The Small Claims Track - Who Pays?

Since pursuing a matter to the Small Claims Track may involve a substantial sum of money, clients facing the prospect of litigating 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 victor have been restricted by the Civil Procedure Rules to minimise financial risk to parties. Generally therefore, the court will allow the successful party to recover limited costs such as court fees and witness expenses.

Under Part 27 of the Civil Procedure Rules that govern civil disputes, the court will rarely make an order for the losing party to pay sums in respect of the winning party’s ‘costs, fees and expenses’, e.g. legal fees.

There are exceptions to the 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).

To assist the judge in calculating awards of costs, Part 45 of the Civil Procedure Rules sets out a number of tables detailing what costs can be recovered by a successful party litigating on the Small Claims Track. These tables can be found on the justice.gov.uk website and vary according to the status, judgment and enforcement of the claim.

Costs orders for a losing party to pay the winning party’s legal costs are therefore very unusual. On the Small Claims Track, parties are expected to bear their own costs, even if they pursue a successful claim.

As a caveat to the general rules on costs, it must be stated 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.

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 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.

At Fosters, our Litigation Team discusses costs with client from the very first appointment; ensuring clients are provided with an estimate of costs for their matter. A full and frank discussion about costs with our solicitors will enable you to decide best how to approach litigation and confidently resolve your dispute.