A small claim is a case that has been allocated to the Small Claims Track in the County Court. The Small Claims Track is usually allocated to claims worth up to £10,000. 

Pursuing a matter to the Small Claims Court may involve a substantial sum of money, clients who are in the Small Claims Track frequently ask where the burden of costs will fall if they are successful i.e. who pays?

In the Small Claims Track, the costs that a losing party will pay to the “winner” have been restricted by the Civil Procedure Rules to minimise financial risk to parties. Generally therefore, the court will only allow the successful party to recover limited costs such as court fees, interest and witness expenses.

Under Part 27 of the Civil Procedure Rules the court will rarely make an order for a losing party to pay sums in respect of the winning party’s ‘costs, fees and expenses’, e.g. legal fees. There are exceptions to this general rule however which allow the court discretion to make an award for:

• The fixed costs attributable to issuing the claim;
• Court fees paid by the issuing party;
• Travel and accommodation expenses which a witness reasonably incurs in attending a hearing;
• Fees incurred in the instruction of an expert to attend the hearing (limited to £200).

Costs orders for a losing party to pay the winning party’s legal costs are therefore very unusual. You would have to prove unreasonable action by the other side. In Small Claims cases parties are expected to bear their own costs, even if they pursue a successful claim.

The caveat is that if a party brings an unreasonable small claim that obviously fails, or defends a claim by acting unreasonably and subsequently loses, the court has discretion to make a punitive order for that party to pay the other side’s costs.

Judges have discretion and I have seen a claim for £10,000 fail but we have won the case but only been awarded just over £1,000 and in that case the judge would not allow the client to recover the trial fee she paid for a £10,000 claim and awarded her a lesser trial fee figure.

I have also seen clients fail to pay a trial fee and they then have to seek permission to pay the trial fee as the case will have been dismissed if the trial fee is not paid. That means a hearing to argue that and even if you win that argument the other side will seek costs of arguing that point in court and such costs are often over £1,500.  Which may negate the whole point of pursuing a small claim. 

In order to further restrict litigation, the courts actively encourage an out of court settlement between the parties. If parties do not adopt a constructive, cooperative approach to Alternative Dispute Resolution (such as mediation) or settlement, the court may then case to enforce penalties. Bear in mind however, costs are unlikely to be recovered in the event that the legal matter is settled before court proceedings have been issued as most settlements will not agree to legal costs being paid. 

We can discuss costs with clients from the start; ensuring they are provided with an estimate of costs for their matter. A full and frank discussion about costs will enable you to decide best how to approach litigation to resolve your dispute.