Litigating Circumstances

It would not seem unreasonable to suppose that the responsibilities of tree owners were now clearly defined and beyond dispute following the House of Lords' landmark decision in Delaware Mansions v City of Westminster.

Given the clarity of their Lordships' judgment, why are so many subsidence recovery claims still ending up in litigation?

Unfortunately, we live in the real world. With the introduction of the civil procedure rules (CPR), there was great emphasis on litigation as the recourse of last resort. Although no specific pre-action protocol exists for subsidence claims, there has been a much greater exchange of information at the early stages of the recovery process than had been the case pre-CPR. That being said, a significant number of claims still fail to settle at the pre-litigation stage.

Amenity value
The great majority of subsidence claims are brought and funded by the insurance industry against local authority tree owners. Hard-pressed local authorities have to balance the amenity value of their tree stock against the perceived risk of damage to its council taxpayers' properties.

This premise has a sound legal basis in the case of Leakey v National Trust. Here, the Court of Appeal, in considering the extent of the defendant's duty to take reasonable care, ruled that the risk of damage on the one hand had to be weighed against the practicability of taking preventative measures. There was particular emphasis on the likely cost as against the known risk.

Another reason why these claims still litigate is an inability or reluctance to make concessions where reasonable in order to concentrate on the real issues in dispute. So often, a recovery claim is met with a number of seemingly standard responses, for example, the drains or dry weather is to blame, with the real issues being ignored.

Part 36 of the CPR allows both parties to a dispute to make an offer on a specific issue at any stage of the dispute. While the use of such offers in relation to quantum is now widespread, Part 36 offers are less frequently made in relation to other issues, such as liability or causation.

The costs consequences for a defendant in circumstances where a claimant's Part 36 offer is not accepted and the claimant goes on to establish liability at trial can be severe. In Huck v Robson, the Court of Appeal took note of a pre-action offer by the claimant to agree a liability split of 95% and 5%, ordering the defendant to pay costs on an indemnity basis. Any question as to whether costs were reasonably incurred are resolved in the receiving party's favour.

Cost saving
The low take-up of alternative forms of dispute resolution (ADR) is also a major factor. Buildings insurers may be concerned that ADR will lead to strong claims being under-settled and the local authorities may fear the opposite.

One advantage of ADR is that the involvement of senior representatives from both parties with decision-making authority could lead to a substantial cost saving. Once the weaknesses in a party's case have been exposed by a neutral third party, for instance the mediator, that party is less likely to risk letting the matter go to trial.

So many claims become active only towards the end of the six-year limitation period. This may be due to pressure to conclude the policyholder's claim, with the recovery being put on one side.

Also, the local authority, which may be uninsured or have a substantial deductible in respect of these claims, may simply hope the claim will go away. It will thus choose not to make any offers until the claimant `puts its money where its mouth is' by issuing proceedings.

Recommend acceptance
This brings us to the vexed issue of the parties' legal costs, which can become disproportionate to the amount in dispute. Much has been said about the benefits of `no-win- no-fee' arrangements (known as conditional fee agreements or CFAs).

What tends to be overlooked is that a lawyer pursuing a recovery claim on a CFA basis is more likely to recommend acceptance of a third party's first (often low offer) on the basis that this triggers the lawyers' entitlement to be paid. This can lead to a tendency to under-settle strong cases.

To summarise, subsidence cases still litigate for the simple reason that both parties frequently fail to get to grips with the real issues in dispute. Once the real nature of the dispute is defined, the parties can take a reasoned, objective view and proceed accordingly using the tools available under the CPR.

Question 1
What are the costs consequences of a defendant's Part 36 offer?

a. Claimant may be ordered to pay defendant's costs from the date of the offer if it fails to beat the offer at trial

b.Claimant has costs protection if it beats the defendant's offer

c.Defendant can recover costs to date of the offer if claimant fails to beat the Part 36 offer at trial.

Question 2
Identify the correct definition of indemnity costs:

a.Any question as to reasonableness of costs is decided in the paying party's favour

b.Any question as to reasonableness of costs is decided in the receiving party's favour

c.The court orders the paying party's solicitors to meet the receiving party's costs.

Question 3
What type of Part 36 offer was made in Huck v Robson?

a.An offer to accept 100% liability

b.An offer to accept an apportionment of liability

c.An offer to agree quantum, subject to liability.

Case references
Delaware Mansions and others v Lord Mayor and Citizens of the City of Westminster, House of Lords, 25.10.01

Leakey v National Trust for Places of Historic Interest or National Beauty, 1980, Queen's Bench 485

Rosalind Huck v Tony Robson, Court of Appeal, 21.3.02