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Orton v Barclays [2026]: Discontinuing a Small Claim Is Not in Itself Unreasonable

18 October 20268 min readLast reviewed 18 October 2026

Key points

In Orton v Barclays Bank UK Plc [2026] EWCA Civ 1025 (31 July 2026), the Court of Appeal set aside a £2,132.88 costs order made under CPR 27.14(2)(g) against a claimant who had discontinued an arguable small claim 12 days before trial.
The costs-neutral regime of the Small Claims Track is the starting point and must be given real weight, so the unreasonable behaviour provision must not be construed widely. The burden is on the party alleging unreasonableness.
Withdrawing a claim, or pursuing one unsuccessfully, should not itself be considered unreasonable. Vexatious behaviour, such as issuing proceedings with no prospect of success, will usually be unreasonable.
The defendant's letters inviting discontinuance on a drop hands basis by a deadline were not offers, because they conceded nothing. CPR 27.14(3), on rejecting an offer in settlement, was not engaged.
The court rejected a Denton-style approach and the circuit judge's four-stage test, and warned that the opposite result would let well-resourced parties correspond their way out of costs neutrality.
For housing disrepair claims allocated to the Small Claims Track, a landlord's letter that only demands discontinuance by a deadline, conceding nothing, is not an offer, and letting its deadline pass is not, without more, unreasonable behaviour.

A landlord’s solicitors write: discontinue by Friday, each side to bear its own costs, or we will seek our costs. On the Small Claims Track, Orton v Barclays Bank UK Plc [2026] EWCA Civ 1025 takes much of the force out of that letter. The Court of Appeal held that the finding against a claimant who discontinued an arguable small claim 12 days before trial, for commercial reasons, could not stand, and that the defendant’s “drop hands” letters, which conceded nothing, were not offers at all.

The claim was about payment protection insurance, not housing disrepair, and the judgment does not mention housing. But the decision is about CPR 27.14(2)(g) itself, the route to a costs order for unreasonable behaviour on the Small Claims Track, so it applies to every claim allocated to that track, including housing disrepair claims.

Quick answer

On the Small Claims Track, discontinuing a claim, or pursuing one that fails, is not in itself unreasonable behaviour under CPR 27.14(2)(g). The party alleging unreasonableness has to prove it, against a starting point of costs neutrality that the court must give real weight. A letter that only invites the other side to discontinue concedes nothing, so it is not an offer in settlement, and CPR 27.14(3), on rejecting an offer, is not engaged.

What happened in Orton v Barclays?

Mr Orton brought a claim against Barclays under sections 140A and 140B of the Consumer Credit Act 1974 for about £2,750 plus interest: the balance of his loss on a payment protection insurance policy on which Barclays had received a very high, undisclosed commission. The claim was allocated to the Small Claims Track.

Barclays’ solicitors wrote several times inviting him to discontinue by a deadline on a “drop hands” basis, with each side bearing its own costs, and warning of costs consequences if he did not. The Court of Appeal noted that the early letters wrongly ignored the allocation and asserted costs rules that do not apply on the Small Claims Track. Mr Orton, for his part, made offers to settle at £3,250, £2,750, £1,990 and finally £1,690, each inclusive of costs. None was accepted.

On 22 May 2024 Barclays’ solicitors emailed a final deadline of 12pm on 31 May: discontinue on a drop hands basis by then, or they would prepare for the trial listed on 19 June, including instructing counsel, and seek costs, including under CPR 27.14(2)(g). Mr Orton discontinued on 7 June, 12 days before trial. The evidence, in a witness statement from Mr Hussain, a solicitor at Consumer Rights Solicitors, was that Mr Orton had made a commercial decision himself: having reviewed Barclays’ trial evidence, he concluded that he would need counsel, whose fees would essentially absorb the value of the claim.

District Judge Lindsay held that he had behaved unreasonably by not accepting the final “drop hands offer” and by leaving his commercial decision too late, and ordered him to pay £2,132.88, the costs Barclays incurred after 31 May. HHJ Robinson BEM dismissed his appeal and set out a four-stage framework for applications under CPR 27.14(2)(g) as guidance.

What the Court of Appeal decided

Cockerill LJ, with whom Andrews LJ and Bean LJ agreed, allowed the appeal on both grounds and set the costs order aside. By agreement there was no order for the costs of the appeal itself, because of CPR 27.14(2) (at [115]). The judgment turns on three points (at [74]).

