This was a case on the small claims track. The Court considered the meaning of ‘a party who has behaved unreasonably.’ CPR 27.14 (2) (g).
In a joint judgment, the Court of Appeal said,
Unreasonable behaviour” in relation to costs in Small Claims Track appeals
30 …it is necessary to refer to the invitation made by Vos LJ, when granting permission to appeal, to consider the proper meaning of CPR Pt 27.14 (2)(g). We doubt if we can usefully give general guidance in relation to the circumstances in which it will be appropriate for a court to decide whether a party “has behaved unreasonably” since all such cases must be highly fact-sensitive. In the somewhat different context of the jurisdiction to order a party’s legal (or other) representative to meet what are called “wasted costs” (defined as costs incurred “as a result of any improper, unreasonable or negligent act or omission” of such representative), the court speaking through Sir Thomas Bingham MR said:-
“… conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting in a practitioner’s judgment, but it is not unreasonable,” see Ridehalgh v Horsefield  Ch 205, 232F .
31 While we would not wish to incorporate all the learning about wasted costs orders into decisions under CPR Pt 27.14 (2)(g), we think that the above dictum should give sufficient guidance on the word “unreasonably” to district judges and circuit judges dealing with cases allocated to the Small Claims Track. Ridehalgh was, of course, dealing with acts or omissions of legal representatives but the meaning of “unreasonably” cannot be different when applied to litigants in person in Small Claims cases. Litigants in person should not be in a better position than legal representatives but neither should they be in any worse position than such representatives.
32 The only other thing we can usefully add is that it would be unfortunate if litigants were too easily deterred from using the Small Claims Track by the risk of being held to have behaved unreasonably and thus rendering themselves liable for costs. The rules could have provided that on appeal the normal rules as to costs should prevail, but Pt 27.14(2) applies in terms to costs relating to an appeal; an appellate court should therefore be wary of ordering costs on appeal to be paid if they were not ordered below, unless circumstances on appeal are truly different.
Re-determining the costs issue
33 On the basis that we have described, and giving proper weight to the somewhat obscure legal point that lay at the centre of this case, for which the judge had, himself, given permission to appeal, we conclude that it is not possible to hold that Mr Dammermann had behaved unreasonably in pursuing his appeal. The rejection of the £1,000 settlement offer is the only remaining factor that might be supportive of a finding of unreasonableness, but that, on it is own, is incapable of satisfying the test in Pt 27.14(2)(g). There being no other basis for awarding costs under the Small Claims Track regime in Pt 27.14, Lanyon Bowdler’s application for costs must be dismissed.