Roger Pearson reports on a case which sees the Secretary of State fight off the largest High Court dilapidation claim to date.

The scene is now set for the final round of the largest ever High Court dilapidation action, with a claim which could go as high as £18m.

The claim, which centres on Elizabeth House at London's Waterloo, has been mounted against the Secretary of State for the Environment (DoE) by P&O Property Holdings and P&O Pension Funds Investments. Legal costs alone are said to already run to around £1m on each side.

The P&O companies claim that when the Government's lease of the building ended they discovered among other things that partitions and asbestos, which should have been removed under the terms of the lease, had not been removed. They accuse the DoE of breaching its lease obligations and that the failure to do so is a breach of the covenants to keep the premises in good repair.

In a recent round of the action at the Technology and Construction Court, Judge Anthony Thornton clarified a series of preliminary points which, barring any possible appeal moves by the DoE, should pave the way for the case to be heard fully later this year.

When the case comes to its full hearing the judge will have to decide the true cost of restoring Elizabeth House. The P&O companies will have to establish that the restoration work in question was necessary if the property was to be re-let.

Initially the DoE had claimed that the P&O companies had intended to demolish Elizabeth House shortly after termination of the its tenancy. But that claim has been dropped.

The DoE also argued that the P&O companies intended to carry out structural alterations to the property shortly after termination of the DoE's sub-leases and that the alterations would have rendered any repairs valueless.

On this point the judge ruled that he was satisfied there was no immediate intention to carry out alterations, though he accepted that the companies had intended to carry out substantial refurbishment at some stage if future redevelopment was not possible.

The judge said he was also satisfied that P&O had commenced repair work on the basis that redevelopment was not a viable option and that the only alternative was to re-let in order to maximise the income. He accepted that P&O took the view that re-letting could not be achieved without substantial repairs.

P&O are represented by Speechley Bircham and Titmus Sainer Dechert is advising the Secretary of State.