Ordinarily, the small claims track is seldom reported on from a costs perspective as, whilst it is not impossible to recover costs inter partes (CPR 27 provides for disbursements to be recovered), it is somewhat unusual to recover costs litigating the claim, unless evidence can be provided to show the opponent has ‘behaved unreasonably’ (CPR 27.14 (2) (g)). As such, what follows should be a warning for all litigators and particularly those who make regular use of the small claims track.
Reed -v- Boswell (06/12/2022)
Now, the above case was reported on recently by Gordon Exall and follows a case of Ashley Blood-Halvorsen, for whom should get full credit.
Facts / Circumstances of the Claim
By way of background, the Claimant was a landlord of a flat and allegedly obtained a positive reference about a tenant from the Defendant. Hitherto, the tenant took up tenancy with the Claimant and was a nightmare tenant, not to dissimilar to one you would probably see on a television programme like Nightmare Tenants, Slum Landlords. Given such, the Claimant issued proceedings for £8,833.92 for rent arrears against the Defendant seeking damages on the basis the tenancy would not have been given, save, only for the positive reference provided by the Defendant. Thereafter, the matter proceeded and reached a final hearing before District Judge Lumb.
Now, DJ Lumb was extremely critical concerning the Claimant’s case and specifically cited the ‘scant particulars’ that did ‘not even specify the cause of action giving rise to claim as a matter of law’. It was also the Judge’s view that the case should have been struck out at the earlier allocation hearing due to these deficiencies, failing to plead a cause of action. Nevertheless, the smalls claim hearing proceeded and whilst evidence was voluminous (and not always admissible), the Judge confirmed as follows (as taken from the Judgment):-
- The court has to decide the issues in the case on the basis of the evidence.The expert evidence quite simply does not support the Claimant’s case. For that reason, I find that the Defendant’s account is more likely than not to be the correct one. The Claimant’s case is inherently unlikely in the absence of clear corroborative evidence to support her assertions. There is no such corroborative evidence.
- The Claimant as a solicitor with considerable experience in the criminal law will fully appreciate the importance of the best evidence being produced to the court and for the desirability for there to be corroborating evidence. The best evidence of a reference would have been to have requested a written reference as this makes the contents of any representation so much easier to prove. I am sure that in hindsight she wishes that she had obtained a written reference which would have been the prudent thing for any prospective landlord to do. In addition to this, a prudent landlord would have sought an employer’s reference and required proof of income. The Claimant did none of these things. Her explanation that she thought the Defendant was a local businessman of good standing when she did not know him personally, is, I am afraid, a rather weak explanation as to why she failed to make proper and comprehensive checks.
In conclusion, the Judge found that the Claimant had failed to establish that a reference had been given and further, failed to establish a loss, as such, the issue that followed was the question of costs, whereas, the ordinary position on small claims is contained within CPR 27.14:-
(1) This rule applies to any case which has been allocated to the small claims track.
(2) The court may not order a party to pay a sum to another party in respect of that other party’s costs, fees and expenses, including those relating to an appeal, except –
(a) the fixed costs attributable to issuing the claim which –
(i) are payable under Part 45; or
(ii) would be payable under Part 45 if that Part applied to the claim;
(b) in proceedings which included a claim for an injunction or an order for specific performance a sum not exceeding the amount specified in Practice Direction 27A for legal advice and assistance relating to that claim;
(c) any court fees paid by that other party;
(d) expenses which a party or witness has reasonably incurred in travelling to and from a hearing or in staying away from home for the purposes of attending a hearing;
(e) a sum not exceeding the amount specified in Practice Direction 27A for any loss of earnings or loss of leave by a party or witness due to attending a hearing or to staying away from home for the purposes of attending a hearing;
(f) a sum not exceeding the amount specified in Practice Direction 27A for an expert’s fees;
(g) such further costs as the court may assess by the summary procedure and order to be paid by a party who has behaved unreasonably;
(h) the Stage 1 and, where relevant, the Stage 2 fixed costs in rule 45.18 where –
(3) A party’s rejection of an offer in settlement will not of itself constitute unreasonable behaviour under paragraph (2)(g) but the court may take it into consideration when it is applying the unreasonableness test.
As mentioned in the introduction, the successful party is not entitled to the costs they have incurred litigating the matter, save, if unreasonable behaviour can be evidenced – a very high threshold. However, this was an unusual claim, which, prior to the final hearing had already been vacated on one occasion due to lack of judicial availability, consisted of three application hearings for expert evidence and numerous witnesses were in attendance (who were cross-examined). In addition to the fact no cause of action was pleaded and it was anticipated the Claimant was relying on the tort of deceit, this meant the case was more akin to a fast track, even a multi-track matter, rather than a run-of-the-mill small claims case and hence why DJ Lumb decided to reserve his Judgment and deliver a written Judgment.
Within DJ Lumb’s written Judgment, he dismissed the Claimant’s claim (although not going as far to say the Claimant deliberately misled the Court) and further, he wanted to provide a ‘cautionary tale’ for litigants. He specifically advised, there was a perception that the Small Claims Court is an easy way to seek redress and litigants launch into court proceedings without seeking specialist guidance or a proper understanding of the law. This approach however was to be discouraged and in a case such as this, with the issues that had arisen, the Judge held the Claimant had acted unreasonably for the purposes of CPR 27.14 (2) (g). Specifically, the Judge was particularly concerned regarding: (1) the Claimant’s refusal to take remedial action in connection with her statement of case (despite warnings); (2) allegations the Claimant had made that there was collusion between the Solicitors and the expert’ (3) The Claimant’s misunderstanding of a witness statement by a Solicitor; and (4) threats of reporting the Solicitors to the SRA.
All in all, the Defendant’s costs were permitted and whilst the bill presented was reduced from £24,991.80 to £17,500.00, this was a very large reward on costs given the fact this was a small claims matter.
Now, what can be learned from the case?
What can be learned from the case is that not all small claims matters will inevitably be non-cost bearing cases and it pays, in matters whereas substantial issues are being raised to make an application under CPR 27.14 (2) (g) and one supported by a bundle of correspondence evidencing unreasonable behaviour and itemised submissions supporting such a finding (as in the case at hand). This really is a cautionary tale.