Feeling at home with new civil procedures

The new Civil Procedure Rules came into force on 26 April, making fundamental changes to the judicial process. The date itself has been looming ominously on the horizon for many litigators, who were anticipating chaos and wholesale changes to the way they conduct litigation.

Landlord and tenant litigators experienced a particularly rocky start to the new rules. The Lord Chancellor's Department had expressed an intention to leave possession proceedings untouched. However, at the last moment someone realised that the abolition of fixed-date summonses made this impossible. The stopgap solution was the second practice direction to Part 8, introduced on 1 April. The fact that the practice direction to Part 4 was not published until seven days before the rules came into force did not help.

Hardwicke Building, which set up a property helpline to advise solicitors on how to deal with new rules, received hundreds of calls during the first days and weeks of the new system. The calls revealed that there was massive confusion about the fundamentals of its operation: what form to use, where to issue, and even concerning the need for statements of truth. But worse still, many court staff were unclear about the position. One court even put up notices claiming the new rules did not apply to landlord and tenant matters.

These teething problems are gradually being resolved. The initial dust is settling, and we can begin to evaluate, firstly, the impact of the CPR on the way we conduct landlord and tenant litigation and secondly, the extent to which they encompass the peculiar needs of landlord and tenant litigation and enable us to meet our client's objectives.

Consider first the position of the landlord and litigator instructed before the issue of proceedings. Whilst awaiting protocols for landlord and tenant litigation we are entreated to approach potentially litigious matters in the spirit of the existing protocols. Unfortunately, the nature of the claims covered by those protocols differs significantly from landlord and tenant matters. For example:

The strict time constraints imposed by the 1954 Act will clearly inhibit the ability of landlords and tenants to take a Woolfian approach to pre-action activity. Unless parties now engage in significant preparation and negotiation before service of the section 25/26 notice, there will be little time to deal with matters before issue.

The overriding motivation of most residential tenants to remain in their home for as long as possible and their requirement for a court order generally make the prospects of securing vacant possession on reasonable or acceptable terms without litigation an unrealistic ideal.

Where a right to forfeit arises, serious attempts at pre-action resolution of a dispute are unlikely to assist a landlord. The risk of waiver between knowledge of the right to forfeit and the act of forfeiture by issuing proceedings makes it desirable to keep the timescale short and contact with the tenant limited. Since rent cannot be demanded or accepted pre-action, taking time for a detailed airing of issues and investigation of possible solutions is similarly unattractive.

However, in certain respects landlord and tenant litigation has been well ahead of the game. For example, what is a section 146 Notice but a detailed letter of claim? While strictly the cause of action to which such notice relates does not arise until expiry of any remedial period, there is no reason why that time cannot be put to good use. If one adds details of any damages sought and a request that the tenant acknowledge receipt and give details of any defence within specified time periods, a section 146 notice and covering letter can stand as a CPR letter of claim.

Similarly section 17 notices served upon an original lessee or guarantor can easily be expanded to serve the same dual purpose.

One aspect of the CPR which has attracted considerable attention is the approach to the use of experts both before and during litigation. Landlord and tenant practitioners already use single experts as arbitrators to resolve disputes confined to issues of valuation in rent reviews. In future, when the issues between parties in potential litigation are confined to the state of repair and/or valuation (where there is every prospect a court could impose a single expert) a pre-action attempt at alternative dispute resolution by an expert makes increasing sense. Indeed, thought should be given to providing for the greater use of alternative dispute resolution when new leases are drafted.

With regard to initiating proceedings, Part 8, unlike the remainder of the CPR, does not require a defendant to file and serve a defence or written evidence before the first hearing. Accordingly, contrary to Woolf's aims, a tenant remains able to ambush his possession-seeking landlord with an allegation of disrepair, subject only to an enhanced risk of costs.

Statements of truth are intended to ensure that parties do not put forward cases or points without merit. They are required in all cases whether or not the potential evil exists. They present particular problems for institutional landlords and/or those using the services of managing agents.

They also present an extra difficulty for the solicitor making a joint application for an order under section 38 of the 1954 Act. Proper instructions must be obtained from both parties to enable the statement of truth to be signed on behalf of both, even though it seems particularly unnecessary in such a case.

No one can be in any doubt that negotiated settlements are supposed to be encouraged under the CPR; indeed the courts are specifically enjoined to assist the parties to reach such a conclusion whenever possible. Negotiations between landlord and tenant are affected by the complex bundle of rights and obligations which exist between them and their shared interest in the ongoing use of the property.

There has always been a greater tendency for commercial landlords and tenants to negotiate earlier than the participants in many types of litigation. In addition, it is common for them to use the occasion of litigation to secure agreement to matters beyond the scope of the instant dispute. Such negotiations can be lengthy and very complicated.

Under the CPR, parties completing their allocation questionnaires can indicate they want a one month stay for negotiation. Indeed, the court has power to stay proceedings of its own initiative and can do so at any stage.

However, since a primary focus of the CPR is to ensure the speedy conclusion of litigation, it remains to be seen how willing the courts will be to allow significant time for negotiation once litigation has commenced. It is to be hoped that existing levels of willingness to negotiate in landlord and tenant matters will not be stifled. In particular, in the instances highlighted above where pre-action negotiation is likely to be undesirable or unsatisfactory, surely the courts should encourage a suspension of proceedings for a realistic period to allow meaningful negotiations.

Part 36 introduces some highly desirable new pressures to negotiate. However, it is likely that landlords and tenants will often feel unable to use that mechanism to gain formal protection against costs. For example, many applications for new tenancies encompass a range of issues between the parties. Sometimes they seek things which a court would not actually order. Such parties will generally be unwilling to lose the advantages of bargaining about the whole package by picking off individual items to make a formalised Part 36 offer and risk its acceptance.

Of course, it remains open to the court to reward or penalise parties in costs for the extent to which they did or did not make genuine efforts to settle. Whether it will be willing to consider the detail of what may be lengthy and complex negotiations between landlord and tenant in order to do so is another question.

It remains to be seen how well the CPR can be adapted to suit the needs of landlord and tenant litigation. Perhaps the authors of the new system have not yet fully appreciated the distinctions between these cases and the vast majority of civil disputes. For example, the fact that landlords and tenants have very different interests in the same substantial asset. They are parties to a highly-structured legal relationship involving rights and obligations far more extensive than those at the centre of any particular dispute between them. Furthermore that relationship often continues beyond the resolution of the dispute.

In some respects, landlord and tenant litigation has embodied the spirit and aims of the CPR for some time already, but an unthinking application of the new rules to landlord and tenant cases could produce ridiculous consequences. Michelle Stevens-Hoare and Sara Benbow are barristers in the property group at Hardwicke Building.