lazari's pleading, the allegations that the design and/or construction of the Flat was inherently defective was denied and the allegation that the design and/or construction of the development was defective was admitted but it was asserted that the defect had been fully rectified and there is no hint or suggestion that the Defendant might be liable for any damages.
13. In the course of argument at the hearing, Counsel for L&N accepted that in effect it was accepting liability for the defect or defects which led to the excessive overheating and responsibility for putting right the overheating problem. The full scope of the breach or breaches of duty is still not accepted in that the complaints about the Flat is not being fit for habitation and the propriety of the completion being certified on 10 December 2010 remained challenged.
14. The Schedule of Loss was served later in December 2012. Part A identifies various losses from 15 December 2010 to 14 December 2012 totalling some £94,000 as attributable to substantial completion not having been achieved on or by 10 December 2010. This comprises mortgage payments, lost interest and other outgoings on the Flat. Part B claims in the alternative similar heads of loss attributable to the Claimant being unable to move in due to the excessive heat. Part D claims some £15,000 for replacement of flooring throughout the Flat and £7,770 for redecoration due to discolouration attributable to the excessive heat. Part E identifies an unquantified head attributable to alternative accommodation or loss of rental income due to loss of use. Part F identifies expert fees totalling some £6,400. Part G identifies the un-quantified stigma capital diminution.

