Orton v Barclays: CPR 27.14 Unreasonable Behaviour Costs [2026] EWCA Civ 1025
Fixed Costs — 2026-07-31
In Steven Orton v Barclays Bank UK PLC, the Court of Appeal in 2026 allowed an appeal against a small claims costs order and gave important guidance on CPR 27.14(2)(g). The decision confirms that unreasonable behaviour must be assessed against the firm starting point of costs neutrality. Discontinuance, unsuccessful pursuit of an arguable claim and failure to accept an opponent's ultimatum do not, without more, justify an adverse costs order.
Overview
Date: 31 July 2026
Judges: Lady Justice Cockerill, Lady Justice Andrews and Lord Justice Bean
Court: Court of Appeal, Civil Division
Hearing date: 8 July 2026
Citation: [2026] EWCA Civ 1025
Nature of Proceedings: Second appeal concerning an unreasonable behaviour costs order under CPR 27.14(2)(g) following discontinuance of a small claim
Key Issues:
- How CPR 27.14(2)(g) should be applied within the costs neutral small claims regime
- Whether discontinuing an arguable claim shortly before trial for commercial reasons was unreasonable behaviour
- Whether a party can create adverse costs consequences through time limited invitations to discontinue
- Whether the Denton relief from sanctions approach has any place in the CPR 27.14(2)(g) assessment
In Steven Orton v Barclays Bank UK PLC, the Court of Appeal in 2026 allowed an appeal against a small claims costs order and gave important guidance on CPR 27.14(2)(g). The decision confirms that unreasonable behaviour must be assessed against the firm starting point of costs neutrality. Discontinuance, unsuccessful pursuit of an arguable claim and failure to accept an opponent's ultimatum do not, without more, justify an adverse costs order.
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The Facts
Mr Orton entered into a credit agreement with Barclays in 2004 and took out payment protection insurance. Barclays received commission of between 59.7% and 84.6% of the monthly premiums. Following a complaint, Barclays paid regulatory redress, but Mr Orton claimed that this did not compensate his full loss. In July 2023 he issued an unfair relationship claim under sections 140A and 140B of the Consumer Credit Act 1974 for about £2,750 plus interest. The court allocated the case to the small claims track at the outset.
Barclays defended the claim on limitation, unfairness and quantum. Its solicitors repeatedly invited Mr Orton to discontinue, initially asserting costs consequences that did not reflect the small claims rules. The Court of Appeal noted at [31] that the early correspondence wrongly ignored both the allocation and the express disapplication of the ordinary costs consequences of discontinuance.
Mr Orton made several monetary offers. Barclays did not move from its demand for discontinuance on a drop hands basis. On 22 May 2024 it required discontinuance by noon on 31 May, failing which it said that it would prepare for trial, instruct counsel and seek costs under CPR 27.14(2)(g). The parties served their trial evidence on 3 and 4 June. On 7 June, twelve days before trial, Mr Orton discontinued.
His solicitor explained that this was a commercial decision made after reviewing Barclays' evidence. Counsel would be needed, and the irrecoverable fee would substantially absorb any award. Barclays applied for costs. District Judge Lindsay held that Mr Orton had behaved unreasonably by failing to accept the 22 May demand and by taking the commercial decision too late. She ordered him to pay £2,132.88. HHJ Robinson BEM dismissed his first appeal and proposed a four stage framework influenced by the Denton approach.
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The Court of Appeal's Decision
Lady Justice Cockerill gave the judgment of the court. Lady Justice Andrews and Lord Justice Bean agreed. The Court allowed both grounds of appeal, set aside the District Judge's order and made no order as to the costs of the appeal.
1. Costs Neutrality Is the Essential Starting Point
The Court began with the structure of the small claims track. CPR 27.14 prevents an award of costs except within defined exceptions. Part 36 does not apply. CPR 38.6(3) also disapplies the ordinary rule that a discontinuing claimant pays the defendant's costs.
