Scottish Sheriff Court Decisions

Act:  Waclawski for the pursuer and respondent

Alt: McDougall for the defender and appellant

EDINBURGH, 7 April 2015

The Sheriff Principal, having resumed consideration of the appeal, answers the question of law in the negative;  refuses the appeal and adheres to the sheriff's interlocutor of 15 August 2014;  finds the appellant liable to the respondent in the expenses of the appeal all as same may be taxed by the Auditor of Court on the summary cause scale.

(signed) Mhairi M Stephen

NOTE:/

NOTE:

1. This appeal proceeds by way of stated case from the sheriff's decision on the expenses of this small claim.The claim relates to damage to a motor vehicle following a road traffic accident which occurred on 17 September 2013 near Livingston.The pursuer makes a claim against the other motorist for £863.90 being the cost of repairs to her vehicle following the collision;her uninsured losses and a compensatory sum for inconvenience.

    

2. When the summons was served it also intimated the return date as 24 April 2014 with a hearing date (in terms of Chapter 9 of the Small Claims Rules 2002) on 8 May 2014.The response by the appellant was made in the form of defences lodged on 28 March 2014.The appellant's response disputes liability and his esto position is that the pursuer's negligence contributed to the accident.On the matter of quantum the appellant admits that the pursuer's vehicle was damaged as a result of the collision but otherwise the pursuer's statement of loss is denied.The case then proceeds under Chapter 9 of the 2002 Rules as a defended claim.At the hearing on 8 May 2014 the court fixed a hearing on evidence for 31 July 2014.Standing the nature of the appellant's response it is reasonable to assume that this was fixed in terms of Rule 9.2(4) as evidence was required for the purpose of reaching a decision on the dispute, there being disputed issues of fact and law.

    

3. The sheriff in the stated case at paragraph 2 narrates briefly the procedural history.When the case called before the sheriff on 14 August 2014 at a hearing on expenses he was informed that the case had settled extra judicially for the sum of £394.45 being 50% of the agreed damages of £788.90.The proof fixed for 31 July 2014 had been discharged.It appears to me, however, that may be incorrect.Clearly the cause had not settled extra judicially as parties had not been able to reach agreement on the question of expenses.Expenses form part of the claim.

    

4. The hearing on expenses before the sheriff turned on the meaning of the words "having stated a defence, has not proceeded with it" where they appear in section 36B(3)(a)(ii) of the Sheriff Courts (Scotland) Act 1971.

   "Expenses in small claims

   36B.   (1)     No award of expenses shall be made in a small claim in which the value of the claim does not exceed such sum as the Secretary of State shall prescribe by order.

   (2)   Any expenses which the sheriff may award in any other small claim shall not exceed such sum as the Secretary of State shall prescribe by order.

   (3)     Subsections (1) and (2) above do not apply to a party to a small claim –

   (a)  who being a defender –

   (i)   has not stated a defence; or

   (ii)  having stated a defence, has not proceeded with it; or

   (iii) having stated and proceeded with a defence, has not acted in good faith as to its merits; or

   (b)  on whose part there has been unreasonable conduct in relation to the proceedings or the claim;

   nor do they apply in relation to an appeal to the sheriff principal.

   (4)   An order under this section shall be by statutory instrument but shall not be made unless a draft of it has been approved by a resolution of each House of Parliament."

    

5. Section 36B clearly governs expenses in small claims actions.The effect of sub-sections 1 and 2 is that no award of expenses shall be made in a small claim in which the value does not exceed £200 and in any other small claim the expenses shall not exceed £150.Read together sub-sections 1 and 2 serve to restrict the liable party's exposure to expenses and similarly restricts the successful party's expenses.However, these sub-sections do not apply to a defender who (i) has not stated a defence or (ii) having stated a defence has not proceeded with it or (iii) having stated and proceeded with a defence has not acted in good faith as to its merits.Also, the limitation on expenses does not apply to a party on whose part there has been unreasonable conduct in relation to the proceedings or to the claim.Where the restriction or limitation does not apply liability for expenses is on the summary cause scale.Incidentally, nor does the limitation apply in an appeal to the Sheriff Principal.Rule 21.6 of the Small Claim Rules 2002 also applies to expenses subject to section 36B of the 1971 Act.

    

6. Given that the claim for the principal sum had apparently settled on a 50/50 compromise basis prior to the hearing on evidence, the sheriff had to decide whether it could be said that, having stated a defence, the defenders had "not proceeded with it".Mainly on the authority of Fenton v Uniroyal Englebert Tyres Limited 1995 SLT (Sh Ct) 21 the sheriff, considering himself bound by that decision, concluded that the defence had not been proceeded with and therefore found the pursuer entitled to expenses on the summary cause scale.All of the cases cited to the sheriff were referred to in submissions before me. The sheriff considered the approach of the Sheriff Principal in Semple v Black 2008 SCLR 1098 as persuasive for equitable reasons but followed Sheriff Principal Nicholson in Fenton.

