Khiaban v Beard

This is an appeal from the order of District Judge Stephenson made on 11 February 2002 sitting at Barnet County Court whereby she dismissed the Claimant’s application to set aside her order dated 5 November 2001 by which she had struck out the claimant’s claim on the grounds that the amended particulars of claim did not reflect the full value of his claim. She gave the claimant permission to appeal against her decision of 11 February, and directed that the appeal be transferred to His Honour Judge Paul Collins at Central London County Court. Judge Collins considered that the issue raised by this appeal involved an important point of principle or practice such as to justify the transfer of the appeal to the Court of Appeal under CPR 52 r 14(1)(a).

The action concerns a road traffic accident which occurred on 27 March 2000. As a result of the collision between the vehicles of the two parties, the claimant’s vehicle had to be repaired at a cost of £755.89 (incl VAT). The claimant paid an insurance excess of £125, but subject to this, the repair costs were borne by his insurer. The parties’ insurers entered into a memorandum of understanding (MOU) by which they agreed to abide by the court’s decision as to liability in relation to the claimant’s claim to recover the excess from the defendant: the court’s decision would determine which insurer would bear the repair costs. Pursuant to the MOU, on 13 December 2000, the claimant’s insurer (being subrogated to the claimant’s rights against the defendant) issued a claim against the defendant in the name of the claimant. By the claim form, the claimant claimed damages which were quantified at £155.73. This sum comprised £125 in respect of the insurance policy excess, and £25 for miscellaneous expenses.

On 14 July 2001, District Judge Stephenson of her own motion ordered:

“1.

By 8 August 2001 the following party or parties will disclose any written or oral agreement between their insurers to refund to the other side’s insurers the full cost of vehicle repairs if the insurance policy excess is recovered as a consequence of these proceedings:

Parties: claimant and defendant.”

On 3 August, the defendant’s solicitors confirmed to the court the existence of the MOU. On 17 August, District Judge Stephenson, again acting of her own motion, ordered the claimant to file and serve amended particulars of claim reflecting “the true value” of the claim together with the appropriate court fee by 4 pm on 14 September, and that “in default the claim be struck out”. On 13 September, the claimant served his amended claim form and particulars of claim. By his amended particulars of claim, he deleted the claim for miscellaneous expenses, but left the claim for £125 unamended. He added the following words:

“The claimant is comprehensively insured with AXA Insurance and they have paid for the repairs to the vehicle on or about 28^th April 2000 in the sum of £738.90. It has been agreed between the claimant and the defendant insurers that they will abide by the courts decision and keep their claim for the repairs to the claimant’s vehicle out of the proceedings to keep the costs to a minimum.”

On 5 November, the district judge struck out the claim for breach of the order of 17 August. The order recited that the district judge found that the amended particulars of claim did not reflect the full value of the claim as they did not include the full cost of vehicle repairs. Brief reasons were annexed to her order. They stated:

“a.

The value of a claim determines the level of a court fee. This is set out in the County Court Fees Order 1999. Schedule 1 paragraph 1.1 refers to commencement of proceedings “to recover a sum of money”. If the proceedings have been brought to determine whether a sum of money, that is the full vehicle repair costs, should be paid, the full court fee should be paid.

b.

Under CPR26.8 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”. If a claim is to determine liability for a repair bill the court must know the amount of money in issue, that is the total of the bill, not just a segment of it, in other words not just the excess.

c.

No provision under the CPR is cited which enables litigants to understate their claims by agreement in order to minimize costs.”

On 7 November, the claimant gave notice of his intention to apply for an order that the order of November should be set aside on the grounds that the particulars of claim did reflect the full value of the claim. At the hearing on 25 January 2002, the claimant was represented by Mrs Mahoney. The defendant did not appear and was not represented. At the conclusion of the argument, the district judge gave her ruling, but the order was not drawn up until 11 February.

