Uncivil Litigation: Costs and the small claim
APRIL 2010
The overwhelming majority of cases issued at Court are “small claims”, i.e. those with a financial value of £5,000 or less. Whilst generally the ability of the successful party to recover its costs from the losing party is highly restricted in small claims litigation, this is not always the case. This article explores the standard costs provision in small claims cases and offers a warning about the circumstances when the usual rule can be disapplied, with potentially disastrous consequences.
The “Small Claims Track” within the County Court system offers a streamlined process for the determination of lower value, straightforward claims. Small claims are managed by the Court in a way that is designed to appeal to litigants in person (i.e. those without the benefit of legal representation) as hearings are dealt with on a more informal basis than in other parts of the Court system and strict rules of evidence and procedure do not apply.
In addition, the small claims track is subject to the following rule about costs recovery:
The Court may not order a party to pay a sum to another party in respect of that other party’s costs, fees and expenses … except –
- The fixed costs of issuing the claim;
- Court fees which have been paid;
- Reasonable travel costs of attending hearings;
- Limited amounts for lost earnings;
- Limited amounts for any expert witness fees; and
- Such further costs as the Court may assess … to be paid by a party who has behaved unreasonably.
The last section of the rule above has been highlighted as it can be overlooked until it is too late. A litigant in person who is unaware of this particular rule might be tempted to pursue small claims litigation ‘over enthusiastically’, perhaps feeling safe in the knowledge that the costs consequences of failure will not be too great. This could be a very costly mistake.
In fact the Court can be asked by the winning party to consider whether the behaviour of the losing party is such that a costs order be made. If the winning party has been represented throughout, the costs it might seek to recover from the defeated litigant in person could run into many thousands of pounds, dwarfing the actual value of the amount claimed in the first place (we have seen this happen).
What constitutes “unreasonable behaviour” is difficult to give guidance upon as the rules leave this question open and there is not extensive case law to fill the gap. Examples of conduct which has been found to be “unreasonable” are:
- pursuing a claim which is speculative and unsupported;
- the fabrication of an untruthful defence; and
- persisting in a claim in the face of overwhelming evidence that the claim will fail.
If a small claim is issued, then the normally restricted costs regime cannot be used as cover to pursue litigation which has no merit, nor should it influence parties to act unreasonably. The normal rules can be disapplied at the discretion of the Judge in circumstances which are difficult to predict and this uncertainty, coupled with the financial consequences that might follow, should serve as a warning to all small claims litigants to beware and act reasonably.
If you would like any further information about the issues raised in this newsletter please contact Nigel Adams or any other member of Goodman Derrick LLPs Litigation Department on 0207 404 0606.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. |