1. Costs neutrality is the starting point, and it must be given real weight

The Small Claims Track is “designed to be different”. CPR 27.14(2) bars costs orders except in the cases it lists, CPR 27.2(1)(g) disapplies Part 36, and CPR 38.6(3) disapplies the usual rule that a discontinuing claimant pays the defendant’s costs. That package shows how firm the commitment to costs neutrality is, so the unreasonable behaviour provision “must not be construed widely” (at [75]–[82]).

2. Tests borrowed from other contexts can mislead

Ridehalgh v Horsefield, the source of the familiar “acid test” of whether conduct permits of a reasonable explanation, was a wasted costs case. The court accepted the test but warned that, restated as a demand for an explanation, it can become divorced from the costs-neutral context. It held that eliding it into the Denton approach to relief from sanctions is wrong: Denton starts from an established default, while the small claims costs jurisdiction starts from an entitlement not to pay costs (at [86]–[89]). The circuit judge’s four-stage framework was unnecessary and, in the court’s words, “prone to lead to an approach to this provision which is both too generous to those invoking it and too likely to lead to escalation of costs” (at [113]–[114]).

3. The letters were not offers, and the claim was treated as arguable

An offer to settle signals a willingness to take less than you would get at trial. Mr Orton made repeated offers; Barclays “came not one step towards him”. In the court’s words the letters were “invitations to discontinue”: “essentially rejections and ultimata” (at [93]). Before the Court of Appeal it was acknowledged that, on closer analysis, it was wrong to describe them as offers. That concession had not been made before the district judge, and the point does not appear to have been taken on Mr Orton’s behalf there. She had therefore proceeded on the basis that both sides had made offers and that CPR 27.14(3) was engaged, which was wrong.

The second aspect: before the Court of Appeal it was expressly agreed that the matter should be approached on the basis that Mr Orton’s claim was arguable. That had not been conceded before the district judge, and Barclays’ stance that the claim was hopeless appears to have informed, to some degree, her scepticism about his commercial reason (at [94] and [100]). The court’s conclusion concerned a claimant who, in an arguable case, chose to discontinue (at [106]).

The guidance at paragraph 90

The court limited the safe guidance to be taken from the authorities to this:

whether a party has behaved unreasonably must be judged on all the facts, including the Small Claims Track context and the breadth of the costs neutrality regime which generally applies;
the burden of proof is on the party alleging unreasonableness;
the circumstances that qualify are those that do not permit of a reasonable explanation, the Ridehalgh “acid test”;
earlier cases are unlikely to help, but vexatious behaviour, such as issuing proceedings with no prospect of success, will usually be unreasonable, while withdrawing a claim or pursuing one unsuccessfully should not itself be considered unreasonable;
judges should bear in mind that it is undesirable to deter parties from using the track.

A departure from costs neutrality has to be justified by something unambiguously unreasonable (at [98]). The court also explained why the opposite result would be unacceptable. A claimant could be worse off discontinuing for commercial reasons than fighting the case and losing (at [107]). A party could be penalised in costs for not settling within a very short window, nine days in Orton, when no such penalty would be available under Part 36, which gives a 21-day period for reflection (at [108]). And it would open the door to well-resourced parties “corresponding their way out of the costs neutral regime” and, equally unacceptably, would let a claimant pressure a defendant with repeated offers to settle backed by deadlines and threats of costs applications if they were not accepted promptly (at [110]).

What it means for housing disrepair claims

Orton applies to any housing disrepair claim the court has allocated to the Small Claims Track. Where the tenant seeks an order for repairs, that is normally the track if the work is estimated at no more than £1,000 and any other damages claim is worth no more than £1,000 (CPR 26.9(1)(b)). A claim for damages only falls outside rule 26.9(1)(b); the Small Claims Track is then normally the track if the claim is worth no more than £10,000 (CPR 26.9(4)), subject to the personal injury limits in rule 26.9(1)(a).

Where a landlord’s solicitors press a tenant whose claim is on that track to discontinue by a deadline, each side bearing its own costs, with a threatened application under CPR 27.14(2)(g):

a letter that only demands discontinuance, conceding nothing, is not an offer, so letting its deadline pass is not the rejection of an offer under CPR 27.14(3);
discontinuing later, for a genuine commercial reason, is not unreasonable in itself;
the landlord carries the burden of proving unreasonable behaviour, against a costs-neutral starting point.

Orton does not make conduct irrelevant. Vexatious behaviour, such as issuing proceedings with no prospect of success, will usually be unreasonable, and a rejected genuine offer can still be taken into account under CPR 27.14(3). It remains sensible to engage with the correspondence, to make realistic offers as Mr Orton did, to keep a short note of why a claim is discontinued, and to check whether a letter described as a drop hands offer actually concedes anything. In Orton that point does not appear to have been taken before the district judge.

