Allocation wars and incoherent defences

Since well before the Jackson Reforms on 1st April 2013 liability insurers and others have been fighting battles over allocation of claims to track. The “Holy Grail” is to achieve an allocation of a modestly valued personal injury claim or a property damage only claim to the Small Claims track.  A related point is the relentless attempt to retain claims within the MOJ Portal process through the  expansion of the ambit of stage 3 hearings: but that phenomenon is worth an article in itself.

A recent decision of the Court of Appeal illustrates one of the arguments that has been deployed successfully to force a downwards allocation of a claim to a non-costs bearing track. The case represents a qualified victory for the insurance industry but as is the way with satellite litigation has also opened the door to fresh arguments that insurers may have difficulty grappling with.

The case of Akhtar.v.Boland [2014] EWCA Civ 872 concerned the legitimacy of making partial admissions on a wholly tactical basis in order to reduce the scope of the sums in “dispute” for the purposes of allocation.

The Court of Appeal noted at paragraph 3 of its judgment the issue to be decided on the appeal in these terms:

Although nominally an appeal between two individuals, in fact this appeal is fought between a credit hire company or credit hire companies on the part of the claimant and a motor insurance company or motor insurance companies on the part of the defendant. It raises issues as to the correct track to which claims should be assigned that are of wide general importance. The essential question is what is meant by “the financial value … of the claim” in CPR 26.8(1)(a) and “any amount not in dispute” in CPR 26.8(2)(a).

The Court of Appeal further explained the nature of the interests lying behind the nominal parties to the appeal at paragraph 4:

Evidently, it is in the interests of a credit hire company to maximise the financial value of a claim for damages following a road traffic incident, so as to justify the instruction of lawyers and to recover the costs of doing so, and in the interests of insurers to minimise the financial value of a claim below the limit for the small claims track, so that the claimant cannot recover any legal costs of his representation.

The facts of the case are worth noting in full for two reasons. First they illustrate the way that the issue of allocation was approached. Second they demonstrate the danger of “pleading by rote”.

6. The claim relates to a road traffic accident on 13 October 2011, the facts of which are immaterial to this appeal. The claim form, issued on 17 May 2012, gave the value of the claim as “Damages in excess of £5,000 but less than £10,000 plus interest and costs”. The particulars of special damage in the claimant’s Particulars of Claim were as follows:

          1. Hire of Vehicle £5280

Recover charges £300

Storage charges £712.80

Vehicle test appointment £50

Miscellaneous Expenses £50

Total £6392.80

Accordingly, the prayer was for “Damages for (sic) exceeding £5000 but not exceeding £10,000 (sic)”. On this basis, of course, the fast track was appropriate. There was a notice of funding stating that there was a conditional fee agreement.

7. The defendant (in reality his insurer) served his defence on 26 July 2012. It was described by counsel for the claimant before the Judge as incoherent, a description with which I have some sympathy. Paragraph 1 admitted the accident and liability to compensate the claimant for “any proven loss and damage caused to the claimant as a direct result”. Paragraphs 2 to 7 were as follows:

“2. Hire charges are denied in the sum of £5280. The defendant admits hire charges in the sum of £1860. This figure represents T4 ABI GTA daily rate of £73.81 plus VAT for a period of 21 days. The hire charges remain in dispute in the sum of £3420.

3. Recovery charges are denied in the sum of £300. The defendant admits £150 plus VAT in respect of recovery charges. The defendant avers that no specialist recovery was necessary for the claimant’s accident damaged vehicle. The amount in dispute is £120.

4. Storage charges are denied in the sum of £712.80. The defendant admits £486 in respect of storage charges. This represents £15 plus VAT daily charge for a period of 27 days. The amount in dispute is £226.80.

5. The Rochdale Metropolitan Borough Council three monthly vehicle test appointment is denied in the sum of £50. The defendant avers that this head of claim is irrecoverable, pursuant to the case of Clark v Ardingtons at paragraph 155. Further, or in the alternative, the defendant avers that this would have been incurred by the claimant in any event.

6. Miscellaneous expenses are denied in the sum of £50.

7. For the purpose of allocation, the amount in dispute is £3866.80 and falls within the remit of the small claims track.”

The Court of Appeal then went on to note the following at paragraph 8 of its judgment:

However, these apparently unqualified admissions were contradicted in subsequent paragraphs. Paragraph 8 pleaded, correctly, that the claimant had entered into a credit hire agreement for a replacement car and claimed to have done so for a period of 40 days. Paragraph 9 was directed at the enforceability of that agreement:

“9. The defendant is unable to plead precisely through want of knowledge. The claimant is put to strict proof as to:

i. The written terms and conditions of hire by way of production of the original documentation.

ii. The intended date of payment as determined when he signed the agreement.

iii. What representations were made by AM or its agents, as to the terms of payment of the said hire charges. The defendant requires the claimant to attend the hearing for the purposes of cross-examination.”

