Changes to the Small Claims Regime May Force Parties to Mediate

Small Claims CourtWe consider when it is right to take a small claim and look at a number of tips to help you succeed.

In last month’s journal we considered the impact of the proposed increase to the small claims regime. One major effect is that it will be more important than ever to have a good understanding of civil litigation. If you have completed the Diploma course, you will be aware of the principles of litigation and this article may be a timely reminder. If you are yet to complete your Diploma, we will outline some top tips to consider when dealing with a potential claim.

The small claims system is designed to be quick, cheap and user-friendly. You can use the county court to claim damages for a wide range of issues. Examples of typical disputes would include debt matters, damage to property, poor workmanship, personal injury or the supply of faulty goods, to name but a few. The question is not usually whether to make a claim but should you do so. 

As a litigator I would be the first to discourage a client from rushing into legal action. This may seem strange, but the court rules very much encourage this approach. Court action should be a last resort. Many (I suspect the majority) of disputes get nowhere near a court. The reason for this is that before you bring a claim you have to take a number of steps, including:

  • Giving a debtor a clear opportunity to pay up before issuing a claim; and
  • Writing a letter confirming how much you are claiming, what you are claiming for, what efforts you have already made, giving warning that you will make a claim and giving a reasonable deadline (usually at least 14 days).*
  • As of April 2012 parties may have to mediate before a final hearing. Mediation is normally an informal process whereby a trained third party (mediator) helps to clear up misunderstandings, highlight concerns and help the parties reach a resolution.

All of these steps are designed to help the parties avoid full-blown litigation, and there are a lot of reasons why this is a good idea.

One reason can be that the person or company you want to sue cannot pay. This may happen if they are being made bankrupt, are unemployed or have existing county court judgments against them. With these types of defendants, any type of legal action is likely to be pointless. Assuming the defendant does not fall into this category, you have defendants that will not pay. These types of defendants may lose the case, but even with a judgment against them, you may have to force them to pay by taking further legal action (known as enforcement action). If enforcement is necessary, then it will add cost and time. If legal action is necessary, then it may take a considerable amount of time to obtain judgment, so you have to be prepared for the long haul. Perhaps most importantly, there is the cost of pursuing an action through the courts. We considered in an earlier journal article, Changes Afoot for Small Claims, that legal costs in small claims can easily exceed the amount in dispute. Bearing all this in mind, we have listed several tips on how to approach a potential claim that all, whether they are lawyers or laymen, should follow.

How to approach a potential claim:

  • Make sure everything is in writing. File letters and keep notes.
  • Give the other side 30 days’ written notice of your intention.
  • Be sure of your legal grounds. It is not advisable to bring an action if you are fairly uncertain of success. If you keep bringing unreasonable claims, you may find yourself deemed a “vexatious litigant” and effectively barred from bringing further claims.
  • Never threaten what you cannot or do not intend to do. If you threaten to file a claim, be prepared to do so. If you have given a 30-day warning, show you mean business by starting action immediately after the warning expires.
  • Keep records of all costs incurred. You can claim back some costs even in small claims, and in exceptional circumstances you can claim some compensation for your time.
  • If you are not sure on a point of procedure, you can ask the court staff, but bear in mind that they cannot advise you on legal matters.

If you follow this approach, then you will be better organised and more capable of negotiating a settlement with a potential defendant, and if all else fails and a claim must be issued, then you will have complied with the rules of the court.

* If you have completed the Litigation module of the Diploma course, you will already have an example of a letter before action which you can adapt to suit your own needs.