The staggering rise in court fees that came into force this week has sent shock waves throughout the SME sector.

By way of summary:

For a claim worth £25,000, the issue fee has increased from £610 to £1,250.
For a claim worth £70,000, the issue fee has increased from £910 to £3,500.
For a claim worth £125,000, the issue fee has increased from £1,115 to £6,250.
For a claim worth £190,000, the issue fee has increased from £1,315 to £9,500.
For a claim worth £200,000, the issue fee has increased from £1,515 to £10,000.

These fees are just the court fees to issue proceedings, further fees are payable as a case progresses (although these are not quite so eye-watering).

Many commentators have said that this will lead to SMEs using other methods to attempt to resolve business disputes, such as negotiation or mediation. However, whilst these are great ways to resolve disputes, they are best used in conjunction with court proceedings rather than as alternatives.

The main reason to issue court proceedings is when the other party either ignores your claim or fails to deal with it appropriately. What is then needed is some form of compulsion to force them to engage. Without this, any request to negotiate or mediate is likely to fall on deaf ears.

Once a party is served with court papers, they cannot simply ignore them. If they do, they will end up with a court judgment against them which will be based just on what the Claimant says.

This judgement can lead to a CCJ being registered (which can affect their ability to raise credit). In addition, they could find their goods being seized by High Court Enforcement Officers, being made bankrupt or being wound up or, in some extreme cases, being arrested and facing the possibility of imprisonment if an injunction order has been ignored.

So, there is no better way of ensuring that the other party takes your claim seriously than issuing court proceedings.

Issuing court proceedings has other advantages too. One of the most important is the court’s ability to require a party to disclose documents. Commercial cases are usually won or lost according to what the documents say. Therefore getting hold of documents that help your case or harm your opponent’s case are usually of crucial importance.

Under the English legal system, disclosing documents is done at a relatively early stage, soon after each party has set out details of its case, so it is often the case that the best time to go to mediation or commence serious negotiations is after documents have been disclosed.

So, it does seem to me that that issuing court proceedings will still be necessary unless your opponent can be persuaded to engage with serious negotiations before action is taken. There are various tactics that can be employed to try to achieve this not the least of which is that the courts can order them to pay more costs if they do not engage in pre-litigation exchanges of information. Otherwise, there will still be no alternative other than issuing court proceedings. There is some good news, however: should you win your case, you can expect these fees to be added to the costs that the Defendant will have to pay.

Gary Cousins
Business Solicitor