Background
Steven Orton brought a small-claims-track claim under sections 140A–B of the Consumer Credit Act 1974 concerning Barclays’ undisclosed commission on payment protection insurance. Barclays had previously paid regulatory redress, but Orton sought approximately £2,750 plus interest for his alleged remaining loss. Barclays repeatedly demanded that he discontinue, imposed short deadlines, and warned that it would seek costs, while Orton made several offers to accept less than the amount claimed.
Twelve days before trial, after the parties exchanged evidence, Orton discontinued for commercial reasons: he considered that counsel’s fees would largely absorb any recovery. A district judge found his late discontinuance unreasonable under CPR 27.14(2)(g) and awarded Barclays £2,132.88 in costs incurred after its final deadline. A circuit judge dismissed Orton’s first appeal and proposed a four-stage framework for assessing unreasonable behaviour.
The Court’s Holding
The Court of Appeal allowed Orton’s appeal on both grounds and set aside the district judge’s costs order. The small claims track is a strongly costs-neutral regime, including when a claimant discontinues, so CPR 27.14(2)(g) must not be construed widely. Barclays bore the burden of establishing conduct that was unambiguously unreasonable and did not permit a reasonable explanation.
The courts below applied the wrong approach by insufficiently grounding their analysis in costs neutrality, scrutinizing Orton’s explanation as though he bore the burden of disproving unreasonableness, and treating Barclays’ demands to discontinue as settlement offers. Those letters offered no concession and were properly characterized as ultimata, not offers. Discontinuing an arguable claim after a late cost-benefit assessment was not unreasonable merely because Barclays had set an earlier deadline.
The Court also rejected the circuit judge’s four-stage framework. It improperly resembled the relief-from-sanctions analysis and risked lowering the threshold for costs. Courts should consider all the facts, keep the small claims regime’s costs neutrality firmly in view, place the burden on the party alleging unreasonableness, and ask whether the conduct permits a reasonable explanation. No order was made as to the costs of the appeal.
Key Takeaways
- Costs for unreasonable behaviour under CPR 27.14(2)(g) are reserved for clear cases and must be assessed against the small claims track’s strong presumption of costs neutrality.
- Discontinuing or unsuccessfully pursuing an arguable small claim is not, by itself, unreasonable, and a party should not be worse off for discontinuing than for proceeding to trial and losing.
- A party cannot manufacture exposure to costs by issuing repeated demands to discontinue, attaching short deadlines, and describing those demands as settlement offers.
Why It Matters
The judgment protects access to the small claims track by preventing well-resourced litigants from using aggressive correspondence and threatened costs applications to undermine its costs-neutral design. It confirms that parties may make sensible commercial decisions to discontinue without automatically exposing themselves to the opposing party’s legal costs.
It also limits procedural glosses on CPR 27.14(2)(g): the inquiry remains fact-sensitive, but it is not a relief-from-sanctions exercise requiring the accused party to justify its conduct through detailed evidence.