If your claim is below £10,000 it will be allocated to the small claims track. Generally speaking, in small claims cases you will never be awarded more than fixed costs, if you are successful. However, the Civil Procedure Rules (CPR) provide that where a party has behaved unreasonably the court may award further costs to be payable by the unreasonable party.
The court has recently provided further guidance on what can be defined as unreasonable behaviour in Dammerman v Lanyon Bowdler LLP  EXCA Civ 269. It was confirmed in Dammerman v Lanyon Bowdler that rejection of an offer of settlement is not in itself grounds constituting unreasonable behaviour under CPR Part 27.14 (3) but the court may take it into consideration when it is applying the unreasonableness test. It also considered that a party will not be behaving unreasonably if the litigation leads to an unsuccessful result or because a more cautious legal representative would have acted differently.
It is clear from this decision and the previous case of Ridehalgh v Horsefield  Ch 205, 232F that the court will judge each matter on the individual circumstances of the case when determining whether or not one party's behaviour is unreasonable, resulting in a further costs award to be payable by that party.
It is important to note that litigants should not be deterred from Small Claims Track litigation in fear of being considered to have behaved in an unreasonable manor and rendering themselves liable to pay costs, these cases demonstrate that the exercise of the Court's discretion will only occur when unreasonable behaviour is extreme.