County Court Reform Proposals: Avoiding court if not all costs

Giles Peaker, Solicitor
Journal of Housing Law - July 2011
email Giles

As if reforms to legal aid and civil litigation costs weren’t enough,¹ the Ministry of Justice has issued a consultation on reform of the County Courts and civil procedure, titled “Solving Disputes in the county courts: creating a simpler, quicker and more proportionate system”.²

While couched in terms of improving access to justice and simplifying dispute resolution, there is little doubt that the primary purpose is costs saving and reducing demand on the County Courts, primarily through mediation. As in the other reform proposals, “proportionate” is a code word for reducing legal costs. The same rhetoric of “countering a litigation culture” that was set out in the civil litigation costs and legal aid reform proposals is used to bolster the case for reform, although as in those proposals, no evidence is cited in support of this assertion.

The impact of the proposals on housing matters is perhaps not immediately apparent from the headline proposals, but there are some suggestions that would have a clear effect on housing practice and costs in County Court proceedings. In addition, there are proposals for further reforms in the future which would be important for housing law practices.

This article looks first at the broad overview of the reform proposals, then turns to the specific proposals that will affect housing law practice. Lastly, it considers the suggestions for further reform in the future.

Broad overview
The headline proposals are set out at para.25. They include:

• Increasing the small claims limit to at least £10,000, £15,000 or £25,000, with £15,000 as the preferred option. (Not including personal injury and housing disrepair claims, which are proposed to remain at £1,000.)
• Requiring all cases below the small claims limit to have attempted settlement by mediation before being considered for a hearing.
• Introducing compulsory mediation information/assessment sessions for fast track and possibly multi track claims.
• Extending the RTA fixed costs simplified claims procedure to other kinds of personal injury claim, possibly including low value clinical negligence claims. Consideration of raising the upper limit for such a procedure from £10,000 to £25,000 or £50,000, with £25,000 the preferred option.
• A “simpler and more effective” enforcement regime.

There is a threefold approach here, in which the simple raising of the small claims limit is combined with a pre-action (or pre-hearing) filter of mediation or assessment for mediation, and the imposition of a broader fixed costs regime, drawn in part from the Jackson report.³

The immediate impact of these main proposals on housing matters appears to be limited. Housing disrepair, at least where there is a claim for works and either the works or damages exceed £1000, is proposed to remain outside the increased small claims limit. There are similarly no immediate proposals to impose a fixed costs regime on housing matters, unlike personal injury and lower clinical negligence.

Raising the small claims threshold
Many “damages only” claims for disrepair, where works have been done or the tenant has moved from the property, and “damages only” claims for breach of quiet enjoyment or trespass to goods, will fall below an increased small claims limit (and if the limit were raised to £15,000, virtually all such claims would become small claims). Legal Aid funding is very likely to be withdrawn from disrepair cases (where there is no immediate risk to health) and from breach of quiet enjoyment and trespass to person, goods and land. If the small claims limit is raised as proposed, there is no realistic prospect of claimants being represented, even in serious cases, because there will be no legal aid and costs will not be recoverable.

The other proposals look to have a more significant impact on housing practice in the medium to long term, both through the introduction of new pre-action stages, for which it is unlikely that costs will be recoverable, and through proposals for fixed costs regimes.

Enforcing mediation
A compulsory pre-hearing mediation session for small claims is proposed. This may be of doubtful efficacy in many cases. For example of what use would it be in straightforward debt claims?⁴ But the compulsory mediation session will not affect housing practice so long as most or all housing cases remain within the fast or multi track.

However, a compulsory assessment for mediation (or information session about mediation) in fast and multi track cases will be a source of delay while waiting for the telephone based assessment/information session and in effect will be another hearing for which it is highly unlikely that costs will be recoverable. It is not clear from the present proposals whether such a session would be compulsory in matters where, for example, an injunction is sought (for works or for re-entry). The current wording of the proposal is for a blanket pre-claim assessment session in all claims, but where the matter is urgent, this would be an unnecessary and impractical step.

Mandatory pre-action directions
The mediation assessment session is not the only proposal for the pre-action period. The paper sets out proposals⁵ for a general fixed pre-action protocol (or “mandatory pre-action directions”) for claims under £100,000, with which compliance would be necessary in order to be able to issue a claim, rather than the vague and infrequently used sanction of a penalty in costs for not following a protocol that is currently in place. The example given of such a pre-action process consists of:

• Triage—consideration of options. Could the dispute be resolved by referral to an Ombudsman, a Regulator, or a trade association scheme, or does the matter require legal advice. (As the Localism Bill proposes unifying the Housing and Local government Ombudsmen and restricting access to the Ombudsman solely to those referred by a “tenant’s panel”, referral to an Ombudsman in housing matters is likely to be a very limited option.)
• Evidence gathering—parties/solicitors attempt to resolve the matter and strictly adhere to the timetable and directions in the relevant Dispute Management process.
• Negotiation/Settlement—a stocktaking stage, where most of the evidence has been gathered and the parties will be required to try to settle the claim via mediation or other dispute resolution process.
• Trial—where the issue could not be resolved at the settlement stage, the parties would produce joint evidence packs (setting out efforts made to settle the dispute and the evidence for trial) and apply to the court for a final hearing.

