THE LIMITS OF DECLARATORY RELIEF: THE DANGERS OF APPLYING FOR IT: CLAIMANT’S ARGUMENTS (AND PLEADINGS) FAIL TO RAISE THE ROOF

I am grateful to my colleague John de Waal QC at Hardwicke for  bringing my attention to the judgment of Mrs Justice O’Farrell in Office Depot International (UK) Ltd v UBS Asset Management (UK) Ltd & Ors [2018] EWHC 1494 (TCC).  It is a case that highlights (i) the requirements and limitations of an application for declaratory relief: (ii) the importance of setting out the particulars of claim fully. The claimant was fortunate in being given a second opportunity to amend its particulars so as to plead its case properly.

 

“…the jurisdiction of the court is not to declare the law generally or to give advisory opinions; it is confined to declaring contested legal rights, subsisting or future, of the parties represented in the litigation before it and not those of anyone else”

THE CASE

The claimant and four potential defendants were in dispute in relation to the terms and requirements in relation to repairing covenants of a lease, the primary problem being a leaking roof. The claimant issued proceedings seeking declaratory relief in relation to the dispute.

Three of the defendants applied to strike the action out and/or summary judgment. The defendants’ applications were adjourned to allow the claimant to amend its particulars. This was the judgment after that adjournment.

 

THE APPLICATIONS

During the application it became common ground that the application against one defendant (the former landlord) should be struck out.

THE LAW AS TO DECLARATORY RELIEF

The judge then considered the principles relating to declaratory relief and held that the case against one of the remaining defendants was unsustainable (even if permission to amend was given). The action against that defendant was struck out.