Those provisions form a deliberate package. At [80] to [82], the Court described the benefit and burden of a regime designed for claims generally worth less than £10,000 and for litigants who may have no representation. The exception for unreasonable behaviour must be read in a way that preserves that scheme. It therefore must not be construed widely.
This affects both the legal test and the court's treatment of the evidence. The question is not whether the litigation could have been conducted more efficiently, whether a different lawyer would have advised an earlier decision, or whether costs might have been saved. The party seeking costs must show conduct sufficiently outside the norm to displace the starting entitlement to costs neutrality.
2. The Burden Remains on the Party Seeking Costs
The Court reviewed Ridehalgh v Horsefield, Dammermann v Lanyon Bowder LLP, Willow Court Management Co (1985) Ltd v Alexander and Lea v GP Ilfracombe Management Co Ltd. The familiar acid test asks whether the conduct permits of a reasonable explanation. However, that formulation must remain anchored to the costs regime in which it is applied.
The Court distilled the safe guidance at [90]. All the facts matter, including the breadth of small claims costs neutrality. The applicant bears the burden:
> “The burden of proof is on the party alleging unreasonableness to establish it.”
Conduct without a reasonable explanation may qualify. Vexatious conduct, including bringing a claim with no prospect of success, will usually be unreasonable. By contrast, withdrawal or unsuccessful pursuit of a claim should not itself be treated as unreasonable. Courts must also avoid deterring parties from using the small claims track.
This was important because the decisions below had effectively reversed the burden. Once Barclays alleged unreasonableness, the focus shifted to whether Mr Orton could prove that his commercial decision was sufficiently convincing. The correct question was whether Barclays had proved conduct that unambiguously justified departing from costs neutrality.
3. Denton Does Not Supply a Four Stage Test
The Circuit Judge had proposed a four stage framework asking whether the conduct was proved, whether it was serious or significant, whether there was a good reason and whether another reasonable explanation emerged. The Court of Appeal rejected that approach at [87] to [90] and [112] to [114].
Relief from sanctions starts with an established breach of a rule. The defaulting party must explain that breach, and seriousness and significance have a defined role. CPR 27.14(2)(g) starts somewhere different: a party is entitled not to pay the opponent's costs unless the statutory exception is proved.
Importing Denton risks turning a narrow exception into a detailed inquiry in which the respondent must justify every imperfect litigation choice. It may also increase costs by encouraging evidence and argument about the quality of an explanation. The Court held that no concepts of seriousness or significance are needed and no further gloss should be added to the rule.
4. An Invitation to Surrender Is Not an Offer
The decisions below treated Barclays' letters as offers, particularly the 22 May email described as the final drop hands offer. The Court of Appeal held at [91] to [93] that this premise was wrong.
Mr Orton had made several offers to accept less than his claim. Barclays offered no concession. Its letters required him to abandon the case and imposed deadlines backed by threats of costs. They were rejections and ultimata, not offers to settle. CPR 27.14(3), which permits rejection of an offer to be considered without making it unreasonable of itself, was therefore not engaged on the assumed basis.
This distinction matters in practice. A party cannot acquire Part 36 type protection by setting a short deadline in correspondence when Part 36 is expressly disapplied. Nor does labelling a demand as a drop hands offer alter its substance where the sender gives up nothing.
5. Commercial Discontinuance of an Arguable Claim Was Not Unreasonable
Before the Court of Appeal, the parties agreed that Mr Orton's underlying claim was arguable. His decision followed review of Barclays' trial material and the conclusion that counsel would be needed. The cost would substantially erode the value of the claim.
The Court rejected the view that this explanation made no sense merely because some relevant considerations existed earlier. Mr Orton did not necessarily know from the outset the eventual cost of counsel or that counsel would be required. The issues had already narrowed once, and they might have narrowed again. The conclusion that nine further days were too long also depended on treating Barclays' deadline as legally significant.
The Court drew on McPherson v BNP Paribas and Lastminute.com v Moskalevitch. A claimant should not be deterred from abandoning a claim by a costs risk that would probably not arise if the claim proceeded to trial and failed. An unsuccessful result is not proof of unreasonable conduct, and discontinuance should not be stigmatised where the underlying claim is arguable.
