21/01/2016

As a general rule all claims of a value less than £10,000 are allocated to the Small Claims Track. The Small Claims Track has its own costs rules which prevent recovery of legal costs save for in very exceptional circumstances.

These costs rules have a considerable impact upon many businesses seeking to recover debts or enforcing contractual provisions through the courts. Sometimes these claims, which are for significant sums, are relatively complicated and onerous on a business’ resources. For these reasons business’ often look for professional legal support and advice. The issue of irrecoverable legal costs then rears its ugly head.

Businesses are then faced with the decision whether to instruct solicitors and incur the irrecoverable cost, expend precious internal resource dealing with the litigation itself, do a quick deal at a discount or write off the debt. None of these options are particularly attractive.

However, there are simple steps which can be taken to mitigate this problem and, in principle, make those Small Claims Track legal costs recoverable. The key is to agree the entitlement to costs recovery before problems arise. With properly drafted clauses incorporated into your standard terms of business, tenancy agreements, leases etc. costs can be made, in principle, recoverable even on the Small Claims Track. This has been confirmed by the Court of Appeal in the case of Chaplair Limited v Kumari.

Whilst costs will always be assessed as to reasonableness and subject always to the court’s discretion it seems that contractual provisions entitling a party to its costs of recovery of a debt/of a dispute will now be enforced and followed by the courts. Previously the court’s treatment of such contractual provisions has, in our experience been inconsistent and unpredictable.

The importance of ensuring that you have a contractual entitlement/agreement to recover costs will only become more important in the future with it becoming increasingly more likely the Small Claims Track will soon be expanded to deal with claims of £15,000 or more.

We can review your contractual documents/terms of business and incorporate carefully drafted clauses which will optimise the prospects of recovering your legal costs in those problematic Small Claims Track matters.

For further advice on how to make Small Claims Track legal costs recoverable please call Richard Anderson on 01782 205000 or email richard.anderson@beswicks.com