46. The court has a wide jurisdiction to grant declaratory relief: Governor and Company of the Bank of Scotland v A Ltd [2001] EWCA Civ 52 per Lord Woolf CJ, delivering the judgment of the Court of Appeal:
“[45] The wide power of the courts to give guidance to trustees is undoubted. However the court’s ability to resolve disputes which could give rise to undesirable legal consequences is no longer restricted, if it ever was, to situations involving trusts. In his first Hamlyn lecture given in 1949, “Freedom Under the Law”, Sir Alfred Denning, as he then was, identified the challenge facing the court as being to develop “new and up-to-date machinery” (p. 116). The first element of the machinery identified in the lecture was the remedy of declaratory relief. The court’s power to make a declaration (or ‘declaration of right’) was derived from the Court of Chancery and was originally supposed to be restricted to declaratory judgments as to existing private rights (see Guaranty Trust Company of New York v Hannay [1915] 1 KB 536, which sets out the early history). Sir Alfred Denning saw the need to develop its scope in order to control the abuse of executive power, and over the half-century which has elapsed since his lecture it has performed a crucial function in the emergence of the modern law of judicial review. The development of declaratory relief has not however been confined to judicial review. Doctors and hospitals have increasingly been assisted by the ability of the courts to grant advisory declarations. It was at one time thought, that an interim declaration could have no practical purpose. The developments in other jurisdictions showed this was not the situation. Now the CPR acknowledges that just as interim injunctions can be granted so can interim declarations. Order 15 Rule 16 still remains part of the CPR. Its transitional life is about to come to an end. The Rules Committee has approved a new rule, part 40.20 of the CPR which omits any mention of “rights”. It merely states “the court may make binding declarations whether or not any other remedy is claimed.
[46] … The fact that the courts now have these powers, must not, however, be regarded as a substitute for financial institutions taking the decisions which should be their commercial responsibility. The court’s powers are discretionary and only to be used where there is a real dilemma which requires their intervention.”
    1. Declaratory relief will be granted only where there is a real dispute between the parties: Gouriet v Union of Post Office Workers [1978] AC 435 per Lord Diplock at p.501:
“…The only kinds of rights with which courts of justice are concerned are legal rights; and a court of civil jurisdiction is concerned with legal rights only when the aid of the court is invoked by one party claiming a right against another party, to protect or enforce the right or to provide a remedy against that other party for infringement of it, or is invoked by either party to settle a dispute between them as to the existence or nature of the right claimed. So for the court to have jurisdiction to declare any legal right it must be one which is claimed by one of the parties as enforceable against an adverse party to the litigation, either as a subsisting right or as one which may come into existence in the future conditionally on the happening of an event …
… the jurisdiction of the court is not to declare the law generally or to give advisory opinions; it is confined to declaring contested legal rights, subsisting or future, of the parties represented in the litigation before it and not those of anyone else.”
    1. Declaratory relief will be granted only where the terms of the declaration sought are specified with precisionOxfordshire County Council v Oxford City Council [2006] UKHL 25 per Lord Scott at paragraphs [92]-[93].
    2. As between the parties to a claim, the court can grant a declaration as to their rights, or as to the existence of facts, or as to a principle of law, where those rights, facts, or principles have been established to the court’s satisfaction. The court should not, however, grant any declarations merely because the rights, facts or principles have been established and one party asks for a declaration. The court’s power to grant declaratory relief is discretionary. The court has to consider whether, in all the circumstances, it is appropriate to make such an orderFinancial Services Authority v Rourke [2001] EWHC 704 per Neuberger J:
“It seems to me that when considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration.”
Determination of the applications concerning the Fourth Defendant
  1. The difficulty raised by the pleaded case against UBS Triton is that it does not raise any issue that the court can properly determine.
  2. Firstly, there is no dispute between the parties as to the nature and scope of OD’s repairing obligations under the lease. OD has an ongoing obligation to keep the premises in repair, not by carrying out any specified works but so as to achieve the specified standard of repair. The choice of works required to maintain the warehouse in the required condition is a matter for OD. It is not open to OD, as tenant, to require UBS Triton, as landlord, to identify or agree any particular scheme of works required in order to satisfy OD’s repairing covenant. OD does not admit what works are required but no other party is advocating any particular scope of works. UBS Triton’s position is that it is a matter for OD to determine what works are required to satisfy its repairing obligations. The APOC does not include any claim for a negative declaration. On the face of the pleadings, there is no dispute as to the scope of remedial works required.
  3. Secondly, in the absence of any positive case by OD, there is no basis on which the court can, or should, determine what works, if any, are required to put the roof into a state of repair. Although, in appropriate cases, the court will assist parties in making decisions, such as, a declaration as to the proper distribution of trust funds in a case brought by trustees, or a declaration as to the appropriate treatment in a case brought by a clinician, usually the claimants must identify the particular course of action in respect of which approval is sought. In those cases, the court assumes responsibility for the administration of the trust or decision making for someone without capacity. Absent good reason, such as where there is an issue of capacity or illegality, it would not be appropriate for the court to assume responsibility for, or interfere with, a decision made pursuant to a commercial contract because it would amount to a trespass on the freedom of the parties to contract and act in their own commercial interests. Although Mr Wonnacott drew the court’s attention to cases where a claimant adopted a neutral position, they concerned claimants who were faced with conflicting claims. In this case, OD is not facing conflicting claims from other parties. Indeed, UBS Triton’s position is that it is a matter for OD to decide on the scope of work necessary.
  4. Thirdly, it would not be appropriate for the court to carry out an inquisitorial process to identify the scope of works required. OD proposes to put the neutral expert report before the court, identifying the four alternative schemes, but without any positive case as to the scheme that OD considers is necessary to meet its obligations under the repairing covenant. UBS Triton’s position is that it is a matter for OD to determine what works are necessary. The court would be left to interrogate and evaluate the options without the benefit of the adversarial trial process. The likely outcome would be successful submissions from the defendants that, in those circumstances, the court could not decide which option was appropriate. Mr Wonnacott was unable to identify any authority in which the court has determined what works a tenant is required to carry out under a lease where there is no crystallised dispute with the landlord.
  5. Fourthly, it would not be appropriate for the court to grant a declaration, identifying the works necessary to satisfy OD’s repairing obligations. The obligation is to ensure a state of repair; it is not an obligation to carry out specific works. The court could determine whether works that had been carried out in fact achieved the requisite state of repair, in the event of a dispute. However, it is not for the court to direct or supervise OD’s performance of its covenant. As Mr Jourdan rightly submits, this would transfer the risk of the covenant in the lease from the tenant to the landlord.
  6. In summary, the claim for a declaration against UBS Triton is not formulated so that any underlying issue between the parties is sufficiently clearly defined to make it justiciable.
  7. For the above reasons, OD has no real prospect of succeeding on that claim. The application to amend the APOC to plead the claim against UBS Triton is refused and UBS Triton is entitled to an order striking out the claim against it.

