In 2002, Mr. Dammermann entered into a mortgage with a
bank. He defaulted on that mortgage and
LPA receivers were appointed. The
receivers appointed Lanyon Bowdler to conduct the sale of the property. On sale of the property Lanyon rendered a
bill to the receivers that was paid and became part of the secured
liability. Mr. Dammermann issued
proceedings contesting the legal fees charged.
The claim was allocated to the small claims track and was dismissed at
trial. Mr. Dammermann appealed but was
unsuccessful. Lanyon applied for a costs
order against Mr. Dammermann for the costs of the appeal. The Court held that as this had been a small
claim their jurisdiction was limited under CPR27. However, they held that Mr. Dammermann had
behaved unreasonably under CPR 27.14(2)(g) and an order for costs was
made. Mr. Dammermann appealed the making
of a costs order.
The appeal was based on three submissions:
- His behavior had to be
viewed in the context that the judge hearing the appeal had granted
permission to appeal.
- The point of law was
unusual and required careful judicial determination. It was not unreasonable to pursue the
- The judge had been wrong
to consider the offer to settle that Mr. Dammermann had declined but not
the counter offer he had made.
The Court of Appeal (Longmore LJ and McFarlane LJ) held:
- The first two grounds had
considerable force. When assessing
the costs application the judge should have considered that “the point on which Mr
Dammermann lost was a somewhat intricate point arising from a legal
document which was "artificial or contrived" and "apt to
give a false impression" and the fact that the judge had granted
permission to appeal”.
- Even though the judge held on appeal that Mr. Dammermann had been ‘barking up the wrong tree’ this
was only after careful legal analysis and after he had granted permission
- The judge was perfectly entitled to consider the offer refused by
Mr. Dammermann and was justified in doing so. The fact that Mr. Dammermann was content
to settle for a significantly figure was not relevant.
- On the basis that judge fell into error for failing to consider the
intricate point of law and that he had given permission to appeal this
appeal must succeed. The refusal of
the offer to settle was not sufficient on its own to warrant a costs
order. The application for costs
would be dismissed.
The Court then went
on to consider ‘unreasonable behaviour’ in
Small Claims Track appeals. Whislt
referring to appeals some of the comments directly relate to Small Claims
trials at first instance. The Court
- They were not prepared to give general guidance because each case
will be different. However, they referred to Sir Thomas Bingham MR. in Ridehalgh v Horsefield (case
concerning wasted costs applications): "... conduct cannot be described as
unreasonable simply because it leads in the event to an unsuccessful result or
because other more cautious legal representatives would have acted
differently. The acid test is whether
the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as
optimistic and as reflecting in a practitioner's judgment, but it is not
unreasonable," see Ridehalgh v
Horsefield  Ch 205, 232F.
- That dictum in Ridehalgh should
provide sufficient guidance to District Judges and Circuit Judges dealing
with cases allocated to the Small Claims Track. This meaning of ‘unreasonably’ must apply to litigants in person as it does to
legal professionals. One should not
have an advantage over the other.
- The Small Claims Track provides a useful limited costs approach to
resolving disputes. Litigants
should not be deterred from using it by the risk of being held to have
behaved unreasonably. Appeal courts
should be wary of ordering costs on appeal if they were not ordered below
unless circumstances are much different.
highlights how difficult it will be to obtain a costs order on the Small Claims
Track. Simply the loss of a case or
rejection of an offer will not be enough if the pursuit of the claim is