Small claims limit increased to £10,000 – will businesses lose out?

21 Jun 2013

The value for the small claims court has risen for non-personal injury claims from £5,000 to £10,000 as part of the Jackson Reforms to Civil Litigation procedure that came into effect on 1 April 2013.  As a consequence, there will inevitably be a jump in the number of claims being issued under the small claims procedure.

The main difference between the small claims track and the fast and multi tracks, is that each party bears the majority of their own costs.  This is opposed to the ‘loser’ paying the winner’s costs, which is the standard in the fast and multi tracks.  The government believes this will encourage businesses and litigants in person, who have disputes over money claims to use the small claims track to resolve these disputes and put an emphasis on mediation throughout the court process.

Despite the increase in resources provided by the government and the Court offering assistance to litigants in person in the small claims track, the legal process remains similar and the legal arguments are often the same as with those claims of a higher monetary value.  A business will not now be able to recover their costs from the other side even if they are successful at Court.  This is likely to deter many from bothering with the claim at all.  This is an unfortunate result, as for many small to medium businesses a written off debt of a sum up to £10,000 can be significant.

Additionally, concerns have been expressed about whether this raised limit will increase the likelihood of debtors simply not paying debts under £10,000 as they know if they are issued against and lose their case, the additional cost implications will be minimal.

All in all, it would therefore seem that it may be the wiser creditor who seeks legal advice from experienced debt recovery solicitors regarding the recovery of such outstanding debts prior to beginning court action or writing off a recoverable debt of £5,000 – £10,000.