Business owners have warned new, higher Court fees could see some SMEs put out of business.
The new Court costings, set to be introduced in April this year have been dubbed a “barrier to access to justice” for SMEs who need to litigate.
For those who cannot meet the cost that barrier could mean they go out of business.
Under the new scheme all money claims of more than £10,000 that go to Court will have increased fees. Claimants pursuing redress between £10,000 and £200,000 will be charged 5% of the amount and those of more than £200,000 face a flat fee of £10,000.
This represents a Court issuing fee for a £200,000 claim jumping from £1,912 to £10,000. In the worst case scenario the increase is 622%.
The changes have already got the go-ahead from the House of Commons and are expected to be agreed by the House of Lords next week.
Jackie Roberts, who owns property company Minhafan Estates, based in Aberystwyth, West Wales, may have to turn to the Courts to claw back consequential loses from the bank after she was mis-sold an interest rate hedging product.
Her company has received one payment back from the bank but are still up to £100,000 out of pocket.
She said, “Slapping SMEs with more costs when they are already at a very low ebb is unfair. The UK Government often talk about how SMEs are the driving force behind the economy and highlight how much they are doing to help us. But the fee increases are a massive hindrance.”
Litigation Lawyer Craig McAdam of Slater and Gordon Lawyers, which has represented more than 300 SMEs fighting to get justice after being mis-sold rate swap products, said, “HM Government’s argument is that more money will be raised through the Court system.
“But, as we have seen with the introduction of Employment Tribunal fees, there is likely to be far fewer proceedings because people simply cannot afford the Court fees and therefore less will be raised.
“The right to redress through the Courts is the foundation of our democracy and yet these fees will, for many, take that right away. These enhanced Court fees will have a big impact on access to justice for SMEs who have been mis-sold interest rate swap products.
“Businesses mis-sold interest rate hedging products are particularly vulnerable because the harm caused to their finances by the actions of the banks makes the cost of litigating against them, in many cases, unaffordable
“It hands power to those who already benefit from a hugely unequal bargaining position and exasperates the inequalities faced by small and medium size businesses in the UK. The proposals should be reconsidered at the soonest possible opportunity.”
Jeremy Roe, Chairman of pressure group Bully-Banks which represents more than 2,000 SMEs pursuing the banks, said the new Court fees will be the difference between some SMEs being able to take on the banks in the Court or going bust.
“Initiating litigation against your bank is a very difficult and, frankly, scary process for SMEs,” he said. “These people have already been treated appallingly and now the Government wants to put another barrier in their way.
“The extra costs that will be incurred with litigating is an attack on access to justice. It is as simple as that. It will stop some people getting the redress they deserve.
“They were mis-sold a product, often by someone purporting to be an advisor who was actually a salesman, and it ended up costing them a lot of money. They deserve to get that money back. And this rate rise comes from a Government which claims to be on the side of the SME. It hands yet more power to the banks.”
Last week the Law Society announced it had issued a pre-action protocol letter for Judicial Review to challenge the fee hikes claiming the increases would be “tantamount to 'selling justice' contrary to the principles of Magna Carta”. The Law Society also claim the Government does not have the power to raise fees for the purposes it has stated in the consultation, to make departmental savings.
New Court Fees Explained
|Amount Claimed||Current Fee||New Fee|
|£10,000 - £200,000||£455 - £1,315||5% of the amount claimed|
|More than £200,000||£1,515 - £1,920||£10,000|
Jackie Roberts owner of property company Minhafan Estates took out an interest rate hedging product with Barclays.
“We were sold the product in February 2007. The bank advised us we needed it for protection. At the time it did not feel like we were really being sold something, it felt like we were getting advice. We were dubious but the bank was very persistent that we needed this product.
“Of course when the interest rate began to tumble it became clear very quickly that we were in trouble. We investigated what the break charge would be and we were told it was £130,000 which was obviously far more than we could afford.
“In 2011 we took legal advice and we were actually invited to tell our story to the Financial Services Authority (FSA) when they were drawing up the redress scheme.
“We settled the first part of our claim without litigation for £140,000. But we are still pursuing the bank for consequential loses of between £70,000 and £100,000. If we had been forced to litigate for those two figures added together we would not have been able to afford the £10,000 in Court fees. It simply would not have gone ahead. For many it could mean the end.
“Slapping SMEs with more costs when they are already at a very low ebb is unfair. The Government often talk about how SMEs are the driving force behind the economy and highlight how much they are doing to help us. But the fee increases are a massive hindrance.”
Craig McAdam is a Senior Group Litigation Lawyer at Slater and Gordon Lawyers UK.
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