PI Brief Update

'Unreasonable behaviour' bar raised: Court of Appeal clarifies the application of CPR 27.14(2)(g) - Lucy Stock, Temple Garden Chambers

18/08/26. On 31 July 2026 the Court of Appeal handed down judgment in Orton v Barclays Bank UK plc [2026] EWCA Civ 1025, providing further clarification regarding the court’s powers to make a costs award on the Small Claims Track under CPR 27.14(2)(g) where a party has “behaved unreasonably”.

Factual Background

The Claimant, Mr Orton, issued a Plevin claim against Barclays alleging non-disclosure of commission regarding a PPI policy purchase, seeking damages of approximately £2,750 plus interest. The case was allocated to the Small Claims Track. The Defendant’s solicitors sent the Claimant a series of letters inviting him to discontinue the claim, threatening applications for summary judgment, strike-out, and applications for costs. In response, the Claimant made several offers to settle which were rejected, before serving a notice of discontinuance 12 days before trial on the grounds that instructing a barrister for the hearing made continuing the case economically unviable. Barclays applied for a costs order under CPR 27.14(2)(g).

At first instance, Lindsay DJ awarded Barclays £2,132.88. Robinson HHJ dismissed the Claimant’s appeal taking the view that the Claimant’s solicitors had failed to engage with the Defendant’s solicitors in any meaningful way.

The Claimant appealed to the Court of Appeal on two grounds: (i) Robinson HHJ had erred in upholding the decision of the District Judge that the Claimant had behaved unreasonably for the purpose of CPR 27.14(2)(g); and (ii) in any event Robinson HHJ had erred in law in setting out and then applying his guidance, derived from the approach to relief from sanctions under CPR 3.9, to CPR 27.14(2)(g).

CPR 27.14(2)(g): Procedure and relevant authorities

CPR 27.14 provides that where a claim is allocated to the Small Claims Track:

“(2) The court may not order a party to pay a sum to another party in respect of that other party's costs, fees and expenses, including those relating to an appeal, except –

…

(g) such further costs as the court may assess by the summary procedure and order to be paid by a party who has behaved unreasonably…”

…

(3) A party's rejection of an offer in settlement will not of itself constitute unreasonable behaviour under paragraph (2)(g) but the court may take it into consideration when it is applying the unreasonableness test."

In addition, the general rule under rule 38.6(1) that "a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant” does not apply to the Small Claims Track pursuant to CPR 38.6(3).

The appeal in Orton centred around three decisions relied upon to varying degrees by the parties: (i) Willow Court Management Co (1985) v Alexander [2016] UKUT 290 (LC); (ii) Lea v GP Ilfracombe Management Co Ltd [2024] EWCA Civ 1241; and (iii) Dammermann v Lanyon Bowder LLP [2017] EWCA Civ 269.

Willow Court concerned the interpretation of rule 13(1)(b) of the Tribunal procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (“the 2013 Rules”), which dictates that a costs order is made only in limited circumstances, one of which is “if a person has acted unreasonably in bringing, defending or conducting proceedings”. At para 20, the Upper Tribunal reviewed the decision of Sir Thomas Bingham MR in Ridehalgh v Horsefield [1994] Ch 205, finding it to be sufficiently illuminating on the meaning of unreasonable: “[…] conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. […] The acid test is whether the conduct permits of a reasonable explanation."

In Lea, Coulson LJ, considering rule 13(1)(b) of the 2013 Rules found at para 9 that the term "unreasonable" may include vexatious behaviour or harassment, but does not require it. He then reiterated, at para 14, that it would not be appropriate for the Court to set down general guidelines on the meaning of "unreasonable" and declined to do so, stating that the case involved an application of the Willow Court/Ridehalgh approach.

Dammermann related to the interpretation of CPR 27.14(2)(g). The Court concluded that that rejection of an offer as the only relevant item of behaviour was insufficient to amount to unreasonable behaviour. The Court, although unconvinced that general guidance on unreasonable behaviour could be given, endorsed the dictum of Sir Thomas Bindham MR in Ridehalgh.

Court of Appeal Decision

Cockerill LJ, with Bean and Andrews LJJ agreeing, reversed the decision of the lower court and allowed the appeal. Cockerill LJ stressed that a key feature of the Small Claims Track is its “costs neutral” environment which is not narrow and extends to disapplying costs rules as to discontinuance and Part 36: it follows that the “unreasonable behaviour” provision must not be construed widely [75-82].

When considering the relevant authorities, Cockerill LJ issued caution that Lord Bingham’s “acid test” formulation from Ridehalgh should not become divorced from the context which informs its meaning. In addition, the Court warned against the use of the Denton criteria to guide any assessment of unreasonable conduct [83-90].

On the facts of the case, Cockerill LJ found that the Defendant’s letters should not have been considered offers but were rather “invitations to discontinue’: essentially rejections and ultiamta” [93]. The District Judge had been wrong to approach his analysis on the basis that both parties had made offers and CPR 27.14(3) was engaged. Moreover, the Claimant’s decision to discontinue a claim shortly before trial due to the cost of legal representation outweighing any potential damages was a common commercial reality and did not inherently constitute “unreasonable conduct”.

The case is a clear indication that the court will not be willing to allow an inequality of arms to abuse the Small Claims Track: disapplication of the costs-neutral regime has to be justified by something which was “unambiguously unreasonable” [98].

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