Reallocating claims to allow costs recovery: 4 key issues

Reallocating claims to allow costs recovery: 4 key issues

Practitioners are reminded that claims can be reallocated to multitrack to allow costs recovery. We consider the various issues that arose in yesterday's Court of Appeal decision (26 February) in Conlon v Royal Sun Alliance [2015] EWCA Civ 92.

Basis for application

In the small claims court no inter partes costs orders will be made unless a party has acted unreasonably.  The claimant was appealing a judgment which found against her and she made an application for reallocation to a different track with such reallocation to be backdated so as to enable the court to order costs recovery if successful on her appeal.

Power of the court

The Court of Appeal noted that under CPR 46.13 the court has the power to reallocate as well as to backdate the reallocation so allowing recovery of costs from the backdated date. However, it held that parties are entitled to rely on the costs provisions in small claims proceedings and this would play a part in the strategy adopted during the proceedings. It would therefore require the court to be satisfied that there were good reasons for ordering a backdated reallocation and timing of the application would be a key consideration.

Key issues to consider

No costs recovery

Following the Court of Appeal decision inAkhtar ([2014] EWCA Civ 943 ) the inability to recover costs in small claims applies throughout the entire appeal process including second appeals.

Timing is a clear consideration

In this case leaving the application until four months after filing the notice of appeal was considered to be far too late. No guidance was provided in the short judgment as to what issues the court may consider in determining whether the application was too late. If dealing with a small claims matter which is likely to involve substantial costs, such costs would generally either be due to:

  • The complexity of the case in which case it may well be more appropriate for it to be transferred to a different track; or
  • one of the parties is being unreasonable in which case the court would have power to order payment of costs
The conduct of the parties

The defendant had, for commercial reasons, determined it would not contest the appeal; it agreed to the judgment in its favour being set aside and judgment being entered for the claimant. The Court of Appeal found nothing to criticise in the approach taken by the defendant.

Financial means of the parties

Whether the reallocation is being sought against a party with sufficient financial means, in this case the defendant was a substantial business, appears to carry no weight. The general principle applies that any party should be entitled to run its case in the small claims courts on the basis that there will be no costs recovery.

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About the author:

Janna is a dispute resolution lawyer. She deals primarily with cross border issues and is active in the work being undertaken in relation to the implications of Brexit for Dispute Resolution lawyers. Janna also heads up a LexisNexis costs team bringing together expertise from across the company to deal with the costs issues facing the profession.