Dilapidations: exaggeration of a claim
Tall stories?
31 January 2011
Vivien King discusses exaggeration of a claim or defence in dilapidations and asks whether it is a negotiation tactic, outright fraud or misrepresentation
Anyone involved in the dilapidations field must be aware that exaggeration will not assist a party to a dispute, particularly in relation to any costs award granted by the courts. In Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2009] EWHC 2014, where the landlord’s initial claim of £425,000 was reduced to a mere £1,073 in settlement negotiations, the court ordered the landlord to pay the tenant’s costs on an indemnity basis.
It should however be recognised that, leaving aside deliberate exaggeration, there will be areas of dispute in any claim. Just because parties cannot agree upon the level of damages due for a breach of covenant does not mean that one party or another is exaggerating their position. Further, it should be accepted that both parties and their representatives are – even if they leave exaggeration where it belongs, i.e. outside the claim or defence door – going to put forward their best case before recognising the strength of the other side’s position.
But there are times when matters are deliberately ignored or a decision made not to disclose material facts. In such cases, parties and advisors could be in breach of the civil court rules relating to disclosure of evidence. A failure to disclose evidence, even if it harms a party’s case or plays directly in to the hands of the other, could amount to contempt of court.
Landlord declarations
The classic example relates to a landlord’s intentions for the subject premises at or shortly after the lease end. A declaration during the lease term that the landlord intends to conduct works left undone by a defaulting tenant in breach of its covenant to repair, might lead to a settlement after which the landlord conducts other works rendering valueless those originally proposed. This might evidence exaggeration or a deliberate intention to mislead, but it might also evidence a landlord’s change of heart for very good and understandable reasons (e.g. a change in the letting market). Hence, care should be taken before the wrong conclusion is reached.
Nevertheless, there are almost certainly occasions when a deliberate tactic is used by the landlord which does amount to an intention to mislead. In such circumstances, it has been said that the landlord has defrauded the tenant.
If a person dishonestly makes a false representation, or fails to disclose information, with the intention of making a gain for himself or another or to cause or expose another to loss, this may amount to fraud pursuant to the Fraud Act 2006. It has been said that this applies to dilapidations.
There are occasions when a deliberate tactic is used by the landlord which does amount to an intention to mislead. In such circumstances, it has been said that the landlord has defrauded the tenant
But fraud is a crime, not a civil claim by one party against another. It requires the intervention of criminal law enforcement agencies (the police, fraud squad and/or Crown Prosecution Service) and it seems unlikely that such bodies would be interested in an assertion that one party to a claim for dilapidations, or its representative, has falsely represented a claim or defence or failed to disclose information with the intention of making a gain. So, if not an actionable fraud, does the representation amount to a breach of the civil law? Can one consider it to be a misrepresentation? A misrepresentation is:
- an untrue statement of either fact or law
- made by one contracting party to another which
- induces the other to enter into a contract and
- pursuant to which the other suffers loss.
One can see that this might apply to a case of dilapidations, excepting that the untrue statement made by one party is not made with the intention of inducing the other to enter into a contract but of entering a settlement of the purported claim.
I have not been able to find legal support for the proposition that a claim of ‘misrepresentation’ applies to a settlement as well as to a contract – but the concepts of settlement and contract are not so dissimilar as to suggest that the courts would not accept the proposal. Perhaps if those in the dilapidations field would leave the emotive subject of fraud aside and concentrate upon the civil concept of misrepresentation, an answer to this fascinating question might be obtained. We wait to see.
Vivien King is a Consultant to commercial building consultancy Malcolm Hollis