    

7. The question on appeal for my decision is:-

   Did I err in finding the pursuer entitled to expenses on the summary cause scale?

    

8. Mr McDougall, for the appellant, emphasised that the action had settled for 50 per cent of the agreed damages.Damages had been agreed at £75 less than the sum claimed.This was in line with the defence on the merits and contributory negligence.The pursuer had compromised her claim in the light of the defences.Accordingly, it was argued that the defender had proceeded successfully with his defence.The actual heads of agreement and terms of settlement are relevant to the question of expenses which involves the issue, and indeed the central issue, whether the defender proceeded with his defence.To ignore the facts would perpetrate an unfairness on any defender who succeeded in coming to an agreement consistent with his defence.Settlement is to be encouraged and the court should interpret section 36B(3)(a)(ii) in a manner which would promote the aim of early settlement.The sheriff's interpretation of the provision discourages settlement and acts as an incentive to defenders to proceed to proof in cases of limited value causing disproportionate expense for parties and inconvenience to the court.

    

9. The sheriff followed a line of authorities from Gilmour v Patterson 1992 SLT (Sh Ct) 10; Glover v Deighan 1992 SLT (Sh Ct) 88; Fenton v Uniroyal Englebert Tyres Limited (supra) and Owenson v Chaucer Insurance (an unreported judgment dated 19 August 2013).The sheriff in Owenson agreed with and followed the reasoning of Sheriff Principal Nicholson in Fenton.The sheriff in this case considered himself bound by Fenton.The sheriff erred in that regard.He was not bound by a decision of a former Sheriff Principal especially standing his comment at paragraph [12] of his stated case where he refers to his note appended to the interlocutor of 15 August 2014:

   "I personally prefer the reasoning of Sheriff Principal Wheatley, as he then was, in the case of Semple, that the whole circumstances have to be looked at to determine whether the defender has proceeded with his defence, and would have followed that case had it been open to me, to do so."

    

10. Mr McDougall argued that I should conclude that Gilmour & Fenton were correctly decided on their facts however, they can easily be distinguished from the present case.In Gilmour the defender conceded both liability and quantum.In Fenton the Sheriff Principal was not referred to the decision in Hamilton v Sullivan 1993 SCLR 969 which took a contrary view. In Hamilton the Sheriff Principal decided that the defender had proceeded with his defence despite settlement without proof.Mr McDougall considered that the Sheriffs Principal in Glover & Fenton adopted an unduly restrictive interpretation of the provision which led to undesirable results.

     

11. I was urged to distinguish Fenton, Gilmour and Owenson and follow the reasoning in Semple v Black 2000 SCLR 1098.I should answer the question of law in the affirmative and allow the appeal.Expenses of £150 should be substituted for the sheriff's award of expenses on the summary cause scale.The expenses of the appeal, however, should be allowed on the summary cause scale.

     

12. Mr Waclawski, for the pursuer and respondent asked me to conclude that both Fenton and SO v Chaucer were correctly decided.The reason they were correctly decided is the issue before the court is one of statutory interpretation.It is neither a discretionary nor an equitable matter for the sheriff.These authorities are correct in law.The provision as to expenses found at section 36B of the 1971 Act reflects the nature of small claims procedure.Expenses are to be certain and predictable.The procedure is to be speedy and straightforward especially for the non-represented litigant.The first or preliminary hearing is the point where the parties and the court must focus on whether there is a disputed issue of fact or law at all.Cases that cannot be resolved at that stage are allowed to proceed to proof once the issue of fact/law is identified.Once the case passes from the first hearing (or a continuation of that hearing) to proof the defender is on notice as to the consequences on expenses.If settlement is to be reached or the case compromised that must be done at the first hearing.

     

13. Mr Waclawski commented on the authorities relied upon by the appellant.He did not consider that the case of Hamilton was persuasive.Hamilton may have been wrongly decided as the court appeared to give undue weight or consideration to the conduct of the pursuer as well as the defenders in reaching the view that the defenders had proceeded with their defence by settling prior to proof.

     

14. Where the issue is one of statutory interpretation the facts and circumstances of previously decided cases are of limited value.Accordingly, I was asked to refuse the appeal by answering the question of law in the negative and awarding expenses in favour of the pursuer and respondent on the summary cause scale.