This Application

15. Ms Lazari's application was issued on 17 December 2012 seeking a Conditional Order under CPR Part 3.1 "requiring the Defendant to pay £100,000 into the Court Funds Office and remain there until further Order" and that if such was not paid in within a specified time the Defendant would be debarred from defending the matter. This was supported by a witness statement from Mr Marsden, Ms Lazari's solicitor. He reiterated Mr Justice Edwards-Stuart's comments at the earlier hearing that he was "full of sympathy" for her and that "you could not have had a worse experience with this" referring to what happened as a "disaster" going on for 22 months. He refers to the fact that, although the repair works have purportedly been carried out, neither Mr Swainson nor Mr Dougan have signed off on them at temperatures which although reduced were "still not at an acceptable level". He says that the air flow rate specified for the remedial works has not been achieved. He refers to the fact that an important report is still awaited from L&N emanating from sub-contractors of Ardmore about fire dampers and the measures to be taken whereby warnings are to be given if there is an issue with the proposed system in the future.. He refers in some detail to the financial position of L&N and various associated or holding companies which show net liabilities on the balance sheet, concluding that "there is a high likelihood that the Defendant might be unable to trade and might go into liquidation". It suggests that the directors have "a history of liquidation, administration and dissolution of companies". He suggests that L&N has failed to comply with the Practice Direction for Pre-Action conduct by refusing access to documents and other properties. £100,000 figure is supported as "a very reasonable compromise" and being "less than 10% of the purchase price of the property" albeit that it is "not sufficient to cover the damages sought".
16. L&N submitted three witness statements, the first being from Baerbel Schuett who explains that the group is an experienced property developer in London. She refers to the fact that flats came with the benefit of a decennial Premier Guarantee insurance policy. She says that most of the flats were occupied in or by the spring of 2011 but that residents advised in May 2011 that some internal, corridor areas were very warm. She explained that the Flat has never had window coverings and the comfort cooling has never been used. She told Ms Lazari that the excessive heat in her apartment was "probably due to solar gain, exacerbated by the flat being unoccupied with no natural ventilation or mechanical cooling being used". She says that, since the remedial works were done, temperatures have been substantially reduced. She says that L&N had "done everything they could to investigate and remedy the problem". She says that the work has been signed off by Mr Dougan, albeit that his open report did not emerge until mid January 2013. She accepts, as was accepted by Mr Justice Edwards-Stuart, that documents requested were not provided by L&N but says that prior to the proceedings she had not realised that there was any Pre-Action Protocol being pursued.
17. Mr Dougan explains that he designed the remedial work scheme and oversaw the execution of those works by Ardmore and its sub-contractors. He confirms that air pressure in the ceiling voids was not achieved but that this was attributable to the "leaky nature" of the ceiling void. He says however that the ceiling void was not intended to be an airtight enclosure but that what has been achieved "is a good result". He does not address the missing report. He confirms in effect that an air flow sensor/switch remains to be installed so that a failure can be detected.
18. Mr Phillips, the chairman of L&N, answers the remarks made by Mr Marsden about the financial position. He does not seem to deny that superficially on the accounts there are some deficits but says that the company is still trading and there is no intention of putting it into administration or liquidation. He says unequivocally that it will be supported by its holding company and that debts due have been restructured in July 2012. He challenges the suggestion that the directors have a history of liquidation, administration and dissolution of companies.
19. These witness statements were challenged at least in part by three further witness statements from Mr Marsden, Mr Swainson and Ms Lazari. Mr Marsden explains that Mr Dougan's report about the remedial works was only served after the application was issued. He refers to that report and its acceptance that, before the remedial works, temperatures were substantially above the recommended design temperature range for comfortable environments for human occupation of 20°C to 24°C. He relays the fact that the British Wood Flooring Association had indicated that, at temperatures above 27°C, wood flooring will warp as it has done here. He challenges Mr Phillips' evidence about the company. He complains about the application issued on 23 November 2012 being without notice, saying that this was a further example of L&N's "continued reluctance to play by the rules". He identifies Ms Lazari's concern "that the Defendant is continuing to defend this matter without actually taking on any real risk as they may be planning to dissolve the company should an order being made against them."
20. Mr Swainson goes into more technical matters referring to Mr Dougan's report, averting to the fact that the remedial scheme clearly showed the air flow path was through the ceiling void and his view that the design of the proposed ventilation system was sufficiently robust to meet the stated objective of removing the excessive heat gains from the ceiling void provided that it could be ventilated at an air change rate of 20. He refers to tests in late November 2012 which show significantly less than 50% of the projected airflow being accounted for, suggesting that much of the air is somehow leaking. It states that there has been no sign that the air flow rate, as designed, has been achieved yet. He says that he is not confident but, even though the temperature internally is now within recommended guidance for thermal comfort, he infers that this may be attributable to the fact that the outside air temperature has consistently been below 10°C. He is not prepared to sign off the remedial works. He recommends that the ceiling void is opened to find the source of leakage and put right (at the cost of some £10,000) or that monitoring continues into the warmer period of the year with a re-assessment of the effectiveness of the remedial work then being taken. He suggests that, if the design airflow rates through the ceiling void cannot be achieved, fans could be installed to ventilate the ceiling voids or the existing fans modified (at a cost of £10,000), alternatively the hot water distribution pipes located under the flat should be relocated at no less than £150,000. He refers to 3 queries he had raised with Mr Dougan which have not yet been answered. He confirms that the wooden flooring has warped due to excessive heat.
21. Ms Lazari confirms what the British Wood Flooring Association has said about warping of wood floors and refers to the fact that the temperature data showed that the temperature was 29.9°C for a prolonged period such that it would have warped the flooring and indeed that it is so badly warped that she has to replace it. She refers to the fact that the floor temperature has remained higher than the internal air temperature since the remedial work. She believes that when the outside temperatures increase the temperature within the Flat will also increase.

CPR 3.1

22. CPR 3.1 provides:

"(1) The list of powers in this rule is in addition to any powers given to the court by any other rule or practice direction or by any other enactment or any powers it may otherwise have.

(2) Except where these Rules provide otherwise, the court may …

(m) take any other step or make any other order for the purpose of managing the case and furthering the overriding objective…

(3) When the court makes an order, it may

(a) make it subject to conditions, including a condition to pay a sum of money into court; and

(b) specify the consequence of failure to comply with the order or a condition…

(5) The court may order a party to pay a sum of money into court if that party has, without good reason, failed to comply with a rule, practice direction or a relevant pre-action protocol.

