Lazari v London & Newcastle (Camden) Ltd

This judgment follows on from the judgment handed down by this Court on 31 January 2013 ([2013] EWHC 97 (TCC)) and is it raises similar issues of principle and discretion. I will repeat Paragraphs 2 and 3 of that earlier judgement:

“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.”

Ms Lazari sought to have money paid into court pursuant to CPR Part 3.1 and by way of a late amended application an interim payment order. I found that there had been some procedural non-compliance on the part of L&N, that it had admitted liability for the key complaint relating to responsibility for the overheating and that a payment into court of £30,000 was justified, as set out in Paragraph 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.”

Various directions were given to secure that this matter does come on for trial in June 2013, the Order being dated 1 February 2013. There was a relatively tight but achievable timetable and a key element was an order that: “The parties’ experts shall continue to meet with a view to narrowing issues and shall serve and file their joint statement under CPR Part 35.12(3) by no later than 4pm 30 April 2013.” This was important because there had been misunderstandings and a lack of liaison between the experts. In my judgment I had said at Paragraph 31 that I wanted to ensure that there continued "to be the utmost cooperation between solicitors and (as and possibly more importantly) between the experts."

As permitted under that Order, Ms Lazari served Further Particulars of Loss on 28 February 2013 which identified more details of previously un-particularised loss:

On 14 March 2013, Ms Lazari issued a further application seeking, so far as is material to this judgment, an order that the payment into court “be increased as the Claimant’s further particulars of loss have been updated and the Claimant’s claim has now increased". This was supported by witness statements from her solicitor Mr Marsden, Mr Swainson her mechanical engineering expert and from her. Mr Marsden described how the work as carried out did not meet the original design specification of 20 air changes per hour as there are fewer than two air changes per hour. He referred to an increase in the internal temperature of the flat during a shorter period of warmer weather in early March 2013. He accused the Defendant of refusing to carry out further inspections in breach of Paragraph 1(e) of the Order of Mr Justice Edwards-Stuart (which required inspections to be carried out which the experts agree it would be expedient and could reasonably be carried out without undue inconvenience. He referred to e-mails and correspondence which suggested that Mr Dougan had been laid off by L&N. He sought to explain that some £258,000 at least was currently justifiable.

Mr Swainson referred to the fact that temperature had risen to 25°C within the flat. He accepts that the heat transferred through the floor slab of the flat may have been reduced but says that it has not been eliminated; the remedial works to date were only taking some of the hot air below the flat floor out of the ceiling void. He refers to an attempt since January 2013 to engage with Mr Dougan but without success. He suggests that the cooler air is being lost within the ceiling void below the flat and the ceiling should be looked at with a view to reducing leakage. He refers without disapproval to another option which would be putting a duct within the ceiling void better to ventilate it (at a cost of about £20,000 plus VAT).

Ms Lazari refers in her statement to the temperature having risen in her property with the somewhat warmer weather in early March of 10° to 14°C. She believes that the reason for the Defendant’s recent behaviour is “a delaying tactic till they become insolvent". She requests that the payment in be increased to at least £100,000.

This was responded to with witness statements from Ms Alderson, L&N’s solicitor, and Mr Dougan. She refers to her attempts to have a meeting between the parties, which was finally organised to suit both parties’ convenience, this being held eventually on 8 March 2013. She says that the purpose of the meeting was to seek to agree a finite list of all of the outstanding complaints and to agree a manner in which they might be resolved. She explained that it became clear that Ms Lazari’s main concern was to get the heating problems properly resolved. Mr Swainson said that the idea of removing all the heating pipes in the ceiling void was "bonkers". Her client’s express position was that it "wanted to do all it reasonably could to meet the remaining concerns of Miss Lazari and expert". A further meeting was fixed between the experts. She explains that the warning system had been installed at the end of February 2013. She explains that the Claimant will never have to incur the cost of repairing the defect and that the Defendant has already paid some of the expert’s fees; she said that at the meeting of 8 March a L&N director offered to pay his fees going forward but this had been rejected. She indicated that it needed to be determined whether the flat was uninhabitable before any loss of use damages were allowable and that any blight value turned on expert evidence; all other heads of loss had been taken into account in the previous judgement.

