Can you recover costs in a small claims dispute?

The basic position is that for claims which have been allocated to the Small Claims Track, usually with a monetary value of less than £10,000, the Court will not order a party to pay fees or expenses to the other party, subject to certain exceptions.

One of those exceptions is if the Court thinks a party has behaved unreasonably.

The question of what constitutes unreasonable behaviour was considered recently in the case of Dammermann v Lanyon Bowdler Solicitors (2017). In short, the Court considers whether rejection of a reasonable offer by one of the parties during the course of proceedings could amount to unreasonable behaviour. Usually, a party that rejects a reasonable offer can expect to be penalised by the Court and find itself subject to an adverse Costs Order. However, in the context of this case, the rejection of what was perhaps considered to be a reasonable offer was not automatically considered to be evidence of unreasonable conduct as the Court took into account a number of other material factors to the case.

The question therefore is whether this case sets a precedent that the rejection of a reasonable offer on its own will ever justify a finding of unreasonableness. This should not be considered to be the “golden rule” and each case is likely to be determined on its own facts.

One must never ignore the general principle that the Small Claims Court procedure is designed so as not to deter individuals from pursuing claims without legal representation or for fear of receiving an adverse Costs Order.

There is clearly a difference in claims which may be considered ‘optimistic’ to claims where litigation is pursued unreasonably. On the other hand however, this does not mean that you should be put off from seeking costs if your opponent’s conduct is such that it is clearly inappropriate.

Depending upon which side of the table you sit, the threat of a costs order for unreasonable conduct can still be a useful tool in your negotiating armoury.

For further advice on small claims disputes or recovering costs, please do not hesitate to contact our Dispute Resolution team on 0800 042 0700, or email enquiries@lindermyers.co.uk