(6) When exercising its power under paragraph (5) the court must have regard to

(a) the amount in dispute; and

(b) the costs which the parties have incurred or which they may incur.

(6A) Where a party pays money into court following an order under paragraph (3) or (5), the money shall be security for any sum payable by that party to any other party in the proceedings …"

23. In Olatawura v Abiloye [2002] EWCA Civ 998, the Court of Appeal considered these provisions in the context of an application by a defendant for summary judgment against a claimant and where the judge below had refused the application but ordered the claimant to provide £5,000 by way of security for costs. Simon Brown LJ (as he then was) said:

"17. Let me, however, put aside what I have already described as the "not entirely satisfactory" circumstances of this case and look at the real questions of principle which arise under the new rules.

18. The first is clearly this: is there indeed now jurisdiction under CPR to make orders which are tantamount to orders for security for costs outside the provisions of part 25 (section II)?

19. In my judgment the answer to this question is a clear yes. The individual rules which I have already set out above admit of no other possible conclusion and, indeed, as Judge Cowell below observed, this too is the stated view of the editors of the Annual Practice…

20. As to the rules themselves, let me make just a few obvious points. Paragraphs 4 and 5 of PD 24 to my mind necessarily contemplate an order akin to that for security for costs, providing as they do for the making of an order requiring a sum of money to be paid into court where it appears to the court improbably that a claim (and not merely a defence) will succeed. Rule 3(3) in terms allows the court to make any order conditional on (amongst other things) the payment of money into court. Yet more specifically rule 3(5) empowers the court to order a non-compliant party to pay money into court and rule 3(6) requires the court in exercising that power to have regard to the costs incurred or to be incurred.

21. I pass, therefore, to the more difficult second question which arises on this appeal: what should be the court's approach to the exercise of its wider new jurisdiction to order security for costs and, more narrowly, was such an order properly made in the particular circumstances of this case?

22. The first point to be made is I think this. Before ordering security for costs in any case (ie whether or not within rule 25) the court should be alert and sensitive to the risk that by making such an order it may be denying the party concerned the right to access to the court. Whether or not the person concerned has (or can raise) the money will always be a prime consideration, not least since article 6 of ECHR became incorporated into domestic law. Paradoxically, of course, the more difficult it appears to be for the person concerned to raise the money, the more obvious becomes the need for an order for security to protect the other party against the risk of incurring irrecoverable costs. The court will have to resolve that conundrum as best it may.

23. Assume, then, that in a given case the court concludes that an order for security would not unfairly deprive the party concerned of his ability to litigate the dispute. Should such an order then be made? In addressing this question it is right to bear in mind that under the new rules it is not just the claimant against whom an order for security for costs can be made; it can also be made against the defendant. Under the old rules, of course, it was only the defendant who could be ordered to pay money into court, principally in proceedings for summary judgment, as a condition of his being allowed to defend the claim. That payment in was not, of course, in respect of costs, but rather to provide some security for the claim. But if, as a condition of pursuing an unpromising defence, it is appropriate to secure the claim, why not also the claimant's costs of advancing the claim? And if that, why is it not at least as appropriate to require someone advancing an unpromising claim to secure the defendant's costs. He, after all, has chosen to involve the defendant in litigation and the defendant has no option but to concede the claim or incur costs in resisting it. Such no doubt was the thinking underlying the new rule 24.

24. Now, it is clear, the court has an altogether wider discretion to ensure that justice can be done in any particular case. Obviously relevant considerations, besides the ability of the person concerned to pay, will be (a) his conduct of the proceedings (including in particular his compliance or otherwise with any applicable rule, practice direction or protocol), and (b) the apparent strength of his case (be it claim or defence). And these considerations, of course, are expressly reflected in the new rules governing the court's power to order payment into court: rule 3.1(5) dealing expressly with compliance, rule 24 with the probabilities or otherwise of success.

