Generally, only limited costs are recoverable in claims allocated to the small claims track, being claims such as debt claims below £5,000. If there is a contractual provision relating to such costs though, they may still be recoverable.
In Shaw v Nine Regions Ltd, the Recorder hearing a claim based upon a loan agreement regulated by the Consumer Credit Act 1974 for £3,000 refused to allow the successful defendant its legal costs. This was despite there being a contractual provision in the loan agreement between the parties that the defendant could claim its legal costs incurred in enforcing the agreement or taking/defending court action. The defendant appealed. The claimant argued that the small claim rule should apply which provides for recovery of only very limited costs. Alternatively, he argued that the contractual term as to costs was void and unenforceable under the Unfair Terms in Consumer Contract Regulations 1999 (the Regulations).
The judge held that although regulation 5 of the Regulations did appear to apply to the term in question as it was not individually negotiated, the term was entirely reasonable and caused no imbalance in the parties' rights and obligations to the detriment of the consumer. It did not exclude or hinder the claimant's right to take legal action or exercise any other legal remedy. The judge awarded the defendant its costs of the appeal and below.
Things to consider
Where a case is proceeding in the small claims track and is based upon a contract, consideration should be given as to whether there is a term in the contract that might provide for costs to be recovered by the successful party. If it doesn't the usual costs provisions will apply.