To settle or not to settle? That is the question

When a case is allocated to the small claims track, i.e., the amount in dispute is below £10,000, the parties are usually encouraged to avoid going to trial and consider settlement. This avenue minimises solicitors’ costs and avoids the payment of a counsel fee.

The small claims track is a simplified procedural system for dealing with lower value claims. This is the usual track for claims with a financial value of not more than £10,000. Only limited costs are recoverable on claims allocated to the small claims track and therefore it is usually recommended that the parties attempt settlement at an early stage, regardless of whether they have a strong claim or defence. However, on cases where parties need a binding precedent or a determination from the court on the point of law, attempting settlement at an early stage is unlikely to be suitable. 

Costs on the small claims track are primarily governed by Civil Procedural Rule (“CPR”) 27.14. Under CPR 27.14(2) the following costs are recoverable:

  • Fixed solicitors' costs as set out in CPR 45.
  • Court fees.
  • Certain travel and accommodation expenses incurred attending hearings.
  • Fixed sums for loss of earnings/holiday entitlement as a consequence of attending hearings (limited to a maximum of £95 per person per day).
  • Fixed sums for expert's fees (£750 for each expert from 1 April 2013).

Note that in respect of solicitors’ costs, the maximum amount which a party is likely to be able to recover is £110.00 (see CPR 45.2). Moreover, the counsel’s fee, which would usually be payable at the trial and can be anywhere between £300.00 - £600.00 plus VAT, will most likely not be recoverable regardless of the outcome of the trial. This is because the counsel’s fee is not a recoverable disbursement under CPR 27.14(2). 

In claims, where there is a contractual right to costs, the winning party can argue that their contractual right to recover costs prevails over the usual small claims track rules.  There have been some cases where the courts have accepted this argument and awarded a cost order outside the remit of CPR 27.14(2). However, this is rare as generally the courts are extremely reluctant to award any costs outside the remit of CPR 27.14 even where there is a contractual right to costs. Hence, when a claim is allocated to the small claims track, the parties should recognise that only limited costs are likely to be recoverable.

Considering the above, it is usually recommended on small claims that the parties put some thought towards a settlement at an early stage. There is a free mediation service for small claims which is generally quite useful and will often result in settlement. This is offered to the parties once they have filed their directions questionnaire. 

Alternatively, the parties to small claims can seek to settle the dispute through “without prejudice save as to costs” correspondence. Marking the correspondence as “without prejudice save as to costs” means that the correspondence cannot be shown to the Court until after the main issue is resolved. However, the ‘save as to costs’ part means that the communication can be disclosed when the Court is considering the issue as to liability of costs. 

If a claim is settled at an early stage and before the trial, it will help the parties to minimise the solicitors’ costs. More importantly, as the claim will not proceed to a trial, the parties would not incur any counsel fee which is generally not a recoverable disbursement. Hence, when a claim is allocated to the small claims track, the parties are usually encouraged to consider settlement regardless of the strength of their claim or defence. Nevertheless, there can be instances where settlement will not be in the parties’ interest and it is recommended that parties consider the merits of settlement on a case by case basis. 

Written by : Shehroze Mehmood, Trainee Solicitor

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