UK: Tenders And The Cap On Simple Procedure Expenses. Is It That Simple?

The rules governing expenses (costs) in lower value simple procedure actions in the sheriff court are, on the face of it, straightforward.

• If the value of the claim is £3,000 or less, awards of expenses are subject to statutory caps:
• In very low value claims worth £200 or less, no expenses at all are recoverable.
• For claims between £200 and £1,500 in value a maximum of £150 is payable in expenses.
• Where the claim is between £1,500 and £3,000 the maximum sum recoverable in expenses is 10% of the value of the claim.
• Claims worth over £3,000 are not subject to the cap.

However, there is an exception to the above under s81(5)(a)(ii) of the Courts Reform (S) Act 2014. This section dis-applies the various levels of cap in cases where a respondent in a simple procedure:

"...having stated a defence, has not proceeded with it"

The meaning of that phrase was considered in Graham v Farrell 2017 SC EDIN 7

The background to Graham

In January 2017 the claimant raised a simple procedure action for payment. The action initially proceeded as undefended and decree was granted.

The decree was subsequently recalled on the respondent's application and a response form setting out a defence was lodged.

Parties were initially ordered to mediate the dispute but mediation proved unsuccessful.

At the beginning of August 2017 a case management discussion took place. An evidential hearing (the simple procedure equivalent to a proof or trial) was fixed to take place in October and the respondent was allowed to adjust his answers.

Three weeks prior to the evidential hearing the respondent lodged a minute of tender offering £3,000 in settlement. That offer was accepted four days later.

The claimant lodged an application seeking decree in terms of the tender and acceptance together with an order for an uncapped award of expenses.

Amount of decree, not sum sued for

The claimant attempted to argue that the statutory cap on expenses did not apply since the original sum claimed in the summons had exceeded £3,000. That argument was rejected by Sheriff McGowan. He found that the cap would apply if the sum "decerned for" by the court was £3,000 or less. The sum decerned for was the amount stated in the decree granted by the court.

Stating a defence and not proceeding with it

The claimant did however successfully argue that the respondent in Graham had stated a defence and, because the action had been compromised by way of tender and acceptance, had then not proceeded with that defence. Accordingly, the statutory cap on the award of expenses did not apply.

Sheriff McGowan considered that the decision of Sheriff Principal Stephen in Tallo v Clark (in relation to a similar provision applicable in small claim procedure) was highly persuasive - albeit Tallo was a case which settled by extra-judicial negotiation rather than tender. He concluded:

"The crucial point is the meaning of the phrase "... has not proceeded with [the defence stated]...". In my opinion, the meaning of those words was definitively determined in Tallo to mean "... not proceeding with the hearing on evidence and obtaining a decision or judgment of the court...": Tallo, paragraph 18."

The sheriff accordingly found the respondent in Graham had lost the protection of the cap on expenses and was liable to the claimant in expenses as assessed under Chapter V of the Table of Fees.

The impact of Graham

Concerns have been expressed about how the decision in Graham might impact on extra-judicial resolution of simple procedure actions. Further judicial scrutiny seems likely since a decision of a single sheriff does not bind other sheriffs.

It is also important to note that in both Tallo and Graham a hearing of evidence had already been fixed by the time the actions settled. In both cases it was the failure to proceed with that hearing which resulted in the loss of the protection of the cap. Many simple procedure cases will settle well before that stage is reached and the decision in Graham may therefore be distinguished on that basis.

The operation of the simple procedure rules is already under review and we are aware that the decision in Graham has been brought to the attention of the Scottish Civil Justice Council. The SCJC Costs & Funding Committee plans to consider the issues raised when it meets in March 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.