Don’t pay the wrong court fee whatever you do!

25 Jan 2016

In the case of RICHARD LEWIS & ORS v WARD HADAWAY (A Firm) (2015) the court decided that where claimants had deliberately understated the value of their claims in order to pay reduced issue fees to the court and stop the limitation period from running, it would have been disproportionate to strike out the claims for abuse of process because of the amount of the defendant's potential liability in damages and because the claims were arguable. However, since the appropriate fee had not been paid to the court at the time of issue, the defendant was entitled to summary judgement.

A defendant applied for the striking out of claims brought against it on the ground of the claimants’ alleged abuse of process in seeking improperly to avoid payment of court fees. Alternatively, the defendant applied for summary judgement on limitation grounds.

The claimants had issued proceedings very close to the end of the limitation period. Although the sums referred to in the letters of claim ran into hundreds of thousands of pounds, the fees paid on the claimants’ behalf on issue of the claim forms reflected very much lower claims. In each case, the claim forms were amended after the issue of proceedings, just before service, to claim the larger sums. The balance of the appropriate larger fees was paid at that time. That conduct gave rise to the strike-out application.

The defendant contended that the claimants had deliberately understated their estimate of the value of their claims in order to reduce the initial fees paid to the court on issue as a device to stop time running.

The Court decided that the claimants, through their solicitors, had deliberately underestimated the value of their claims in order to avoid or defer the payment of the full and correct fees for the claims which they always intended to make. If the claims had been issued purely as a protective step due to the imminent expiry of the limitation period and if, within the four months for service, a decision had been taken not to pursue any particular claim, and then only the lower fee would have been paid. It was clear that the claimants always intended to amend their claims at a later stage because the pre-action protocol letters evinced an intention to make much larger claims. That situation was different from cases where a lesser fee had been paid at the outset because of a litigant’s financial situation but where there was complete transparency in what was done and the parties had agreed to proceed on that basis. It was also difficult to understand how the claimants’ solicitor could sign a statement of truth in the claim form to the effect that the claimants expected to recover damages limited to £15,000 when he knew that those claims were going to be amended to claim damages of more than £300,000. 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. There was a public interest in preventing such improper use of the court process.

The claims were arguable and the defendant’s potential liability in damages was £9 million. 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 would now be time-barred, that would result in substantial prejudice to the claimants. Moreover, there was no suggestion that the claimants’ conduct had been fraudulent or dishonest, since it had not been concealed in any way.  The prejudice to the defendant was limited because the position had been rectified by payment of the full fees before the claim forms were served. The duration of the abuse of process was limited and only deferred the time for payment of the correct fees for four months. Taking account of all the various factors and having regard to the overriding objective, it would be disproportionate to strike out the claims.

Given the finding that the claimants’ conduct had been an abuse of process, they had not done all that was in their power to do to set the wheels of justice in motion and bring the matter before the court for its process to follow.  Paying “the appropriate fee” did not cover the payment of a fee in circumstances where the act of payment was an abuse of process. Since the appropriate fee had not been paid in time, the defendant’s application for summary judgment succeeded.

Our View: This case should serve as a wake up call to those involved in issuing court claims whether as a lawyer or as a litigant in person. There is a perfect storm at work here.  Court fees have risen fast in recent times and therefore some will have been tempted to underestimate claim values and therefore court fees. If this combines with a tendency to leave things to the last minute then disaster could follow! As ever any claim should be issued well in time and if there is any doubt about the claim value you should err on the high side at the point of issuing even if this means paying a higher court fee. If you are defending a claim then you should look closely at the amount claimed and compare it with how the claim has been presented in the pre action letters and how this compares with the issued claim.  If in doubt seek advice.