When huge legal costs ARE recoverable in the Small Claims Court

There is a dangerous misleading statement on this website, referring to the Small Claims Court: "You do pay a fee upfront. But if you win, it won't cost you anything as you'll get the fees back. If you lose, you don't – so be realistic with your initial claim."

A long leaseholder friend of mine in a residential block has been sued by his freeholder in the Small Claims Court. The claim was for about £5000. He lost and so had to pay the £5000 - fair enough.

But then the judge ordered him to pay the supposed £18000 legal costs of the other party. She said this was because an "indemnity clause" or something in his lease overrode one of the fundamental principles of the Small Claims Court!

Either this is actually nonsense or it is a bloody outrage if indemnity clauses in Leases can trump the principles of the small claims track. Leasehold is indeed an antiquated inheritance from the bloody landed gentry in this silly country - the French had the right idea in the 18th century about that lot.

I would ask someone suitably qualified from MSE to comment on this post.

Thanks.

Comments

  • eskbanker
    eskbanker Posts: 29,971
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    edited 30 January at 3:24PM
    1w2e3r4t said:
    There is a dangerous misleading statement on this website, referring to the Small Claims Court: "You do pay a fee upfront. But if you win, it won't cost you anything as you'll get the fees back. If you lose, you don't – so be realistic with your initial claim."
    That statement doesn't say anything about awarding of legal costs, it's just referring to the court fee.

    It also says:
    if you lose, any costs awarded against you are usually limited.
    and

    You shouldn't have the other party's lawyer's fees awarded against you – but you could find yourself paying certain expenses of theirs if you lose

    but inevitably a general MSE piece won't cover every single aspect of all types of case, so something as specialist and niche as defending a case entailing indemnity clauses will be outside the normal MSE scenario of consumers taking action against companies.
  • DullGreyGuy
    DullGreyGuy Posts: 9,202
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    CPR 44.5 allows for costs to be allocated where there is a contractual basis for it. 

    Thinking about it logically though... why should the other leaseholders have to pay for the enforcement against your friend who the court agreed owed the money in the first place? Any cost incurred by the freeholder is ultimately paid by the leaseholders either collectively for shared costs or individually if incurred by only one. 
  • BoGoF
    BoGoF Posts: 6,802
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    There's nothing to comment on. As above, you have misread what the article actually says.
  • born_again
    born_again Posts: 13,709
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    Is this a case of you advising your friend on the words posted & they are now not happy with your advice?


    I suggest you read the disclaimer at the bottom of every page..


     We're a journalistic website, but can't guarantee to be perfect, so do note you use the information at your own risk and we can't accept liability if things go wrong.

    Life in the slow lane
  • Grumpy_chap
    Grumpy_chap Posts: 14,458
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    This is not a case of the indemnity clause trumping the principles of the small claims track.
    Small claims is a process by which the individual (or organisation) can enforce their rights.  In this case it is the rights under the lease (which includes the indemnity clause).
    The small claims track is faster and cheaper than alternative legal routes, but still only a process to test the same rights that the lease confers.  Remember that the lease is only a form of contract.

    Judges can, and will, look unfavourably where a party has incurred legal costs that are disproportionate in defending the claim.  At first sight, £18k legal fees to defend a £5k claim does look disproportionate.  The judge must, therefore, have assessed that these fees were reasonable given the details and complexity of the case.  Complexity does not have to be linked to value.

    A judge may also have considered the higher legal fees if it was considered that the claim was vexatious or premature (did not seek simpler remedies in the first instance).
    What is the nature of the issue?
    What steps had the friend pursued to resolve the issue prior to initiating the small claims case?

    The judge may also have looked at equitable resolutions and the fairness of the legal fees being discharged across all fee holders in the assessment of reasonableness.

    1w2e3r4t said:
    There is a dangerous misleading statement on this website, referring to the Small Claims Court: "You do pay a fee upfront. But if you win, it won't cost you anything as you'll get the fees back. If you lose, you don't – so be realistic with your initial claim."

    A long leaseholder friend of mine in a residential block has been sued by his freeholder in the Small Claims Court. The claim was for about £5000. He lost and so had to pay the £5000 - fair enough.

    But then the judge ordered him to pay the supposed £18000 legal costs of the other party. She said this was because an "indemnity clause" or something in his lease overrode one of the fundamental principles of the Small Claims Court!

    Either this is actually nonsense or it is a bloody outrage if indemnity clauses in Leases can trump the principles of the small claims track. Leasehold is indeed an antiquated inheritance from the bloody landed gentry in this silly country - the French had the right idea in the 18th century about that lot.

    I would ask someone suitably qualified from MSE to comment on this post.

    Thanks.

  • sheramber
    sheramber Posts: 18,657
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    You do pay a fee upfront. But if you win, it won't cost you anything as you'll get the fees back. If you lose, you don't – so be realistic with your initial claim."

    Does that not refer to the person/body doing the suing- in this case the freeholder?

    It is not referring to the defendant.- your friend
  • eskbanker
    eskbanker Posts: 29,971
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    At first sight, £18k legal fees to defend a £5k claim does look disproportionate.
    The £18K here related to costs incurred by the claimant, not the defendant.

    What steps had the friend pursued to resolve the issue prior to initiating the small claims case?
    The friend was the defendant.
  • Okell
    Okell Posts: 620
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    1w2e3r4t said:

    ... A long leaseholder friend of mine in a residential block has been sued by his freeholder in the Small Claims Court. The claim was for about £5000. He lost and so had to pay the £5000 - fair enough.

    But then the judge ordered him to pay the supposed £18000 legal costs of the other party. She said this was because an "indemnity clause" or something in his lease overrode one of the fundamental principles of the Small Claims Court!...
    I know the claim was only for "about £5000" but is your friend certain** that this was under the "small claims procedure"?

    If I were your friend and had been ordered to pay £18k for the other side's legal costs in a small claims case I'd be seeking my own legal advice and not relying on friends posting on here.  Some firms of solicitors will offer 30 mins worth of legal advice for free.

    At the very least he ought to contact CAB for advice.

    ** I can see why a judge might consider that an indemnity clasue would override other considerations, but then I'd have thought the nature of the case would have made it unsuitable for small claims in the first place(?).  One of the purposes of small claims was to make access to law cheaper and claimants weren't intended to be legally represented or advised - or if they were couldn't recover those costs.
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