Small claims track costs are now markedly harder to recover. In Orton v Barclays Bank UK Plc [2026] EWCA Civ 1025, handed down on 31 July 2026, the Court of Appeal held that the unreasonable behaviour exception in CPR 27.14(2)(g) must be read narrowly because the track is designed to be costs-neutral, and that discontinuing a small claim for commercial reasons is not by itself unreasonable.
What did the Court of Appeal decide?
Cockerill LJ, sitting as Deputy Head of Civil Justice, allowed a second appeal and set aside the £2,133 costs order made against Steven Orton in the county court at Middlesbrough. Her reasoning begins with the architecture of the track rather than with the wording of the exception, and that is what gives the judgment its reach. A small claim is built so that the losing party pays little or nothing beyond fixed costs. An exception wide enough to catch ordinary hard-fought litigation conduct would quietly dismantle the design it sits inside. She put the point less gently than that, saying the approach taken below would blow the scheme of the small claims track to bits.
The second strand of the judgment concerns borrowing. Practitioners arguing 27.14(2)(g) have long reached for other unreasonableness tests, and Denton is the obvious candidate, but Cockerill LJ warned that analogies of that kind may not help. A test built for relief from sanctions answers a different question in a different procedural setting, and carries a standard the small claims track was never meant to bear.
How a £2,750 claim produced a £2,133 costs order
Orton’s claim was ordinary Plevin territory: roughly £2,750 plus interest, arising from undisclosed commission on a PPI policy, and allocated, as claims of that size almost always are, to the small claims track. What followed was less ordinary. Barclays’ solicitors pressed for discontinuance on short deadlines and threatened summary judgment, strike out and costs, in correspondence Cockerill LJ described as bombastic. Orton answered with a series of offers that came down from £3,250 to £1,690, none of which was accepted, and twelve days before trial he discontinued on the straightforward basis that counsel’s fees had made a claim of that value uneconomic to run.
District Judge Lindsay awarded Barclays £2,133 under CPR 27.14(2)(g) on 16 July 2024, and His Honour Judge Robinson BEM dismissed the first appeal in [2025] EWCC 12. It therefore took a second appeal, and the Deputy Head of Civil Justice, to restore what a good many practitioners had assumed was already the position.
Why does the track itself narrow the test?
CPR 27.14 exists to keep costs out of low-value litigation. Beyond fixed commencement costs, court fees, limited witness expenses and the capped experts’ fees, it permits a costs order only in defined circumstances, and paragraph (2)(g), covering conduct that was unreasonable, is the one that actually gets argued.
Its difficulty is that it carries no internal limit. Read on its own terms, (2)(g) invites a judge to measure the parties’ behaviour against a general standard of reasonableness, which in a hard-fought PPI claim will nearly always turn up something to criticise on one side or the other. Orton holds that this is the wrong comparison, because the exception takes its meaning from the regime it qualifies, and where the design assumption is that each side bears its own costs, conduct has to sit some distance beyond robust before the exception engages at all.
That reading sits comfortably with Dammermann v Lanyon Bowdler LLP [2017] EWCA Civ 269, which until now was the only appellate authority of any substance on the point. The judgment is better read as reinforcing Dammermann than as departing from it, with the emphasis shifted from the quality of the conduct to the character of the regime in which the conduct occurred.
What should firms change in their standard correspondence?
The obvious audience is defendant firms handling volume consumer claims, and the message there is blunt. Correspondence asserting a costs risk that the allocation does not support is now more likely to be quoted back at you than to produce a settlement, and the deadline-backed demands for discontinuance in this case did not win the costs order so much as lose it.
It would be a mistake, though, to read the judgment as one-sided. Cockerill LJ added, without needing to decide the point, that a claimant pressing repeated deadline-backed offers with intimations of costs applications would be behaving just as unacceptably. Firms running high volumes of low-value claims should treat that as a warning rather than an aside, particularly where a standard offer template is doing the pressing on their behalf.
The remedial exercise is small. Pull the standard letters used on both sides, find every sentence that asserts or implies a costs consequence, and check each one against what CPR 27.14 actually permits on a claim of that value. Most of what needs changing will be in the templates rather than in anyone’s judgment.
One further point is worth noting for anyone weighing an appeal in this area. There has been no comparable appellate guidance since 2017, and the fact that this one came from the Deputy Head of Civil Justice, in a second appeal on a rule argued daily in the county court, suggests it is intended to settle the question rather than to add to it. It lands alongside a run of other small claims and procedural changes we covered in this month’s roundup on small claims and family procedure, and the economics of running low-value work shifted again when court fees rose on 13 July.
If you conduct or defend small claims, the bar for recovering costs under CPR 27.14(2)(g) has just been raised. Aggressive pre-trial correspondence that ignores allocation and asserts the wrong costs regime is a liability rather than a lever, and discontinuing for commercial reasons is not by itself unreasonable. Review your standard letters on both sides.