[2007] EWHC 2015 (TCC)

Although CPR 38.6 provides that a claimant who discontinues will usually be liable for the defendant’s costs, this is not invariably the case. Where there has been a substantial change of circumstances, the defendant may not be entitled to his costs. This was so here. The claimant brought proceedings against three defendants alleging a serious and long-running conspiracy. It managed to settle the claim against two of the defendants for a substantial sum and recovered also under its insurance policy which provided cover for the financial consequences of the fraud of its employees. The remaining defendant, Mr Dobson, was representing himself and had very few assets. In these circumstances, even if the claimant obtained a judgment in its favour against Mr Dobson, it was unrealistic to imagine that he would be able to pay anything towards the judgment or the claimant’s costs. Given that the claim against Mr Dobson was reasonably brought, the court was satisfied that it was appropriate to make no order as to costs.

Comment: there is a clear suggestion in this case that the judge thought that Mr Dobson was lucky to be getting off so lightly given the serious nature of the allegations against him. The defendant may have to pay the discontinuing claimant’s costs in some circumstances, for example where his refusal to acknowledge possession of the claimant's goods in circumstances where they could easily have been identified had led to the proceedings – see PT Bank Negara Indonesia v IBL Trading Ltd. At the other extreme, a discontinuing party who should never have brought the claim in the first place may be ordered to pay the defendant’s costs on the indemnity basis, as happened most notably against the liquidators of BCCI in the Three Rivers litigation.

Frustratingly for defendants, it is still impossible under the CPR to recover costs from a would-be claimant who abandons his claim before issuing proceedings. Is the position any different if the claimant goes on to issue proceedings but abandons some of his claims made pre-action? In McGlinn v Waltham Contractors Ltd the defendant tried to recover costs related to abandoned claims as costs "incidental to" the subsequent proceedings under s51 Supreme Court Act 1981. The judge held that these costs cannot be recovered save in exceptional circumstances which give rise to some sort of unreasonable conduct. He commented that it would be contrary to the whole purpose of the pre-action protocols if claimants were routinely penalised if they decided not to pursue claims in court which they had originally included in their protocol claim letters. It would be wrong in principle to penalise the claimant for abandoning claims which the defendant had demonstrated were not going to succeed, because to do so would be to penalise the former for doing the very thing which the protocol was designed to achieve.