The district judge said that a distinction was to be drawn between a subrogated claim, and one which was not subrogated. It was quite clear in this case that “what was in dispute” between the two insurers was the total cost of the repair costs. She considered that CPR 26.8(2), which provides that, when deciding the track for a claim, it is for the court to assess the financial value of a claim, supported her view that it was for the court to determine the true value of a claim. She said:

“The difficulty arises with regard to subrogated claims where the outstanding issue of the vehicle excess is used as a peg for the insurance companies to hang their proceedings on with regard to liability. What the insurance companies want is simply the decision as to liability so that, between themselves, be the true cost of what is in dispute £200, £2000, or whatever, they will get the decision of the Court on liability in order to decide who pays up for the full cost of vehicle repairs.”

And later:

“The Small Claims track is particularly wide and it is, it appears, being utilised by insurance companies to get the County Courts to make decisions on liability, whatever the size of the claim that they have between themselves, just on the basis of sometimes £100, £125 or £200 excess claims.”

She then touched on the question of court fees, and said:

“The other point which I grappled with is what is the role of the Court with regard to the payment of the fees when it comes to the decisions of the judiciary. Is it a judicial function to consider whether a higher fee should have been paid because the true value of the claim is much higher? Or is it nothing to do with the judiciary?”

She concluded by saying that she had not been persuaded to set aside her order. She thought that there may be a lacuna in the CPR, and as I have said, gave permission to appeal.

As before the district judge, so too before this court, the defendant has not appeared and has not been represented. We have, however, been greatly assisted by Mr Michael Ashe QC who appears on behalf of the claimant. Largely for the reasons advanced by Mr Ashe, I consider that the decision of the district judge cannot be supported. The word “claim” is not defined in the CPR: see the note at para 25.12.4 of the Autumn 2002 edition of Civil Procedure which states:

“Rule 2.3(1) defines “defendant” as a person against whom a claim is made. The word “claim” is not defined. When used as a noun in other rules it usually refers to the whole of the case in question (see, for example, r.8.1 and r.26.2) or to a separate cause of action raised in proceedings (see, for example, r.7.3). It therefore appears that, under r.25.12, as under the pre-CPR provision (RSC 0.23) a claimant is not entitled to apply for security for costs solely in respect of some interim application initiated by the defendant, for example an application under Pt 17 to amend his defence or under Pt 18 for further information as to the Particulars of Claim (for a case authority on the pre-CPR provision, see Re B (Infants) [1965] 1 WLR 946; [1965] 2 All ER 651 n).”

But, although the CPR appear to afford the word “claim” different meanings according to the context in which it appears, nowhere is it used in a context which suggests that it includes claims which are not brought before the court in legal proceedings. Thus, in the context of a road traffic case, “claim” should be construed as meaning a demand made formally through the court by the claimant for a sum to be paid to him or her by the defendant. As Mr Ashe puts it in his skeleton argument: “ ‘claim’ in the context of the CPR cannot be said to include any amount which one party may hope to retrieve from another party as a result of a private agreement between the two. It can only cover what the claimant seeks to recover through the court”.

A claimant may have various reasons for not including in his claim heads of damages to which he would arguably be entitled, if he established liability. He may decide that the cost of proving a head of loss is disproportionate to the sum that he thinks he is likely to recover. Or he may decide that the evidence that would have to be adduced in order to prove a head of loss would cause him embarrassment which he wishes to avoid. Or he may decide not to seek to recover a head of loss because he is confident that it will be made good to him by a third party. A claimant is fully entitled to decide what to include in his claim. If he excludes a head of loss from his claim, and he is awarded judgment on his pleaded claim, he will normally be precluded as a matter of law from subsequently starting proceedings to recover the excluded head of loss: see Henderson v Henderson (1843) 3 Hare 100. That is the chance that a claimant must take if he excludes from his claim sums which he could claim from the defendant. But there is nothing in the general law which positively obliges a claimant to include in his pleaded case all the claims which he could arguably advance against a defendant.