Different pre-action directions and fixed cost matrices are envisaged, depending on the nature and value of the dispute.

While the proposals refer at some points to this process being for “money claims under £100,000”, at others simply to “claims under £100,000”, whether this is envisaged as extending to all claims with a damages claim element, or solely to “money only” claims is hard to discern.

Given that mandatory settlement meetings are proposed for possession cases (see below), it would not be a surprise to see this proposal extended to cover all claims with a money or damages component.

Housing possession cases
The consultation considers housing possession (tenants and mortgage possession) separately, at least in relation to the rent arrears pre-action protocol and the mortgage possession protocol.⁶ It is noted that the evidence suggests, although not definitively, that the introduction of the protocols resulted in a reduction in claims brought, but the high level of lack of engagement by tenant/mortgagor defendants is set out as a concern.

The proposed solution is to make the existing pre-action protocols mandatory and to introduce a mandatory settlement stage, bringing the parties together earlier. As with much of the document, the proposals lack specifics, but such a mandatory settlement stage could clearly have a significant impact on how possession claims are dealt with by both parties. The nature of any sanction for non-compliance at the settlement stage will be key, for as the document notes, “recent court visits suggest only 50 per cent of tenants attend rent arrears hearings and just 30 per cent of borrowers attend mortgage arrears hearings”.⁷ If the defendant has not complied with the settlement stage, what difficulties will it present for a later defence? Any sanction would surely have to be compliant with art.6 of the ECHR or face an early challenge.

For claimants, if the sanction is to not be able to bring a claim until the settlement stage has been completed, the concern will be to see an exemption on evidence of the defendant’s failure to comply. But this stage will certainly add time and costs to the claimant’s pursuit of possession.

Fixed recoverable costs
Jackson L.J.’s review of civil litigation costs proposed that all fast track claims should be covered by a system of fixed recoverable costs.⁸ Jackson L.J. expressly included possession claims and disrepair claims in this, although in the event the figures were not obtainable on disrepair and possession cases to enable the report to make the concrete proposals for fixed costs that it did for PI. The report indicated more research would be needed into possession and disrepair. In the County Court reform document,⁹ the RTA PI system of fixed costs is taken to have been a great success and views are sought on a system of fixed costs for “all fast track claims not covered by the RTA PI scheme or an extension of it”. It is noted that further work would need to be done on the figures to be included in any matrix of fixed costs.

Future concerns
Overall, while the more concrete proposals contained in the consultation document may have a limited impact on housing cases, there will be some immediate effects if the proposals are implemented. Access to the courts for damages only claims in disrepair or breach of quiet enjoyment will be severely curtailed due to the removal of costs recovery from all but the very highest value cases (over £15,000 or maybe £25,000), there will be additional “settlement” stages or mediation assessment either in existing pre-action protocols or in revised “pre-action directions”, which will delay cases and almost certainly involve additional, unrecoverable, costs. Of immediate concern would be the specifics of any proposal to introduce a compulsory settlement stage in possession proceedings, most likely at a time when the defendant will be un-represented, and the potential sanctions for non-compliance.

If the proposals for mediation and settlement stages do result in fewer claims being issued or pursued through the courts, this may be a good thing. However, the concern would be that fewer cases end up in court simply because it has been made more difficult to get there, rather than on the merits of the case or its amenability to settlement.

Beyond the specific proposals, the direction of travel is clear, as shown in the emphasis on mediation or early settlement and on fixed costs matrices, and it is to be expected that fixed costs for possession claims and disrepair claims will be back on the agenda in the near future.

¹See D. Marshall’s article “Conditional Fee Agreements in housing disrepair cases”, and S. Stephen’s “Legal Aid Reforms — the Housing Implications” pp.78–81 of this issue.
²Ministry of Justice, “Solving Disputes in the county courts: creating a simpler, quicker and more proportionate system. A consultation on reforming civil justice in England and Wales”, CP6/2011, March 2011. Responses are sought by June 30, 2011.
³Jackson L.J., Review of Civil Litigation Costs Final Report, December 2009.
⁴Although a separate protocol is proposed for undefended debt claims where the claimant is a business and defendant a consumer.
⁵Jackson L.J., Review at paras 85–89.
⁶“Solving Disputes in the county courts: creating a simpler, quicker and more proportionate system,” paras 93–101.
⁷Para.98.
⁸Jackson L.J., Review of Civil Litigation Costs Final Report, December 2009, Ch.15.
⁹County Court reform document at paras 83–84.

Giles Peaker is a solicitor in Anthony Gold's Housing & Public Law department. For further information email Giles or call 020 7940 4000.