Small Claims Costs: Court of Appeal Clarifies When Costs Can Be Awarded After Discontinuance

In Orton v Barclays Bank UK PLC [2026] EWCA Civ 1025 (31 July 2026), the Court of Appeal has recently provided important precedence on the circumstances in which costs can be awarded in Small Claims Track proceedings.

The decision confirms the general costs-neutral regime within the Small Claims Track; that each party bears their own legal costs regardless of who wins or loses the case.

The court must consider this regime before finding that a party has behaved unreasonably.

Background

Mr Orton brought a claim against Barclays concerning undisclosed commission paid on a Payment Protection Insurance (PPI) policy. Although Barclays had previously paid compensation following a complaint, Mr Orton pursued a further claim for approximately £2,750 under sections 140A and 140B of the Consumer Credit Act 1974.

The claim was allocated to the Small Claims Track. Barclays repeatedly invited Mr Orton to discontinue the claim and offered to waive any claim for costs if he did so by a specified date.

Twelve days before trial, Mr Orton discontinued the claim after concluding that the costs of pursuing it, particularly counsel’s fees, would outweigh any likely recovery.

Lower Courts Decision

Following discontinuance, Barclays sought costs under CPR 27.14(2)(g), arguing that Mr Orton had acted unreasonably by pursuing the claim for so long and discontinuing shortly before trial.

The District Judge agreed and ordered Mr Orton to pay Barclays’ costs of £2,132.88. The court considered that Mr Orton should have accepted Barclays’ position much earlier and that the late discontinuance caused Barclays to incur unnecessary costs.

Mr Orton appealed, but the Circuit Judge upheld the costs order, finding that there was no reasonable explanation for the delay in discontinuing the claim.

Court of Appeal Decision

The Court of Appeal allowed the appeal and set aside the costs order.

The court held that both judges had approached the issue incorrectly because they failed to start from the fundamental principle that the Small Claims Track is intended to be a costs-neutral regime. Costs orders are the exception, not the rule.

The Court emphasised that:

• The burden is on the party seeking costs to prove unreasonable conduct.
• The costs-neutral regime must be given real weight.
• A party discontinuing a claim does not automatically act unreasonably.
• Making a commercial decision to discontinue shortly before trial will not, of itself, justify a costs order.
• The exception in CPR 27.14(2)(g) should be construed narrowly.

Key Takeaway

The decision confirms that courts should be slow to depart from the costs-neutral regime that underpins the Small Claims Track.

To obtain costs under CPR 27.14(2)(g), a party must establish conduct that is clearly and unambiguously unreasonable, rather than conduct that is simply unsuccessful, mistaken, or motivated by commercial considerations.

For litigants, the decision will be a welcome reminder that the withdrawal of a claim, or the unsuccessful pursuit of one, does not of itself amount to unreasonable behaviour. An adverse costs order will generally only be justified where a party’s conduct falls plainly outside the bounds of reasonable litigation conduct.

Written by: Nesrine Bokhamy, Trainee Solicitor, CS Litigation

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