Hussain: Consumers cannot be bullied
The Court of Appeal has overturned a judgment which it said opened the door to “well-resourced parties corresponding their way” out of the small claims track – and would have blown it “to bits”.
Had the decision of District Judge Lindsay been upheld, the court said, it would have allowed defendants to say in correspondence that cases were commercially unviable because of the costs to fight them to trial, and “contend that anything short of early discontinuance is unreasonable, and sounds in costs”.
That approach – which the court described as “redolent” of the tone of the correspondence from City giant Simmons & Simmons in the case – “would blow the scheme of the small claims track to bits”.
Lady Justice Cockerill, the deputy head of civil justice, went on: “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.”
In Orton v Barclays Bank, Steven Orton issued what the Court of Appeal described as essentially a standard Plevin claim: a claim for around £2,750 plus interest arising from undisclosed commission on a PPI policy. It was allocated to the small claims track.
Barclays’ solicitors, Simmons & Simmons, responded by demanding immediate discontinuance in short deadlines, and threatening applications for summary judgment, strike-out and costs.
Describing the correspondence as “bombastic”, Cockerill LJ noted that the letters initially ignored the fact that the case had been allocated to the small claims track and asserted a costs regime that did not apply to it.
Mr Orton, however, made several offers to settle, reducing from £3,250 to £1,690, all of which Barclays rejected. He discontinued 12 days before trial, on the basis that he would require counsel and their fees made it uneconomic.
Barclays then applied for costs under CPR 27.14(2)(g), the “unreasonable behaviour” exception to the costs-neutral regime of the small claims track.
In Middlesbrough, DJ Lindsay awarded the bank £2,133 and His Honour Judge Robinson dismissed Mr Orton’s appeal.
In allowing his second appeal, Cockerill LJ stressed the importance of the small claims track being costs neutral, meaning that the ‘unreasonable behaviour’ provision “must not be construed widely”.
Analogies via different regimes and other rules invoking the concept of unreasonableness in different contexts – such as the Denton test – “may not be helpful”, she went on.
She added: “Judges exercising the discretion should also bear in mind the undesirability of deterring parties from using the small claims track.”
On the facts of the case, the Court of Appeal said the Simmons’ letters were wrongly treated as offers, when Barclays did not move an inch. “They were ‘invitations to discontinue’: essentially rejections and ultimata,” Cockerill LJ said.
The district judge’s reasoning also seemed informed by the bank’s argument that the claim was hopeless, when before the Court of Appeal there was “a clear and explicit agreement that we should approach the matter on the basis that the appellant’s claim was arguable”.
“What appears in the judgment is an approach where, once an allegation of unreasonableness was made, the burden somehow fell on the appellant to disprove unreasonableness.
“That led to the judge interrogating the reasonableness of the decision and (courtesy of the lack of agreement as to the merits of the claim) importing into the decision some element of scepticism as to the original merits or good faith of the claim.”
Cockerill LJ said the court also could not accept “the implicit conclusion that the appellant’s ‘commercial’ reason for discontinuance at this point made no sense” – it was only having reviewed the bank’s case that Mr Orton took the view that he would have to instruct counsel to deal with it.
“It was not a certainty until the respondent’s materials had been filed that the issues would not narrow and hence would require more than the appellant or his solicitor to engage.”
Cockerill LJ added that the answer could to some extent also be reached by looking at the implications if the district judge was correct, including how it would blow the small claims track to bits.
It would also mean that “a party in a costs-neutral regime can be worse off by deciding to settle or discontinue the case for commercial reasons than if they turned up and fought the case”, and that a party to a small claim could be subjected to a costs penalty for failing to settle in a very short time window.
Mr Orton was initially represented by the now-defunct SSB Law. His case was taken over by Manchester firm Consumer Rights Solicitors and director Kavon Hussain said the decision showed that “the small claims track cannot be weaponised”.
He said: “When the costs order was made against Mr Orton, we said it set a dangerous precedent in circumstances of a clear inequality of arms. The Court of Appeal has now agreed.
“Consumers who bring modest, arguable claims against lenders are entitled to the protection of the costs-neutral regime Parliament and the rules committee designed for them – and they cannot be bullied out of it by ultimatums dressed up as offers. We are proud to have stood with Mr Orton to the end.”
The Court of Appeal described the tone of the Simmons & Simmons’ correspondence as “unpleasantly surprising to see in the context of a costs-neutral regime dealing with small claims where many litigants will not be legally represented”.
It went on: “We appreciate however that in this case the appellant was legally represented by solicitors experienced in this type of litigation, and that the correspondence was therefore between experienced professionals.
“We therefore make no further observations about this correspondence – other than to note that we hope that those involved will ensure that the plainly incorrect assertions in the earliest correspondence are not replicated in any future letters in other similar cases.”
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