(Not So) Small Claims Costs

Where costs are being claimed under contract in a matter allocated to the small claims track, the court is free to assess these notwithstanding the fixed costs imposed by CPR 27.14.

When a client whose case is on the small claims track, asks whether, if successful, they are able to recover their legal costs from the otherside, the answer is usually a rather disappointing, ‘no, not all of your costs’.

There then follows an explanation of CPR 27.14(2)(a) and (c) which set out that: ‘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 – (a) the fixed costs attributable to issuing the claim... (b) any court fees paid by that other party…’ As a result of CPR 27.14, District Judges often prevent recovery of costs beyond fixed costs and court fees and as a result, potential Claimants, particularly those with low value claims, may be put off bringing a claim where the costs of doing so exceed the sum being sought.

This is all too unsatisfactory where the potential Claimant has a clear cut case that ought to be pursued and poses a difficulty for Claimants who wish to rely on a contractual right to recover their costs.

Contrary to CPR 27.14, CPR 44.5 provides that, ‘where the court makes an assessment of costs which are payable under the terms of a contract, the costs are presumed to be costs which are reasonably incurred and reasonable in amount’ and pursuant to Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171, where there is a contractual right to costs, discretion should usually be exercised to reflect the contractual right.

The Court of Appeal’s recent decision in Chaplair Limited v Kumari [2015] WCA Civ 798 has rectified this anomaly, determining that a Claimant who has a contractual right to costs is not constrained by the fixed costs in CPR 27.14 as CPR 27.14 has to be read as subject to CPR 44.5 (Patten LJ at para 44) and there is nothing in the rule making powers in respect of the CPR which enable the rules to exclude or override the contractual entitlement (Patten LJ at para 45).

Landlords in particular will benefit from this decision as agreements with tenants will invariably include a clause for the recovery of the Landlord’s costs of bringing a claim for rent arrears, but of course anyone with a contractual right to costs will be able to rely on such clauses notwithstanding CPR 27.14.

The decision in Chaplair is also interesting as the Court of Appeal held that the decision of the LVT not to allow the Landlord’s costs as part of the service charges (pursuant to Section 20C Landlord and Tenant Act 1985) did not prevent a Landlord applying to the court for an award for those costs under the terms of the lease.

Whilst enforcement of money claims is another matter altogether and contractual costs remain subject to the court’s power to disallow costs it considers unreasonable, at least clients can now be advised that where costs are payable under a contract, these can, in theory, be recovered from the losing party.

Unfortunately for those clients who are unable to rely on a contractual right to costs, CPR 27.14 still prevails.

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