08 Apr 2015

Debt Recovery

Revised/Enhanced Court fees – what does it all mean?

March 2015 saw a groundbreaking change to litigation in England and Wales. As of 9 March 2015, the cost of issuing a claim with a value of more than £10,000.00 has increased from fees which were determined by a “sliding scale”, to 5% of the actual value of the claim. Those who are unfamiliar with the litigation process may not understand the significance of these changes, but to give an idea of the impact it may have on some businesses, a case valued at £200,000.00 will now cost £10,000.00 to issue at court, whereas on 8 March 2015, it would have cost £1,315.00. The maximum court fee for issuing the claim is capped at £10,000.00, however, the vast increase has placed limitations on the ability of some creditors to claim money which is rightfully theirs.

What was the main objective of the Government changes?

The main objective was to settle monetary disputes before ever seeing an inside of a court room, thus keeping costs and resources to a minimum and utilising the already available resources for more complex litigation, where the skills and expertise of experienced Judges is required. When the consultation was initially published, it was estimated that the increase in court fees alone would account for an increase of £120 million annually to the Ministry of Justice’s financial resources, however, it is uncertain whether the changes will bring any such effect.

Who is most affected by the increase in court fees?

The increase in court fees is sure to have an impact on all Claimants, but will most certainly have a more detrimental effect on those Claimant’s who already struggle to pay court costs, SMEs who rely on the courts to enforce contractual payments and restore cash flow, creditors in insolvencies, and smaller law firms who will inevitably suffer financially. These “revised” court fees will significantly reduce the ability of individuals and small businesses with legitimate claims to pursue these through the courts. Equally, it will be the defendants who settle claims against the Claimants who will eventually be footing the bill for enhanced fees. Therefore, all parties to a claim are likely to suffer as a result of the enhanced fees.

What are the implications of the changes?

Positive implications 

Parties will think more carefully about settling cases pre-litigation. In some cases, parties may actually prefer to settle for slightly less than they are actually owed to ensure a quick resolution to the dispute in hand, without the added risk of being unsuccessful at Court.
If the issue fee is high the cost of a mediator may become more attractive and there could be some increase in ADR.
Recourse to ombudsmen and similar schemes for professional disputes may become more appealing to individual claimants in particular.

Negative implications

Claimants may become less ambitious in valuing claims to avoid incurring higher issue fees. Some may even settle claims pre-litigation for a value of less than they would be likely to achieve at trial, purely due to the financial risks of issuing a claim.
We may see an increase in self-represented litigants aiming to cut overall costs. Litigants in person should remember that a judge’s role is to determine both the facts of the case and the law applicable to those facts. Presenting a case involving points of law is no easy task for lawyers with many years of experience, let alone a litigant in person. Indeed, litigants in person present significant difficulties for the court process because the wrong application may have been made, the court may not have the power to do what is being asked of it, there may be no papers to assist with what is happening in the case, or there may well have been no productive discussions on the matter outside court or before the hearing. It may be that the level of animosity between the parties is such that they are simply not capable of speaking to each another. This may prolong the actual litigation process further, and mistakes made by the litigants in person may give the parties no alternatives but to instruct solicitors to bring their case back on track.
Parties that feel they are in a weaker position will try to spend more time negotiating or be slower to issue proceedings, which could present limitation issues for the Claimant.
The increased fees could actually act as a barrier to entry into the justice system which could have the reverse effect on the Government’s intention to increase revenue by £120 million per annum.

How this is affecting our clients?

At HardingEvans, we act for a variety of clients, ranging from individuals, to nurseries, to large construction companies. Managing cash flow within a business has always been an important part in any business, but when companies are owed such vast sums of money and struggle to pay the court issuing fees due to the new increase, what happens then? Part of the service which we provide at HardingEvans is to advise our clients on the best method for recovering monies owed to them, which does not always include issuing a County Court Claim. Important questions for our clients are:-

Do you need to sue or would a commercial settlement be more effective?

Litigation takes time and you’ll rarely get back all of your legal costs if you win.  Additionally, Judges will encourage attempts to settle if you do sue, so it makes sense to try before incurring court costs and legal fees. Furthermore, there are other alternatives to issuing a County Court Claim, such as insolvency proceedings (both options are available in cases where the debt is above £750).

Is the debtor worth suing?

One of the main points to advise our clients on is the possibility of getting all of the money owed back, even if we were to be successful in Court. After all, there is no point spending £10,000.00 in court fees alone pursuing a £200,000.00 claim when the debtor has assets of less than the value of the claim. At HardingEvans, we have the resources to check the financial positions of debtors, which ultimately lead us to providing the best advice for recovering the monies owed.

Are you insured?

Some of our commercial clients have legal expenses cover which they can claim against in the event of a dispute. Not all businesses have legal expenses insurance so it is vital to check this before we begin with the litigation process as such cover is not usually retrospective.

Conclusion

As a new change, the actual effects that the changes bring to the justice system are unmeasured. However, due to the disproval of most of the legal profession, a review is due to take place by Justice secretary Chris Grayling, shortly. In the meantime, our job is to manage the client’s expectations and advise them on the best way to deal with the dispute now that these changes are being enforced.

For more information please contact Nicola Moorcraft on 01633 244 233 or email moorcraftn@hevans.com

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