Unreasonable conduct and costs in court cases

Most people who bring a court claim will be aware that if they lose, they may have to pay the costs of the other side as well as their own. It is often the risk of paying these costs which will deter someone from brining a court claim.

It must be remembered, however, that the winning party will not necessarily recover their costs from the losing party. The behaviour of the winning party can have an impact.  A recent Court of Appeal case considered the issue of unreasonable behaviour when making a costs order. The case is particularly interesting because it provides some guidance on orders for costs in the small claims court.

Cases are usually allocated to the small claims track in the County Court if they are worth less than £10,000. If it is a personal injury claim or a tenant claim the cut off figure is £1,000. The most common types of claim in the small claims track are:

  • Compensation for faulty services (e.g. builders, garages)
  • Compensation for faulty goods
  • Landlord and tenant disputes
  • Wages owed to employees

In some cases, claims worth more than £10,000 will be allocated to the small claims track.

The significance of this therefore is that a large number of claims will be dealt with in this way and claimants are encouraged to bring such claims if they are valid. Therefore, comment by the Court of Appeal on the behaviour of litigants and the impact on costs is important.

The facts of the case in hand were complex and involved default on a mortgage. The bank appointed a receiver to sell the property in question to recover the mortgage arrears. The legal fees that the bank incurred in so doing were added to the borrower's overall debt. The borrower brought a small claims track case to challenge these fees.

The borrower's case was dismissed but there had been a suggestion that because the point that he had pursued was a somewhat obscure legal issue, that this may have amounted to unreasonable behaviour from a costs point of view.

The Court of Appeal took the view that each case would depend on its own facts but that the borrower had not been unreasonable in this case in pursuing what they described as a 'somewhat intricate' claim. 

The Court indicated that: 'It would be unfortunate if litigants were too easily deterred from using the small claims track by the risk of being held to have behaved unreasonably and thus rendering themselves liable for costs.'

Any potential court proceedings carry a risk of a high bill especially if a party loses. To discuss this or any other litigation related matter, contact us.

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