51st state

One of the problems that will face any incoming Labour government in 2024, is the state of the County Court, and in particular the backlog of small claims, and the fact that it takes 51 weeks for a small claim to proceed through the court system. A well advised new administration should be able to make some inroads into the thickets of the county court lists, by reducing the Small Claims track limit to £5000 again, and rewriting Practice Direction 26, in luminous green crayon. I am convinced that at the moment, it appears to be written in invisible ink, as it seems to be routinely ignored on allocation.

Thus last week, I had the engaging prospect of seeking to set aside an order allocating the case to the Small Claims Track, where the damages claimed were in excess of £51,000. My all time record, for the previous highest “small claim” was £37,000. The District Judge on reconsideration at an oral hearing duly obliged, and the case has now changed course onto a costs bearing track, and is heading for a Fast Track trial. I am reasonably sure that as a quantum only dispute, where there is no personal injury claim, it will settle long before there it gets there.

The court’s power to allocate a claim to track is governed by part 26 of the Civil Procedure Rules, in particular rules 26.6, 26.7 and 26.8 and the accompanying Practice Direction 26. Rule 26.6 of the Civil Procedure Rules provides as follows:

(1) The small claims track is the normal track for–

(a) any claim for personal injuries where –

(i) the value of the claim is not more than £10,000; and

(ii) the value of any claim for damages for personal injuries is not more than—

(aa) £5,000 in a claim for personal injuries arising from a road traffic accident, except as provided in sub-paragraph (bb);

(bb) £1,000 in a claim for personal injuries arising from a road traffic accident, in any of the circumstances specified in rule 26.6A; or

(cc) £1,000 in any other claim for personal injuries

Rule 26.7 states:

(1) In considering whether to allocate a claim to the normal track for that claim under rule 26.6, the court will have regard to the matters mentioned in rule 26.8(1).

Rule 26.8 sets out the following criteria:

(1) When deciding the track for a claim, the matters to which the court shall have regard include –

(a) the financial value, if any, of the claim;

(b) the nature of the remedy sought;

(c) the likely complexity of the facts, law or evidence;

(d) the number of parties or likely parties;

(e) the value of any counterclaim or other Part 20 claim and the complexity of any matters relating to it;

(f) the amount of oral evidence which may be required;

(g) the importance of the claim to persons who are not parties to the proceedings;

(h) the views expressed by the parties; and

(i) the circumstances of the parties.

(2) It is for the court to assess the financial value of a claim and in doing so it will disregard –

(a) any amount not in dispute;

(b) any claim for interest;

(c) costs; and

(d) any contributory negligence.

Practice Direction 26 notes at paragraph 8.1:

(1) (a) The small claims track is intended to provide a proportionate procedure by which most straightforward claims with a financial value of not more than £10,000 can be decided, without the need for substantial pre-hearing preparation and the formalities of a traditional trial, and without incurring large legal costs. (Rule 26.6 provides for a lower financial value in certain types of case.)

(b) The procedure laid down in Part 27 for the preparation of the case and the conduct of the hearing are designed to make it possible for a litigant to conduct his own case without legal representation if he wishes.

(c) Cases generally suitable for the small claims track will include consumer disputes, accident claims, disputes about the ownership of goods and most disputes between a landlord and tenant other than opposed claims under Part 56, disputed claims for possession under Part 55 and demotion claims whether in the alternative to possession claims or under Part 65.

(d) A case involving a disputed allegation of dishonesty will not usually be suitable for the small claims track.

(2) The court may allocate to the small claims track a claim, the value of which is above the limits mentioned in rule 26.6(2). The court will not normally allow more than one day for the hearing of such a claim.

 In addition, the court applies the overriding objective.

These provisions collectively indicate that although a District Judge allocating a case has a discretion, when making her decision, that decision can be characterised as a “weak” discretion rather than a “strong” one. A strong discretion would provide that the procedural judge can “make such order as the court thinks fit” or must only take into account “all the circumstances” of the case.

