In their joint judgment in Peter Dammermann v. Lanyon Bowder LLP  EWCA Civ 269 , LJJ Longmore and McFarlane considered CPR Part 27.14(2)(g) and sought to give some guidance on when a litigant in a matter allocated to the Small Claims Track should be liable for costs as a result of “unreasonable behaviour”.
The matter before the Court of Appeal emerged as a result of a challenge by the Appellant to costs which the Respondents (who were a firm of solicitors that acted on behalf of LPA Receivers appointed by the Appellant’s mortgage company) had incurred. There were no issues of unreasonable behaviour when the matter was heard at first instance, however His Honour Judge Main, who initially granted leave to appeal upon what was perceived to be a an obscure point of agency, took the view at the appeal hearing that the Appellant’s conduct in continuing to pursue the appeal was unreasonable in light of:
1) The Respondent’s skeleton argument filed in advance of the hearing, which made it clear that the Appellant’s position had no hope of succeeding and
2) The Appellant’s rejection of an offer to settle.
The Court of Appeal allowed the Appellant’s appeal against the costs order, noting that HHJ Main has not given proper weight to the obscure point of agency that lay at the centre of the case, for which he had himself granted leave to appeal (i.e. . The Court’s judgment endorsed the guidance set out by Sir Thomas Bingham MR in Ridehalgh v Horsefield  Ch 205, 232F in relation to wasted costs as also being suitable for assessing whether costs had been unreasonably incurred:
“… 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.”
The Court also expressed caution that litigants should not be “too easily deterred” from using the Small Claims Track by the risk of being held to have behaved unreasonably.