Small claims court limit heading for £15,000

The monetary limit under which individuals including small businesses and contractors can avoid going to court to formally settle a dispute is set to increase from April of next year.

At present, a person can make a claim of £5,000, or less, to go through the small claims court system, which is the least arduous route for out-of-pocket firms and individuals.

But as part of a consultation to simplify and improve the county court, the Ministry of Justice proposes to raise the small claims threshold ideally, it says, to £15,000 from April 2012.

“If the threshold is increased to £15,000”, the MoJ said “up to 83% of all defended cases currently allocated to a case management track would fall within the new £15,000 limit.”

Asked about the proposed increase, a contracts lawyer said it was probably good news for the smallest of businesses because, if successful, their legal costs are usually not recoverable under the existing small claims process.

Roger Sinclair, legal consultant at egos explained: “All too often the risks of having to pay the other side’s costs if the case is lost…can deter claimants from pursuing perfectly valid claims – because they quite simply couldn’t afford to lose.  This defeats justice”.

Under the government proposal, both parties would have to accept mediation before a formal hearing is granted and, also on small claims, the case may no longer have to be heard with the two sides present.

The MoJ reflected: “There are clear advantages to parties if cases can be determined on paper or heard by telephone, since very often, one of the parties may live at a distance from the court.

“For both parties and, if they have them, their legal representatives, to have to attend court in person, could constitute a considerable additional expense, both in terms of travel and time.”

Before that stage, however, both parties would have to undertake mediation in person or by phone, or through an advisor, in an attempt to settle the issue without involving the court.

Mediation, which the MoJ says has solved more than 70% of 10,000 recent claims that were heading for a formal hearing, would be compulsory for all cases up to a value of £100,000.

Mr Sinclair endorsed: “In my experience, [mediation] has a real prospect of helping the parties to reach their own resolution, rather than have a judge impose it. It will also generally cost less than taking a case all the way through the courts.”

Affected parties can have their own say on the consultation, which is open until June 30^th and will be followed in October when the government responds with the proposals it will pass into law.

Editors’ note: Further reading:

• How to get paid when contracting
• How do I use the County Court to recover money owed?