Can contractual costs usually recoverable under CPR 44.5 still be recovered when a case has been allocated to the small claims track (‘SCT’)?
The Claimant landlord brought county court proceedings to recover unpaid rent and service charges from the Defendant. The proceedings were allocated to the SCT before transferal to the Leasehold Valuation Tribunal (‘LVT’). The landlord was successful overall in the LVT but no order as to costs was made. The matter was referred back to the county court on the issue of costs.
The Claimant claimed he was entitled to contractual costs under the lease under a provision that the tenant was to pay the landlord’s costs of various incurred expenses, including “all costs charges and expenses (including legal costs and fees payable to a surveyor) which may be incurred by a landlord in contemplation of proceedings under sections 146 and 147 of the Law of Property Act 1925 notwithstanding forfeiture may be avoided otherwise than by relief granted by the court.”
However on the SCT costs are limited under CPR 27.14 to court fees and witness expenses only, unless there has been a finding of unreasonable behavior. This appeared to DJ Watson at first instance to limit the costs recoverable and he ordered that the Claimant costs be limited to £250. HHJ Wulwik on appeal reversed this decision and made an order of costs against the Defendant, holding that the limitation on costs in the SCT did not apply because the costs were not payable under the CPR but instead under the terms of the lease. The Defendant appealed to the Court of Appeal.
The Court of Appeal upheld HHJ Wulwik’s decision and dismissed the appeal. It held that CPR 27.14 does not impose a limit on a contractual recovery of costs. CPR 27.14 has to be read as subject to CPR 44.5, which allows a court to award costs payable under a contract subject to its equitable power to disallow unreasonable expenses.
This case will provide welcome assistance to parties who have thus far been limited in recovering contractual costs on the SCT, particularly since the limit on the SCT has been increased to £10,000. Parties, especially landlords involved in service charge disputes, seeking an award of contractual costs over and above the usual confines of the SCT may wish to add this case to their arsenal.
Vaughan Jacob / 1st Oct 2015
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