Whether claimant liable to pay costs of discontinuing where a settlement was reached

https://www.lawtel.com/MyLawtel/FullText/ AC0145126QBD(Comm).pdf

When a claim is discontinued, the normal position is that the claimant will be liable for the costs  incurred by the defendant up to the date of discontinuance. In this case, the claimants commenced  proceedings relating to 27 swap transactions entered into with the defendant bank. A full and final  settlement was reached in relation to 7 of those transactions. The claimants subsequently served  notice of discontinuance in relation to these 7 transactions and also in relation to a further 13  transactions.

The bank sought its costs of the discontinued proceedings in relation to the 20 transactions.  Hamblen J has now held as follows:

  1. Where there has been a full and final settlement of a claim and the proceedings in respect of  which the claim is made, a party cannot thereafter apply for its costs of the proceedings (unless  that right is expressly preserved in the settlement agreement). If costs are not mentioned in the  settlement, each side will bear its own costs. Taking steps to discontinue or stay the claim is for  the benefit of the court rather than the parties. That analysis applies both where the settled  claim is the only claim in the proceedings and where, as here, there has been a settlement of only part of the proceedings.

The judge also noted that proceedings are usually discontinued where it is recognised that a claim  is unlikely to succeed, and hence the defendant should usually receive his costs. However, here,  “the effective reason for discontinuance of the 7 claims is the fact that the claimants have been  paid over a million pounds in settlement of those claims, and in such circumstances it does appear  unfair and unjust that they should have to pay costs in relation to claims so settled”.  Accordingly, in relation to the 7 settled claims, there should be no order as to costs.

  1. However, the usual rule should be followed in relation to the 13 other transactions which were not settled.