In court proceedings the normal rule is that the successful party can recover its legal costs, subject to assessment by the Court. However, where a claim is worth £5,000 or less it will normally be allocated to the small claims track where the successful party is typically limited to minimal fixed costs. The result of this is that the successful party often has to bear most of its own legal costs. This can deter parties from taking disputes worth less than £5,000 to Court. The legal costs of doing so would often be disproportionate to the value of the claim.

However, a recent High Court decision has indicated that a successful party can recover its legal costs in the small claims court where there is a contract dispute and the contract provides for the recovery of legal costs. In that case the defendant sought to rely on a term within a loan agreement that permitted him to recover ‘reasonable expenses and any legal costs’ incurred in taking action to enforce the agreement. The claimant resisted the defendant’s application for costs and argued that the defendant should be limited to fixed costs because the claim had been allocated to the small claims track. The judge disagreed and awarded the defendant his legal costs.

Following this ruling, businesses may wish to consider including a provision in their contracts to provide for the recovery of any legal costs incurred in enforcing those contracts at Court.

If you require any further advice or assistance please contact Rachel Brown or a member of the Litigation team at Wortley Byers on 01277 268365 or rbrown@wortleybyers.co.uk.

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