The Court of Appeal recently provided a judgment on the issue of a Claimant's liability for the Defendant's costs when discontinuing its claim. Whilst this judgment was given in a case concerning consumer credit, it provides useful guidance generally on the rules relating to liability for costs on the discontinuance of a claim.

Discontinuance is where a Claimant ends all or part of its claim, perhaps because the claim has little prospects of succeeding or because the Claimant is unable to fund the litigation. If a Claimant wishes to discontinue its claim the procedure which is set out in Part 38 of the Civil Procedure Rules should be followed. Notably, the usual rule on discontinuance is that the Claimant must pay all of the Defendant's costs up to the date that a notice of discontinuance was served.

In this case, the Court of Appeal held that on discontinuance there is a presumption that the Defendant should recover their costs. Unless the Claimant can provide "cogent reasons" for departing from this usual position, it will be liable for such costs. We consider that a Claimant will be unlikely to provide such cogent reasons except for in exceptional circumstances.

This case serves a useful reminder that a Claimant should think carefully before deciding to issue proceedings. If proceedings have been issued and a Claimant does want to bring them to an end prematurely, they would be well advised to attempt to negotiate a compromise of the claim rather than simply discontinuing. The parties could then agree between them whether a payment should be made in relation to the Defendant's costs. For example, if the parties agree "no order as to costs" they would each bear their own costs.

Case: Brookes v HSBC Bank Plc; Jemitus v Bank of Scotland Plc [2011] EWCA Civ 354