Article by Christine Rutkowski
[Orton v. Barclays Bank UK Plc [2026] EWCA Civ 1025]
The Court of Appeal have considered the approach to be taken to the costs provision under CPR r. 27.14(2)(g) – namely the ‘unreasonable behaviour’ exception to the standard costs neutral approach ordinarily applied to claims proceeding on the Small Claims Track.
Background
Mr. Orton issued proceedings against Barclays Bank UK Plc seeking damages arising from alleged mis-selling of payment protection insurance (“PPI”) and non-disclosure of commission payments (commonly described as a ‘Plevin’ or ‘Unfair Relationship’ claims). Damages claimed did not exceed £3,000.00 plus interest and the claim was allocated to the Small Claims Track.
In its defence, the bank raised limitation; that the relationship was not unfair as a redress payment had been made and also challenged quantum. Early on in proceedings, the bank invited Mr. Orton to discontinue his claim as it disclosed no real prospect of success – confirming that it would waive its entitlement to costs if he did so. The bank’s correspondence confirmed that should discontinuance not follow, an application to strike out the claim would be made and costs would be sought. This invitation to discontinue was again made shortly before trial with a deadline set.
Mr. Orton discontinued his claim seven days after the deadline (and twelve days before the listed trial) and the bank applied for an order for costs in its favour pursuant to CPR r. 27.14(2)(g) based on Mr. Orton’s unreasonable behaviour.
The Appeals
At first instance, a District Judge found that Mr. Orton’s decision to discontinue was taken too late and without any new evidential development prompting the discontinuance, this amounted to ‘unreasonable behaviour’ justifying an award of costs in favour of the bank.
Mr. Orton appealed this decision, which was dismissed by a Circuit Judge who gave obiter guidance on CPR r. 27.14(2)(g) that derived from the relief from sanctions approach taken in Denton v. TH White Ltd [2014] EWCA Civ 906.
The Court of Appeal disagreed – allowing Mr. Orton’s appeal and setting aside the costs order. It found (at [76] and [77]) that there was a ‘special procedure’ which applied to claims allocated to the small claims track that was designed to be different and to which a key part was the establishment of a ‘costs neutral’ environment. This was particularly clear given that the costs consequences of discontinuance under CPR r. 38.6(1) and CPR r. 36 in its entirety do not apply to claims allocated to the small claims track. It therefore followed that the ‘unreasonable behaviour’ provision under CPR r. 27.14(2)(g) should not be construed widely.
Significantly, the Court of Appeal confirmed at [85] that reliance on authorities had to be treated with a degree of caution as they were all fact sensitive and few related to small claims matters. The court referred to Lord Bingham’s ‘acid test’ in Ridehalgh v. Horsefield [1994] Ch.205 of “whether the conduct permits of a reasonable explanation”; however confirmed at [87] that the focus on an explanation should not divorce the test from the context which informed its meaning and at [86] made the point that Ridehalgh was neither an ‘unreasonable behaviour’ case or a small claims matter, but a wasted costs case: “where unreasonableness was invoked as part of a wider formula in that jurisdiction…” and therefore required “a necessary nexus with impropriety/vexatiousness (and a context where unreasonable and vexatious elide) which cannot be assumed to be applicable in the Small Claims costs jurisdiction. The court additionally stated: “Nor does it necessarily follow that everything seen as ‘unreasonable’ in the context of the wasted costs jurisdiction would also be ‘unreasonable’ in the context of a default costs neutral Small Claims jurisdiction….”
The Court of Appeal further found at [89] that utilising the Denton test (which emphasised the importance of the explanation by the defaulting party) was erroneous. Denton started from an established default in compliance with the rules. The Small Claims costs jurisdiction started from the different perspective of an entitlement not to pay costs.
Limits of safe guidance taken from authorities
The Court of Appeal at [90] limited what they described as ‘safe guidance’ which could be taken from the authorities as follows:
(a) The process of evaluating whether a ‘party has behaved unreasonably’ must be informed by all the facts. That includes the context of the Small Claims Track and the breadth of the costs neutrality regime which generally applies;
(b) The burden of proof is on the party alleging unreasonableness to establish it;
(c) The kinds of circumstances which will qualify are as set out in the ‘acid test’ in Ridehalgh, namely circumstances which do not permit of a reasonable explanation;
(d) Reference to previous cases is unlikely to be helpful, however:
(i) Vexatious behaviour, such as issuing proceedings with no prospect of the claim being successful, will usually be unreasonable;
(ii) The withdrawal of a claim or unsuccessful pursuit of a claim should not itself be considered as unreasonable;
(e) Judges exercising the discretion should also bear in mind the undesirability of deterring parties from using the Small Claims Track.
While the Court of Appeal have not offered specific guidance for other claims which fall under a Fixed Costs Regime (for example, claims issued on/after 01 October 2023 and allocated to and/or proceeding on the Fast or Intermediate Tracks), the general guidance and consideration of authorities set out by the Court of Appeal in Orton may offer some clarification of how ‘unreasonable behaviour’ should be considered and assessed in the context of CPR r. 45.13.
The Court of Appeal’s judgment can be found here.
