A cautionary tale – don’t understate a claim’s value in order to pay a lower court fee

Background

Lewis & others v Ward Hadaway [2015]

The claimants’ solicitors issued a number of claims just before the limitation period expired.  The value of the claims was understated to allow the claimants to pay a lower court fee. The claim forms stated that the claimants expected to recover damages limited to £15,000 when the actual value of the claims was over £300,000, with a total potential liability for all claims of around £9 million.

The claim forms were then amended prior to service of proceedings four months later to reflect the sums actually claimed and the balance of the correct, higher court fee was paid. The solicitor acting for the claimants said this approach was adopted as they were waiting to be put in funds for the full court fees. The letters of claim had correctly detailed the higher claim value. Both the claimants and their solicitors were aware that when the claim forms were originally issued, the values stated on the claim forms and the fees paid were incorrect and the intention was to claim the larger sums when the claims were later served.

The defendants applied for the claims to be struck out for abuse of process, or for summary judgment for limitation reasons as the claim had not been properly issued within the limitation period.

Decision

The judge held that there had been an abuse of process. In deliberately understating the value of the claims to avoid paying the full court fees, the claimants had not paid the court the amounts due at the appropriate time and caused the court to incur further costs in unnecessary administrative work to process the amended claim forms. The claimants could have paid the correct fee when first issuing the claim. The judge also expressed concern about the statement of truth accompanying the original claim form, though he held there was no suggestion of any fraud or dishonesty.

When assessing whether the claims should be struck out for this abuse of process, the judge held that the claims were potentially of a high value and were arguable. There would be substantial prejudice to the claimants if their claims were struck out.

However, the judge decided that as a result of the claimants’ abuse of process, the claim had not been properly issued within the limitation period. The claimants had deliberately paid a lower court fee despite their intentions to claim a higher amount and being able to pay the appropriate fee at the outset.

The defendant’s application for summary judgment was granted and the defendant’s limitation defence was successful.

Impact

With the recent substantial increases to court fees, and the likelihood of further rises in the future, it can be tempting for claimants faced with a pressing limitation deadline to issue a protective claim form for a low sum, and pay the corresponding lower court fee, whilst assessing their position.

This case confirms that the court will not allow this. If a claimant and their solicitors are aware of the value of a claim, this must be the amount stated on the claim form and the corresponding fee paid. In the event that it is unclear what the value of the claim will be, it is better to work with the higher end of the likely value to avoid later amendments and claims of abuse of process.

If you are a defendant to a claim issued toward the end of the limitation period, and the value stated in the letter of claim is substantially different to that in the letter of claim, and/or the claim form value has been amended outside of the limitation period, you may want to seek advice in light of this case.

If you would like to discuss this article in further detail, please contact Catherine Woodward, on 0113 227 0366 or at catherine.woodward@gordonsllp.com