Mr Dougan disagree that the air changes were as low as 2 per hour; his measurements in November suggested an air change rate in the order of 6 or 7 per hour. He refers to readings which show that temperatures in the flat have fallen since October 2012 and that the flat is in a habitable condition now regardless of the number of air changes being achieved. He believes that the remedial works have been a success but he does accept that as outside temperatures increase the temperatures in the flat will also increase albeit that that does not demonstrate, he says, that the remedial scheme has been ineffective; this can be addressed by the air conditioning systems installed in the flat. He refers to the meeting of 8 March 2012. He suggests that, both experts having inspected large areas of the ceiling voids, it is unlikely that there are significant voids or holes and that further opening up work is unnecessary. He refers to the use of a flexible duct within the ceiling to achieve a greater airflow rate and indeed this is to be done over the next few weeks.

Arguments by both Counsel reflected the witness evidence put in by their respective clients.

It is unnecessary to set out in any detail the principles to be applied and the scope of the discretion to be exercised, which was addressed in the earlier judgment.

There has in my judgement been a further breach by L&N of a court order namely the requirement that the experts were to continue to meet with a view to narrowing issues. As Ms Schuett of L&N said in her email of 11 February 2013 to Mr Swainson, Mr Dougan had no instructions from L&N to meet or even communicate with him because he thought the works had been completed in accordance with his design. However, Mr Swainson had communicated with Mr Dougan on 7 January and 1 February 2013 without any acknowledgement let alone an answer. The Court had emphasised the importance of the experts continuing to liaise, particularly having regard to the tight timetable and the expressed preference for the parties to try to settle their differences. What L&N effectively did was to prevent its own expert from liaising even informally with Ms Lazari’s expert for a period of some five weeks, with the result, as it has turned out at least, that remedial works now agreed (namely the installation of the flexible duct) will probably be carried out five weeks later than would otherwise have been the case.

I am unconvinced however that this breach of the Court’s order was a deliberate and flagrant (or contumelious) one; it was at the very least a careless breach in that L&N took its eye off what the Court had ordered. What L&N wanted to do as appears from the correspondence was to seek to settle all issues between the parties including in relation to matters which are not the subject matter of these proceedings. Its solicitor sought to set up a meeting but through no particular fault of either party that could not be arranged for about four weeks after it was first promoted on 7 February 2013. This approach responded to the plea from the Court (in Paragraphs 33 and 34 of the earlier judgment) that the case was "crying out to be resolved by mediation or some other settlement process" and the parties should be encouraged "to start serious settlement discussions".

The grounds specified in the application and indeed highlighted in the supporting evidence are that Ms Lazari’s particulars of loss have been updated and her claim has increased. In themselves, these grounds are insufficient unless and save to the extent that they are supported by strong evidence and that it is fair and just to increase the payment in. The Court should be reluctant to jump in to a developing fray between the parties, particularly where it has already ruled once broadly on the same grounds, just because the applicant has since increased her claim and puts in some more evidence which supports her claim. That evidence is not capable on a procedural application such as this of being challenged or undermined by cross-examination. It would be wrong in effect to open up, review and revise upwards the earlier decision just because evidence which could have been put in earlier (but was not) has now been collated.

Although this will be a matter for the trial judge, the evidence currently available from both sides suggest that, at best, the heating problem has only just been resolved in that it appears to be common ground that the maximum "acceptable" temperature of 24°C might just have been reached. However, as liability has been accepted, there should be no significant heat generated in effect into Ms Lazari’s flat at all by the heating pipes which run immediately under her flat; the fact that the air cooling remedial work is or might just be cooling the pipes so as just to keep the temperature down and hovering around the higher acceptable limit may well be insufficient to remedy the defect, liability for which has been accepted. Thus, the latest remedial solution of the flexible duct which provides yet further air to cool the pipes may well not just be a gratuitous but a necessary amelioration of the problem.

However, all the remedial work done is being paid for by L&N and I therefore can not increase the payment in to reflect the need for any further remedial work. It is clear for instance that the flexible duct work could well resolve the heating problem, albeit that all the remedial works are designed to avoid the very much more extensive and wholesale remedial work which neither party is actively pressing for. The evidence is that at least some of the further expert fees have been offered to be paid by L&N and for reasons best known to her and her advisers that specific offer made on 8 March 2013 was not accepted. I took into account expert fees, replacement wooden flooring costs and redecoration costs and general damages in the first judgment and it would be wrong to revise my earlier judgment as nothing has changed materially with regard to those claims.

