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Take care to pay the correct issue fee!

27th January, 2016

In April 2015 we wrote about the hike in court fees for civil claims, which we thought could lead creditors to look again at petitions for bankruptcy as a cheaper option. We also warned it was to be approached with caution. [Higher Court fees for civil claims could lead creditors to look again at petitions for bankruptcy].

In March 2015, court fees for many civil litigation claims rose significantly. This was particularly painful for those with high value claims: for a claim above £300,000 the issue fee had been £1,920; after the fee hike it was £10,000.

Occasionally, a claimant will come to a solicitor with a prospective claim and the solicitor realises the claim must be issued immediately or it could be successfully defended as being time-barred. However, this means there is not enough time before paying the court issue fee for the solicitor to properly analyse the strengths and weaknesses of the case and advise the client whether it stands a good chance of being successful.

This is one reason why a claimant has four months between issuing a claim and having to serve it on the defendant. The four-month period gives the claimant time to get proper legal advice and decide whether to pursue the claim or not.

In such circumstances, the claimant has a tough choice. If they issue the claim (and pay up to £10,000 in court fees), they may later decide not to pursue to claim at all. The court fee, however, is not refundable.

This could tempt a claimant to issue their claim limited to a lesser sum, but then amend the claim before service on the defendant, at which point the difference in court issue fee would need to be paid.

This is a risky strategy. On 21 December 2015, the High Court gave judgment in Richard Lewis & Others v Ward Hadaway (A Firm) [2015] EWHC 3503 (Ch) which illustrates the danger.

Mr Lewis and his fellow claimants deliberately understated the value of their claims in order to pay reduced issue fees to the court and stop the limitation period from running, despite always intending to make much larger claims.

The defendant firm of solicitors, Ward Hadaway, faced potential liability in damages of £9 million, yet the claims were issued to recover damages limited to £15,000. The claims were amended just before service, to claim the larger sums.

Ward Hadaway argued that this was an abuse of process and the claims should be struck out.

The court found that the claimants had deprived the court of fees which should have been paid at the outset and had also caused the court additional administrative work in processing the amended forms. This was an abuse of process and the court agreed there was public interest in preventing such improper activity.

However, the court decided that to strike out the claims would be to enable the defendant to avoid the claims entirely, without a trial on the merits. Since the claims were now time-barred, that would result in substantial prejudice to the claimants.

In contrast, the prejudice to the defendant of the late payment of the court fee was minimal. Taking into account all the various factors of the case, including the delay by the defendant in bringing the application to strike out the claims, the court decided it would be disproportionate to do so.

Unfortunately for 11 of the 31 claimants, the court agreed with the defendant that as the appropriate court fee had deliberately not been paid before the limitation deadline for issuing the claim, those 11 claims were time-barred.

It is also worth remembering that there are other sanctions open to a court apart from striking out a claim, and a claimant who abuses court process is likely to be penalised on costs.

The Lewis v Ward Hadaway case clearly illustrates the risk a claimant takes in underestimating its claim at issue, if they intend to amend the claim later.

For more information please contact Jan Chillery, Litigation Partner, on 01244 405441 or email [email protected]

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