Small Claims Track. Are you really safe from costs?

[pt2537]

Many people seem to have the view that if their claim is allocated to the Small Claims Track (SCT) that they will be safe from costs being ordered against them if they lose. Im sorry to say that this couldn’t be further from the truth. I’ve heard clients say “its ok its a SCT case so i don’t need a lawyer as im not at risk of costs, am i?” the answer they get often surprises them!!.


Firstly, while the CPR part 27 does limit the costs that a Court can order, CPR rule 27.14(2)(g) allows the Court to make an order as to costs for circumstances where a party is deemed to have been unreasonable in their conduct. So if the Court finds against you and finds you have acted unreasonably, then the Court can aware costs of the litigation too.



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https://consumercreditlitigationandd...fe-from-costs/

[R0b]

Re: Small Claims Track. Are you really safe from costs?

@pt2537

Good read, worth noting that just because a recovery costs clause is in there, does not mean it will always be applied - its at the discretion of the judge, and in the Nine Regions case, even though the judge did not make a comment on this, I think he was swayed by the complexity of the case as well as applications to transfer to the fast track also.

Prior to Nine Regions there is of course the Church Commissioners v Ibrahim case back in 1997 where the court held that where there is a recovery clause, this overrules the small claims limit on costs. However, unreported county court decision Graham v Sand Martin Heights 2011 the judge concluded that Nine Regions was wrongly decided. couple of good points from the judge:

Faced with awyers and the risks of heavy costs ... the defendant might want to seek representation too ... even if successful, would be debarred by Rule 27.14 and would have no countervailing contractual provision

It follows that if contractual provisions are to be heard in small claims ... there will be an inherent and gross inequality of arms in favour of the claimant which appears to raise serious Human Rights concerns under Article 6

s.51(1) Senior Courts Act 1981 ... Subject to provisions of this or any other enactment and the rules of the court, the costs of and incidental proceedings shall be discretion of the court

There is many good points the judge makes in the transcript and well worth a read and arguably the last quote is an important one.

Note that the Court of Appeal case Chaplair v Kumari 2015 considered the effect of contractual recovery clauses and stated that the court should exercise its discretion. The CoA did not consider Nine Regions nor Graham v Sand Martin Heights.

Also worth noting that Graham v Sand Martin Heights had not been appealed or overruled.

Until it is has been clearly ruled upon, it seems that it is the courts discretion and is not bound by the contractual provisions.

My own personal opinion to make things more clearer would be to include the recovery clause and specify an allocation of track. Although still the courts discretion on allocation it could give an argument when the case is to be allocated and I don't think we have seen the courts allow such clauses or even considered them but could prove useful

[pt2537]

Re: Small Claims Track. Are you really safe from costs?

Agree Rob, but crucially when a litigant in person is before the Court its unlikely they will be versed in those points and arguments. Obviously when the Judge exercises his or her discretion on costs, its very difficult to overturn on appeal. Thats the big problem a litigant in person faces.

[R0b]

Re: Small Claims Track. Are you really safe from costs?

Yep, I understand and agree with you, just thought I'd expand a little on your blog post. Unreported cases such as Graham v Sand Martin may prove useful in deflecting an award of costs under contractual provisions although its a shame cases such as these are not always heavily reported on.

[pt2537]

Re: Small Claims Track. Are you really safe from costs?

Yep, I understand and agree with you, just thought I'd expand a little on your blog post. Unreported cases such as Graham v Sand Martin may prove useful in deflecting an award of costs under contractual provisions although its a shame cases such as these are not always heavily reported on.

Absolutely!!