One then comes to the further evidence relating to the loss of use of the flat. I can properly ignore the rental valuation because the evidence is that Ms Lazari did not and does not intend to let her flat. There is the further claim relating to the mortgage payments or contributions made by our to her relatives’ mortgage in effect for continued occupation of her relatives’ property. Although the Further Particulars of Loss are supported by a statement of truth signed by her solicitor, it is noteworthy that Ms Lazari does not specifically address this arguably supportable head of claim in her witness statement accompanying her latest application. Assuming that she was not committed in any event and irrespective of the problems with her new flat to make or continue to make these contributions to or for the benefit of her relatives’ mortgage, the claim would be arguable because she is in effect paying for accommodation which she would not otherwise be paying for if she had been able to move in to her new flat. However, I find it difficult to form a sufficiently strong view to justify adjusting the payment in upwards without some evidential explanation from her or from those advising her.

That leaves the "blight” capital diminution. It is almost common ground that the first round of remedial work coupled with the flexible duct work to be done over the next few weeks will have the effect of cooling the pipes sufficiently so that they do not contribute significantly to or cause any overheating problem. It is said that there is now in effect an alarm system in place so that, if the cooling air remedial system breaks down, it can be put right reasonably promptly. That does leave at least in theory a possible blight in that an honest vendor of the flat can be expected to have to disclose to potential purchasers the fact of the remedial work, why it is there and that there is a risk that it might break down or need maintenance from time to time in the future so that there might for foreseeably short periods be some overheating. It is undoubtedly the position that on its face the valuation expert report supporting the blight loss does provide evidence of a loss of about £150,000, assuming that all the requisite remedial work is done. It is also the case that L&N did not produce its own valuation expert evidence to seek to undermine this, albeit that it had the valuation report relied upon by Ms Lazari on or shortly after 28 February 2013. That said, the application was only made on 14 March 2013 and the Court had not then ordered that either party could rely upon expert valuation evidence for the purposes of the trial.

Whilst I can accept the possibility of recovery of a blight capital diminution in a case such as this, it would need to be closely examined by the trial judge and recoverability may well depend on a closer examination of the effectiveness and reliability of the remedial work than Ms Lazari’s valuation expert has yet been invited to consider. It will ultimately be a question of evidence but a diminution of between 11% and 16% to reflect a remedial solution which has been signed off as suitable by at least one and probably two engineering experts seems somewhat high. It may also be the case that such is the demand for good-quality accommodation in Central London there may be sufficient purchasers for whom there may be no stigma. This factor of course may only go to reduce the capital diminution to a significantly lower figure.

In what is likely to be a particularly controversial area of the case, I do not consider that it is appropriate or fair at this stage, with a trial looming in less than three months time and with L&N having not yet had much opportunity to deploy its own valuation expert, to take this blight evidence into account. I say this particularly in circumstances in which Ms Lazari signposted this particular loss claim back in December 2012 and could have deployed valuation evidence for the purposes of her first application. Put colloquially, she had one "bite of the cherry" with her first application and it is not desirable that a litigant such as she is to feel encouraged by her first relatively successful outing to have another "bite" when she has put together some further evidence which she could have deployed on a second outing. Such a further application generates substantial costs in a case which is by TCC standards not a large one and diverts resources when there needs to be a concentration on settling the case or at the very least getting the case ready for trial.

There has been some reliance, again, on the financial position of L&N but, I consider that the position has not changed materially (at least so far as the evidence indicates) so that it can be taken into account on this application.

Whilst I can understand the frustration felt and suspicion harboured by Ms Lazari and her professional team, particularly in circumstances in which, yet again, L&N was in breach of a Court order, I do not consider that it would be right to accede to this latest application. Although this is a very important matter so far as Ms Lazari is concerned, it is important that procedural applications such as this are kept to a reasonable minimum, particularly where the overall costs of the case could well overtop either what she is claiming or at the very least what she ultimately recovers. A litigant should not make repeated applications for financial relief under CPR 3.1 or under CPR 25.7 just because he or she has obtained more evidence of them than was deployed on an earlier application, particularly where such evidence could have been obtained for the purposes of that earlier application. So far as the breach of the Court order is concerned, that is a matter which can be taken into account on the question of costs. Ms Lazari’s application is dismissed.