Small Claims Costs in the Court of Appeal
The intersection of the SCT regime and the explosion of PPI claims
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Small Claims Costs: CPR 27
Civil Procedure Rule 27 and Practice Direction 27A outline the key guiding principles for Small Claims Track allocated matters in England and Wales. Matters are CPR 26.6 ‘small claims’ if the claim value is less than £10,000 (CPR 26.6(1)(a)(i))/CPR 26.6(3), the value of any personal injury is not more than £5,000/£1,000 (depending on whether it is an RTA claim or not, CPR 26.6(1)(aa)/(bb)/(cc)) or otherwise the matter is a housing dis-repair case with the cost of any repairs/and other damages being less than £1,000 (CPR CPR 26.6(1)(b)(i)/(ii)).
Notably any claim for a remedy for harassment or unlawful eviction further cannot be allocated to the Small Claims Track regardless of claim value (CPR 27.1).
CPR 27.1(1)(a)/(b) limits the legal costs recoverable on the Small Claims Track with reference to the categories of recoverable costs set out in CPR 27.14 and otherwise with reference to the CPR 45 fixed costs regime.
CPR 27.14(2) limits recoverable costs to CPR 45 fixed costs (CPR 27.14(2)(a)), the costs of specific performance/an injunction (CPR 27.14(2)(b); PD27A), Court fees, should the Claimant need to pay a fee (CPR 27.14(2)(c)).
It also allows for reasonable party/witness expenses in attending the hearing, including loss of earnings (CPR 27.14(2)(d)(e)), expert fees (CPR 27.14(2)(f); PD27A), any costs ordered to be paid for unreasonable behaviour (CPR 27.14(2)(g)) and stage I/stage II fast track fixed costs where a claim has been progressed within the same regime, but stage costs remain unpaid (CPR 27.14(2)(h)).
CPR 27.14(4) further clarifies that the costs of lay representation is also capped by virtue of these same rules.
Costs Issues in Small Claims: Smith v The Royal Bank of Scotland plc  Costs LR 677
Small claims are thus, designed to be cheap and cost effective to be both brought and defended. Problems surface in scenarios where the small claims regime has unwillingly become the battleground for a wider issue, such as PPI claims as the individual claim may be worth a nominal amount, yet the potential wider cost to a party can be considerably larger and be of greater industry significance.
It was against this background that the Court of Appeal in Smith v The Royal Bank of Scotland plc  Costs LR 677 was required to consider whether a grant of Permission to Appeal (‘PTA’) could be tied to a condition that the Appellant (RBS PLC, the bank) meet the Respondent’s (Karen Smith) cost of the appeal.
Following the Supreme Court decision in Plevin v Paragon Personal Finance Ltd  UKSC 61;  1 WLR 422, a decision which opened the floodgates for wider PPI litigation, Karen Smith brought a claim in the County Court at Bodmin for repayment of PPI premiums together with interest.
Being a relatively low value claim, albeit one with more macro scale PPI implications (para 6 Smith), the matter was allocated to the Small Claims Track. At Trial, the Claimant was awarded a totality of £1,711.29 on the basis of a finding of a section 140A Consumer Credit Act 1974 ‘unfair relationship’, this sum including a small claim costs award of £365.
After an initial failed appeal, a second PTA was sought and was granted on 09/03/2021. However, PTA grant was made subject to the condition that the Appellant bank pay the Claimant’s/Respondents reasonable costs of the appeal (para 10).
Mrs Smith’s solicitors filed a notice of application in order to fix the costs at the relevant amount (para 11) and in response the Appellant bank lodged a cross-appeal seeking to set aside the imposed costs condition on the grounds that the Court did not have the jurisdiction to set such a condition.
In considering the jurisdictional issue, the Court of Appeal considered the decisions in Canada Square Operations Ltd v Potter  EWCA Civ 339 (para 13) and Akhtar v Boland  EWCA Civ 943. The Court of Appeal considered that the condition, in effect, side-stepped the prohibition on costs orders in small claims matters and therefore was an incorrect use of general powers (para 17).
The Court expressed the primacy of CPR 27.14(2) and considered that the only ‘work around’ would be to re-allocate the case, yet such would amount to both the rewriting of history and the importation of concepts which simply do not apply to the Court of Appeal (para 18). The cost condition was therefore set aside, rendering further questions a nullity.
The decision in Smith demonstrates the protective approach that is adopted with regards to CPR 27.14(2) and the need for the Small Claims Court to maintain the certainty of workings of the low-cost small claims regime for matters allocated to the Small Claims Track. Any side-stepping of the small claims costs limitations are open to clear challenge, as are any general attempts to dilute the general structure of the small claims costs limitations.
The rationale for this conservative approach to the rules is clear in that, not only does this protect the low-cost approach of the Small Claims Track, but it also protects both Claimants and Defendants from substantial adverse costs orders which they may not have the financial resources to meet should they need to pay the other side, or otherwise would be willing to risk incurring in exercising legal rights.
How Can ARC Costs Assist?
ARC Costs can provide expert legal advice, assistance, and representation in any legal costs matter. We regularly assist in small claims costs cases, as well as in higher value claims. Our Costs Draftsmen can assist by providing costs budgets, bills of costs and costs negotiations services. Our Costs Lawyers also hold expertise in providing representation at Court hearings, such as at detailed assessment or any CCMC.
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