6. Correspondence Cannot Rewrite the Small Claims Costs Regime
The Court tested the decisions below by considering their practical consequences at [105] to [110]. If they stood, a party could be worse off for discontinuing on commercial grounds than for attending trial and losing. A litigant could face a costs penalty for failing to meet a deadline far shorter than the 21 days associated with Part 36, even though Part 36 does not apply. Parties would also be pushed towards optimal litigation conduct in a procedure designed for people with limited resources.
Most seriously, a well resourced party could use repeated demands and costs threats to correspond its way out of the costs neutral regime. The Court said that this:
> “would blow the scheme of the Small Claims Track to bits.”
The concern applies equally to claimants and defendants. Neither side may use unilateral deadlines and threatened costs applications to create leverage that the rules deliberately withhold.
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Practical Implications
For Costs Lawyers
1. Begin with costs neutrality. Any CPR 27.14(2)(g) submission should start with the breadth of the small claims costs restrictions, including the disapplication of Part 36 and the ordinary discontinuance rule.
2. Keep the burden on the applicant. The party seeking costs must prove unreasonable behaviour. The respondent does not have to demonstrate that every decision was optimal or supported by a detailed evidential explanation.
3. Identify conduct beyond withdrawal or failure. Discontinuance, rejection of an offer and unsuccessful pursuit of an arguable claim do not establish unreasonableness of themselves. The application must identify conduct that has no reasonable explanation when viewed in the proper context.
4. Do not import Denton. Seriousness, significance and a staged inquiry into good reason are not the CPR 27.14(2)(g) test. The Court of Appeal expressly rejected that gloss.
5. Examine the substance of alleged offers. A demand that the opponent abandon the claim may be an ultimatum rather than an offer. A costs submission should analyse what the sender actually proposed to give up.
For Litigation Practitioners
1. Do not overstate costs rights in small claims correspondence. CPR 38.6 does not impose the ordinary discontinuance costs rule after allocation to the small claims track. Part 36 also does not apply.
2. Deadlines do not create a private costs code. A short deadline backed by a threat under CPR 27.14(2)(g) does not acquire the effect of a Part 36 offer. The court will examine the substance and context of the communication.
3. Commercial review may properly occur close to trial. A party may reassess an arguable claim after exchange of evidence and discontinue because irrecoverable representation costs make trial uneconomic. That does not become unreasonable merely because an opponent wanted the decision sooner.
4. Record the real reason for discontinuance. Although the respondent does not bear the burden of disproving unreasonableness, a clear contemporary record of the commercial assessment can resolve factual disputes and reduce the scope of a later costs application.
5. Reserve CPR 27.14(2)(g) for clear cases. Applications based on imperfect engagement, delay in making a commercial choice or refusal to capitulate risk generating satellite costs that undermine the purpose of the track.
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Conclusion
Orton v Barclays is now the leading appellate explanation of how unreasonable behaviour costs should be approached on the small claims track. The acid test remains whether the conduct permits of a reasonable explanation, but it cannot be separated from the strong costs neutral starting point. The applicant bears the burden, and withdrawal or unsuccessful pursuit of an arguable claim is not enough.
The decision also gives a practical warning about litigation correspondence. Parties may negotiate robustly, but they cannot manufacture Part 36 type consequences through unilateral deadlines or describe a demand for surrender as an offer. The Court's rejection of the Denton inspired framework should also keep CPR 27.14(2)(g) applications short, focused and exceptional.
For costs practitioners, the central lesson is that the rule protects the integrity of the small claims scheme rather than rewarding whichever party can show that the opponent might have litigated more efficiently. This Mackenzie Costs analysis should be read alongside the full judgment when advising on any application under CPR 27.14(2)(g).
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Citation: Steven Orton v Barclays Bank UK PLC [2026] EWCA Civ 1025
Full judgment available at: The National Archives
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