Q&A: Increase in court fees for businesses

Government increases in some civil court fees are due to come into effect from March 9, 2015, and will have a big financial impact on all businesses that regularly use the court system to recover debts and resolve commercial disputes.

These ‘enhanced’ civil court fees will apply to all claims and applications issued in the County Court or High Court.

How much are court fees rising?

The sum payable to issue a claim will no longer be scaled to a maximum of £1,920 but will be calculated to 5 per cent of the sum claimed through the proceedings, to a maximum fee of £10,000.

This represents an increase, in some cases, of 622 per cent and there are fears that this will prevent or discourage some SMEs from accessing justice.

Claims at or below £10,000 will remain charged at the old rate. The table below, courtesy of the Law Society, shows the impact of this increase in court fees.

Are these fees being contested?

The Law Society, the independent body for solicitors in England and Wales, has begun judicial review proceedings on behalf of its members. The Law Society alleges that the increases are based on inaccurate or unrepresentative figures.

What’s behind these increases?

Until now, the court service has been subsidised by other government departments. However, it is now attempting to ensure its fees reflect an overall ‘full costs recovery’ rate so there is no loss of revenue. The new charges should ensure that the courts recover over and above the current costs levels, raising an estimated £12billion in extra revenue to be used to modernise the court system.

How will it affect my business?

If you regularly use the court system for debt recovery or to resolve commercial disputes, these changes will make it more expensive to access justice. Even though you can usually recover the court fee from the debtor if you win, the initial loss of these sums from your cash flow can have a negative impact on your business.

If you have credit terms with your current suppliers, you may find these terms are being squeezed as businesses attempt to ensure their bottom line is not affected by these changes. In commercial litigation, the defendant, aware of the large up-front cost faced by the claimant, may find it easier to ‘hold it to ransom’. Legal expenses, insurance premiums and excesses may also increase to reflect this extra up-front outlay.

Is there anything I can do to reduce the impact?

There is a rapidly closing window to start litigation proceedings before the changes come into force on March 9. If you issue a claim before this date, you do not have to serve it upon the defendant until the expiry of four months, and therefore do not risk adverse costs if you decide not to proceed.

Once the new fees are introduced, you may want to consider other forms of dispute resolution, such as arbitration or mediation. However, it is important to ensure you have the correct legal advice before attempting any settlement. Please contact us right away if you have any questions about how this will impact your business.

For more information on the new court fees, or any other commercial litigation matter, contact Laura Hallett Lea on 01772 258321. Laura specialises in all aspects of property law as part of Harrison Drury’s team of solicitors in Lancaster, Preston, Clitheroe, Garstang and Kendal.