To cap or not to cap expenses - that is the question?
The expenses for simple procedure actions are currently set out in Sheriff Court Simple Procedure (Limits on Award of Expenses) Order. This states that expenses will be awarded as follows:
- No expenses where the value of the claim does not exceed £200
- A maximum sum of £150 where the claim is between £200 and £1,500
- Expenses will be capped at a maximum of 10% of the value of the claim where the value is between £1,500 and £3,000
- Where the claim exceeds £3,000 the successful party may be entitled to uncapped expenses as assessed
However, there are exceptions under section 81 (5) of the Court Reform (Scotland) Act 2014 where uncapped expenses would apply. These are:
- Where a defence has not been stated
- Having stated a defence, has not proceeded with it, or
- Having stated and proceeded with a defence, has not acted in good faith as to its merits, or
- A party to the case has behaved unreasonably in relation to the case
A recent example
We recently pursued an action where the Sheriff required to consider the circumstances under which uncapped expenses should be allowed. In our case, the Respondent disputed both quantum and liability in their Response Form. Unfortunately, the Respondent passed away before any evidential hearing. There were two Case Management Discussions before it could be established that the Respondent had passed away. Thereafter, quantum was agreed at £2,071.87 however, there was a dispute in relation to whether the Defenders should be paying uncapped or capped costs.
It was our position that we would be entitled to a full account of expenses as the Respondent had stated a Defence but had not proceeded with it as per section 81(4) and (5) of the Court Reform (Scotland) Act 2014. The Respondent’s agent offered £210 plus VAT on the basis that a Sheriff would be likely to sympathise with their position due to them not being able to proceed with their defence as a result of the Respondent passing away. As such, parties were unable to agree expenses so a hearing on expenses was sought.
At the hearing, the Sheriff accepted that because the Respondent had stated a defence in relation to both liability and quantum and then ultimately settled the case, they had not proceeded with their defence and therefore, our expenses were not subject to being capped. Whilst the Sheriff was sympathetic to the Respondent’s position, they were unable to direct the court to any authorities that supported that expenses should be capped in the circumstances. Ultimately, it was neither party’s fault that they ended up in the position that they were in but the Sheriff was of the view that the law is clear on when uncapped expenses should apply.
When making the decision, the Sheriff made reference to the case of McKinlay v Aviva 2021 [SC FAL 26] where capped expenses were awarded and a defence was stated. However, this was distinguishable as the Respondent’s defence in that case was based on quantum only and the case settled for substantially less than what was sued for and at an early stage in the litigation. Therefore, it could not be said that the Respondent had not proceeded with their defence.
There is likely to be an increase in the number of hearings relating to what “stating a defence and not proceeding with it” truly means. The facts and circumstances of the individual case should be taken into account when considering proceeding to a hearing on expenses.
Insurance & risk
Remember, remember how to stay legal this November!
Pinch point - insurance and liability in the Suez Canal
Insurance Update - Discount Rate Revised
Insurance & risk
Insurers beware – new regulations on post-accident 'declarations' set to come into force
Insurance & risk
Motor Insurers Bureau - new Untraced Drivers Agreements in force as of 1 March 2017
Commercial dispute resolution
Employers' liability insurance: defending claims for injury or loss
Call us for free on 0330 912 0294 or complete our online form below for legal advice or to arrange a call back.