     

    DECISION

15. This is an appeal on expenses in small claims procedure.That procedure was introduced into the sheriff court in 1988.It is designed to be simple enough to be followed and used by parties without legal representation and cheap enough so as to present litigants with certainty as to the financial risk on expenses.Accordingly, expenses recoverable are restricted in terms of section 36B of the Sheriff Courts (Scotland) Act 1971 and Rule 26.1 of the Small Claims Rules 2002.Small claims procedure is a type or subset of summary cause procedure identified for small claims procedure by reference to the sum claimed (section 35(2) of the 1971 Act).The Small Claims (Scotland) Amendment Order 2007 (SI 2007/496) raised the small claims threshold from £750 to £3,000.

     

16. The limitation or restriction as to expenses to which I refer in paragraphs 4 and 5 do not apply to a defender who (i) has not stated a defence or (ii) having stated a defence has not proceeded with it or (iii) having stated and proceeded with a defence has not acted in good faith as to its merits.Nor do they apply to a party on whose part there has been unreasonable conduct in relation to the proceedings or the claim.If any of these exceptions apply the successful party is entitled to recover expenses on the summary cause scale which is, of course, a higher scale.

     

17. This appeal is solely concerned with section 36B(3)(a)(ii) and the correct interpretation of that provision.It is a narrow point but nevertheless an important one given that a significant proportion of small claims actions are for payment.If a defender has not proceeded with his stated defence he cannot benefit from this limitation on expenses namely the fixed expenses.

     

18. The decided cases of Gilmour, Glover, Fenton and Owenson have interpreted the provision strictly in accordance with its terms acknowledging that the outcome can be harsh on occasion.I agree with that approach.In a procedure designed to be used by party litigants without legal representation and which is intended to be speedy and effective, predictability and certainty as to expenses is important.Small claims procedure can be contrasted with other forms of procedure in a number of ways.It is the only procedure to lay down fixed fees and is focussed on resolution of the dispute at an early stage.The main event is the "Hearing" in terms of Part 9 of the Rules.The hearing and its purpose is set out in Rule 9.1 and 9.2.The focus is on securing the parties’ attendance with the sheriff enjoined to have a positive role in finding out what the claim and any defence is about and seeking to negotiate and secure settlement of it.If settlement cannot be reached between the parties the sheriff must, if possible, reach a decision on the whole dispute and may only continue the hearing for evidence when he or she cannot reach a decision.Parties cannot rely on a hearing of evidence being required.The sheriff has to be satisfied that evidence requires to be led before a hearing on evidence will be fixed.That, in my view, informs the rules as to expenses.It is unhelpful to compare small claim procedure with ordinary procedure where parties are entitled to litigate to proof or conclusion subject to the rules of pleading and procedure.Accordingly, the reference to not proceeding with a defence means not proceeding with the hearing on evidence and obtaining a decision or judgment of the court.I agree with the reasoning of Sheriff Principal Nicholson in Fenton.This is not a matter which calls for a discretionary or equitable determination but is a matter of statutory interpretation.

     

19. The argument advanced on behalf of the appellant is to the effect that the court should have a discretion as to expenses.The Sheriff Principal in Hamilton exercised his discretion in favour of the defenders as the pursuer had conceded the argument prior to the hearing on evidence.It appears to me that Hamilton was correctly decided on an equitable basis but wrongly decided as a matter of interpretation.It was argued before me that a strict interpretation of the provision is the enemy of settlement.Of course, compromise is a worthwhile and valuable objective in litigation.The appellant's argument however misunderstands small claims procedure.If small claims procedure is understood properly parties must pin their colours to the mast by the date of the first hearing. A defender cannot rely firstly, on a hearing on evidence and secondly, on negotiation following a defence being stated.Once the defence is stated and the sheriff appoints a hearing on evidence a defender will only be protected on expenses if he proceeds with his defence at the hearing of evidence in good faith unless, of course, the claim and the consequential expenses are settled extra-judicially.

     

20. I detect no error in law in the sheriff's decision on the matter of expenses.The sheriff is attracted by the approach of Sheriff Principal Wheatley in Semple.However, Semple is a case which deals with tender and acceptance of tender and strictly the remarks on section 36B are extraneous to that matter and therefore obiter. The discretionary or equitable approach suggested by the Sheriff Principal in that case has understandable attraction if one is considering where the interests of justice lie.However, the issue in this appeal is the interpretation of the statutory provision and a discretionary approach is the enemy of certainty and predictability.The sheriff may have come to the correct decision for different reasons but nevertheless, in the end of the day, the correct decision was reached.The sheriff considered himself bound by the decision of a former Sheriff Principal of this Sheriffdom.The correct approach, in my view, is to regard Sheriff Principal Nicholson's decision as highly persuasive.

     

21. Accordingly, I answer the question of law in the negative and the appeal is refused.The appellant will be liable to the respondent in the expenses of the appeal on the summary cause scale.

(signed) Mhairi M Stephen