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Thanks for all of that information AuntLydia, I wasn't sure whether I would still get a CCJ if I pay what is agreed in court but from your own experience it seems not. I had heard that a small claims court was not a scary place and really just somewhere more like an office where a decision is given. Yes I am admitting liability and there is no question of liability, more just the actual amount being claimed.
I have spoken to both of these girls a few times about it, whilst they are very annoyed with me, they have discussed it in an amicable manner. Both girls made it clear that they would prefer to settle this by going through proper legal channels and to sue me for damages. With it being £5000, I think they feel I'll miss payments and likely stop paying which is understandable.
You also make a good point that if I were to start making out of court settlements, the students could possibly still try suing me further down the line and I then end up being further out of pocket not to mention lots of hassle.
Obviously damages have been done and these girls need to be compensated, I am waiting to see all of their proof of purchase but possibly on this occasion court might be the right way to settle this.