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Small Claims Proceedings

Volume 78: debated on Thursday 2 May 1985

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10.15 pm

I beg to move amendment No. 16, in page 15, line 38, at end insert

'and which are raised initially by the pursuer under the small claims proceedings or have been subject to a direction under section 37(2C) of this Act'.
We have tabled the amendment in order to obtain some idea of the Government's thinking. Those who served on the Committee will remember that clause 18 deals with small claims proceedings. In Committee we had an interesting debate—which we left with the Solicitor-General—relating to what happened when someone raised a summary cause. Apparently, in the Government's eyes, it would automatically translate into a small claims proceeding if it fell below a certain financial ceiling. In brief terms, there was a distinction between a system that envisaged a choice that might largely lie with the pursuer as to whether it was a small claims or a summary cause proceeding, and a system that automatically translated itself into a small claims proceeding. I preferred the first system. The Minister said that he would think about it, but I think that he preferred the second. I gather that the Scottish Consumer Council, which is just one of the interested bodies, has some sympathy with the first system, but is prepared to live with either.

I tabled the amendment simply to discover the result of the Minister's thinking.

The Government intend that in general every summary cause whose subject matter falls within the prescribed description for small claims will proceed as a small claim, irrespective of whether a defence has been stated. On that basis, in amendments that I shall shortly move, we propose to make provision for taking cases out of small claims procedures where difficulties of law or fact arise. We also propose to cover the question of the award of expenses in undefended small claims cases and the questions of abuse of procedure.

The effect of the amendment tabled by the hon. Member for Glasgow, Garscadden (Mr. Dewar) would be that a case might proceed as a small claim only if it fell within the prescribed description and if, in addition, the pursuer chose to raise the case as a small claim. The Government would not consider that to be either a practical or satisfactory way to proceed. I hope that the amendments to which I shall shortly speak will set out a framework for acting that will be satisfactory both to pursuers and defenders, whether they are consumers or those who are small business men.

I shall await with interest the Minister's remarks. The subject is important and, unfortunately, we are having to take it at rather a sharp gallop. However, at this point at least I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment No. 17, in page 16, line 9 leave out from beginning to end of line 15 and insert—

'Expenses in small claims proceedings.
36B.—(1) No award of expenses shall be made in small claims proceedings in which the value of the claim does not exceed such sum as the Lord Advocate shall prescribe by order.
(2) Any expenses which the sheriff may award in any other small claims proceedings shall not exceed such sum as the Lord Advocate shall prescribe by order.
(3) Subsections (1) and (2) above do not apply—
  • (a) to small claims proceedings in which no defence has been proceeded with;
  • (b) where the sheriff is satisfied that any party to the proceedings has acted frivolously, vexatiously or otherwise unreasonably in relation to the proceedings;
  • (c) in relation to an appeal to the sheriff principal.
  • (4) An order under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.'.

    With this, it will be convenient to take amendment No. 18, in page 16, line 15 at end insert—

    '(3) When the sum claimed or the amount involved in a small claims proceedings fall below a certain sum then no expenses shall be due to or by either party to the proceedings unless the sheriff certifies that the expenses have resulted from the frivolous or vexatious conduct of one of the parties to those proceedings and such sum shall be laid down by order made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament'.

    Under the Scottish scheme as proposed, the cause does not become a small claim on the stating of defences. It starts off as that, and it is that aspect in particular that has given rise to legitimate concern not so much in relation to the recovery of the sum fixed for—since all the remedies available for execution of a summary cause degree will be available for a small claims decree—but rather in relation to awards.

    Some hon. Members will remember that in Committee I said that the Government were sympathetic to the principle of a financial band for small claims within which no expenses would be awarded against a defender in favour of a successful pursuer, or vice versa. However, in the case of those major utilities and many others who use the summary cause procedure for debt collection, if such a no-expenses rule were to be applied universally, then for those debts that fell within such a band, small claims might well be seen as an invitation to debtors to avoid paying their bills, and even after court proceedings were successfully brought against them—having to pay not one penny more than was due at the outset—the pursuer would have to pay all his own expenses involved in bringing the action, and might be substantially worse off financially. We are in no doubt that it would be totally inequitable, since the whole object of our scheme is that there should be a fair and balanced approach to the bringing of small claims and to the award of expenses.

    I shall explain the Government's proposals for a solution while dealing with the details of the amendments. Subsection (1) of new clause 36B makes it clear that no expenses are to be awarded where the value of the small claims proceedings does not exceed an amount to be prescribed. Subsection (2) provides that in relation to small claims falling between the limits prescribed for subsection (1) and the upper ceiling for small claims in general an award of expenses to be made is not to exceed such sum as would also be prescribed. Subsection (3) thereafter caters for what would otherwise be the possible injustices that might arise through abuse of the scheme. It provides for circumstances where the special no expenses or limited expenses rule for small claims is to be disapplied and the ordinary rule for the award of expenses in a summary cause is to be applied.

