Where a claim is for a value of £10,000 or less it is typically allocated by the Court to what is known as the ‘small claims track’. Within that track the ability of the successful party to recover its costs from the unsuccessful party is limited to court fees and witness expenses unless there has been a finding of unreasonable behaviour by the other party. This means it is usually uneconomical for parties to obtain legal representation in such cases.
However, the recent case of Chaplair Limited v Kumari highlights a way of recovering legal costs in circumstances where that is expressly provided for in a contract between the parties. Chaplair, the Claimant landlord, brought court proceedings against its tenant, Mrs Kumari, in order to recover unpaid rent and service charges. Although the proceedings were allocated to the small claims track, the Claimant argued that it was entitled to contractual costs under the lease pursuant to a provision that the tenant was to pay the landlord’s costs of various incurred expenses including legal fees.
At the first instance, the District Judge held that the small claims costs rules applied and he limited the amount of the Claimant’s recoverable costs to £250. On appeal to the County Court, the decision was reversed and the Circuit Judge allowed the Claimant to recover its costs on the basis that the costs rules did not apply because the costs were not payable under the Civil Procedure Rules but instead under the terms of the lease. Mrs Kumari appealed to the Court of Appeal.
The Court of Appeal upheld the Circuit Judge’s decision and dismissed the appeal. It found that the Court retains discretion as to whether to award contractual costs and that such costs were recoverable subject to the Court’s equitable power to disallow unreasonable expenses.
This case demonstrates that if contracts are properly drafted and claims are properly pleaded then there is a reasonable chance that costs may be recoverable even if the claim is a “small” claim. A landlord with an appropriately worded lease now stands a much better chance of recovering contractual costs in the small claims track.
This case will provide welcome assistance to parties who have so far been limited in recovering contractual costs in the small claims track, particularly since the limit on that track has been increased to £10,000.
If you are involved in any dispute, contractual or otherwise, or if you require assistance with the drafting of a lease or any contractual documentation then please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.