Issue

The Court of Appeal considered in Steven Orton v Barclays Bank Uk PLC [2026] EWCA Civ 1025 the proper approach in applying CPR 27.14(2)(g). The interpretation of this is important for practitioners as it is often one of the only routes to costs exceeding the fixed costs regime on the Small Claims Track where there is no contractual entitlement.

Background

The Claimant had brought a PPI “unfair relationship” claim against the Defendant. They had discontinued the claim shortly before the trial and after a deadline to do so given by the Defendant.

The District Judge at first instance, decided, that this constituted unreasonable behaviour and awarded the Defendant their costs. The Claimant appealed and a Circuit Judge dismissed this appeal.

The Claimant then appealed to the Court of Appeal.

Decision

The Court of Appeal allowed the appeal and set aside the decision on costs.

Lady Justice Cockerill gave the lead judgment, and considered a series of decisions which touched on the issue of unreasonableness, notably Dammerman v Lanyon Bowder LLP [2017] EWCA Civ 249 and Ridehalgh v Horsefield [1994] Ch 205. Having considered the authorities, Lady Justice Cockerill distilled the following guidance at [90]:

1. The evaluation of whether a party has behaved unreasonably must be informed by all of the facts, including the context of the Small Claims Track and the breadth of the costs neutrality regime.
2. The burden of proof is on the party alleging unreasonableness to establish it.
3. The kinds of circumstances which will qualify will be those which do not permit of a reasonable explanation.
4. Vexatious behaviour such as issuing proceedings with no prospect of succeeding will usually be unreasonable
5. The withdrawal of a claim or unsuccessful pursuit of a claim should not be considered itself to be unreasonable
6. Judges exercising their discretion should bear in mind the undesirability of deterring parties from using the Small Claims Track

The Judgment goes on to set out that the District Judge should have approached the situation as one where the disapplication of the costs neutral regime had to be justified as something unambiguously unreasonable with the burden on the Defendant here to prove this.

The Judgment points out that if the first instance decision was upheld, a party would be worse off for discontinuing or settling a case for commercial reasons (such as in this case, the cost of instructing Counsel outweighing the potential award), rather than turning up to court and losing the case.

It was also made clear that there is no benefit from setting out any further approach to the test beyond what is set out in the rules, beyond the above guidance.