Paragraphs 11 and 12 put the claimant to proof of his impecuniosity justifying his entering into the credit hire agreement. Paragraphs 13, 14, 15, 18, 21 and 22 were as follows:

“13. It is not admitted that the claimant needed to hire a vehicle at all or for the full hire period in question. The claimant is put to strict proof that he took all reasonable steps to mitigate his losses in respect of the hire period.

14. The defendant has no knowledge of whether the claimant could have had use of another vehicle at no charge or a lesser charge during the hire period, or whether the claimant had a reasonable need for a vehicle throughout the entirety of the hire period and in these respects the claimant is put to strict proof.

15. No admissions are made as to the period of hire. The claimant is put to proof regarding how he managed without a vehicle between the accident date on 13 October and the start of the hire period on 20 October. Further, the defendant avers that hire should have ceased 7 days after the date when the cash in lieu settlement was sent to the claimant (3 November), instead of continuing until 29 November.

18. The defendant avers that the rate of hire charged by AM includes a charge for additional services and benefits, which are irrecoverable pursuant to the decision in Dimond v Lovell. The defendant avers that such hire charges as the claimant can recover should be calculated at the equivalent “basic hire” rate. The defendant reserves the right to adduce such “basic hire rate” evidence to support the contention that it would have been reasonably possible to hire an appropriate vehicle at a lower cost.

21. The claimant is put under strict proof as to the nature of his insurance policy and, if comprehensive cover was provided, why the policy was not utilised rather than incurring credit hire charges and additional charges.

22. The claimant has failed to mitigate his loss in that he:

a. ….

b. Failed to make any reasonable attempt to negotiate with the credit hire company for the hire of a vehicle on less expensive terms than those set out in the credit hire agreement.

c. …..”

The scene having been set the Court of Appeal recorded the following interlocutory stages:

On 16 August 2012 the claimant’s solicitors filed their allocation questionnaire. They stated that they considered the most suitable track for the claim to be the fast track; they estimated costs to date as £7,000 plus VAT and disbursements, and the overall costs likely to be £15,000 (including a 100 per cent success fee), plus VAT and disbursements, i.e., over twice the amount of the damages claim. The defendant’s solicitors’ allocation questionnaire stated that they considered the most suitable track to be the small claims track, and gave as the reasons:

“The defendant refers to paragraph 7 of the defence and avers that the amount in dispute is £3,866.50. The issues in dispute are not complex and therefore the claim falls within the remit of the small claims track.”

In the lower courts the result was that judgment was entered on the sum “not in dispute” and the case was allocated to the Small Claims track. The Claimant appealed.

The discussion and decision by the Court of Appeal was brutally short. The Court of Appeal began by considering what were the “commonplace propositions” that formed an appropriate starting point.

I begin by mentioning what seem to me to be commonplace propositions concerning admissions and interlocutory judgments.

Where an allegation made by one party in proceedings is admitted by the other party in unqualified terms, that other party must not, seek to adduce evidence or raise arguments to the effect that that admission is not binding on him. The court has no jurisdiction to investigate a fact that has been admitted, unless the party making the admission obtains the permission of the court under CPR 14.1(5) to withdraw the admission and does so.

This principle applies even more strongly to a judgment for all or part of a claim. Neither party may adduce evidence or make submissions that if accepted would lead to decisions or findings inconsistent with the judgment, unless there is a successful application to set the judgment aside.

Where a defendant admits part, and not the whole, of an unliquidated damages claim, the claimant is entitled to judgment on that admission, and to pursue the proceedings to seek and obtain judgment for the balance. Contrary to the claimant’s submission, such a judgment does not extinguish the claimant’s cause of action.

Where an admission is equivocal, or inconsistent with other allegations in the defence, the claimant may, and should, seek further information or clarification of the defendant’s case under CPR 18.1. If the claimant fails to do so, and the court considers that it is uncertain what are the issues between the parties that fall to be determined at trial, it may itself make an order for clarification, and in an extreme case, where the defence is truly incoherent, the court may strike it out. On an application such as that heard by DJ Fox, if the court is uncertain as to whether an admission is unqualified, or as to its effect, I would expect the court to seek and to obtain clarification from the defendant at the hearing, and for that clarification to be made or confirmed in writing (under CPR 18.1 or in an amended defence).