    The circumstances are, first, where a small claim is undefended or where a defence is not persisted in, to take care of the difficulties which might otherwise arise for undefended debt collection; secondly, where a party has acted frivolously, vexatiously or in any other way unreasonably in the course of a small claim; we envisage this taking care in particular of a party acting in bad faith or in a dilatory manner with the object of frustrating the proceedings; and, thirdly, as at present in clause 18, when an appeal to the sheriff principal is taken from a small claims decision of the sheriff.

    I consider that this is a reasonable approach for the clause to adopt. It maintains the general thrust and emphasis upon small claims and contains, I hope, encouragement for wider use by the general public of the courts for airing their grievances. At the same time it seeks to avoid the inequitable features which all members of the Standing Committee recognised. It will not have escaped the notice of hon. Members that the new clause 36B which replaces part of subsection (2) of clause 18 sets out the principle of our approach to expenses. The precise financial amounts are to be prescribed by order by my noble and learned Friend the Lord Advocate. I make no apology for this. I consider this to be the correct and proper approach to adopt.

    I do not demur from what the Solicitor-General has said: That the proper way to deal with it is by means of an order. In that way I hope that it can also be regularly reviewed. However, could the Solicitor-General mention the sums he has in mind for the initial order?

    In Committee I said that in the first instance we were looking at a range between £500 and £1,000. However, I assure the hon. Gentleman that no firm decision has been taken. On the top limit to be fixed within which bounds will be set and levels of expenses determined, it seems to me that it is more sensible to wait until the point of introduction before determining what is the most appropriate level.

    As the hon. Member for Glasgow, Garscadden (Mr. Dewar) appreciates, this is a very important innovation in the law of Scotland. For that reason I have had to take slightly longer over dealing with it. Nevertheless, I hope that the principles I have set out are now clearly understood. It appears from my recent correspondence with the chairman of the Scottish Consumers Council that that body understands what we are now seeking to do and in broad measure welcomes the banding approach that we have adopted.

    The Minister has been consistently helpful. Other organisations which take an interest in the matter have undoubtedly expressed that view, too, and it would be churlish not to put that on the record. I accept that negotiations and discussions must take place. However, the Solicitor-General referred to an upper limit for small claims proceedings of £1,000, wth the range lying between £500 and £1,000. I hope that he has not closed his mind to the adoption of the upper figure that was mentioned earlier. Although the maximum expenses award of £50 has disappeared as a result of the amendments, I presume that it does not mean that the Minister has changed his mind. If I am wrong about that, no doubt he will say so. If not, I shall assume that I am right.

    For the purposes of illustration, if £500 were to be the figure initially seized upon, we would anticipate as presently advised having a £50 expenses limit and the band for no expenses due to or by would be at £150. That is the sort of relationship that I hope will give the hon. Gentleman some feel for what might be introduced if we were to go above £500.

    We might want to correspond on this point. As I said in Committee, £150 is on the low side, but as the orders will have to be finalised we can conduct the debate in another way.

    Clause 18, 36B(3) says:
    "Subsections (1) and (2) above do not apply—
    (a) to small claims proceedings in which no defence has been proceeded with".
    Does that mean that if someone raises what at the moment would be a summary cause, say for a sum which normally when it converts into a small claims proceeding would be below the no expenses limit, it only falls under the no expenses rule if it is defended? That seems to be what that is saying and it takes us back to that anomaly which led to some skirmishing in Committee, as the Solicitor-General will remember, where anyone in the welfare rights office or solicitors office would advise his client to lodge defences in order to get the benefit of the no expenses rule. That might have some anomalous and strange results in terms of equity and the position of those pursuing, say, trade debts. That seems to be the position still under the amendment, but I hope that the Solicitor-General will clarify that point.

    I am in sympathy with what the Solicitor-General is trying to do but does the amendment help with vextious small claims? That is a problem that we all come across in our surgeries. Will the proposal in any way alleviate the problem?

    Subsection (3)(a) is there because we are anxious to avoid a problem which seems to have arisen under the English proceedings that once a defence has been lodged, or whatever the comparable step is, thereafter one is brought into the no expenses due to or by provision whether or not one has a proper defence to pursue. That is an aspect of the arrangement which is open to abuse which we want to avoid. A small shopkeeper might find that he has a number of debts which people are not paying and it could lead him to considerable costs. By that provision we are seeking to make sure—it would have to be elaborated upon in rules—that there is an arrangement for individuals trying to abuse the system.

    The hon. Member for Linlithgow (Mr. Dalyell) has referred to the very vexatious type of claim. We are trying to get a simple, cheap and effective small claims procedure, but at the same time we should not so develop things that as we manage to open one door it allows other people to come in and act vexatiously or to the detriment of others who are perfectly entitled to sue for their debts.

    I am probably being rather dim, but, as I understand it, a small claims proceedings in which no defence has been proceeded with will not be covered by subsections (1) and (2). That pulls two ways. It would mean that they would not get the advantage of the no expenses band, but it would also take them out of the protection of saying that any small claims proceedings should not have expenses above the limit set by the Lord Advocate. On simple reading that might mean that in those cases normal expenses running above the small claims proceedings limit could be collected. In a counterproductive way, that seems to expose one danger while protecting against another.

    Order. We are getting into a muddle. We are not in Committee. The Minister had allowed an intervention.

