What costs can a claimant expect?

**R0b** · 29th May 2020, 13:11:PM

The story you've given doesn't make sense to me or at least in part. Your supplier has issued a claim but you've said that the invoice was paid, so as far as I see it, your supplier has no claim against you. Not entirely sure where you bank comes into this at all, as they have nothing to do with the contract you've entered into with your supplier.

Anyway, like everything in contract law, the starting point is to check what you signed up to. It is not uncommon for suppliers to have clauses in the contract that says if there's a debt and you fail to pay it, then you are also liable for the costs incurred in recovering that debt.

The small claims track limits costs recoverable but those limits are subject to the contractual arrangement you have with your supplier. Out of curiosity, why did you refuse a Tomlin Order if they accepted instalments? By refusing to that, your business runs the risk - if it is a limited co could end up with a CCJ or if you are trading as an individual - then you could end up with one yourself.

**gazfocus** · 29th May 2020, 13:26:PM

Hi rob. Thanks for commenting.

With regards to the details of the claim, etc, the claimant invoices us, we paid said invoice, claimant doesn’t receive payment. We argue we paid, claimant takes us to court. Claimant then get statement from their bank that our bank never passed payment to them so we are pursuing the bank to find out where the payment has gone.

We refused a Tomlin order because we have now been able to pay the claim in full, but I think it’s important to say that the Tomlin order was offered based on the amount claimed and it’s now only once we have offered to pay in full that they are now talking about claiming their ‘considerable costs’. This is the first mention of it.

For the record, we have also changed banks due to this issue and the amount the claimant has claimed on the court claim has actually been paid in full today by faster payments with all claimant bank details being checked by our bank before making payment.

**gazfocus** · 29th May 2020, 13:30:PM

Ps I have just looked at the terms of our agreement with the supplier and they are very brief (3 paragraphs) and do not state anything about claiming for their costs.

**gazfocus** · 29th May 2020, 13:57:PM

Further email from the claimants solicitor is citing CPA 27.14 (2)(g) which from my research is relating to costs incurred due to a summary judgement which is not the case here.

**R0b** · 29th May 2020, 14:02:PM

I see.

It would have made sense for you to make a counterclaim against the bank and bring them into proceedings rather than going about it the way you have but that can't be rectified now.

Because you have chosen to make the payment directly, things might be a little trickier now. By making payment, you've effectively admitted liability so the next question I would ask is whether or not prior to you making the payment, has the claim be allocated to the small claims track. If the answer is no, you could be liable to pay their costs.

However, if the claim has already been allocated and there's nothing in the terms then I can't see how they can recover legal costs since the small claims rules will prevail.

It would be helpful to see the correspondence from their solicitor because either they are trying to take advantage knowing that costs can't be recovered or there is something you've not told us and they do have a right somewhere for costs. It wouldn't make sense for a firm to tell you that they if costs can't be agreed, they will ask a court to make a determination unless there as good reason to do so because they could be in breach of their regulatory duties under the SRA Standards and Regulations.

If you haven't already, it would be useful to know the basis as to why they think you are liable for their costs, if the claim has been allocated to the small claims track where costs are limited. If they are not able to provide a satisfactory response then you could mention that you are minded to report the solicitor and their firm to the SRA for breach of their duties, on the basis that they are abusing their position by trying to take advantage of you in claiming for something that they know is not recoverable.

Either that will flush them out and they will immediately withdraw from seeking costs or they will respond and provide you the basis for claiming these costs.

Can you name the solicitors?

**gazfocus** · 29th May 2020, 15:32:PM

Hi R0b,

The only thing I haven't mentioned is that the solicitor did previously say they would apply to the court for a summary judgement because they believed that my defence had no merit. I was the one who initially requested a payment arrangement to which they came back with the proposal (some weeks later) of the Tomlin Order, by which time circumstances had changed (and obviously the worldwide covid19 crisis). I replied to the solicitors email within an hour saying 'in the interests of getting this resolved, we are intending to make payment in full whilst we pursue a claim seperately with our bank', and asked if he could confirm whether or not we would still be able to trade with the supplier on a payment upfront basis once the claim was settled.

