The judgment of the Court of Appeal today in Smith v The Royal Bank of Scotland Plc [2021] EWCA Civ 977 highlights the fact that the small claims track is a “no costs” regime, even when matters reach the Court of Appeal. Consequently the court had no power to impose a condition that a proposed appellant be responsible for the respondent’s costs.



The defendant bank sought permission to appeal in a “second appeal” in relation to a case about damages for PPI and interest. The case had been allocated to the small claims track.


Permission to appeal was granted by a single Lady Justice, but subject to a condition that the defendant pay the claimant’s costs of the appeal.

    1. The application for permission to appeal (PTA) was considered by Asplin LJ on the papers in the usual way. By a decision sealed on 9 March 2021 she granted permission on all three grounds of appeal subject to the condition that the Appellant bank was to pay Mrs Smith’s reasonable costs of the appeal limited to the sum agreed between the parties, or, in default of agreement, determined by the court. She stated her reasons as follows:-
“All of the grounds have a real prospect of success and raise important points of principle in relation to this type of case, of which there are many. There is no High Court or Court of Appeal authority in relation to the interpretation and effect of the relevant transitional provisions and the application of the Limitation Act 1980 in the circumstances.
The condition is imposed because the Respondent is an individual with a small claim who is required to defend a second appeal which is of importance to the Applicant/Appellant, a large corporation, because of the number of similar claims and the extent of their total value.
A formal application to impose a condition must be filed by 4pm on 31 March 2021.”


The bank successfully applied to the full court to set aside that condition.

    1. We decided to deal with the Bank’s jurisdiction point first. In considering whether to revoke or vary the grant of permission to appeal or the conditions on which permission to appeal has been given the full court does not sit on appeal from the single Lord or Lady Justice (LJ) who granted permission. We can only discharge or vary the order of Asplin LJ if there is a compelling reason to do so: CPR 52.18(2). But it cannot be disputed that if a condition imposed on the grant of PTA was one which the single LJ had no power to impose, that is a compelling reason for setting the condition aside.
    1. CPR 27.14(2) provides that the court may not award costs in a case allocated to the small claims track, with some specified exceptions which are not in issue here. In Akhtar v Boland [2014] EWCA Civ 943 this court held (per Sir Stanley Burnton) that “the wording of CPR 27.14 is clear, and extends to the costs of an appeal, and I see no basis for construing that as inapplicable to an appeal to this court”. In Canada Square Operations Ltd v Potter [2021] EWCA Civ 339, another significant case in the PPI litigation, the bank (“CSO”) had lost in a small claims track trial and on appeal to a High Court judge. Lewison LJ granted PTA to this court and wrote in his reasons for giving PTA:
“Ms Potter has asked for the grant of permission to be made conditional on CSO paying her reasonable costs of the appeal irrespective of the outcome. Similar orders have been made in other cases where the amount in issue was small and the appellant wished to clarify the law for its own benefit e.g. Morris v Wrexham [2001] EWHC 697 (Admin)Ungi v Liverpool CC [2004] EWCA Civ 1617. But this is a case to which CPR part 27.14(2) applies. That rule applies to a second appeal to this court, Akhtar v Boland [2014] EWCA Civ 943. Under that rule the court has no power to make an order for costs. I do not consider that where a rule expressly deals with the questions of costs it would be a proper use of the power to attach conditions to be used to sidestep the rule.”
    1. When the substantive appeal in Canada Square v Potter was heard in this court the refusal of Lewison LJ to impose the costs condition applied for was noted at paragraph 52 and there was no suggestion that he had been in error.
    1. Ahktar v Boland is binding on us; so that, as Mr Weir accepts, neither party to this appeal could be ordered to pay the other party’s costs. It is of course quite commonplace for this court to grant a party with large resources permission to appeal (whether a first appeal or a second appeal) on terms that it pays the opposing party’s costs whatever the outcome, but appeals from cases heard on the small claims are an exception.
    1. There are situations in which the court can impose a condition on a party’s continuing participation in a case which could not be the subject of a direct order. Mr Weir referred us to Edwards-Tubb v J D Wetherspoon plc [2011] EWCA Civ 136; [2011] 1 WLR 1371, a personal injury case in which the claimant, having set in train the pre-action protocol procedure for nominating experts and been examined by his nominated expert, A, then issued proceedings accompanied by a report from a different, nominated expert, B. It was held that, even though the report from expert A was the subject of privilege and could not be the subject of an order for its disclosure, the court could properly refuse permission for the claimant to reply on the report from B unless he waived privilege in, and disclosed to the defendants, the report from A. There are many other examples. An even more commonplace feature of personal injury litigation is that a court will not make a mandatory order requiring a claimant to attend a medical examination, but can say that if he declines to attend his claim will be stayed. But in neither of these cases is a court overriding an express provision in the Rules.
    1. There is a distinction between a court imposing a condition which it would not ordinarily make the subject of a direct order (such as an order that party A should pay party B’s costs on appeal whatever the outcome in a case where CPR 27.14 is not engaged), and a court imposing a condition which it could never make the subject of a direct order because statute or a rule of court expressly prohibits it. I agree with the decision of Lewison LJ in Canada Square v Potter that where a rule expressly prohibits orders for costs it is not a proper use of the general power to attach conditions so as to sidestep the rule.
    1. Mr Weir sought an alternative way of upholding the judge’s order, which is to ask us to re-allocate the case to the fast track or multi track. The county court’s discretion to reallocate to a different track under CPR 26.10 was described by Dyson LJ in Maguire v Molin [2003] 1 WLR 644 at [26] as apparently unfettered, and no doubt that is true; but it is far too late for us to reallocate the case now. No application was made in the county court, as it could have been, for the case to proceed on the fast track or multi-track. Appeals in this court do not proceed on the small claims track, fast track or multitrack: these are county court concepts. We cannot rewrite the history of the case.
  1. These are my reasons for the decision, which we announced after hearing oral argument on the point, that the costs condition was one which Asplin LJ had no power to impose and must accordingly be set aside. This made it unnecessary for us to hear argument on whether, had the power existed, there was any other compelling reason for varying or revoking the condition as to costs.