The recent judgment in Gillian Smith v Wigan Borough Council [2026] EWHC 660 (SCCO) concerns a request by the Defendant (the paying party) for an oral review of the decision of a costs officer following a provisional assessment of costs conducted on the papers. The case concerned housing disrepair, where the Claimant advanced in pre-action that they would be seeking damages and repairs. The matter then settled prior to the issue of proceedings. The issue for Costs Judge Nagalingam was whether the claim would have been allocated to the Small Claims Track, and therefore should the costs officer have limited costs to those that would have been awarded had the claim proceeded to trial on this track. This case therefore provides useful precedent when considering the decision in Birmingham City Council v Lee [2008] EWCA Civ 891 and CPR 46.13.

Defendant’s Submissions

The Defendant firstly relied upon CPR 46.13 which states at (3) that ‘Where the court is assessing costs on the standard basis of a claim which concluded without being allocated to a track, it may restrict those costs to costs that would have been allowed on the track to which the claim would have been allocated if allocation had taken place.’

The Defendant submitted to the Judge that when implementing CPR 46.13 for this case, the matter would have been allocated to the Small Claims Track with reference to the requirements in CPR 26.9 and the evidence before the court. The evidence before the court was the pre-action correspondence and the settlement offers. All bar one of the settlement offers from the Defendant were for below £1,000, with the accepted offer being a Part 36 offer for £1,000. The Defendant argued that the settlement sum was the best indicator as to the value of the claim when considering track allocation on the evidence the court had before it.

The Defendant further submitted that the court did not have any evidence before it to assess what the claim value would have been pleaded at had it been issued.

Claimant’s Submissions

The Claimant accepted that the settlement sum had relevance, but it should not be the sole consideration, and the Judge should also consider the full chronology of offers. The Claimant further argued that the Defendant’s use of a Part 36 offer was an acceptance from them that the matter would be allocated to the Fast Track. The Claimant sought to rely on the Court’s approach Birmingham City Council v Lee [2008] EWCA Civ 891 that costs should be calculated according to the track which the claim would fall if made by way of litigation. Applying this to the facts of the case and CPR 26, the Claimant submitted that damages would have been pleaded in excess of £1,000 and that without the outstanding specific performance element of the claim, the pleaded value would have been either £1,3000 to £3,000 or £1,000 to £5,000.

Evidence Analysis and Decision

In coming to their decision on whether this matter would have been allocated to The Small Claimant Track, the Judge considered the multiple settlement offer letters exchanged between the parties and the further correspondence setting out the Claimant’s vulnerabilities and repairs to be completed. In the offer letters, the Claimant was maintaining offers of above £1,000 for damages plus the repairs, and costs to be assessed if not agreed. The Defendant maintained offers below £1,000 for damages plus repairs, but initially on costs stated that the Defendant would pay small claims costs. This changed when the Defendant made their first Part 36 offer when it was stated that the Defendant would pay the Claimant’s reasonable legal costs to be assessed if not agreed. The final offer that was accepted was the Part 36 offer for £1,000 plus repairs and that the Defendant will pay the Claimant’s reasonable legal costs, to be assessed if not agreed.

The Judge’s decision was that they would not interfere with the provisional assessment as they were not persuaded that the matter would have been allocated to The Small Claims Track. The Judge based this decision on the developing words on costs in the Defendant’s offers from ‘small claims costs’ to ‘costs to be assessed not agreed’, that three of the offers the Defendant made were Part 36 offers, and the main consideration being that pursuant to CPR 26.9(1)(b)(iii) there was no doubt from the Judge that had proceedings been commenced the claim would not have been allocated to the small claims track. This was because the Judge determined that the value of the claim for damages would have reasonably been pleaded at more than £1,000 based on the details within the correspondence between the parties.

The Judge further commented that finding for the Defendant would be undesirable as it may cause a lack of trust between parties going forward when trying to reach an agreement, as well as promoting parties going back and forth with counteroffers with a difference of pennies or pounds to escape potential allocation to The Small Claims Track when assessing costs. In this case, it would not have been desirable for the Claimant to have counteroffered £1,001 simply to avoid the costs argument that the Defendant put forward in this case of the settlement sum of £1,000 being the best indicator for track allocation.

Conclusion

The decision confirms the process that a Judge should take when assessing a costs decision under CPR 46.13. It further shows that the wording of offers between parties and other pre-action correspondence is important, as this can be used to assess which track the matter would be allocated to.