25. That, however, is by no means to say that the court should ordinarily penalise breaches of the rules and the like by making orders for payment into court under rule 3.1(5). Quite the contrary. The one case drawn to our attention in which this question has been considered - Buckley J's judgment in Mealey Horgan plc -v- Horgan (transcript 24 May 1999, briefly reported in The Times, 6 July 1999), to which reference is made in paragraph 3.1.5 of the Annual Practice - held that it would be inappropriate to order a defendant to give security as a penalty for failure to serve witness statements in time when that had prejudiced neither the trial nor the claimant. Buckley J suggested, however, that such an order might be appropriate if "there is a history of repeated breach of timetables or of court orders or if there is something in the conduct of the party which gives rise to suspicion that they may not be bona fide and the court thinks the other side should have some financial security or protection". That seems to me to point the way admirably: a party only becomes amenable to an adverse order for security under rule 3.1(5) (or perhaps 3.1(2)(m)) once he can be seen either to be regularly flouting proper court procedures (which must inevitably inflate the costs of the proceedings) or otherwise to be demonstrating a want of good faith - good faith for this purpose consisting of a will to litigate a genuine claim or defence as economically and expeditiously as reasonably possible in according with the over-riding objective.

27. Similarly it is not to be thought that an order for security for costs will be appropriate in every case where a party appears to have a somewhat weak claim or defence. The last thing this judgment should be seen as encouraging is the making by either side of exorbitant applications for summary judgment under rule 24.2 in a misguided attempt to obtain conditional orders providing security for costs. On the contrary, the court will be reluctant to be drawn into an assessment of the merits beyond what is necessary to establish whether the person concerned has "no real prospect of succeeding" and the occasions when security for costs is ordered solely because the case appears weak may be expected to be few and far between."

24. This has been considered again more recently in Huscroft v P&O Ferries Ltd [2010] EWCA Civ 1483. Lord Justice Moore-Bick referred to the paragraphs in Olatawura set out above:

"13. To those comments may be added the observation that the power to make a conditional order given by rule 3.1(3) is couched in general terms; an unqualified condition that a sum of money be paid into court is only one kind of condition that may be imposed. Moreover, there can, I think, be no doubt that, if the court imposes a condition that a sum of money be paid in, it is entitled to order that it stand as security for the defendant's costs, if it considers it appropriate to do so. Although the court no longer gives a party who successfully opposes an application for summary judgment leave to defend (or proceed), an order dismissing the application is in practical terms an order in his favour to which conditions may be attached…

17. In both Olatawura v Abiloye and Ali v Hudson the court appears to have been concentrating primarily on the court's power to order a payment into court under rule 3.1(5), although it may be fair to say that in neither case was it at pains to draw a clear distinction between the two rules. However, they are distinct and directed to different situations. In particular, rule 3.1(3) is deliberately drafted in quite general terms and I think that this court should be reluctant to lay down any hard and fast rules about the circumstances or manner in which the power can be exercised. Experience shows that cases are infinitely variable and the rule does not place any limit on the nature of the conditions that may be imposed or the circumstances in which the power may be invoked, other than providing that a condition may be imposed as an adjunct to an order. However, two matters seem to me to provide support for the view that the power to attach conditions to an order is intended, as Mr. Myerson submitted, to enable the court to exercise a degree of control over the future conduct of the litigation. The first is the existence of rule 3.1(5), which is clearly intended to give the court power to punish a party who without good reason fails to comply with the established procedural code, including the pre-action protocols. Although such an order may well have a beneficial influence on the future conduct of the litigation, it is directed more to what has gone on in the past than what will go on in the future. To that extent it is quite different in nature from a condition of the kind contemplated by rule 3.1(3) which, combined with a sanction for failure to comply, usually of a stringent nature, is designed to control the future conduct of the party on whom it is imposed. The second is the language of the rule itself. The very fact that it allows the court to make an order subject to conditions is sufficient to show that the rule is concerned with the basis on which the proceedings will be conducted in the future, and that remains the case even when the condition is imposed in order to make good the consequences of some kind of previous misconduct.