Where a claim ends before allocation, CPR 27.14 does not apply. Instead, CPR 46.13(3) allows the court, on a standard basis assessment, to restrict costs to those that would have been allowed on the track to which the claim would have been allocated: see our note on Smith v Wigan. The costs of a claim that settles before allocation are also covered in our note on Birmingham City Council v Lee.

What Orton does not decide

It concerns claims allocated to the Small Claims Track. On the other tracks, and where a claim is discontinued before allocation, the general rule in CPR 38.6(1) is that, unless the court orders otherwise, a discontinuing claimant pays the defendant’s costs incurred on or before the date the notice was served; for an unallocated claim the court may restrict them under CPR 46.13(3).
It does not decide which track a housing disrepair claim belongs on. That turns on CPR 26.9, including whether an order for repairs is sought and the value of the works and of any damages, and on the matters in CPR 26.13.
It was decided on the agreed footing that the claim was arguable. It does not protect vexatious conduct: issuing proceedings with no prospect of success will usually be unreasonable.

How DMD Costs Can Help

We draft and negotiate claimant housing disrepair costs for solicitor firms, including the track and allocation arguments that decide what is recoverable. See our housing disrepair costs draftsman service, or the legal costs glossary for the Small Claims Track costs rules in brief. The fee is fixed and agreed before any work begins.

Sources

Orton v Barclays Bank UK Plc [2026] EWCA Civ 1025 (Find Case Law)
CPR Part 27: the Small Claims Track (rules 27.2(1)(g) and 27.14)
CPR Part 38: discontinuance (rule 38.6)
CPR Part 26: Case Management – Preliminary Stage (rules 26.9 and 26.13)
CPR Part 46: Costs – Special Cases (rule 46.13)

Frequently asked questions

In Orton v Barclays Bank UK Plc [2026] EWCA Civ 1025, the Court of Appeal set aside a £2,132.88 costs order made under CPR 27.14(2)(g) against a claimant who discontinued an arguable small claim 12 days before trial. The finding that he had behaved unreasonably could not stand, and the defendant’s “drop hands” letters, which conceded nothing, were not offers to settle.

Not in itself. The Court of Appeal’s guidance at paragraph 90 is that the withdrawal of a claim, or the unsuccessful pursuit of one, should not itself be considered unreasonable. Vexatious behaviour, such as issuing proceedings with no prospect of the claim succeeding, will usually be unreasonable.

Not where it concedes nothing. In Orton the defendant’s letters invited the claimant to discontinue by a deadline, with each side bearing its own costs. The court held that they offered nothing: they were “invitations to discontinue”, “essentially rejections and ultimata”, so CPR 27.14(3), on rejecting an offer in settlement, was not engaged. A proposal that does give something up, such as dropping a counterclaim, is a different matter.

The party alleging it. The court held that a departure from the costs-neutral regime has to be justified by something unambiguously unreasonable, with the burden of proof on the party making the allegation. In Orton the district judge stated the burden correctly but, in substance, required the claimant to disprove unreasonableness, which was one of her errors.

No. CPR 27.2(1)(g) disapplies Part 36 for claims allocated to the Small Claims Track. The Court of Appeal noted that, had the decision below stood, a party could be penalised in costs for not settling within a very short window, nine days in Orton, when no such penalty would be available under Part 36, which gives a 21-day period for reflection.

Not automatically. The general rule in CPR 38.6(1) is that, unless the court orders otherwise, a discontinuing claimant pays the defendant’s costs incurred on or before the date the notice of discontinuance was served. CPR 38.6(3) says that rule does not apply to claims allocated to the Small Claims Track, so costs are limited to what CPR 27.14(2) allows, which includes further costs for unreasonable behaviour under rule 27.14(2)(g).

Only once the court allocates it there, having regard to the matters in CPR 26.13. Where the tenant seeks an order requiring the landlord to carry out repairs or other work, the Small Claims Track is normally the track if the work is estimated at not more than £1,000 and any other damages claim is worth not more than £1,000 (CPR 26.9(1)(b)). A claim for damages only falls outside that rule; the Small Claims Track is then normally the track if the claim is worth not more than £10,000 (CPR 26.9(4)), subject to the personal injury limits in rule 26.9(1)(a).

No. Orton is about CPR 27.14(2)(g), which applies only to claims allocated to the Small Claims Track. On the other tracks, and where a claim is discontinued before allocation, the general rule in CPR 38.6(1) applies: unless the court orders otherwise, a discontinuing claimant pays the defendant’s costs incurred on or before the date the notice was served. For a claim that was never allocated, the court assessing those costs on the standard basis may restrict them to what the likely track would have allowed (CPR 46.13(3)).

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