The question that arises, therefore, is whether there is anything in the CPR which justifies the conclusion reached by the district judge. It would be very surprising if there were, since such an interference in the autonomy of a claimant to decide what to include in his claim would be a very serious matter indeed. CPR 16.3 provides:

“Statement of value to be included in the claim form

16.3

– (1) This rule applies where the claimant is making a claim for money.

(2)

The claimant must, in the claim form, state –

(a)

the amount of money which he is claiming;

(b)

that he expects to recover –

(i)

not more than £5000;

(ii)

more than £5000 but not more than £15000; or

(iii)

more than £15000; or

(c)

that he cannot say how much he expects to recover.”

The reference to “the amount of money which he is claiming” supports the view that the amount “claimed” by a claimant is limited for the purposes of the CPR to what is in the claim form. There is nothing in CPR 16.3 to suggest that the court is in any way concerned with the question whether the claimant should be claiming more than he is in fact claiming.

The district judge was much influenced by CPR 26.8, which deals with matters relevant to allocation to a track. It provides that, when allocating a claim to a track, the court must have regard inter alia to its “financial value”. But there is nothing in the language of CPR 26.8 to indicate that the court is concerned with the value of items which are not being claimed. Indeed, rule 26.8(2)(a) goes so far as to require the court to disregard items which are being claimed, but which are not in dispute. The amount “in dispute” must be limited to that which is included in the claim form or particulars of claim, and is (a) an amount for which the defendant does not admit liability, or (b) a sum in respect of an item forming part of the claim for which judgment has not been entered: see CPR PD 26 para 7.4.

Nor does CPR PD 26 para 7.3(1) support the conclusion of the district judge. It states: “Rule 26.8(2) provides that it is for the court to assess the financial value of a claim”. PD 26 para 7.3 amplifies CPR 26.8(2). In particular, PD 26 para 7.3(2) provides:

“(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.”

This provision is directed at the case where the court believes that the value of a claim may be overstated. If the draftsman of CPR 26.8 had intended that the court should have the power to increase the value of a claim, it would have been provided for here. In my judgment, the court does not have the power to increase the financial value of a claim in respect of items of claim that are included in the claim form and particulars of claim. Still less does it have power to increase the claim to include items of claim that the claimant has chosen not to include at all.

As has been seen, the district judge made reference to the court fees, although it is not clear what part, if any, the impact of the amount claimed on court fees played in her reasoning. County Court Fees Order Schedule 1 para 1.1 provides that the court is only entitled to demand fees in relation to “the sum claimed”. Thus, for example, where the sum claimed does not exceed £200, the fee payable is £27. As Mr Ashe submits, it is no part of the judicial function to extract from the parties the maximum possible amount of court fees at the cost of forcing a claimant to claim more than he wishes to claim.

In my judgment, therefore, there is nothing in the CPR which justified the decision of the district judge to order the claimant to increase his claim to include the repair costs. Nor is there any reason for distinguishing between subrogated and non-subrogated claims. There is nothing objectionable in what the parties did in the present case. Even if the claimant had included the full claim in his claim form and/or particulars of claim, its value would still have been well under £5000, and, therefore, on the face of it, a case suitable for the small claims track. In any event, the real issue between the parties was liability. The parties were entitled to simplify the claim, and limit the amount claimed to £125. In so doing, they have acted in accordance with the overriding objective in that expense has been saved and the case can be dealt with proportionately. If the issue of liability were complex and not suitable for the small claims track, then it would be open to the court to allocate the case to a different track: see CPR PD 26 para 8.1.

I would, therefore, allow this appeal. The district judge was wrong to strike out the claim on the basis that the claim form and the particulars of claim as amended did not reflect the full value of the claim. Nor was she entitled to make an order that the claimant must amend his claim form and particulars of claim to increase the value of the claim. I would set aside the orders of 5 November 2001 and 11 February 2002, and reinstate the claim.

I agree.