This email apparently went to the solicitors spam folder (which he confirmed today) so I had the following email from him on Wednesday (which subsequently ended up in my spam folder so I saw it this morning)...

I refer to the above matter and my email of 5 May 2020 detailed below to which I have not had your response and/or payment.

In the circumstances it is clear you do not wish to settle this matter with my client and therefore I have been instructed to pursue the debt, together with the legal costs associated with the same. Your failure to co-operate and engage in settlement discussions will only result in further costs being incurred by either party. Costs which my client will seek to recover from you in addition to the sums claimed.

In view of the above I shall be contacting the county court today with a view to progressing the matter to a hearing.

I then responded to this (from multiple email addresses to make sure he received it) advising that I had indeed responded to his previous email and suggested he check his spam folder.

I then received an email advising he was seeking his clients instructions and asked when we would be looking to pay the sum claimed, to which I responded simply to say we should have the funds available no later than next week.

I then received the following...

I refer to your email below.

Whilst I will be taking my clients instructions on whether they are prepared to continue trading with you on the basis of payments being made in advance of orders being accepted I can confirm my client has incurred significant costs in reaching this stage of the proceedings.

You are well aware that the sums being claimed amounts to £xxx as detailed on the Claim Form issued against you.

However my client has incurred significant legal costs of £xxx (exclusive of VAT) at this stage. Since my clients offer to you to discharge the sums claimed by monthly instalments of £xxx has been superseded by your offer to pay the sums claimed in one lump sum at a date to be determined next week, my clients offer is withdrawn and no longer capable of being accepted by you.

It is clear that your Defence did not have merit as it was based on the assertion that the debt had been paid to my client as it now appears you are seeking to recover those sums from the bank. Therefore my client has incurred unnecessary costs in issuing such a Claim as no such payment had been received as alleged or at all and is therefore entitled to seek its costs from you.

I therefore request your settlement proposals for the discharge of those costs in addition to the sums claimed. If a settlement cannot be reached on costs which stand as a separate issue to the sums being claimed I will need to seek my clients instructions on making an application to the Court on costs for a Judge to determine at a hearing (subject of course to my client accepting your offer to discharge the sums claimed next week)

I look forward to your response.

followed by...

I refer to my email below and await your response.

However I have now received my clients instructions with regard to the recommencement of trading with you and confirm that my client will not consider trading with you until the full sums outstanding are discharged and then once this has happened my client will review its position and I will advise you accordingly.

I responded to the solicitor advising that my limited knowledge tells me that the client is only entitled to a limited amount of costs which are as stated on the original claim form (court fee, legal representative fee and interest) and that I do not believe we are obligated to pay any other costs, especially costs reaching 90% of the original claim amount. I also disagreed that my defence did not have merit as it wasn't until the claimant mentioned evidence from their bank (during the claim itself) that we had anything with any weight to challenge our bank.

His response...

With all due respect my client is entitled to seek costs under the Small Claims Track under CPR 27.14 (2)(g).

I am not sure what your interpretation is of unreasonably conduct is. However a Defence based on the alleged premise that the debt has been paid when in fact it has not, especially given the fact that my client chased you for payment of the debt prior to litigating on it, to me would indicate unreasonable conduct. You had ample to time to contact you bank prior to the Claim being issued to ascertain whether the payment had actually been made rather than delaying or failing to do so. In fact you had ample time to pay the debt when you received the Claim Form which you did not

My clients claim should not be used as a vehicle to pursue your own bank for alleged errors it may or may not have caused on your account. That is an issue between you and your Bank.

Moreover, I can confirm that your email of 11 May 2020 did go to spam, although I am surprised that it did, especially given that your previous emails with the same email address were received without issue.

I have provided you with my clients instructions vis-à-vis the recommencement of trading and that position has not changed.

I then emailed to say payment had been made in full today to which his response was 'Please note this does not distract from the issue which needs to be resolved regarding costs, please let me know the position.'

I have also emailed the court that the solicitor requested the hearing to be to advise that the claim has now been paid in full along with the print out from online banking to prove as such.

