PI Brief Update

On the Right Track: High Court Rules on Pre-issue Settlements and CPR r46.13(3) - Georgina Pressdee, Temple Garden Chambers

27/03/26. On 18 March 2025, Costs Judge Nagalingam handed down his Judgment in Smith v Wigan [2026] EWHC 660 (SCCO). The sole issue was whether the Costs Officer should have restricted the Claimant’s costs to those recoverable on the Small Claims Track pursuant to CPR 46.13(3). This required the Court to determine whether, had the Claim been issued, the matter would have been allocated to the Small Claims Track.

Background

The underlying Claim was a landlord and tenant dispute over repairs and associated damages for the Claimant’s reduced living conditions whilst the repairs remained outstanding. The Claim settled prior to issue for £1,000 in damages, a promise from the Defendant to complete the repairs and to pay the Claimant’s reasonable legal costs, to be assessed if not agreed. Proceedings were then issued for the purposes of costs only.

Multiple offers were exchanged in the run up to the Defendant’s final offer, which was ultimately accepted. Initially, the Claimant made an offer of £1,400 in damages, the repairs and her reasonable and proportionate costs, subject to detailed assessment if not agreed. This was rejected by the Defendant on the basis that “... the value of the repairs in the claim are below £1,000 and the claim should be allocated to the small claims track”. The Defendant counter offered £500 in damages, the repairs and small claims costs. However, all subsequent offers from the Defendant were on the basis that the Defendant would pay the Claimant’s reasonable legal costs, to be assessed if not agreed. Notably, the final offer from the Claimant was for damages in the region of £1,100 and came with an explanation of why it was anticipated that, if the matter was litigated, the Claimant would expect an award in the region of £1,300.

Ruling: Appeal Dismissed

CPR r46.13(3) provides that, “Where the court is assessing costs on the standard basis of a claim which concluded without being allocated to a track, it may restrict those costs to costs that would have been allowed on the track to which the claim would have been allocated if allocation had taken place.” Costs Judge Nagalingam made two important observations about this provision:

1. It is discretionary.
2. It invites a hypothetical analysis of what would have happened had the Claim been allocated. It is not framed in terms that require only the settlement sum to be taken into account.

Costs Judge Nagalingam then considered CPR r26.9(1)(b) which provides that the Small Claims Track is the normal track for a tenant seeking an order for repairs or other work only if both the cost of the repairs and the value of any other claim for damages are (respectively) estimated at not more than £1,000.

Costs Judge Nagalingam found no explanation for why he should accept that the Claim would be allocated to the Small Claims Track, except for the agreed settlement sum. There was no reference to the settlement sum in CPR r46.13(3). Had the legislature intended it to be determinative, it would have been mentioned. Accordingly, he rejected the Defendant’s argument that the settlement sum alone dictated the value of the Claim. Instead, he was satisfied that, had proceedings been commenced, the value of the Claim for damages would have reasonably been pleaded at more than £1,000. As an aside, he observed that the Defendant’s offers had given the impression that no fixed costs argument would be advanced at the detailed assessment stage and that, if permitted, the Defendant’s conduct would imperil future agreements due to a lack of trust between the parties or result in offers designed to fit within or exceed the threshold for allocation to the Small Claims Track by only a few pounds.

Image: public domain from https://pixabay.com/en/gleise-seemed-tram-soft-2440216/