In the present case, it is clear that DJ Fox interpreted the defence as including an unqualified admission that the claimant was entitled to the sum of £2,496: hence he entered judgment for that sum. We have the transcript of the argument before the Judge, from which it is clear that initially the claimant made no application to set the judgment aside, and that the defendant accepted that at trial the claimant could not recover less than the admitted sums totalling £2,496. It follows that at trial the allegations in the defence that were inconsistent with the admissions in paragraphs 1 to 5 would be disregarded, and could indeed have been struck out. However, in the discussion after judgment, Mr Dawes, for the claimant, accepted that if the allocation of the claim was changed the judgment would have to be set aside.

It follows from this that at trial the defendant could not, for example, challenge the entitlement of the claimant to damages for loss of use of his vehicle, or the reasonable need of the claimant to hire a replacement vehicle for a reasonable time and at a reasonable hire charge: for the defendant to do so would be inconsistent with the admission in paragraph 2 (as well as with the judgment). The rate of the hire charge and its duration beyond 21 days would be in issue.

CPR 26 fell to be applied to the proceedings after the claimant had obtained his judgment. CPR 26.7 and 26.8 provide, so far as relevant:

26.7

(1) In considering whether to allocate a claim to the normal track for that claim under rule 26.6, the court will have regard to the matters mentioned in rule 26.8(1).

26.8

(1) When deciding the track for a claim, the matters to which the court shall have regard include –

(a) the financial value, if any, of the claim;

(b) …

(c) the likely complexity of the facts, law or evidence.….”

(2) It is for the court to assess the financial value of a claim and in doing so it will disregard –

(a) any amount not in dispute;

Once the court had determined that the defendant accepted that the claimant was entitled to judgment in the sum of £2,496, the only sum in dispute was the balance of the claim, which was less than £5,000. This is confirmed by paragraph 7.4(2) of CPR PD 26A. The relevant parts of that PD are as follows:

“7.2  The object of this paragraph is to explain what will be the court’s general approach to some of the matters set out in rule 26.8.

‘The financial value of the claim’

7.3

(1) Rule 26.8(2) provides that it is for the court to assess the financial value of a claim.(2) Where the court believes that the amount the claimant is seeking exceeds what he may reasonably be expected to recover it may make an order under rule 26.5(3) directing the claimant to justify the amount.

‘any amount not in dispute’

7.4  In deciding, for the purposes of rule 26.8(2), whether an amount is in dispute the court will apply the following general principles:

(1) Any amount for which the defendant does not admit liability is in dispute,

(2) Any sum in respect of an item forming part of the claim for which judgment has been entered (for example a summary judgment) is not in dispute,

(3) Any specific sum claimed as a distinct item and which the defendant admits he is liable to pay is not in dispute,

(4) Any sum offered by the defendant which has been accepted by the claimant in satisfaction of any item which forms a distinct part of the claim is not in dispute.

It follows from these provisions that if, in relation to a claim the value of which is above the small claims track limit of £10,000, the defendant makes, before allocation, an admission that reduces the amount in dispute to a figure below £10,000 (see CPR Part 14), the normal track for the claim will be the small claims track. As to recovery of pre-allocation costs, the claimant can, before allocation, apply for judgment with costs on the amount of the claim that has been admitted (see CPR rule 14.3 but see also paragraph 7.1(3) of Practice Direction 46 under which the court has a discretion to allow pre-allocation costs).”

In my judgment, in the circumstances before him, in which the claimant retained the judgment for £2,496, the Judge was entitled to allocate the claim to the small claims track, since the sum remaining in dispute was less than £5,000.

Mr Weir pointed out that this result meant that many, if not most, of the issues in the case would be those that would have to be decided if the claim had remained in the fast track. That may be so, but it would equally be so if the claim had been for less than £5,000 from the beginning. If a case is too complex for the small claims track, the court may allocate it to another track: see CPR 26.8(1)(c). The present case is not such a case, and it has never been suggested that it is.

So in theory it is open to a defendant to make partial admissions which are sufficient to enable a claimant to enter judgment and to defend the balance of the claim on the Small Claims track.

In practice many defendants are going to find this conceptually hard to do. Will a defendant be prepared to admit a daily rate of hire ? A duration of hire ? Forego arguments on need for a vehicle, enforceability of a hire agreement and throw overboard all the cherished points which typically appear in the standard mass produced defence and counter schedule?

Experience to date indicates that they are not prepared to do so. And moreover attempts to rely on the Akhtar point can backfire horribly with the risk that if a defence proves to be “incoherent” the document will be struck out. The satellite litigation will continue yet.

 

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