18. Having said that, I think it is also necessary to recognise that rule 3.1(3) does not give the court a general power to impose conditions on one or other party whenever it happens to be making an order and if District Judge Babbington thought that it did, he was in my view wrong. When the rule speaks about the court's making an order it is referring to a direction that a party act in a certain way or that a certain state of affairs should exist, not to the instrument used to give effect to one or more such directions. The court has ample powers under rules 3.1(2)(m) and 3.3 to make whatever orders are needed for the proper management of the proceedings. The purpose of rule 3.1(3) is to enable the court to grant relief on terms and when the power is exercised the condition ought properly to be expressed as part of the order granting the specific relief to which it relates. The order in the present case did not do that. Paragraph 1 was framed as a free-standing order that Mr. Huscroft pay money into court as security for costs; it was not expressed as a condition of obtaining any relief that he was seeking. Paragraph 2 imposed the sanction of striking out his claim in default of compliance. Those were orders of a kind that one might expect to see following an application for security for costs under Part 25 or even an unsuccessful application by one or other party for judgment under Part 24, but not as conditions attaching to a wide-ranging group of relatively routine procedural directions given at a case management conference. I accept that, as Rimer L.J. pointed out when refusing permission to appeal on this point, it would be wrong to elevate form over substance, but it seems to me that expressing the relevant order as subject to the condition in question is the right way to exercise the power. It also has the advantage of requiring the court to focus attention on whether the condition (and any supporting sanction) is a proper price for the party to pay for the relief being granted. That being so, I think it is unfortunate that in this case the District Judge started by considering P&O's application for security for costs rather than by considering what directions the parties were seeking for the future conduct of the proceedings, because it tended to mask the fact that he could only make such an order as a condition of granting some other relief. I do not think that he can be strongly criticised for doing so, given that he was faced with what was in effect a straightforward (if inappropriate) application by P&O for an order for security for costs, but nonetheless it led him to approach the matter from what I consider to be the wrong direction."

25. One can draw from the rule, the overriding objective and the Court of Appeal decisions above the following:

(a) CPR 3.1 gives the Court very wide powers of case management which are additional to, albeit that they may complement or supplement, other powers given to the Court elsewhere in the rules or within the inherent jurisdiction.

(b) These are powers given to the Court to secure the overriding objective. They are not as such given so as to punish a party, save in the context of CPR 3.1(5), where often the Court will want to secure the smooth running of the case in the future to discourage the types of default which have occurred in the past. CPR 1.4 requires the Court to further the overriding objective by actively managing cases. The overriding objective enables the Court "to deal with cases justly"; in practice, this involves amongst other things the Court seeking to secure that any given case is "dealt with expeditiously and fairly".

(c) CPR 3.1 empowers the Court to order either a claimant or a defendant to provide security for costs and this is in addition to CPR 25. However, security for costs under CPR 3.1 should not be granted if it will (to use the security for costs language) stifle the claimant or the defendant as the case may be in the pursuit of its claim or defence in the proceedings. Other relevant considerations are the respondent's conduct of the proceedings (including in particular his compliance or otherwise with any applicable rule, practice direction or protocol) and the apparent strength of his case (be it claim or defence). Security should generally only be ordered where a respondent party has regularly flouted proper court procedures (which must inevitably inflate the costs of the proceedings) or otherwise is demonstrating a want of good faith, that is an unwillingness to litigate a genuine claim or defence as economically and expeditiously as reasonably possible in according with the over-riding objective. The court should be slow to investigate the merits of a claim or defence and it is only in clear cases that security may be ordered.

(d) There are no hard and fast rules however. An order for payment in does not have to be classified as security for costs. An underlying consideration is the need for the Court to exercise a degree of control over the future conduct of the litigation. However Rule 3.1(3) is to be deployed to enable the court to grant relief on terms and when the power is exercised the condition ought properly to be expressed as part of the order granting the specific relief to which it relates.

