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Defendants are always thinking up new ways of attempting to argue out of paying reasonable costs at the conclusion of litigation.

The latest attack is upon any and all claims for costs where damages were finally agreed below the small claims track threshold. So, how do Claimants resist this latest challenge?

It has long been established that a Court will limit costs to the small claims track (or any other appropriate fixed costs regime) if a claim has been purposefully overvalued, pleaded on the basis of obviously incorrect information or where a Claimant has attempted to mislead (see Afzal v Ford Motor Co [1994] CA).

However, Defendants are using the recent case of Stuart Lisbie v SKS Scaffolding Ltd [2011] EWHC 90203 (costs) to extend this limitation to claims made in good faith, but which failed for whatever reason, to produce damages above the fixed costs threshold.

In this unlitigated RTA, costs were limited to the small claims track after contributory negligence reduced damages to under £1,000.00. The Court concluded that RTA fixed costs only apply if the amount of damages actually paid was above the small claim limit and that contributory negligence must be deducted before these damages are determined.

This case can be especially problematic when combined with O’Beirne v Hudson [2010] EWCA Civ 52, where the Court limited costs to those that would have been recovered on a fixed regime despite the Defendant agreeing to meet “reasonable costs on the Standard Basis” at the end of the main action. This was on the basis that “reasonable costs” cannot exceed those that would have been recovered had the correct regime been applied.

However, Nova Costs recommends that Claimants resist such challenges where damages were reasonably valued above the fixed costs threshold during the litigation and costs have been agreed on the Standard Basis.
The case of Lisbie was specifically decided by reference to the RTA fixed costs regime and so it should not be possible to argue for any wider application.

In any event, the decision of Master Gordon-Saker sitting as a Deputy District Judge appears to be at variance with the Court of Appeal judgement in Voice and Script International Ltd v Ashraf Alghfar [2003] EWCA Civ 736, which confirmed that costs would only be limited where the claim could not possibly have ever had a value above the applicable threshold. This decision was not considered in the case of Lisbie, which only concentrated upon the final damages agreed.

In order to strengthen the position, Claimants should be attempting to conclude damages settlements below £1,000.00 on the strict understanding that costs will be paid under the RTA fixed costs regime / Standard Basis assessment. If this is not possible then please contact Nova Costs, who will be happy to take these arguments forward.

If you would like to speak to one of our costs experts please call us today on 0161 276 2000 or email us at info@novacosts.com