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GLC's Mike Dailly

Small claims and counter-claims 


February 13 2006, (c) The Herald 


Justice minister Cathy Jamieson declared last year that Scotland's civil justice system must be "fit for its purpose in the 21st century – modern, accessible and efficient". A noble aspiration, certainly, but many argue that it is an aspiration taking too long in the realisation.

Want to pay someone to represent you in court who is not a member of the Law Society or Faculty of Advocates? Too bad. Ministers legislated for this 16 years ago, but the necessary laws were never commenced. Sold a dodgy endowment mortgage policy by a Scottish solicitor and want compensation for mis-selling? Most unfortunate. It's a shame you didn't buy it from a financial institution, as people do in England, where the success rate in winning compensation is 80%.

There is another, still more glaring, legislative anomaly: Scotland's risibly low small claims ceiling. If you want compensation from a supplier of shoddy goods or services without the hassle and expense of hiring a lawyer the effective maximum is £750, a limit which has been frozen for 18 years. In England and Wales the small claims ceiling is £5000 and has been since 1999. According to consumer organisation Which?, some despairing Scots who can do so choose to pursue their cases in the English courts. So much for "Scottish solutions for Scottish problems".

"The current system is a charter for cowboys," alleges Julia Clarke, public affairs officer for Which? in Scotland. "The executive's failure to address this issue undermines the public's belief in Scotland's justice system."

Some readers poorly disposed to the legal profession cite a common denominator here. Is this (another?) example of Scots lawyers exercising their formidable lobbying clout to protect their pecuniary interests at the public's expense? Actually, no. Or rather, even if there is a grain of truth in that accusation, the issue is not at all simple.

Seven years have passed since the justice minister recommended that the small claims limit be raised to £1500. Nothing happened. As the years have drifted by, the number of actions raised has fallen, along with the real value of the compensation on offer to aggrieved consumers.

In a statement to The Herald last week, The Law Society of Scotland confirmed that it backs increasing the present maximum from £750 to £1500 for small claims, and from £1500 to £5000 for intermediate value summary cause actions, also heard in the sheriff court.

The summary cause procedure is viewed as less attractive for the risk-averse, a category into which many disgruntled consumers would undoubtedly fall, since expenses are higher and go with success. People who lose their case would be liable for their own and the other side's costs.

In small claims actions, litigants are protected from heavy losses and from incurring a large legal bill should they lose by an expenses "cap" of £75 at the current level of £750. This would rise to 10% of the value of the claim with a minimum of £100.

The issue was returned to the political agenda in 2003 after the Scottish Consumer Council published a policy paper arguing for parity with England

and Wales. Labour MSP John Home Scott lodged a motion calling for the increase, which gathered over 32 supporting signatures, though this was eventually withdrawn in the face of considerable opposition.

Opponents of higher limits than those proposed by the law society – including trade unions – carry a trump card. They allege that more radical steps would actually deny legal redress to thousands of poorer Scots by taking them out of the legal aid net.

"The society has concerns about upping the limits beyond (these) as this would cause access to justice issues for those on low incomes," said a society spokesperson. "Some cases – for example to do with dampness claims or non-payment of benefits – can be extremely complex and it would be very difficult for the lay person to represent themselves properly in a small claims court, but without access to civil legal aid they would be unable to appoint a solicitor."

Govan Law Centre chief Mike Dailly, who works in one of Scotland's more deprived communities, observed: "Govan Law Centre and other solicitors in Scotland undertake a significant volume of compensation claims for tenants who live in damp, cold and miserable living conditions. Many claims come in at £2000 to £4000 in value. If the small claims limit was raised to £5000 all poor people who lived in conditions not reasonably fit for human habitation would be denied access to civil justice. No civil legal aid would be available, and even if a case was undertaken for free by a law centre, who would pay for the attendance of an expert witness in court?"

Dailly is a fierce critic of the Scottish Consumer Council, which he accuses of being "obsessed with choice and value for money". However, Graeme Millar, SCC chairman, is unmoved by the counter-arguments and stands by the proposals outlined in the 2003 policy paper. "An increase in the amount Scots can be awarded in small claims procedures is long overdue," Millar told The Herald. "There is no justification for a limit that is more than six times lower than England and Wales. It is time the Scottish Executive acted to give Scots a better deal." The SCC is "unconvinced" that raising the small claims limit to £5000 would affect significant numbers of people in respect of eligibility for legal aid – despite the admitted absence of data on the size of claims in legally aided cases. His organisation does, however, acknowledge that switching cases currently heard as ordinary cause cases into the small claims arena could lead to a loss in income for solicitors' firms – "particularly smaller and rural firms which carry out debt recovery and related civil court work on behalf of pursuers".

While the debate continues, it seems there is at last some movement at Holyrood. Last spring, ministers pledged to raise the small claim limit as part of a general streamlining of the present system, also ruling that claims relating to personal or industrial injury should be excluded because they are too complex for the simplified small claims procedure. An executive spokesman suggested last week that reform could come before the end of 2006.

"We have formally consulted on this before but we are in regular ongoing discussion with all interested stakeholders and are in no doubt as to what their respective views are on this issue," he said. "We accept the case for an increase but have still to decide what an appropriate level should be. While a higher level must be realistic in the sorts of consumer disputes it catches, legal aid is not available in small claims, so there is a clear access to justice issue about raising the limit too high. Having said that, we hope to announce the new level later this year."

Dailly believes it is not too late to influence the final outcome of what has become a tortuously protracted consultation. He has contributed a chapter to a forthcoming book on legal affairs, entitled "Whose Justice is it Anyway", edited by Professor Gregor Gall. Dailly will use it as a platform to lobby for the establishment of an inquisitorial civil tribunal to handle disputed claims up to £5000, and undisputed claims up to £25,000.

Dailly argues that simply raising the small claims limit will not have the desired effect of opening up access to the civil justice system, citing empirical evidence that increases in England and Wales have only produced a minor uptake in claims. He also points to research showing that the majority of small claims cases with a value between £3000 and £5000 involve commercial organisations suing other organisations.

Dailly believes the adversarial nature of a small claims action is a major drawback of the present regime. Around 800,000 adults in Scotland have very low adult literacy and numeracy skills. "While a well educated professional may find it manageable to present their own small claim, a person who finds it difficult to read and write may not," Dailly says.

Representation is expensive, of course, so what is the alternative? Dailly advocates the creation of a civil tribunal that could hear defended money actions up to the value of £5000. The tribunal would be inquisitorial in nature so as to obviate the need for formal representation and reduce the cost of dispute resolution. Representation would be unnecessary because the tribunal would be charged with the task of assisting both parties to achieve a just and fair outcome. It would be the tribunal's role to decide what witnesses should be called. The cost of expert evidence would be payable by the losing party, in addition to a small nominal fee to the tribunal for its time.

Said Dailly: "This proposal could do a number of things, including: substantially opening up access to civil justice to every citizen in Scotland in money or consumer disputes; and taking pressure off the sheriff court, thus enabling the criminal justice system to operate more speedily and effectively.

He added: "Certainly, simply altering the small claims limit – from the evidence in England and Wales – will have little impact, and could cause unintended negative problems."