Costs on the small claims track: when CPR 27.14(2)(g) actually bites

CPR 27.14(2)(g) allows a costs order on the small claims track where a party has behaved unreasonably. It is argued far more often than it succeeds, and after Orton v Barclays Bank UK Plc [2026] EWCA Civ 1025 the exception has to be read narrowly, because the track is built so that each side ordinarily bears its own costs.

This guide sets out what the rule permits, how the unreasonable behaviour test developed, and where the line has actually fallen in the two appellate decisions that matter.

Who is this guide for?

Anyone running or defending claims that end up on the small claims track. In practice that means high-volume consumer work, which is where the argument arises most: undisclosed commission claims, motor and credit disputes, small contract and consumer claims, and the residual PPI and Plevin caseload. It is equally for the defendant side, where standard correspondence templates are the thing most likely to create a problem.

It assumes you know how allocation works and does not explain the track itself. What it addresses is the narrower question of when a costs order becomes available on a track designed to keep costs out.

What can actually be recovered on the small claims track?

The starting point in CPR Part 27 is that the court may not order a party to pay another party’s costs except in the categories the rule sets out. Those categories cover the fixed costs attributable to issuing the claim, court fees, limited witness expenses and loss of earnings, the capped experts’ fees, and a small number of further situations including where the court has made a summary assessment on a specific application.

Then there is paragraph (2)(g), which allows costs where a party has behaved unreasonably. It is the only category that turns on conduct rather than on a category of expenditure, and it is the one that gets argued.

The design point is what makes the difference. The track exists to give litigants a proportionate route for low-value disputes without exposing them to an adverse costs risk that would exceed the sum in issue. An exception read generously would reintroduce exactly the risk the track was built to remove.

That design has a consequence worth spelling out to clients, because it is counter-intuitive. A party can conduct itself in a way the court plainly disapproves of and still face no costs consequence, since disapproval and unreasonableness are not the same finding, and the track was constructed on the premise that the second is rare. Practitioners used to conduct arguments on the fast or multi track, where the discretion in Part 44 is wide and the court is accustomed to marking behaviour through costs, tend to underestimate how much narrower the small claims position is.

How did the unreasonable behaviour test develop?

The word “unreasonable” is borrowed rather than defined. Courts applying (2)(g) have taken it from Ridehalgh v Horsefield [1994] Ch 205, the wasted costs authority, where the working question is whether the conduct permits of a reasonable explanation. Conduct can be misguided, optimistic or plainly wrong and still permit of an explanation. That is a demanding threshold and it was chosen deliberately.

Dammermann v Lanyon Bowdler LLP [2017] EWCA Civ 269 applied that approach to the small claims track and was, until 2026, the only appellate authority of any real substance on the point.

Orton adds a second layer, and it is the more useful one. Cockerill LJ, sitting as Deputy Head of Civil Justice, reasoned from the architecture of the track rather than from the wording of the exception. Because a small claim is designed so that the losing party pays little or nothing beyond fixed costs, an exception wide enough to catch ordinary hard-fought conduct would dismantle the design it sits inside. She also warned against reaching for other unreasonableness tests by analogy, Denton in particular, since a test built for relief from sanctions answers a different question in a different setting. We covered the judgment and what it changes when it was handed down.

What has and has not crossed the line

The two appellate decisions are doing different jobs, and reading them together is what produces a usable line. Dammermann supplies the standard, borrowed from a wasted costs context where the courts had already spent decades working out how much latitude to give a party whose conduct looks poor in hindsight. Orton supplies the reason that standard is the right one for this track rather than a different one, which matters because a standard without a rationale tends to drift as it is applied. The table below sets out where the conduct in those cases fell, with the obiter observation marked as such.

What to do before you apply

A short sequence, worth running in order rather than reaching for the application first.

1. Identify the specific conduct. Not the shape of the litigation, not the other side’s general approach. One or two identifiable acts, with dates.
2. Ask whether it permits of a reasonable explanation. If a competent opponent could give one, the application will fail whatever you think of the explanation.
3. Check the allocation. Conduct before allocation is judged against the track the claim was always going to be on, not the one you would have preferred.
4. Read your own correspondence first. Applications under (2)(g) invite the court to look at both sides, and Orton is a judgment about the applicant’s letters as much as the respondent’s conduct.
5. Price the downside. A failed application on the small claims track adds cost to a matter where cost recovery is the thing you were trying to achieve.

Common mistakes

Most failed applications under (2)(g) share a root cause, which is that the applicant has described a pattern rather than an act, and a pattern almost always permits of an explanation even where each element of it looks unattractive.

Treating discontinuance as an admission. A claimant who walks away has usually made a commercial judgment, and Orton confirms that a commercial judgment is not unreasonable conduct. The discontinuance itself tells you almost nothing.

Importing Denton. It is a familiar framework and it is the wrong one. Cockerill LJ said as much.

Standard letters that assert the wrong costs position. This is the most common and the most fixable. Pull the templates used on both sides, find every sentence that asserts or implies a costs consequence, and check each against what CPR 27.14 actually permits at that value. Most of what needs changing sits in the precedent bank rather than in anyone’s judgment on a given file.

Forgetting the economics have moved anyway. Recovery on low-value work is shaped by more than the conduct exception, and the July court fee increases changed the arithmetic on claims of this size independently of anything in this guide.

Official sources

The rule itself sits in Part 27 of the Civil Procedure Rules, maintained on the Ministry of Justice procedure rules pages. The first appeal in Orton, [2025] EWCC 12, is on Find Case Law and is worth reading alongside the Court of Appeal judgment, because the reasoning that was overturned shows how the wide reading is usually put.

Last updated: 6 August 2026.