When can a claimant avoid paying costs upon discontinuance? We review the recent case law and assess how parties might use the rules to their advantage.
The usual rule on costs following discontinuance of an action by a claimant is that the claimant pays the defendant’s costs up to the date of discontinuance.
There have been several reported cases in recent months in which claimants have sought to avoid the usual costs rule, however. These demonstrate that, although it is uncommon for the usual rule to be displaced, it can be done in the right circumstances. We outline the principles and practical takeaways from those cases below.
The recent cases are all in agreement as to the legal test to be applied. This is drawn from Teasdale v HSBC Bank Plc (as approved by the Court of Appeal in Erica Brookes v HSBC Bank). In summary, the position is as follows:
- Upon discontinuance, the presumption is that the claimant should pay the defendant’s costs up to the date of discontinuance (CPR 38.6).
- A good reason is needed to depart from that position - and it is for the claimant to prove. This is a high threshold.
- The likelihood of success at trial is not itself a good reason. The fact that discontinuance is the practical or pragmatic approach is, again, not a good reason.
- A change of circumstances (to which the claimant has not contributed) will usually be required - and such change will need to have been brought about by the defendant’s unreasonable conduct.
These principles were applied in three recent cases, with differing outcomes. In brief:
- Rule upheld: In BAE Systems Pension Funds Trustees Limited v Bowmer & Kirkland Limited & Ors  EWHC 1222 (TCC), the usual rule on costs was upheld in circumstances where the claimant discontinued against only one of multiple defendants.
The claimant sought to shift the costs to one of the remaining defendants on the basis that, had the remaining defendant provided certain information sooner, the claimant would have discontinued against the other defendant at an earlier stage (thus avoiding further costs being incurred). Without any form of misleading conduct on the part of the remaining defendant, this was not enough to displace the usual rule on costs.
- Rule upheld in part: Ashany and another v Eco-Bat Technologies Ltd was an unusual case in which the Court of Appeal recognised that discontinuance was only necessary upon the claimants achieving the aim of the proceedings: to gain a copy of a document sought by the claimants from the defendant. In essence, the outcome was that, although the claimants were (for the most part) awarded their costs between requesting the document and receiving it, thereafter the defendant was awarded its costs up to the date of discontinuance.
- Rule displaced: In Harrap v Brighton & Sussex University Hospitals NHS Trust it was held unreasonable for one of the defendant’s witnesses to fail to provide certain relevant evidence in his witness statement.
The evidence only came out on cross-examination during trial, soon after which the claimant discontinued. This amounted to a change in circumstances sufficient to rebut the usual position on costs. Notably, however, this did not mean the claimant was entitled to costs - just that there should be no order as to costs from the date of the relevant expert report.
Lessons for claimants and defendants
The CPR can be used to strategic advantage.
If you are a defendant seeking to get a claimant to discontinue, the lesson is simple: be prepared to demonstrate that you have acted reasonably. Avail yourself of CPR 7.7, if appropriate; this rule allows defendants to require the claimant either to serve the claim form or discontinue within a specified timeframe.
For claimants hoping to discontinue where the defendant has acted reasonably, inform the defendant in unequivocal terms that you will not be pursuing proceedings against them but invite discussions regarding the defendant’s costs up to that point. Any agreement on costs can then be documented by way of a consent order for dismissal of the action.
We have also seen cases where one of multiple defendants has been removed from proceedings pursuant to CPR 19.4 on a without notice basis, rather than going down the discontinuance route. The advantage of this is that there is no equivalent provision for the claimant to pay the costs of the party removed from proceedings under CPR 19.4, as there is for a discontinuance. Such decisions are plainly open to being overturned but they highlight a lacuna in the rules that nevertheless may be taken advantage of by claimants.