Simple Procedure - the price of procrastination

Scott Clair represented Ian Graham, the claimant in the recently reported case of Ian Graham v Paul Farrell [2017] SC EDIN 75. The case represented something of a victory for Claimants in terms of expenses in cases which proceed under Simple Procedure. In this article, he considers the full implications of the decision.

Simple Procedure 

Simple Procedure is a court process which was introduced in November 2016, designed to provide “a speedy, inexpensive and informal way to resolve disputes where the monetary value of the claim is less than £5,000”. It replaces Small Claims and Summary Cause procedure in Scotland in relation to monetary claims.

Generally, where the value of the claim is less than £3,000, the expenses which may be awarded to the successful party are capped to a maximum of 10% of the value of the claim. This reflects the spirit of the Simple Procedure. The rules stipulate that cases are to be resolved as quickly as possible; parties are to be encouraged to settle their disputes and should only have to come to court when it is necessary to do so to progress or otherwise resolve their dispute. 

The overarching objective of Simple Procedure is settlement of disputes and, where possible, at the earliest opportunity. It is hoped that the recent note by Sheriff  Kenneth McGowan in the case of Ian Graham –v- Paul Farrell [2017] SC EDIN 75 will encourage early settlement in many Simple Procedure cases.

Ian Graham v Paul Farrell

The case of Graham concerned an action for debt recovery pertaining to unpaid business charges. The case called before Sheriff McGowan at Edinburgh Sheriff Court as an Expenses Hearing, the action having settled by judicial tender (a process whereby the respondent offers to pay a fixed sum of money together with expenses to the claimant in full and final settlement of the case). Prior to settlement, the respondent had lodged written defences with the court and an evidential hearing had been fixed. The terms of the tender were that the respondent would pay the claimant the sum of £3,000 together with his expenses, as assessed by the court, in full and final settlement of the matter.

Parties were agreed as to disposal of the case, other than the level of expenses to be awarded to the claimant, Mr Graham. The respondent, Mr Farrell, argued that the usual rule should apply and Mr Graham should not be awarded expenses in excess of £300. Mr Graham’s position, however, was that by virtue of a lesser known exception in the Courts Reform (Scotland) Act 2014, his entitlement in expenses was unrestricted. This was on the basis that Mr Farrell had stated a defence to the court and ultimately had not proceeded with it, as he chose to settle the case before it went to a hearing of evidence.

Sheriff McGowan found that Mr Graham’s position was essentially correct and so has awarded the claimant (unrestricted) expenses, as assessed on the Simple Procedure defended claims scale. It was held that “not proceeding with a defence” meant precisely that. The case is the first reported case to discuss the operation of the exception contained in section 81(4) of the Courts Reform (Scotland) Act 2014 relative to Simple Procedure actions.

What does the case of Graham mean for respondents?

The Sheriff’s note effectively confirms that the respondent in a Simple Procedure action must “pin his colours to the mast” by the time of a first hearing. If he first states a defence to the action and later settles the case, he will inevitably face an unrestricted liability in expenses to the claimant on the Simple Procedure scale.  This will apply regardless of the value of the claim. 

Crucially, a respondent will only be protected from incurring significant liability in expenses to the other side where he either 1) admits the claim at the outset, 2) proceeds with defending the case (which Graham interprets strictly to mean “to the point of receiving a final decision from the court”), or 3) where the case settles for an agreed amount of expenses. 

Put simply, a respondent cannot expect to sit back in the certainty that he will only pay a maximum of £300 in expenses to the other side if he settles the case after he has stated his defence. It is therefore clear that the spirit of the new Simple Procedure is that if he was minded to settle in the end, then he should have done so at the outset and spared all parties (including the court) further time and expense. He should not, in such a case, be entitled to have his liability in expenses restricted.

The expenses consequences will, in many cases, be significant. Litigation is an expensive process and expenses inevitably increase (and at alarming speed) as a full hearing of evidence approaches. This could result in liability for expenses in the many thousands (rather than few hundreds) of pounds, for many respondents. The expenses could well exceed the award itself.

It is to be hoped that this case will encourage early settlement of disputes in many Simple Procedure cases before the case first requires to call in court as a Case Management Discussion. What is certain, however, is that respondents should consider their position very carefully when served with a Simple Procedure claim, regardless of its value. It will in many circumstances be prudent to contact a solicitor in early course to discuss the merits of defending the action. The respondent cannot rely on subsequent negotiation as to expenses after stating a defence. The fact that this may result in a “harsh outcome” does not matter; nor it seems does the fact that the tender was offered under reservation of the respondent’s whole rights and pleas (i.e. that if it was not accepted, he was prepared to proceed with his defence at an evidential hearing). Following Graham, a respondent should only therefore state a defence to the action if they are intent on maintaining it. 

It seems that there is therefore (perhaps literally) a price to be paid for procrastination.

You can read the full case report here