A practical guide to allocation and avoiding the small claims track

Except where there is a specific rule about allocation (which is outside the ambit of this article), the primary mover for allocation is the first factor in rule 26.8(1): the financial value of the claim. 

An overview of the rules in relation to allocation

CPR 26.7 and 26.8 provide the general principles for allocation. At first blush, the rules are deceptively simple. 

CPR 26.7(1) reads as follows: “In considering whether to allocate a claim to the normal track for that claim…the court will have regard to the matters mentioned in rule 26.8(1).”

CPR 26.8(1) sets out nine factors which must be taken into account when deciding whether or not to allocate to the ‘normal track’ or not. Those factors focus on three core policy considerations:

  1. The value of the claim and/or its importance to the parties;
  2. The complexity of the proceedings; and
  3. The circumstances and views of the parties.

The ‘normal track’ and CPR 26.6, 26.6A and 26.6B

Having looked at CPR 26.7-8, one can immediately see that the concept of ‘normal track’ plays a central role in the allocation decision. The normal track is defined in CPR 26.6. The starting point is CPR 26.6 (3), which states: “Subject to paragraph (1), the small claims track is the normal track for any claim which has a value of not more than £10,000.” 

CPR 26.6(1) sets out various exceptions for particular types of personal injury and landlord and tenant disputes, where the value cut-offs are lower. The rules are fiddly and the aim of this article is not to explain when the cut-off applies – rather it sets out how a claim should be valued and what follows below applies to any type of claim. 

The value of a claim

Before getting to the details it is also important to mention claims which do not seek a money judgment, such as claims that only seek injunctive relief. CPR 26.7(2) states: “The court will allocate a claim which has no financial value to the track which it considers most suitable having regard to the matters mentioned in rule 26.8(1)”. In other words, the valuation test is simply skipped over. In practice, most such claims will be allocated to the fast track or multi-track.

Now to the meat of the issue. The only guidance within Part 26 is CPR 26.8(2) & (3):

 “(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;

(b) any claim for interest;

(c) costs; and

(d) any contributory negligence.

(3) Where –

(a) two or more claimants have started a claim against the same defendant using the same claim form; and

(b) each claimant has a claim against the defendant separate from the other claimants, the court will consider the claim of each claimant separately when it assesses financial value under paragraph (1).”

It is important to note that CPR16.3(6), which deals with the statement of value within the claim form is in very similar terms. One can conclude from this, that while it is the court who will determine the value of a claim, the court will be slow to go behind a correctly stated value on a claim form. This is supported by PD 26 7.3 (2), which states: “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.”

There is also a very helpful county court decision which supports this construction in the form of Elias & Elias v Blemain Finance Limited [2021]EW Misc 15 (CC) (accessible on BAILII). The judgment arose from an appeal against a District Judges decision at an allocation hearing to allocate to the small claims track. 

The claim related to an undisclosed commission paid by the lender to a broker when arranging a second charge mortgage for borrowers. Such claims are often grouped into two classifications: 

  1. Secret commission claims: where the claimant is provided with no disclosure regarding the payment of commission. In such circumstances a claimant is entitled to rescission as of right (subject to making counter-restitution) together with either a sum equivalent to the commission payment as money had and received or damages for fraud. The leading authority in this area is now Wood v Commercial First Business Ltd [2021] EWCA Civ 471.
  1. Half-secret commission claims: where the fact that commission would or may be paid is disclosed but the amount of commission is not. The leading case on half-secret commissions is Wilson v Hurstanger [2007] EWCA Civ 299.

These are often brought as claims for civil bribery, for breach of fiduciary duty and/or under s.140A-C of the Consumer Credit Act 1974 (“CCA 1974”). 

In most undisclosed commission cases, the Defendant will allege that disclosure of at least the fact that commission would/may be paid was provided. Typically this assertion is based on the supposed service of a customer care booklet (e.g. a FISA Booklet) or as a result of written and/or oral disclosure being provided by the broker. Claimants will usually deny such disclosure took place and will bring an alternative claim utilising the unfair relationship provisions of the CCA 1974 citing, amongst other things, the non-disclosure of commission as a source of unfairness in the relation between them and the relevant creditor. Typically, the Claimant will also plead other sources of unfairness.

Elias involved all of the above considerations. In other words, the Claimant was alleging that the commission paid was a secret, whilst the Defendant alleged that any commission was, at best, half-secret and therefore the Claimant’s valuation of the claim was exaggerated. The Claimants valuation of the claim was on the basis that recission would be awarded: ~£25,000.00. HH Judge Keyser QC held at para 16 & 17:

  1. “The value of a claim is fundamental to the question of which is the normal track for allocation”.
  1. The starting point is the Claimants valuation, only if that is unrealistic and unreasonable will the Court go on to determine the value itself;
  1. An Allocation hearing (and by extension a paper allocation decision) is not the same as a hearing for the summary determination of an issue. Where there is a live issue as to quantum – such as in the present case, might turn on the availability of recission or on the nature of relief that might be granted under the Consumer Credit Act 1974 – it will not generally be appropriate for a judge deciding on allocation to do so on the basis of an opinion that, on a contested issue of quantum, one side’s case is preferable to another’s”.