**R0b** · 29th May 2020, 20:46:PM

So basically, either you pay up the costs they've incurred or call their bluff and see what they do. If you wanted to refute their claim for costs you might say something like the response below, assuming what is written is correct in terms of the facts.

Dear [Solicitor],

Where a party seeks costs under CPR 27.14(g) for unreasonable conduct, the bar is generally high. I am sure you will be familiar with the Court of Appeal case Dammermann v Lanyon Bowdler LLP [2017] EWCA Civ 269 where the Court provided guidance on the meaning of 'unreasonableness'. Specifically, the Court referred to Ridehalgh v Horsefield [1994] EWCA Civ 40 where the following was said:

"conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting in a practitioner's judgment, but it is not unreasonable"

When your client sent the letter before action, we fully engaged in the pre-action process and at the time, made it clear to your client that we did not consider to be in breach of contract as we believed the invoice had been paid on instructions to our bank. Therefore, we had no reason to believe payment was not made.

It is, of course, trite law that the general rule in civil cases is that he who asserts must prove. Quite simply, your client, upon receiving our denial of liability, could have presented us with further evidence that the invoice had not been paid prior to commencing proceedings. Instead, your client chose to pursue proceedings and it was only after proceedings had progressed, did your client then decide to provide us with evidence that the monies had not been received, namely the bank statement.

Upon being presented with this, we immediately conferred with our bank to find that payment had not been made, and at which point we then offered to discuss terms of settlement. Subsequently, we have since made payment in full of the amount claimed by your client. As far as we are concerned, the claim has been settled and we have informed the court of the same.

We reject your suggestion that our conduct has been unreasonable at all. On the contrary, we consider your client issued proceedings prematurely and your client could, and should, have provided a copy of its bank statement at the pre-action stage. Had it done so, we believe that the matter could have been resolved without the need for legal proceedings and your client would not have incurred the costs it is seeking to recover. Nevertheless, your client must have been alert to the fact that the sums in dispute meant that the claim would likely be allocated to the small claims track and therefore costs recovery is limited.

Accordingly, we are of the view that in all the circumstances, we have been reasonable in defending the claim. In any event, your client acted irrationally and prematurely in issuing legal proceedings which has contributed to your client's legal costs that could have been avoided.

I trust this sets out our position but if your client wishes to pursue this course of action then we will robustly defend any claim for costs pursuant to CPR 27.14(g). Given that your client's claim is now settled, any request for costs will require an application to be made to the court so as to enable us an opportunity to file any opposing statements.

[OPTIONAL: Should we find that an application for costs is made without notice or your client (through yourselves) seeks to achieve the same without following the proper processes, we will not hesitate in making an application to the court to set aside any costs order and seek our own costs incurred as a result, but we will also report both you and your firm to the SRA as regards your conduct and non-compliance with the SRA StaRs]

Yours [faithfully / sincerely]

Ultimately, it is a decision for you to make on where you want to go with this.

**gazfocus** · 30th May 2020, 16:25:PM

Thanks R0b, I appreciate your reply.

Perhaps in haste, I sent the following to the solicitor...

With respect, your client has no terms that state they are entitled to recover costs, and as far as I am aware CPR 27.14 (2)(g) refers to the costs associated with a successful summary judgement which is not the case here.

You are entitled to your opinion on our actions but I will say that when our bank say one thing and your client say different, it is not unreasonable to trust the word of the bank. Unfortunately, I admit that we were wrong to trust our bank on this occasion and we are pursuing them independently.

However, you continue to claim we had not paid but this isn't the facts. The facts are that we paid (and have evidence of doing so). The facts are that the bank made an error which we are now attempting to resolve with them, but that still does not affect the fact that the amount had in fact been paid.

With regards to our email of 11th May, nowhere did I make the assumption that it did not arrive in spam, I simply stated that if my email landed in your spam folder, that is down to your email system and not anything I am able to control so any costs incurred by your client due to my response landing in your spam folder (and your subsequent assumption that I had simply ignored your clients offer) should, in my view, be covered by yourselves.

