A well-established principle of costs recovery, is that the starting point on costs in the Small Claim Track, is that neither party is entitled to their costs. There can be some exceptions to this rule, including where one party had behaved unreasonably. This position was recently examined in the matter of Orton v Barclays Bank UK Plc [2026] EWCA Civ 1025.
In Orton, the Claimant issues a low value money claim, which was allocated to the Small Claims Track. Twelve days before trial, the Claimant discontinued the claim on the basis that it was no longer commercially viable. Following issue, and prior to withdrawal, the Defendant had invited the Claimant to discontinue on a number of occasions.
On a costs application to the County Court, the Judge found that the Claimant had behaved unreasonably and ordered the Defendant’s costs to be paid. The Claimant appealed on a first occasion, albeit the Judge agreed with the finding of unreasonableness upheld the original decision, using the Denton framework (which was primarily designed to enable parties to apply for relief when they had failed to comply with a direction) in reaching a conclusion.
The four questions asked under the Denton framework are established as being:
- whether the conduct was proved
- whether it was sufficiently serious or significant
- whether there was a good reason explaining it
- whether any other reasonable explanation emerged from the circumstances.
The Claimant appealed on a further occasion, to the Court of Appeal.
The Court of Appeal was of the opinion that the starting point of there being no entitlement to costs in the Small Claims Track had to be given weight due to its integral part of the costs regime. Indeed, they concluded that the conduct must be sufficiently unreasonable to move from this starting point, and the withdrawal of a claim should not itself be regarded as unreasonable without considering all of the facts of the claim.
The Court of Appeal also confirmed that the application of the Denton framework to the question of unreasonableness was inappropriate, as the two scenarios arose from very different procedural positions.
The County Court had taken the view initially, that the invitations to withdraw sent by the Defendant were offers to settle. However, the Court of Appeal stated that this was not the correct approach, and equally, the Civil Procedure Rules specifically confirm that a rejection of an offer does not amount to unreasonable behaviour.
The Court of Appeal further considered that the evidential issues in the claim had changed following issue, necessitating the need for legal representation, which in turn made the claim commercially unviable. The Court of Appeal concluded that a Claimant should be given the opportunity to assess the merits on more the one occasion, and to make a sensible decision not to proceed at any given time without the threat of costs penalties.
Overall, the Court of appeal concluded that no costs were payable and overturned the previous decisions. It concluded that to impose costs on the basis of the lower costs would fly against the intended intentions for the Small Claims Track and enable a well-financed party to correspond its way into costs recovery, where no such costs recovery would usually apply. Cockerill LJ specifically stated that to allow costs would be to ‘blow the scheme of the small claims track to bits’.
The decision serves to remind that the Small Claims Track is designed to encourage access to justice for those representing themselves without the threat of adverse costs.