 

THE CLAIM AGAINST THE REMAINING TWO DEFENDANTS: INADEQUATELY PLEADED

Despite the claimant  having had permission to amend the particulars of claim the defendant argued (and the judge found) that the proposed draft particulars of claim were still deficient.

    1. Mr Hickey further submits that OD’s draft APOC remain deficient, in that:
i) they fail to particularise the alleged breach of any contractual term in sufficient detail to allow Amec to understand the case it has to meet or prepare its defence;
ii) they fail to particularise why any alleged breach by Amec is said to have caused those defects alleged;
iii) they fail to identify the cause of any defects to which reference is intended or identify the extent to which they are alleged to be defects of design and workmanship;
iv) they fail to identify what if any works are presently required to be carried out by OD under its repairing covenant or set out in what respect such works are said to be necessary to rectify defects existing at the time OD signed its lease and which are those for which Amec may be alleged to be responsible;
v) they fail to address the position articulated by UBS Triton that it does not require OD to carry out any works under the repairing covenant to repair any defects in the roof existing at the time OD signed its lease;
vi) the prayer for relief does not identify the terms of any declaration it seeks, nor does it advance any positive case as to 1) whether any remedial works are required to the roof at all; or 2) which if any of the works described by it are necessary in order for OD to comply with its repairing obligations under the lease.

THE JUDGE’S DECISION: CLAIMANT GIVEN ANOTHER OPPORTUNITY TO PLEAD ITS CASE PROPERLY

The judge granted the claimant a further opportunity to attempt to plead its case properly against the remaining two defendants.

  1. For the reasons set out in respect of the claim against UBS Triton, the current pleaded claim against Amec and FK is misconceived and flawed. I reject Mr Wonnacott’s submission that the proposed APOC does not plead a contingent claim against Amec and FK. The allegations of breach are predicated on a determination by the court that a scheme of works falls within OD’s repairing covenant. Their objections to paragraph 14(1) are justified.
  2. However, it would be possible for OD to plead a straightforward claim against Amec and FK for breach of the collateral warranties. The proposed APOC identifies the alleged defects in the design and construction of the roof and identifies the breaches alleged against each defendant. Although Mr Wonnacott has assumed a position of neutrality in the pleading, he accepts that it is likely that the roof is in a state of disrepair so as to engage the repairing covenant in the lease. That is not surprising; the roof leaks. It is incumbent on OD to plead a proper case against each defendant to identify the remedial scheme required to remedy each of the defects alleged. If OD wishes to pursue the claim against Amec and/or FK, it must plead a positive case as to the remedial works and loss relied on.
  3. I have considered whether the court should exercise its discretion to give OD a further opportunity to put its pleaded case in order. Ms Stephens makes a persuasive argument that OD has already had a number of chances to rectify the claim and these proceedings need to stop. This is not a proper or efficient use of the court’s resources and it is not fair to put the defendants to the costs of having to defend the claim.
  4. The following matters must be weighed up. There must be finality in litigation. The injustice to the defendants in letting the proceedings continue is that they have an unknown claim hanging over them. They are entitled to know the nature and quantum of the claims against them and should not have the uncertainty of waiting for a case to evolve. The parties are entitled to a fair and expeditious determination of the dispute. The injustice to OD in not giving it an opportunity to rectify its claim, is that (probably) it will be deprived of any recourse against Amec and FK by reason of limitation. Although the defendants will no doubt submit that it has brought that difficulty on itself, it is clear that OD has been placed in a difficult position by reason of the settlements made by the other parties.
  5. In those circumstances, I have concluded that OD should be given a further opportunity to plead a proper case against Amec and FK and seek permission to amend. Amec has indicated that it may seek to bring the first and/or fourth defendants back into the proceedings by way of contribution claims. A further hearing will be fixed to determine those, and any other applications, and for a CMC. The court will be pro-active in managing this case so that it is dealt with justly and at proportionate cost.