CPR 46.13 Track Allocation Costs

A costs judge has ruled that a £1,000 settlement figure in a tenant disrepair claim was not determinative when assessing whether costs should be restricted to Small Claims Track levels under CPR 46.13.

The discretionary power under CPR 46.13(3) to restrict costs to a specific track is exercised by a holistic, hypothetical assessment of what would have happened had the claim been litigated; the ultimate settlement sum is a relevant factor but is not definitive of the claim’s value for allocation purposes. [58, 80, 84]
When conducting the retrospective allocation exercise under CPR 46.13, the court will consider all relevant contemporaneous evidence of the claim’s value and circumstances at the time of settlement, including detailed calculations and arguments on quantum presented during pre-action negotiations. [62-73, 78, 86-87]
The making of formal Part 36 offers by a defendant during settlement negotiations, which are incompatible with Small Claims Track procedure, is a relevant factor the court may consider as conduct implying an acceptance that the claim would not be treated as a small claim for costs purposes. [55-56, 88]
The court may consider the practical consequences of its decision on future settlement behaviour, such as the undesirability of encouraging parties to engage in tactical bargaining over minimal sums purely to circumvent potential costs restrictions or undermining trust in settlement agreements. [89-90]
Where a paying party seeks to restrict costs under CPR 46.13 by arguing the claim would have been allocated to the Small Claims Track, it is for that party to advance cogent evidence and reasoning to support that hypothetical outcome, beyond merely pointing to the final settlement figure. [79, 91]