Discussion

26. In the light of the clear and wholly proper acceptance by Counsel for L&N that it accepted liability for the defective state of affairs which led to the overheating, Counsel for Ms Lazari sought permission to amend her application to seek relief under the interim payment provisions in CPR 25.6 and 25.7. This was opposed on the basis that it was too late and because L&N would need the opportunity to lodge evidence about the damages sought. Having regard to the overriding objective and in the light of the admission by Counsel made at the hearing, it having not been made clearly within its Defence or otherwise beforehand, I propose to allow the application but, as will be seen, I will make an interim order for a relatively modest sum to be paid into Court to enable both parties to submit further evidence if either of them really wants to. This is partly to save the cost and time involved in a modest case in having a new application issued and processed.
27. The admission by Counsel was properly made because L&N in reality accepts and accepted eventually that the defects which gave rise to the undoubted overheating of the Flat were attributable to factors for which it had contractual responsibility and for which it had an obligation to provide an effective remedial solution. There are of course aspects of liability which are not accepted by the Defendant, namely whether the Flat or the overall development should have been certified as complete in December 2010 and whether L&N proceeded with reasonable dispatch in dealing with the overheating problem. There remain issues as to whether the remedial works done to date represent a complete and reasonable overall solution to the problem.
28. So far as CPR 25.7 is concerned, the threshold conditions that the defendant has admitted liability in effect to pay at least some damages and/or that the claimant would obtain judgement for a substantial amount of money from the defendant are clearly established. Certainly for the purposes of the CPR 3.1, there is strength in Ms Lazari's claims against L&N for the following reasons:

(a) The concessions made in the Defence and by Counsel for the Defendant show that there is an acceptance of substantive liability for the defects.

(b) The very fact that the Defendant has sought to procure the execution of extensive remedial works at its own expense underlines those concessions.

(c) The history suggests (at least without more) that L&N did not accept responsibility for many months and, even when it did, it did not procure the execution of the remedial works within a reasonable time. It even declined to admit liability in the weeks leading up to the service of its Defence. It is difficult to see why a period of some 15 months (let alone the 23 months suggested by Ms Lazari) was needed to procure the design and execution of such works. Whilst one can appreciate that Mr Dougan needed to investigate and that Ardmore and its sub-contractor needed some time to mobilise, 15 months or more seems without a very detailed explanation indeed (which is lacking) to be an excessive period.

(d) L&N's defence that the Flat was in some way fit for habitation because Ms Lazari could have brought the temperatures down by putting blinds up, opening the windows and/or turning the comfort cooling on seems somewhat "thin". There is no dispute on the facts currently that temperatures within the Flat in the 28°C to 30°C range were way beyond the reasonably bearable range (up to 24°C). The source of the overheating lay within installations which were within the control or responsibility of L&N and not of Ms Lazari. Opening the windows or having the air conditioning up high to counter the effects of the overheating could themselves just as well have caused serious discomfort to occupants. The real question is more likely to revolve around whether or not it was unreasonable of Ms Lazari, particularly given her medical conditions, not to move in to the Flat whilst this problem remained unresolved. The answer to that question can not of course be finally resolved now but it would be fair to say that she has a strong case on that at least for much of the period.

(e) On analysis of the evidence put before the Court at this stage, it does seem that the remedial scheme has on any account not been completed at least because there remains outstanding the provision of a failure detection system. It is (almost) common ground that the air flow rate called for by the remedial work design has not been achieved, albeit that L&N suggest that, with the fans kept at an 80% output, the temperatures within the flat can be and are being brought down. Logic suggests at least that Ms Lazari's and Mr Swainson's concerns is that, when the ambient outside temperature goes up (hopefully) in the spring and summer, temperatures in the Flat will or may well rise again as a result of the heat from the piping below her Flat.