In our view, the approach in Elias is clearly correct and we at Your Advocacy have had plenty of success in getting claims allocated to a cost bearing track at re-/allocation hearings focusing on the financial value of the claim as it is to be interpreted by the court as well as also other relevant factors listed in CPR 26.8 (1).

Practical takeaways

When issuing the claim, apply to it the appropriate statement of value taking into consideration the pleaded case and the maximum value of the remedy sought.

You will of course want to temper this with considerations as to:

  1. How large an issue fee your client is prepared to pay; and 
  2. If allocation to a cost baring track is successful, how much risk of an adverse costs order your client is willing to take.

Remember to have regard to what should and should not be included within the statement of value.

CPR.16.3(6) provides that: Interest, costs, contributory negligence or any defence of set-off or counterclaim should not be included within the statement of value. 

Interest

We are not aware of any judgments on point, however, we are firmly of the view that interest, in the context of rr.16.3(6) is only referring to ‘judgment interest’. By that, we mean any award by a Court for being kept out of money – not just under s.69 of the County Courts Act 1984 but also under common law, the equitable jurisdiction or default contractual interest clauses. However, claims relating to improperly applied contractual interest, loss of interest on an account and similar claims are claims for a substantive remedy and in our view, should (indeed must) be included within a statement of value. 

Any defence of set-off or a counterclaim

When providing the statement of value, it should not be reduced to reflect the possibility of a defendant making a counterclaim or set-off. That said, if the Claimant is already aware of a counterclaim being brought and is going to admit some or all of the set-off or counterclaim, there is little benefit to including the admitted amount as it will be discounted by the court on allocation.

The directions questionnaire is important.

When you receive notice of preliminary allocation (whether to the small claims track or not), ensure you include written submissions when filing your directions questionnaire. This is your only chance to influence the allocations judge without the expense of a hearing.

Judges are busy and perform box work under severe time constraints. They do not have time to read a lengthy document and case law. Briefly set out:

  1. The allocation test, highlighting the importance of financial value;
  1. Set out any disputes of fact or law in relation to quantum or remedy and why the Claimant has at least a realistic prospect of obtaining more than £10,000.
  1. Any other factors the court ought to take into consideration.

Even in cases like Elias where there are four or five points that need to be covered, this can usually be done in two A4 pages. 

If the claim is allocated to the small claims track, make a timely application to set-aside

If the claim is not listed for an allocation hearing the Judge will allocate on paper. If you are unhappy with the paper allocation decision, you have a right to apply to set it aside. Any party may apply to set aside an order made without a hearing within 7 days of service (or longer if specified within the order) – see r. 3.3 (4)-(6). The rules require a statement of this right to be included in any order made without a hearing, in practice this is often missing. Absence of the statement of right does not affect the right. You can still apply to set aside the decision. 

If you make a timely application to set aside the order, the highly restrictive Tibbles criteria do not apply and the Court is entitled (and more or less obliged) to hear the matter afresh. See – Al-Zahra (PVT) Hospital v DDM [2019] EWCA Civ 1103.

If you did not receive the order within 7 days of the date it was sealed but applied within 7 days of service, this must be set out and where possible evidenced within the supporting witness statement. So long as the Judge is satisfied the application was made within 7 days of service, Tibbles does not apply.

If you are late in applying to set aside

Think carefully before applying. Before applying, be sure you have a very good reason for delay. If you end up having to argue for reallocation under the Tibbles criteria, your chances are very poor, you will need to satisfy the Judge of either:

  1. A material changes of circumstances;
  2. Material misstatement (innocent or otherwise) of a fact relevant to allocation;
  3. (Possibly) Manifest error on the part of the Judge – although an appeal is usually the safer option in these circumstances.

None of these grounds form an easy challenge to an allocation decision, particularly because you are unlikely to have any written reasons from the Judge and will ordinarily, only be entitled to a review of the decision, rather than a full rehearing.

If you do have good reasons (think relief from sanctions) you can consider an application. However do keep in mind, sickness of a fee earner or impecuniosity of a client and similar circumstances are not likely to be enough.

If you are late, you do not have a good reason and still want reallocation: appeal

If you have a good argument for allocation but you missed the deadline the best option is usually to appeal. Lawyers have an unjustified fear of all appeals, notwithstanding the additional difficulties of overturning case management decisions. Not all appeals are terribly costly and in well selected cases, they offer good prospects. The added benefit here is that an appeal has a 21-day deadline. However, particularly if the case is not listed for a rolled-up hearing, it will take a significant length of time, the costs will be greater than an application and litigation funders are not likely to be keen.

Most allocation notices do not provide reasons for the allocation decision. This is in breach of PD 26 4.2 (4)(a) & (b). One may say that failure to provide reasons for a decision is a prima facie ground of appeal and in this case, where it is specifically required by a practice direction, the point may be made with some force. However, as far as we are aware there are no reported decisions raising this issue on appeal and so should certainly not be used as the reason for bringing an appeal.

If the properly calculated value of your claim is significantly above £10,000 (the higher the better) and in the absence of even brief reasons, the strong inference is that the allocating Judge misdirected himself. If you can invoke other factors under r.26.8 all the better.