Costs in the Small Claims Court

It is generally accepted that when you bring a claim in the Small Claims Court, you cannot recover your legal costs from the other side if you win. That works both ways. A defendant may happily defend an indefensible claim and make life a misery for a poor claimant who may, for example, be owed a substantial sum of money. Equally, a claimant can persecute a defendant with a completely spurious claim.

But stroppy and obstructive parties who behave like dingbats need to be careful. A costs order can be made against a party if he is considered to have “behaved unreasonably”.

What does “behaved unreasonably” mean?

In the recent case of Dammerman v Lanyon Bowdler the facts, in brief, were that Mr Dammerman brought a claim against Lanyon Bowdler, a firm of solicitors, despite there being no contractual relationship between Mr Dammerman and the firm of solicitors. His claim was, putting it politely, barking mad.

The claim was unsuccessful. Mr Dammerman appealed. He lost his appeal. By this time, Lanyon Bowdler were truly fed up with Mr Dammerman and sought costs from him. The court agreed and awarded the firm its costs. Mr Dammerman appealed that costs decision, and his appeal was successful. The appeal court ruled that the firm was not entitled to its costs. Mr Dammerman’s claim had been hopeless but had he acted “unreasonably”? The ruling was “no, he hadn’t”.

The test is this: is the offending party’s conduct “of a reasonable explanation”? The fact that a claim or a defence may have been spurious is irrelevant. Attention needs to focus on the conduct during the claim, not the spurious nature of the claim or the defence itself.