There can be significant financial implications if you lose in the small claims court, so it’s important to know how to manage that risk, the potential outcomes and the steps you can take next if you do lose.
This short guide outlines what happens if you lose in the small claims court, including the immediate impact, the options for appeals or further action and how to avoid it in the future.
Understanding the Small Claims Court in the UK
The Small Claims Track is a part of the County Court system in England and Wales for relatively low-value disputes, usually with a value of up to £10,000. It is a more informal and accessible option than other court processes, often without the need for legal representation. Typical types of cases heard in the Small Claims Court include:
- Consumer disputes (e.g., faulty goods or services)
- Debt recovery
- Minor personal injury claims
- Property damage disputes
- Landlord and tenant disputes (up to a certain amount)
The small claims court tends to settle disputes fairly and efficiently. The judge is often more active in questioning witnesses and leading the proceedings.
Costs and fees for the Small Claims Court
Fees for filing a claim in the small claims court do apply. These fees are based on the claim value and are due at the time of filing a claim. If you lose in the small claims court, you will probably have to pay these initial court fees.
The general rule in the small claims court is that the winning party can recover some costs from the losing party on top of the initial court fees. Such costs are typically capped at:
- The initial court fees paid to start the claim.
- Any reasonable travel expenses incurred by the winning party or their witnesses to attend court.
- Loss of earnings for the winning party or their witnesses due to attending court (subject to a daily limit).
Unlike higher-value claims heard in other court tracks, generally you are not liable for the winning party’s legal costs in the small claims court. This helps make the system more accessible to people and small businesses who might not be able to afford legal fees.
However, there are exceptions to this rule. For example, the losing party might have behaved unreasonably during the proceedings and be ordered to pay more towards the costs of the winning party. Understanding the legal implications before going to the small claims court might help you win your case, or avoid court altogether.
Alternative Dispute Resolution (ADR)
Before going to court, and sometimes even after a claim has been started, considering Alternative Dispute Resolution (ADR) methods are highly recommended. ADR involves mediation, arbitration and negotiation in order to resolve a dispute outside a court setting. Even during a court process, the judge may suggest you consider ADR at different points.
- Mediation: a neutral third side helps both sides reach an agreement.
- Arbitration: a neutral third party makes a binding decision after hearing evidence from both sides.
- Negotiation: direct talks between the parties for a resolution.
ADR may be less expensive, quicker and less stressful than going to court. And if you lose in the small claims court, the judge may have encouraged or even ordered you to attempt mediation at some stage. Sometimes, exploring ADR options before or after a court decision results in a more amicable and less expensive resolution.
What Happens If You Lose in the Small Claims Court?
You pay costs if you lose in the small claims court. You will immediately be legally bound to that judgement. This typically involves:
- Paying the Claimant the amount they have been awarded: this is the most common outcome, where you will pay the other party the sum the judge has determined you owe, plus any interest that may be applied, potentially from the date of the judgment.
- Paying the Claimant’s limited costs: you will probably have to pay the Claimant for their initial court fees and possibly some travel or lost earnings.
- Other specific actions ordered by the court: the judge might order you to take a specific action, such as returning goods or rectifying faulty work within a certain time.
The judgment is final, and the winning party has other ways of enforcing it if you don’t comply. Enforcement methods could include:
- County Court Judgment (CCJ): the judgment will be recorded on the Register of Judgments, Orders and Fines. This will affect your credit score for six years.
- Attachment of Earnings Order: if you are employed, the winning party can apply to have the debt taken directly from your ways to pay the outstanding amount.
- Charging Order: if you own property, the winning party can apply for a charge to be placed on it, so they will be entitled to a share of the proceeds if you sell the property.
- Warrant of Control (formerly bailiffs): court bailiffs can take your goods and sell them in order to pay the debt.
- Third Party Debt Order: if a third party owes you money, the winning party can apply for an order for that money to be paid directly to them.
Take the judgment seriously and understand the consequences of non-compliance. Ignoring the judgment is likely to lead to further legal action and increased costs.
What Can You Do If You Lose in the Small Claims Court?
Although losing can feel like all options are exhausted, if you lose in the small claims court, you can consider:
- Pay the judgment: the simplest and easiest thing to do is to pay the judgment promptly. This will stop more enforcement action and limit the damage to your your credit score. Contact the winning party or their representative to arrange payment.
- Negotiate a payment plan: if you can’t pay the full amount immediately, try to negotiate a payment plan with the winning party. If they agree, clearly document the terms you’ve agreed. The court is unlikely to get involved in setting up payment plans unless enforcement action is being taken.
- Appeal the decision: you have the right to appeal the judge’s decision if you think the case was handled incorrectly. However, appeals are hard and usually fail unless you can prove a serious error of law, procedure, or fact. You can’t appeal because you disagree with the judge’s findings.
- Permission to appeal: you will need permission from the court that made the original decision or the higher court you are appealing to in order to appeal.
- Grounds for appeal: valid grounds for appeal include things like the judge misinterpreting the law, procedural unfairness, or findings of fact that were not supported by evidence.
- Time limits: an appeal is only allowed within 21 days of the judgment.
- Costs of appeal: appeals can be expensive, and you may be liable for the other party’s legal costs if you lose the appeal.
- Seek legal advice: if you are considering an appeal, seek legal advice from a solicitor or barrister who is experienced in appeals. They can assess your case for appeal and guide you through the process if they think you have a chance of winning.
- Set aside the judgment: in very limited circumstances, you can apply to have the judgment set aside. This might be possible if you were not properly served with the claim, were prevented from attending the hearing due to circumstances beyond your control, or if there was a serious procedural error. Legal advice is strongly recommended if you are considering this option.
How to Avoid Losing in Small Claims Court
The best way to avoid losing in the small claims court is to prepare and present your case effectively. Key strategies include:
- Identify your claim or defence: understand what you are claiming or defending against. Identify the key facts and legal principles involved.
- Gather evidence: collect documents, photos, emails, and witness statements to support your case. Organise your evidence logically and make sure it is allowable.
- Read the court rules and procedures: respect deadlines for filing documents and attending hearings.
- Make your case succinctly at the hearing: Stick to the facts and avoid emotional outbursts.
- Expect questions from the judge about your case. Be prepared to answer them honestly and directly.
- Consider mediation: mediation can help you avoid a final court hearing. It’s often worth exploring even if you’re confident in your case.
- Seek advice early: even without a lawyer to represent you, early advice can help you understand your rights and obligations and prepare your case. A barrister may be able to provide expert advice on presenting your case.
- Be realistic about your chances: weigh your case objectively. Sometimes, settling out of court is the best option, even if you believe you have a strong argument.
The costs if you lose in the small claims court can be significant, so understanding the process and all the available options is crucial. Seeking legal advice is always recommended.
Understanding the legal ramifications early may help you win your case or avoid court entirely. As the defendant, understanding what happens if you lose in the small claims court is important, and while you might feel defeated, there are still opportunities to explore. The initial court fee is just one part of a larger bill, and understanding what you are liable for is essential. Also, keep in mind that interest (apr) may be added to the amount you owe if you don’t pay promptly. It’s unlikely the judge will simply ignore a failure to pay.