A weak discretion by contrast, provides a starting point for the exercise of a discretion, or a presumption or limits the factors to be considered. The court’s discretion under rule 26.6 CPR is plainly structured in a way more akin to the latter, than the former type of discretion. There must be positive reasons, falling within the criteria noted in rule 26.8(1) CPR to justify a departure from the “norm”.

Of all the factors, the role of “normal value” is key: it effectively acts as the primary criterion, which enables the court to determine which cases should be allocated to the Small Claims track, and which cases should be allocated to the costs bearing tracks, where it is possible for the winning party to recover their costs.

Conversely, a case which is allocated to the Small Claims track, should be one which in round terms is worth less than £10,000 or where the complexities are few, so that a party can reasonably be expected to litigate the case at her own expense, through her own efforts.

This conclusion does not affront the overriding objective, but rather runs with the grain of it, providing a neat means of ensuring that the requirement of proportionality is met, and reflecting the fact that for cases worth more than £10,000 the rules contemplate that the winning party will as part of a “normal” allocation, recover her costs.

This is the purpose behind the “normal track” concept: where both parties are professionally represented, to under-allocate a case, will not save costs at all. The costs will still be the same, they will still be incurred, but the winning party will simply not recover them. Moreover, removing the costs of the proceedings from the scope of costs recovery on a costs bearing track, can have two unwanted, but foreseeable consequences.

The first of these is the disapplication of Part 36, which in turn means that the court creates a disincentive to settlement. It is no co-incidence that the District Bench’s lists are choked with credit hire small claims worth less than £10,000. Conversely, if a case is appropriately allocated to a costs bearing track, in quantum only disputes it is far more likely to settle.

The second is that if the case does not settle, the court foregoes its proper hearing fee. A credit hire case allocated to the Small Claims track will attract a hearing fee of £346 set against the Fast-track fee of £545 or £199 less than the proper fee. This may be small beer, in the individual case, but there are a huge number of cases and the lost fee income to the courts if cases are under allocated will be significant year on year, in these straitened times.

Where it is clear from the pleaded value of the claim that the case substantially exceeds the Small Claims track upper limit, so the normal allocation should be at least to the Fast Track. It follows that unless there are cogent specific reasons falling within the factors identified in rule 26.8 CPR to persuade the court otherwise, the case should be allocated to the Fast Track.

These factors will usually be absent. The financial value of the case points towards the Fast Track. The remedy sought are damages worth more than £10,000. Complexity must be considered in context. Most credit hire cases would not be regarded as complex by lawyers who specialise in credit hire litigation or experienced judges, but the issues usually set out in the Defence which include copious reference to caselaw will be too complex for a layperson to make sense of them. This is a factor which points towards allocation to the Fast Track.

The ambit of the Small Claims Track can include cases where legal representation may be appropriate or even necessary. Nonetheless it is clear from the Practice Direction that the basic idea is that the small claims track is designed for low-value claims that people can be be expected with a degree of assistance from the court and with simple case management directions to conduct from beginning to end (including the trial) by themselves without legal representation.

Usually there will be two parties, often no counterclaim, and only the Claimant will give oral evidence. The case will be unexceptional in the sense it is important to the Claimant and the Defendant but has no wider significance. These factors can be described as neutral in their effect, as they represent common features of many Fast Track cases. The view expressed by the Claimant will be  that the case should be allocated to the Fast Track and the circumstances of the parties are that both are professionally represented by solicitors who specialise in the field of credit hire and the parties are incurring costs.

These factors will all favour allocation to the Fast Track. In summary in most cases where the credit hire claim exceeds the £10,000 limit there will be nothing in the factors in rule 26.8 CPR to displace the “norm” for allocation of case of this nature, as the factors are either neutral or positively favour allocation to the Fast Track, and none of these factors will favour allocation to the Small Claims track.

But I predict that all too often on allocation, the court will take the view that “they see these claims all the time” and so the boundaries between a small claim and a costs bearing claim, will remain obscured by forensic foliage.

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