I honestly think they are trying it on. They have NEVER up until yesterday made any mention of claiming costs incurred and have only ever been seeking the amount claimed on the claim form. It appears that they are abusing the fact we still wish to trade with the supplier as a bargaining tool to recover their costs, however, I’m not going to just hand over £1150 just to enable us to keep paying them for products.

For what it’s worth, the original invoice was for £1067 and we’ve ended up paying £1246 including the fees claimed on the court claim, so the ‘additional costs’ that they are expecting me to hand over is 107% of the original invoice amount.

I realise after reading @r0b’’s last post that my understanding of CPR 27.14 (2)(g) was incorrect and it is about ‘unreasonable behaviour’ and not summary judgements (so have likely shown a glimmer of hope to the solicitor that I don’t have a clue what I’m talking about). I would imagine however that asking a judge to agree that my belief that payment was made because I had instructed my bank to make said payment is ‘unreasonable behaviour’ would be a huge risk for the solicitor to take at his clients expense.

**gazfocus** · 30th May 2020, 17:39:PM

Duplicate post

**R0b** · 30th May 2020, 18:34:PM

Yes, summary judgment has nothing to do with CPR 27.14 but just a little advice to you, sometimes it is best not to respond immediately unless you absolutely have to. I doubt very much with it being a Friday the claimant's solicitor isn't going to be in any rush to file an application over the weekend.

Always take the time wherever possible to take a step back and digest what is being said, before you reply as more often than not, you will miss something and in this case, you showed to the solicitor that you didn't know what they were referring to.

Whether they think that's sufficient to try their hand with an application for costs I don't know, maybe. Either way, you can use the elements I wrote in that letter as your opposing statement/arguments should they proceed.

**gazfocus** · 30th May 2020, 19:13:PM

I have been speaking to our other director and have discovered that we actually offered to make a second payment to clear the account back in December as a way of resolving this without any need to proceed to court - we were unfortunately not given the opportunity to do so as outlined below.

This is the response I am considering sending to the solicitor (largely based on your example above @r0b). I would be grateful for any thoughts/opinions.

Dear xxx

I have, this weekend, sought advice with regards your accusation of unreasonable conduct. Please find below my response.

I’m sure you will be familiar with the Court of Appeal case Dammermann v Lanyon Bowdler LLP [2017] EWCA Civ 269 where the Court provided guidance on the meaning of 'unreasonableness'. Specifically, the Court referred to Ridehalgh v Horsefield [1994] EWCA Civ 40 where the following was said:

"conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting in a practitioner's judgment, but it is not unreasonable"

We entered into numerous communications with your client before any proceedings were brought against us, where we specifically outlined that we believed payment had been made and even sent evidence to your client of the same. We then requested confirmation of your clients bank account details on 17th December 2019 and advised that we were seeking to make an additional payment as to clear our account balance in lieu of an investigation into the original payment. This request was not responded to until Wednesday 8th January 2020 and we then received the court claim on Tuesday 14th January 2020 (4 working days later) which obviously increased the amount being sought and we felt it necessary to defend our position. We were closed over Christmas until 13th January 2020 so did not have the opportunity to make the second payment offered. Proof of the original payment (in the form of our bank statement was then sent to your colleague, xxxxx on 14th January 2020).

As such, we not only made it clear to your client that we did not consider to be in breach of contract as we believed the invoice had been paid on instructions to our bank, but we also offered to make an additional payment as a gesture of goodwill, but was not, unfortunately given the opportunity to make this payment as the court claim was filed only a short time after sending confirmation of your clients bank details and as we were closed for our Christmas break, the court claim arrived before we saw the email from your client.

It is, of course, trite law that the general rule in civil cases is that he who asserts must prove. Quite simply, your client, upon receiving our denial of liability, could have presented us with further evidence that the invoice had not been paid prior to commencing proceedings. Instead, your client chose to pursue proceedings and to this date had not offered any evidence that the monies had not been received, namely the bank statement, and as such, we have made our payment in settlement of the claim purely to close the matter in an effort to enable us to purchase new stock from your client. As previously advised, we are pursuing our bank for the reimbursement of the original payment, however, as yet they have not admitted any error and as such our payment to your client has been made on trust that the monies have not been received, as has previously been mentioned, no evidence has been forthcoming from your client.

