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Legal costs for civil litigation and Small Claims Court

June 2017
Clients often enter into civil or commercial litigation cases with the understanding that, if they win their case, their opponent will have to pay the client's legal costs. If the case is heard on the Court Fast Track or Multi Track, the client may be right; the standard position in that case will be that the 'winner' gets their reasonable legal costs paid by the 'loser'.

If however the case proceeds on the Court Small Claims Track, the position regarding the legal costs of the case is very different; and as claims of a value of up to £10,000 will normally be allocated to the Small Claims Track, it is an issue that will affect many litigants.

The standard position regarding legal costs in a Small Claims case is that the 'winning' party will only be awarded nominal fixed costs at the end of the case. If the case is complex, and/or the client has required detailed legal assistance, the legal costs charged may then end up creating a large hole in the damages that the client has been awarded at trial. At Norrie Waite & Slater we will always try to limit legal costs in a Small Claims case as much as possible, to lessen the impact of those costs on the client in the situation where the costs can't be recovered from the opponent.

Under the Civil Procedure Rules, Judges are entitled to make an additional order as to legal costs in Small Claims cases where the Judge finds that a party has behaved unreasonably in their conduct. On the face of it, that offers a chance to the 'winning' party to reclaim at least some of the legal costs they have paid out. Experience though suggests that such orders are not particularly common as many Judges place a high bar on what constitutes 'unreasonable conduct' in a Small Claim, and further, the definition of what is 'unreasonable conduct' is very difficult to define, as what one Judge thinks is unreasonable may differ from the opinion of another.

In a recent case (Dammermann v Lanyon Bowdler LLP) the Court of Appeal gave some guidance as to how to assess what is 'unreasonable conduct' by a party in a Small Claims case; essentially, the Court of Appeal found that pursuing an ultimately unsuccessful case, through undue optimism in the strength of the case, or even through a lack of judgment, does not of itself mean that a party has been unreasonable in their conduct. If there is a reasonable explanation for the way the case has been pursued, that won't lead to an additional costs order being made against that party.

For the lawyer this is helpful guidance from the Court of Appeal, though whether it is helps the 'winning' party in a Small Claim is open to question, and the same warnings still apply to clients who think they will get their legal costs paid when they have won their Small Claim; any additional costs order made at the end of a Small Claims hearing will be the exception rather than the rule.

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