In the recent case of Erica Brookes v HSBC and Gerard Jemitus v Bank of Scotland1 the Court of Appeal has re-emphasised the usual presumption regarding the costs of discontinuing proceedings; in the absence of a “good reason” to the contrary, the party withdrawing its claim must pay the other party’s costs. Lord Justice Moore-Bick, delivering the judgment, reaffirmed the guidance of the lower court on what might constitute a good reason.


Ms Brookes and Mr Jemitus were two individuals out of a number of credit card holding claimants who had sought to challenge the validity of their credit agreements, entered into with various credit card issuers. These agreements were “regulated agreements for running-account credit” under section 78 Consumer Credit Act 1974 (CCA) and, as such, the debtor was entitled to a copy of his/her executed credit agreement, if requested in writing. The significance of the cases was that the credit card holders sought to argue that if the creditor could not locate and provide the original signed agreement, but could only provide a pro forma agreement on the same terms as the one he/she had signed, then the debt was unenforceable. They sought various remedies including a declaration to that effect, a reduction of their debit balance to zero and an order that any negative information sent to credit reference agencies should be withdrawn.  

In December 2009, Judge Waksman held that the creditor bank could provide the information necessary for compliance with section 78 CCA from sources other than the original signed credit agreement.2 This largely resolved the various proceedings in the creditors’ favour and in many cases the proceedings were discontinued.  

In March 2010, seven cases returned to court on applications by the claimants that the defendants should bear some or all of their own costs, notwithstanding the discontinuance by the claimants.3 The learned judge disagreed and in May 2011 the Court of Appeal disallowed the appeals by Ms Brookes and Mr Jemitus.

Principles to be applied

The starting point is rule 38.6(1) of the CPR, which provides:

“Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant.”

Judge Waksman (at first instance) had set out six further guiding principles regarding the costs of discontinuance:

  1. On discontinuance there is a presumption that the defendant should recover his costs and the burden is then on the claimant to show a good reason to the contrary;  
  2. Whether the claimant would or might have been successful at trial is not a sufficiently good reason (it was not the court’s role, in any event, to attempt to decide whether the claim would have succeeded had it been pursued);  
  3. If it were clear that the claim would have failed at trial, however, then that lent extra weight to the presumption in the defendant’s favour (it had merely hastened the claimant’s defeat);  
  4. If the decision to discontinue was motivated by “practical, pragmatic or financial reasons” rather than a consideration of the merits of the case then that was also not a good reason to displace the presumption;  
  5. Usually, in order to do so, the claimant would need to show a “change of circumstances” which was not of his own making, rather than a re-evaluation of the claim based on other factors like lack of funds or on information which came out in the normal course of the proceedings; but  
  6. This “change of circumstances” would probably be insufficient unless it had been caused by the defendant’s unreasonable conduct amounting to a good reason to depart from the normal presumption, referred to above.  

These principles were summarised and confirmed by the Court of Appeal but another case had been decided in the interim. In Messih v MacMillan Williams4 a claimant had pursued two separate firms of solicitors for failing to give him proper advice and settled the action against one of them for almost all of his claim. He sought to argue that, having achieved all he could reasonably hope for in the proceedings, he should not be liable for the second (“innocent”) defendant’s costs. Both the court and the Court of Appeal disagreed.  

Whilst Lord Justice Patten5 reiterated that avoiding unnecessary disputes and their associated costs was a “major theme” of the CPR, that of itself could not justify a departure from the usual presumption; something more was needed.  

Counsel for Ms Brookes and Mr Jemitus6 tried to distinguish their cases from prior authority; he argued unsuccessfully that they had a “legitimate interest” in bringing these proceedings which would justify a departure from the usual rule. (This was based on comments made in Carey7 that a debtor has a legitimate interest in seeing the agreement he signed and may have a legitimate interest in obtaining a decision on the meaning of compliance within section 74 CCA). The Court of Appeal disagreed:

“ does not follow that the debtor has a right to bring proceedings at the creditor’s expense in order to obtain relief which goes beyond what he is entitled to obtain under the statute or relief by way of a declaration which has no practical utility...whether a party originally had a legitimate interest... counts for little, if anything, if he subsequently discontinues them rather than pursuing them to a conclusion.”

The learned judge had correctly analysed the substance of the dispute between the parties and had found that no sufficiently good reason had been shown to depart from the usual presumption.