UK & Europe
Insurance & Reinsurance
A recent decision from Sheriff Derek Livingston has provided pragmatic guidance on the level of expenses to be awarded in a simple procedure action which settled extra-judicially.
McKinlay v Aviva Insurance  SC FAL 26
The claimant sued for credit hire charges arising from a straightforward road traffic accident. The claim consisted of £3,692.28 for credit hire costs and £100 for inconvenience. Following negotiations, the claim settled for £1,200, significantly less than the original sum sought.
The claimant sought Chapter V expenses on the basis that the respondent had entered a defence and not proceeded with it (section 81(4)(a)(ii) of the Courts Reform (Scotland) Act 2014. This was opposed and the respondent argued that expenses should be capped. The respondent entered a defence admitting liability and arguing that the sum sued for was excessive.
Sheriff Livingston found that the respondent did maintain their defence – as evidenced by the claimant accepting less than a third of the original sum sought - and awarded the claimant capped expenses. He indicated that if he was wrong in his interpretation of the statute, he retained the court's inherent discretion in relation to expenses and would have exercised it given the facts and circumstances of the case.
It is our view the purpose of section 81(4)(a)(ii) is to prevent respondents simply delaying settlement - entering an unfounded defence simply to delay final settlement of a sum which it is accepted is due. In a lot of credit hire cases we deal with that is simply not the case.
Matters are litigated whilst the respondent is awaiting sufficient information to allow the credit hire claim to be properly quantified. There is no pre-action protocol for non-personal injury claims. As such the claimant is under no obligation to produce the information requested. It can take the matter being litigated to give the respondent the opportunity to take formal steps to recover the necessary information.
It seems unfair for a claimant to be entitled to uncapped expenses when the delay in settlement has been caused by their failure to provide sufficient evidence to quantify the claim. Sheriff Livingston's decision reiterates that the court retains an inherent discretion in relation to expenses. Each decision will turn on the facts and circumstances of the case.
Best practice guidance
Although not discussed by Sheriff Livingston, it is clear that had the claimant been awarded £1,200 following an evidential hearing, his expenses would have been on the capped scale. It seems out of kilter with the aims of the simple procedure process and may put respondents off attempting to settle a matter if the claimant's costs are higher following an extra-judicial settlement than following an evidential hearing.
In order to avoid a similar argument on expenses, it is good practice to put forward an offer with a specified figure for expenses and making it clear that the offer for the principal sum is conditional on the offer for expenses being accepted. If the offer is not accepted in full there is no agreement between the parties and the respondent retains a stateable defence on quantum.
The full judgment can be found here.