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Credit Hire Costs Success for the Keoghs Scotland team
In the recent judgment of Jamie Davis v Skyfire Insurance Company Limited, Keoghs Scotland LLP were successful representing the respondent, Skyfire, in a costs hearing arising from a credit hire claim. The judgment, the full text of which can be read here centred on an untested area of Simple Procedure in Scotland and provides some welcome guidance to those representing respondents in Simple Procedure Claims.
The claimant raised a court action seeking £3,035.32, the majority of which related to credit hire. The respondents immediately admitted liability in their response. The claim settled at £1,700, one day prior to trial. The judgment itself contains a full timeline of events leading up to settlement.
Statutory framework and case precedent
The Simple Procedure track is utilised for non-injury cases with a value of under £5,000.
The statutory framework can be summarised as follows: in Simple Procedure cases, where settlement is less than £3,000, claimant costs are limited to 10% of the sum sued for UNLESS the respondent, having stated a defence, does not proceed with it. If the respondent states a defence and does not proceed with it, then costs are calculated on a considerably higher scale.
The claimants argued that the respondents had lodged a quantum defence, which they had not proceeded with to trial and consequently, that expenses on a costs scale should apply.
We argued that capped expenses of £170 (10% of the settlement figure) should apply. Our argument was two-fold; (1) that reference to stating a defence and not proceeding with it referred to a liability defence and not a quantum only defence, and (2) that if it did refer to a quantum only defence, Sheriffs have discretion under the statutory framework to maintain the 10% cap.
In relation to the respondent’s first argument, the Summary Sheriff felt that he was bound by the wording of the statutory framework and historic case precedent. Although the respondents had conceded liability immediately in their defence, they had lodged a defence on quantum. They had then negotiated a settlement and, accordingly, had not proceeded with their defence. Therefore, on the basis of the statutory framework and case precedent, the higher scale costs should apply. It was irrelevant, for the purpose of the statutory framework, that the quantum defence had achieved almost 50% discount on the sum sued for.
However, the Summary Sheriff was persuaded by our second argument that he had discretion under the current statutory framework to reduce expenses to the 10% cap. He was persuaded that the historic case law could be distinguished as it related to the now defunct Scottish Small Claims procedure which had almost the same rules on expenses but, crucially, did not allow discretion.
Ultimately, the Summary Sheriff was convinced that the reduction in settlement was one that allowed him to exercise his discretion and allow the 10% cap on expenses. Furthermore, he noted that allowing the claimant scale costs would be contrary to the spirit and ethos of Simple Procedure; which is essentially to encourage parties to reach agreement and avoid the need for an evidential hearing.
Complexity – a side issue
Another exception to Simple Procedure capped costs is if the case involves a “difficult question of law”. The claimants argued that the respondent’s reference to an intervention/Copley letter in their defence related to a “difficult question of law”. This is because the validity of intervention letters has not yet been fully considered by the Scottish courts.
Ultimately, this argument was not fully expanded upon by the claimants in their submissions but it is worth noting that Summary Sheriff Cottam did not consider that an argument over the application of an intervention/Copley letter would fall into the definition of a “difficult question of law”.
What does this mean?
If a respondent lodges a quantum defence and does not proceed with it then the decision indicates that the primary position is that scale costs will apply. However, it will then be for the respondent to argue that the court should exercise its discretion. In considering whether to exercise discretion, the courts will look at the timeline of the case, parties’ behaviour and the difference between the sum sued for and the ultimate settlement figure.
In the present case, the Summary Sheriff exercised his discretion based on the timeline of events and the fact that the settlement figure was significantly less than the sum sued for.
However, the judgment does send out a warning shot to respondents in that “such exercise of discretion is unlikely to be made, if ever, in a liability case or where the quantum claimed was practically the same as settlement”.
In his judgment Summary Sheriff Cottam suggests that steps could be taken by respondents to minimise costs such as pausing cases from the outset to allow them to investigate. However, this tactic is not risk free and we have previously had such pauses disallowed in different Sheriff Courts. Therefore, whilst pausing is clearly a tactic to be considered, it may not always be the correct tactic in the circumstances. Each case will turn on its own facts.
Is this decision binding?
Summary Sheriff Cottam’s decision is not binding on the Scottish courts. However, we hope that it provides some clarity to those acting within the credit hire arena going forward. The judgement emphasises the need for respondents to take a proactive and realistic approach to settlement and also the need for claimants to be realistic in their settlement expectations.
For more information, please contact Emily Jeffrey