29. However, the evidence presented about procedural non-compliances by L&N suggests that there have been some:

(a) There are of course the factors which led to Mr Justice Edwards-Stuart making the orders against L&N in late October 2012. These were essentially continuing non-cooperation by L&N to enable Mr Swainson to access not only the remedial works but the documents relating thereto. CPR 1.3 requires the litigation parties to help the Court to further the overriding objective and it can properly be said that by its lack of co-operation in this regard it was not helping the court to further the overriding objective. It was suggested by Counsel for L&N that L&N had already been dealt with and in effect punished by Mr Justice Edwards-Stuart at the October hearing. I do not consider that there was any "punishment" but merely a reflection that not only had L&N's behaviour beforehand and continuing merited injunctive type orders being made against it but also that it had "lost" the application for those orders.

(b) Although Ms Lazari and her advisers did not as such embark upon any Pre-Action Protocol process, it is nonetheless argued that the spirit of such Protocol (in this case the TCC one) required such co-operation. I do not attach any significance to this: either the Protocol process is initiated or it is not. If it is initiated, then any non-compliance by a party with the process can be taken into account and (in an appropriate case) form the basis of an order for a payment into court. If it is not initiated, then it is difficult to say within the meaning of rule 3.1 (5) that there has been a failure to comply in that regard or at least a failure to comply which should attract serious judicial criticism on an application such as this.

(c) It is clear that L&N failed to serve its Defence within the time required by the Rules. It also failed to issue its application for an extension of time as soon as was reasonably practicable (on my estimation no later than about 12 November 2012). I accept that there was no good reason for the application being made on a without notice basis; indeed the only possible reason was the failure of L&N to comply with the rules or alternatively issue its application much earlier. There was no real justification for seeking an order that the Defence should await the service of the Schedule of Loss because, as the Defence when it was eventually served demonstrates, there was a substantial amount which could be pleaded in any event. The Court only extended the time for service of the Defence on pragmatic grounds so as to ensure that proper progress of the procedural stages was initiated and maintained.

(d) There was on the written evidence before the Court non-compliance with the order of Mr Justice Edwards-Stuart (Paragraph (2) (d)) in the non-provision of the ACL Report referred to in Paragraph 11 of Mr Marsden's first statement. This complaint was not addressed at all in the witness evidence of L&N but Counsel for L&N indicated on instructions that her client still did not have such a report, although it was apparently to be dealt with presumably promptly as L&N had suggested or inferred at the October hearing that it would be; it was suggested that any such report is still held by Ardmore or possibly its sub-contractors. No evidence has been proffered to explain that the delay in its provision is justified.

(e) Finally, Mr Swainson suggests that there were three items of information called for by him in an e-mail to Mr Dougan on 7 January 2013. It seems to me however that the e-mail involved an informal technical exchange. It is at least extremely unfortunate that Mr Dougan was unable to respond to the three queries and this does suggest, without any explanation from him, a lack of pro-active cooperation, which does not help.

30. This is not a case in my judgement for an order under CPR 3.1 (3) because there is no continuing non-compliance or other order for the Court to make to which a payment into court would be ancillary.
31. However, this is a case in which it is appropriate to make an order requiring some money to be paid into court. I take into account primarily the facts that L&N has failed to comply with rules of court and, since the initiation of the proceedings, the overriding objective and that there has now been an unequivocal acceptance by L&N that it is liable for the basic defect or defects in question. I am very concerned to ensure that there are no further delays or disruption in this case and that there is and continues to be the utmost co-operation between solicitors and (as and possibly more importantly) between the experts. I am conscious that the costs of this case could well exceed the amount to which Ms Lazari proves an entitlement. At the moment the quantified sums, including continuing losses, are unlikely to exceed £150,000. The sums which are not yet quantified in pleading form include the stigma depreciation (which I suspect will be relatively low if an effective remedial solution is or has been achieved) as well as further expert and possibly remedial costs if and to the extent that the remedial works to date do not provide yet an appropriately effective solution. The general damages are, I suspect, likely to be no more than a four figure sum, depending on what other otherwise quantified heads of loss are allowed.
32. In reaching this view, I am proposing to make the order pursuant both to CPR 3.1.5 and CPR 25.7, essentially as the one rule informs the other at least in this case. I do take into account has a relatively minor factor the evidence about the relatively poor balance sheet and trading of L&E in making the order but I would not have made the order proposed but for the procedural non-compliances and the admission and likely minimum sums due. I was not impressed with the evidence that various directors of L&E can be considered in someway as serially predisposed to putting companies into liquidation or administration; I formed the view that the entrances made in this context were not justified or helpful.
33. The case is crying out to be resolved by mediation or some other settlement process. The relatively small payment into court which I propose to order should concentrate the minds of the parties at least as part of the background to any such process. Such a payment in should not in any way stifle L&N in its defence of these proceedings, as it has repeatedly said that, although its accounts demonstrate some financial difficulties, its holding company is standing behind it and there is no suggestion that a relatively small payment into court will give rise to any financial embarrassment or difficulty.
34. In my view, on the available information, a payment into court by L&N of £30,000 will encourage the parties to start serious settlement discussions and to concentrate minds about economic, timely and effective compliance with all the outstanding orders between now and trial in June 2013. This is a minimum figure which is currently justified on the available evidence:

(a) It is highly likely that the expert costs identified will be substantially justified; they are relatively modest as they now stand (at some £6,400); they are also continuing.

(b) The evidence that the wooden flooring has warped as a result of the sustained overheating is, currently, compelling and is unchallenged on the evidence (albeit it is not admitted in the Defence). Similarly there is no such challenge to the need for and costs of redecoration. The two sums claimed come to some £23,400.

(c) Ms Lazari will probably be entitled to some general damages.

(d) It is likely on the available evidence that, either through general damages or by way of substantive damages, she will recover something for loss of the use of the Flat, although the precise time period for that is subject to challenge. At the very least, I can see a strong argument that some months of loss of use may well fall to be compensated to reflect at least the fact that remedial works have taken at least some 15 months to set up and effect.

35. I do appreciate that L&N has not submitted any detailed evidence which it might wish to deploy about the quantum of any payment in; however, it is at least in substantial part the author of its own misfortune because it was facing an application for payment in and it has not concentrated on the quantum in any detail and also because it was only through Counsel that it made a belated but clear admission of liability at the hearing. Whilst I would of course hope that the parties will not feel it necessary to come back to Court to seek any adjustment to this figure, each will have permission to restore the matter for hearing to seek to vary the size of the payment in. I am ordering that the money is paid into court as opposed to being paid to Ms Lazari because the application itself seeks a payment into court and because a payment into court will preserve the status quo at least for the time being. Both parties must appreciate that, if they can not settle their differences, it is of prime importance that this matter moves to trial in as expeditious and cost-effective way as possible. The directions which have been discussed and broadly agreed at the recent hearing can achieve this provided that all those involved with the litigation co-operate to a high level.

Decision

36. It follows from the above that in the otherwise agreed directions there should be an order that L&N pays into court sum of £30,000 within 14 days of this judgment being handed down. So far as costs are concerned, the parties should submit in writing their submissions so that I can consider them at the time of handing down the judgment and if possible incorporate them in the judgment.

Costs

37. I have received written submissions about the costs. In my judgment, Ms Lazari has broadly succeeded in that she has procured a payment into court of a not insignificant sum albeit 30% of what she sought. The proposed order could just as well have been made under the original or amended application. I take into account the points made in Paragraph 12 of L&N's Counsel's written submissions and Ms Lazari's Counsel's reply submissions and I attach no importance to the points raised by L&N in this regard as it, if anything, further justifies the order to be made and underlines the lack of justification in defending the application. However, given that some time and cost was expended on the inferences about the directors and that a substantially lesser sum is to be ordered than was claimed, I will award Ms Lazari 75% of her summarily assessed costs. So far as summary assessment is concerned the bill including VAT is £8,582 which is extremely modest given that it is accepted that £2,400 of it should be attributed to the CMC aspects of the hearing. I therefore propose to allow her 75% of the balance, £4,636.50, to be payable within 14 days by L&N.