Unreasonable Conduct and the Cost Consequences: What You Need to Know
In civil litigation, the general rule is simple: the losing party usually pays the winning party’s legal costs. But this principle isn’t absolute—especially where a party behaves unreasonably. Whether you’re in the small claims track or subject to a fixed costs regime, unreasonable conduct can lead to serious cost penalties, even if you technically win your case.
My recent experience representing a client in a small claims matter illustrates this well. I successfully argued that an ill-conceived claim, which had been allocated to the small claims track, should be struck out. The claimant had also failed to comply with court orders and directions. The court agreed that their conduct was unreasonable and, as a result, awarded my client the full amount of costs claimed by way of summary assessment—an unusual but powerful outcome in the small claims context. This practical example demonstrates how the courts are prepared to depart from the usual rules where one party’s behaviour warrants it.
This article explains how the courts deal with unreasonable conduct under the Civil Procedure Rules (CPR), focusing particularly on costs under CPR 44, refusal to mediate, and non-compliance with court orders.
The Basics: How Costs Are Awarded Under CPR 44
Under CPR 44.2, courts have wide discretion in deciding:
- Whether costs are payable,
- Who should pay them,
- What amount should be paid, and
- When they should be paid.
One of the main factors the court considers is the conduct of the parties, both before and during proceedings. This includes how a party has complied with court orders, whether they engaged reasonably in settlement discussions, and whether they made or responded to offers to resolve the case.
In serious cases of misconduct, CPR 44.11 allows the court to make punitive costs orders where a party or their legal representative has “acted unreasonably or improperly.”
Small Claims and Unreasonable Behaviour
Normally, in small claims court, the costs that one party can recover from another are very limited. But the court can still award costs if it finds that a party has behaved unreasonably.
This is set out in CPR 27.14(2)(g), which gives the court discretion to depart from the standard rule and make a costs order “if the paying party has behaved unreasonably.”
The Court of Appeal in Damerell v Mew [1] confirmed that this is a high threshold. It’s not enough to have been wrong on the facts or law—there must be conduct that falls significantly below reasonable standards. Examples include:
- Ignoring court deadlines or directions,
- Bringing claims or defences with no real prospects of success,
- Flatly refusing to communicate or settle without good reason.
Refusing to Mediate: A Costly Mistake
One of the most common grounds for a finding of unreasonable conduct is a refusal to mediate or consider settlement.
In the leading case of Halsey v Milton Keynes NHS Trust [2], the Court of Appeal ruled that while parties can’t be forced to mediate, an unreasonable refusal may result in a costs penalty.
More recently, the courts have become even firmer on this point:
- In OMV Petrom SA v Glencore International AG [3], the court noted that parties are expected to engage with ADR seriously and in good faith.
- In DSN v Blackpool Football Club Ltd [4], the defendant’s refusal to mediate was deemed unreasonable, and although they were successful at trial, they were penalised in costs.
In short, the courts expect parties to explore settlement options. If you refuse to do so without clear justification, you could be ordered to pay your opponent’s costs—even if you win.
Fixed Costs Cases: When Can the Court Depart?
In fixed costs cases (like many personal injury claims), the court usually has no discretion to award more than the prescribed amounts. But there is an exception.
CPR 45.29J allows the court to depart from fixed costs where there are “exceptional circumstances.” This is a narrow exception, but serious procedural failures or unreasonable conduct may qualify.
In Bullock v Denton [5], the Court of Appeal confirmed that “exceptional circumstances” could include misconduct that severely impacts the efficient conduct of litigation. However, they also reiterated that this threshold is deliberately high.
Failure to Comply with Court Orders
Failing to comply with court orders—such as missing deadlines for disclosure or witness evidence—can also lead to cost penalties.
Even if the court grants relief from sanctions under CPR 3.9, it may still make an adverse costs order to reflect the time and resources wasted.
In Mitchell v News Group Newspapers [6], the court took a strict approach to non-compliance, though later softened in Denton v TH White [7]. However, the principle remains: procedural rules matter, and flouting them has consequences.
Key Takeaways for Clients and Litigants
- Always act reasonably: Whether you’re a claimant or defendant, your conduct will be under scrutiny from day one.
- Don’t ignore mediation: If you’re invited to mediate, consider it seriously. Refusing without good reason can be costly.
- Follow court directions: Missing deadlines or breaching orders is a quick way to incur penalties—even if you eventually succeed.
- Document your efforts: Keep a clear record of all offers, correspondence, and attempts to resolve matters. It may support a future costs application.
Need Advice?
If you’re involved in a dispute—whether in small claims, fast track, or multi-track proceedings—our litigation team can help you and avoid pitfalls that lead to unnecessary adverse cost awards. Contact us today for clear, practical advice 01603 751 984.
