There has been a rise in claims brought by litigants in person (LIPs) against commercial clients on the small claims track. Why? Perhaps in the challenging economic conditions, claimants want to keep their damages rather than pay solicitors, or look around for more speculative claims, coupled with the ever present “do it yourself” guidance on the internet and social media.
But what are the risks businesses face?
These claims can affect any public-facing company or organisation, and present a strategic dilemma. Should a business incur the costs of defending what may be relatively low value claims? Or risk appearing to concede claims which are cumulatively valuable and which often include reputationally-damaging allegations?
The small claims we are seeing include:
- Reputational issues, such as allegations of dishonestly (or even fraudulently) withholding compensation or refunds.
- Allegations of discrimination or hardship caused to vulnerable claimants.
- Attacks on key business models, such as dynamic pricing.
- Senior leaders may be subject to allegations or even sued personally.
There is little prospect of enforcing confidentiality settlements, and social media means the risks of damaging allegations or effective claimant techniques spreading are greater than ever before. Threats to involve media or consumer groups are commonplace - albeit usually empty, they further emphasise the importance of careful and effective dispute handling to businesses’ image.
“People, processes and technology”
These trends can be combatted in a way that is legally and commercially effective, by bringing together the right people, processes and technology. Cumulatively, these small claims can be significant for many businesses, and the associated reputational risks often mean that using a third party would be ultimately cost-efficient.
Pitfalls of going-it alone
The “people” dimension is crucial. Deciding on the most appropriate line of defence is difficult, and requires a level of commercial and legal understanding and experience. County Courts are often indulgent of litigants in person, even where claims are difficult to understand, have no obvious legal basis or are even misleading. There is also the difficulty of obtaining costs against litigants in person, even under the unreasonable conduct costs provisions of the Civil Procedure Rules.
These factors inadvertently encourage the most difficult and misconceived claims. Experience and judgement is required to strike the right balance between being robust, acting reasonably and conserving client resources. Distinguishing between dishonest or disruptive claimants and those who are genuinely vulnerable or have a real complaint is really important in determining the best posture and achieving an appropriate resolution.
The economies necessary in working on the Small Claims Track can be achieved by striking another balance between experienced legal staff using a light touch to identify the most complex and sensitive claims, and the use of claims handlers and paralegals. Non legally qualified staff can administer cost-effectively the generic procedural elements of claims, and those claims which do have a standard component (such as in bulk claims, for example for airline delays). Technology enables claims and groups of claims to be tracked as efficiently as possible, and that generic content collated where it is appropriate.
“Prevention is better than cure”
Those businesses who develop clear procedures pre-action will be better equipped to manage and avert claims effectively. Typically, businesses want to identify and deal fairly with meritorious claims, but the pre-action picture is complicated, largely due to the encouragement of social media. Potential LIPs frequently approach senior leadership, bypassing usual customer channels, shopping around an organisation seeking some traction. This is often instead of conventional pre-action correspondence and can lead to confusion and duplication.
A major example of where businesses need clear and robust administrative and legal procedures is the frequent scenario where a company is sued under the name of a different group company, or under a brand name only, which may relate to numerous entities. Other incorrect details may also be used, giving rise to issues of service, or claims getting lost within the business – sometimes across multiple jurisdictions. Such claims may be obviously wrong, or there may be some reasonable ambiguity in the claim (for example where multiple group entities are involved in a customer relationship). There are many different permutations of these errors. Businesses that don’t get these processes and responses right are at significant risk of default judgments, with legal and commercial consequences.
Small claims are tricky and dealing with any number of them is daunting. However, the damage can be limited. Strategies can be developed to identify and deal with claims earlier and better, limiting unnecessary litigation and costs, and saving customer relationships and reducing social media exposure where possible. Legal time and resources can then be concentrated on defeating the most complex claims and serious allegations from the most difficult litigants.