On 13 February 2013, the government finally issued the detailed regulations to bring into force the reforms to the Civil Justice System brought about by the Jackson Report.
While the regulations are currently in draft it is not envisaged that there will be any changes to the substance and that these are the regulations that will come into force on 1 April 2013.
There are few surprises in the regulations. I have previously highlighted the changes to the recoverability of success fees and insurance premiums and the potential implications those changes may have on the ability of small business and SMEs to fund litigation.
However, the other main issue for commercial businesses is the increase in the small claims limit from £5,000 to £10,000, which while previously mooted, will now take effect from 1 April 2013. This will mean that except in limited circumstances, any claim, other than personal injury or housing disrepair, which has a financial value of up to £10,000 will, if defended, be allocated to the Small Claims court. Costs are generally not recoverable in the Small Claims court unless there is evidence of unreasonable or vexatious behaviour on the part of the losing party. This means that a party will end up paying its legal costs out of any damages recovered, and if defending the claim may force parties to make payments in settlement of the claim regardless of the merits purely on commercial or cost grounds.
In our experience, it is not uncommon for claims of £10,000 to have novel or unusual legal aspects to them or for expert evidence to be required to prove a case, which means that a party’s legal costs to trial is usually not less than the damages sought. The new limit may therefore make these cases uneconomic to run, unless clients have the time and resources to pursue them themselves.
The messages therefore is clear, if you or your clients have potential claims, in particular debt claims, worth between £5,000-£10,000 that have not yet been issued, make sure that they are issued before 1 April 2013 to ensure that, if they are defended, you will have the prospect of recovering your legal costs from the other party.
If you would like to discuss this, or any other dispute resolution matter, please contact Colin Fenny on 01772 258321, or at Colin.Fenny@harrison-drury.com