A circuit judge’s ruling on costs penalties for unreasonable behaviour 'would blow the scheme of the small claims track to bits' if found to be correct, three Court of Appeal judges have ruled. In Steven Orton v Barclays Bank, the judges allowed an appeal against a ruling that the conduct of a party who discontinued a mis-selling claim shortly before trial amounted to 'unreasonable behaviour' under the Civil Procedure Rules.
Lady Justice Cockerill, with whom Lady Justice Andrews and Lord Justice Bean agreed, observed that the ruling would mean that a party in a supposedly costs-neutral regime might find themselves worse off by deciding to discontinue their case than if they turned up and fought it in court.
The case originated in a claim against Barclays for £2,750 plus interest filed in 2023 by now defunct claims firm SSB Law and allocated to the small claims track. Barclays defended the claim, stating it had no real prospect of success and setting deadlines for it to be discontinued on a 'drop hands' basis.
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Following delays caused by SSB's collapse, the case was listed for June 2024. The claimant's new firm, Consumer Rights Solicitors, made four successive offers to settle, for decreasing sums. In what the appeal judges described as 'somewhat bellicose' tones, Barclays' solicitors, Simmons & Simmons, replied that costs consequences would follow unless the claim was discontinued within 10 days.
The following month, 12 days before the listed trial, claimant Steven Orton served notice of discontinuance. He described this as a 'commercial decision' based on his realisation that his counsel fees would wipe out any recovery. Following a hearing requested by Simmons & Simmons to deal with costs, the district judge in the county court at Middlesbrough made an order of £2,132.88; on appeal a circuit judge upheld the award.
Orton appealed on the ground that the circuit judge had wrongly applied the Civil Procedure Rules for the small claims track. The judge's approach had 'set a standard of conduct which is far too high and stringent', the appeal judges heard. The court had treated Barclays' letter as if it created a Part 36-type deadline 'which is inimicable to the costs neutral scheme'. Barclays argued that the district and circuit judges had correctly interpreted the authorities.
In lead judgment allowing the appeal, Lady Justice Cockerill noted that her decision - following a full day of legal argument conducted by senior KCs on both sides - turned on points that were 'either not apparent or not clear' to the lower judges. The small claims track 'is not Rolls Building litigation' and its costs neutrality is 'a very significant part of its ethos', she said. The judges had been wrong to treat Barclays' letters as offers to settle and wrong to treat as unreasonable the claimant's decision to discontinue.
If the lower courts' decision is correct, she said, 'it opens the doors to well-resourced parties corresponding their way out of the costs neutral regime. That approach ... would blow the scheme of the small claims track to bits. Similarly – and equally unacceptably – a claimant could pressure a defendant by repeated offers to settle backed by deadlines and intimations of costs applications if those offers are not accepted promptly.'
She set aside the costs order of the district judge and noted that the parties had agreed that no costs order should be made in the appeal.
Robert Weir KC, Jonathan Butters and Thomas Westwell, instructed by Consumer Rights Solicitors, appeared for Steven Orton. Roger Mallalieu KC and Karl Nash, instructed by Simmons & Simmons LLP, appeared for Barclays
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