    10.30 pm

    If the claim is within the band where no expenses would be due to or by, and if a defence has not been proceeded with, someone could not take advantage of the no expenses due to or by provision. That would protect the small shopkeeper where there is no proper defence. If the claim was larger and came within the band £150 to £500, the restriction on expenses would be £50 if it was defended in a sensible manner. In those circumstances, it would be for the sheriff to award expenses in the ordinary way.

    The hon. Member for Garscadden will appreciate that if it were simply the making of a claim for an unpaid debt, we would not anticipate the amount of expenses being very great.

    I understand the matter as being that if no defence is proceeded with, that covers someone putting in a frivolous defence simply because he wanted to put in a defence to get round subsections (1) and (2).

    It is unusual to have awards of expenses determined by statute in such detail. Sometimes a perfectly legitimate defence is put in, but is not proceeded with because there has been an extra-judicial agreement between the parties. Will the Solicitor-General for Scotland confirm that in such circumstances there might still be a provision for no award of expenses in the higher band?

    I do not want to delve into legal matters at this stage. I have been guided throughout our debates not only by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) but by the Scottish Consumer Council. They both appear to be satisfied that the amendments will cover the points raised in Committee. As the aim of the small claims procedure is to make courts accessible to ordinary people, I welcome the amendments, because we are speaking on behalf of ordinary people, who are sometimes forgotten between legal gentleman when they discuss the vagaries of the system.

    I welcome the opportunity for the small claims procedure to be established in an informal fashion so that there is no question of the gowns, trappings or pompousness that occurs in usual court procedure. Ordinary people will not be afraid to go through the informal procedure in an attempt to obtain justice.

    On the question of limit transfers, presumably when the sheriff takes that course it will be on a very limited matter.

    The matter to which the hon. Member for Kilmarnock and Loudoun (Mr. McKelvey) referred arises under the next group of amendments.

    The answer to the hon. Member for Orkney and Shetland (Mr. Wallace) is that there are circumstances in which no defence is lodged because an agreement or settlement has been reached. I would expect any expenses to be part of the settlement. On the assumption that there was something of a defence anyway, that would hold it within the arrangements set out in the clause. We must make sure that the matter is absolutely dead right, because we want it to operate successfully.

    Amendment agreed to.

    I beg to move amendment No. 19, in page 16, line 20, leave out from 'stage' to the end of line 21 and insert—

    '—
  • '(a) may, if he is of the opinion that a difficult question of law or a question of fact of exceptional complexity is involved, of his own accord or on the motion of any party to the proceedings;
  • (b) shall, on the joint motion of the parties to the proceedings.'.
  • With this it will be convenient to discuss the following: amendment No. 20, in page 16, line 20, after 'instance', insert

    'if he is satisfied that a difficult question of law or a question of fact of exceptional complexity is involved'.
    Government amendment No. 21.

    The amendments relate to the power of the sheriff to transfer cases which start as small claims out of that procedure and into the more formal approach of summary cause or ordinary cause procedure. Hon. Members have expressed concern that there were no statutory criteria to guide parties and the sheriff when this may be done. The underlying concern was that parties should not be subjected, perhaps, to the additional expense and time which may be involved, unless there was something in the circumstances of the case which clearly demonstrated that the small claims procedure was inappropriate.

    Accordingly, the amendment makes it clear that the sheriff may have a small claims case transferred to ordinary or summary cause procedure only where a difficult question of law or extremely complicated facts are involved. Equally, before a sheriff may have a case transferred on the motion of any one party to the small claims, he must be satisfied that one of the criteria applies. Where, however, all parties to the small claims proceedings are agreed that the case should be transferred, the sheriff must have the case transferred.

    Amendment No. 21 to subsection 2C reflects the approach that where parties request that a summary cause or ordinary cause be transferred to and dealt with as a small claim, which otherwise on account of the monetary limit involved would be inappropriate for it, the sheriff must give effect to the parties' agreed wishes. This approach to remits in respect of small claims is wholly consistent with the approach of section 37 of the 1971 Act to other remits within and from the sheriff court.

    The amendments ensure that the parties' wishes may be given effect to, if they represent the wishes of all, and ensure that small claims cases are not diverted from the small claims procedure unless for the sound reasons laid down in the clause.

    I hope that that answers the query of the hon. Member for Kilmarnock and Loudoun (Mr. McKelvey).

    I have received a letter from Peter Gibson of the Scottish Consumer Council, who says:

    "An informal hearing should be available to the majority of consumers. People will not go to court if they cannot tell in advance whether they will be able to have the cheap and informal small claims hearing. Sheriffs should be able to transfer cases to the ordinary court process if difficult questions of law or fact are involved. However, this discretion to transfer cases should be strictly limited to a small minority of cases."
    Is that covered by the Government's suggestion?

    I hope that the amendment that I have just moved precisely covers not only what Mr. Peter Gibsn said, but the amendment which the hon. Member for Garscadden tabled.

    Amendment agreed to.

    Amendment made: No. 21, in page 16 line 31, leave out 'may' and insert 'shall'— [The Solicitor-General for Scotland.]