We have responded to all of your contact in a timely manner and have increased our offer from monthly instalments to full payment of the claim in an effort to settle this matter once and for all and subsequently, we have since made payment in full of the amount claimed by your client. As far as we are concerned, the claim has been settled and we have informed the court of the same.

We reject your suggestion that our conduct has been unreasonable at all. On the contrary, we consider your client issued proceedings prematurely and your client could, and should, have provided a copy of its bank statement at the pre-action stage, and allowed us the opportunity to make the second payment we offered after having received the confirmation of bank details. Had it done so, we believe that the matter could have been resolved without the need for legal proceedings and your client would not have incurred the costs it is seeking to recover. Nevertheless, your client must have been alert to the fact that the sums in dispute meant that the claim would likely be allocated to the small claims track and therefore costs recovery is limited.

Accordingly, we are of the view that in all the circumstances, we have been reasonable in defending the claim. In any event, your client acted irrationally and prematurely in issuing legal proceedings which has contributed to your client's legal costs that could have been avoided.

I trust this sets out our position but if your client wishes to pursue this course of action then we will robustly defend any claim for costs pursuant to CPR 27.14(g). Given that your client's claim is now settled, any request for costs will require an application to be made to the court so as to enable us an opportunity to file any opposing statements.

Just to add, I’d really like to repair our relationship with the supplier but I really feel that the solicitor is trying to take advantage here, and simply cannot allow the solicitor to bully us into paying what we should not be liable for.

**R0b** · 30th May 2020, 21:47:PM

Looks fine, although in the paragraph where you say "As previously advised, we are pursuing our bank for the reimbursement of the original payment ... " I'm not sure that's relevant here and wonder if it is even worth mentioning, because the issue is the costs for unreasonably conduct. I wouldn't be divulging the status of your claim against your bank as it has nothing to do with your supplier's claim - that's a matter between you and your bank.

It may be that the solicitor is advising the supplier that they could try to recover costs from you under CPR 27.14(g) and the supplier would need to give that authorisation, which makes sense because why would you pay solicitor fees if you can recoup them from the other side?

It may be worth weaving in to the end of your letter that you had a good relationship with your supplier prior to this unfortunate situation and would like to maintain relations, but if the supplier persists then you will have no choice but to defend it.

**gazfocus** · 31st May 2020, 08:27:AM

Originally posted by r0b

Looks fine, although in the paragraph where you say "As previously advised, we are pursuing our bank for the reimbursement of the original payment ... " I'm not sure that's relevant here and wonder if it is even worth mentioning, because the issue is the costs for unreasonably conduct. I wouldn't be divulging the status of your claim against your bank as it has nothing to do with your supplier's claim - that's a matter between you and your bank.

It may be that the solicitor is advising the supplier that they could try to recover costs from you under CPR 27.14(g) and the supplier would need to give that authorisation, which makes sense because why would you pay solicitor fees if you can recoup them from the other side?

I’ll have a go at rewording it, and post here what I come up with. The only reason I’d mentioned the bit about the bank was because the solicitor is using the below as his justification for recommending a claim for costs.

“However a Defence based on the alleged premise that the debt has been paid when in fact it has not, especially given the fact that my client chased you for payment of the debt prior to litigating on it, to me would indicate unreasonable conduct. You had ample to time to contact you bank prior to the Claim being issued to ascertain whether the payment had actually been made rather than delaying or failing to do so. In fact you had ample time to pay the debt when you received the Claim Form which you did not”

**R0b** · 31st May 2020, 08:34:AM

Yeah I did read that but that doesn't mean you have to respond with comments where you are with your bank. The solicitor absolutely knows that the burden of proof rests with the claimant so they shouldn't be trying to pass the buck to you. And your response to that paragraph is what I gave as an example that it's up to the claimant to prove its case, not you.

It's really up to you if you include it or not as it is your dispute and only my opinion.

What costs can a claimant expect?