Unless the parties agree, or the court orders, otherwise, the normal costs consequence of a claimant discontinuing its claim is that the claimant will be liable for the costs incurred by the defendant up to the date on which the notice of discontinuance was served. At first instance in this case, that presumption was disapplied, and the defendant appealed.

The Court of Appeal commented that "The presumption in r.38.6 arises because, in the ordinary case, the discontinuance of a claim by a claimant against a defendant will usually amount to an admission or an acceptance that the proceedings should never have been commenced. In such a case, the starting point must be that the defendant is entitled to its costs, and that is reflected in the default rule". But here, the proceedings had been commenced because of "considerable prevarication and delay" by the defendant and the action was discontinued at least in part because the claimants' original aim had been achieved.

The claimants had not sent a pre-action letter in accordance with Para 6 of the Pre-Action Conduct Practice Direction. Nevertheless, the Court of Appeal held that the Master had been entitled to conclude that this was not a case where another round of correspondence would have been useful: "The parties were, even before proceedings began, engaged in a feud which rendered such procedural matters irrelevant".

The Court of Appeal also found that the Master had been entitled to disapply the presumption in relation to the costs for a certain period because the defendant had acted unreasonably. However, in respect of a later period, the Court of Appeal held that she had erred in finding that the defendant's solicitors "ought reasonably to have stopped incurring costs" once it had been made sufficiently clear that the claimants would not be proceeding to trial. The Court of Appeal found that the claimants had not unequivocally said that they would discontinue and so there was no reason to disapply the default rule for that period.

COMMENT: In Nelson's Yard v Eziefula [2013] the Court of Appeal confirmed that, just because a claimant had already achieved almost all that it hoped for from the proceedings, that does not justify a departure from the normal rule. However, there, as here, the defendant's conduct was taken into account in deciding that the fall-back position would not apply (in that case, the defendant had unreasonably failed to comply with the Pre-Action Conduct PD and had shown no willingness to mediate or settle).