KB-2023-004010 - [2025] EWHC 2689 (KB)

The relevant provisions as regards costs where an action has been discontinued are set out in CPR 38.6(1) as follows:

“(1)

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.”

In Safeway Stores Ltd v Twigger [2011] 2 All ER 841 at para. 58-60, Pill LJ said the following:

“58.

The claimants have sued the eighth defendant but by discontinuing their claim they accepted that it is not a valid claim against the defendant. The position should be, and in my view the wording of the rule provides, that in those circumstances the claimant is on the face of it liable for the eighth defendant's costs. That would have the effect of reversing the order for costs below. The claimant should not normally have the luxury of bringing a claim now accepted as invalid and not meeting costs incurred along the way. Of course, if the eighth defendant's conduct in the course of proceedings was found to have been abusive or vexatious different considerations may apply but an appropriate application would need to be made by the claimant discontinuing.

59.

I do not accept that there is a burden on the party against whom a claim is discontinued to have to seek to set aside the notice under CPR r 38.4 and keep alive the claim against him in order to contest costs below. In my judgment that is to put the burden in the wrong place and it is for the party discontinuing a claim to take the initiative. It is for the claimant discontinuing to seek a different order or to achieve by negotiation a discontinuance on other terms.

60.

The starting position should be, in my view, that a party who unilaterally discontinues a claim against a defendant by serving a notice of discontinuance is liable for the costs of that defendant, as provided by rule 38.6 . Even had the appeal by the other defendants failed in this court the claimants should in my view have met the costs of the party against whom they had discontinued when the claim reached this court. It has not been suggested that the application to strike out was vexatious or other than arguable.”

In the same case, Longmore LJ observed at para 33 that generally “the formal position must … in my view be that orders for costs in favour of a claimant before discontinuance remain in effect. They will not be unwound merely because the claimant discontinues.” However, Longmore LJ at [34] and Lloyd LJ at [41] preferred not to express a view as to whether a notice of discontinuance affected costs already ordered.

In Dar El Arkan v Al Refai [2016] 6 Costs LO 865, Andrew Smith J said the following:

32.

Nothing either in CPR 38.6 or elsewhere in the CPR states in terms that prima facie discontinuance reverses (or otherwise affects) previous costs orders, nor is it obvious that this is their necessary implication. I have already questioned Pill LJ's apparent starting point that discontinuance typically indicates acceptance that the claim (or, presumably by parity of reasoning, a part of a claim) was not valid….

33.

The general position is that interlocutory costs orders are not affected by other costs orders in the proceedings. The table at CPR PD 44.2 provides that the effect of an interlocutory order for costs is that “The party in whose favour the order is made is entitled to that party's costs in respect of the part of the proceedings to which the order relates, whatever other costs orders are made in the proceedings.” Of course, a practice direction cannot amend the rules themselves, but on the face of it would be surprising if the rule and directions under them are not harmonious.

…

35.

The courts' approach is not to revisit interlocutory orders for costs. After all, often the costs are assessed summarily and paid accordingly, and it is not easy to identify a legal mechanism to require a recipient to disgorge costs already paid, there being good consideration for the payment at the time that it was made: the recipient might have altered his position on the basis of the payment.

...

In Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2009] EWHC 2014 (Ch) Mann J observed at para 31 (surely correctly) that:

“The modern practice is to be much more willing to make adverse orders for costs in interim matters as the case progresses rather than to leave them to be made later. The purpose of this is to fix liabilities and to allocate costs. … It is consistent with this that such orders for assessment should be dealt with on a self-contained basis. Otherwise part of the purpose of the orders is lost.”

36.

Further, Mann J's judgment (at para 38) implicitly rejects Pill LJ's characterisation of interlocutory costs as being “incurred along the way” in the course of proceedings. In a case concerning the costs of the trial of a preliminary issue, he considered it “entirely logical” that costs orders should remain unaffected by subsequent events in the litigation, and saw this as:

“consistent with a scheme of litigation in which the costs of applications are dealt with according to the fate of the application. It does not produce unfairness to the paying party, it was the defendant's choice in this case to take the collateral contract point, and it accepted that it should be dealt with as a preliminary issue.”

37.

As a matter of policy it would be surprising if the CPR provides for harsher consequences on a litigant who discontinues a claim or part of a claim than are typically visited on one who pursues an invalid claim or arid litigation to the bitter end. Surely a litigant who comes to appreciate that there is no point in pursuing a claim or part of one is to be encouraged to discontinue it promptly.

…

39.

I therefore conclude that prima facie under the rules discontinuance does not affect costs orders already made. I see no justification for a contrary order in this case. Even if I took a different view about the prima facie position, I would make orders to depart from it, and uphold orders already made….”

In the commentary in the White Book in respect of CPR 38.6, the following principles are stated:

“In Brookes v HSBC Bank Plc [2011] EWCA Civ 354; [2012] 3 Costs L.O.285, Moore-Bick LJ set out the following principles (approved in Nelson’s Yard Management Co v Eziefula and Ashany v Eco-Bat Technologies Ltd [2018] EWCA Civ 1066): (1) when a claimant discontinues the proceedings, there is a presumption by reason of CPR r.38.6 that the defendant should recover their costs; the burden is on the claimant to show a good reason for departing from that position; (2) the fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason for doing so; (3) however, if it is plain that the claim would have failed, that is an additional factor in favour of applying the presumption; (4) the mere fact that the claimant’s decision to discontinue may have been motivated by practical, pragmatic or financial reasons as opposed to a lack of confidence in the merits of the case will not suffice to displace the presumption; (5) if the claimant is to succeed in displacing the presumption they will usually need to show a change of circumstances to which they have not themselves contributed; (6) however, no change in circumstances is likely to suffice unless it has been brought about by some form of unreasonable conduct on the part of the defendant which in all the circumstances provides a good reason for departing from the rule. (See Teasdale v HSBC Bank Plc [2010] EWHC 612 (QB); [2010] 4 All E.R. 630, HH Judge Waksman QC, sitting as a judge of the High Court; affirmed by the Court of Appeal at [2011] EWCA Civ 354; [2012] 3 Costs L.O. 285.)”

The parties take radically different starting points in relation to the applications for costs. The approach of Mr. Smith and CSM is to start with the discontinuance of the Scottish proceedings and the discontinuance in all but name of the instant proceedings, and to say that under CPR Part 38, all of the costs should follow in their favour. This should even include a reversal of the costs ordered in favour of MGWL to reflect the fact that the proceedings should never have been brought.

The approach of MGWL is to look at the matter issue by issue and application by application. In this way, they seek to say that they succeeded on most of the issues and hearings. For example they succeeded in relation to contempt. They succeeded in resisting applications for cross examination in connection with the set aside application. They succeeded in resisting an application that the instant proceedings be stayed pending the determination of the proceedings between MGWL and Duthie. They say that any costs in connection with the underlying section 25 proceedings will be limited in part because Mr. Smith and CSM did not engage in respect of them and/or because they came to an end without any determination about them.

There are various court rules that should be set out. They are as follows:

“Court’s discretion as to costs

44.2

(1)

The court has discretion as to –

(a)

whether costs are payable by one party to another;

(b)

the amount of those costs; and

(c)

when they are to be paid.

(2)

If the court decides to make an order about costs –

(a)

the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b)

the court may make a different order.

….

(4)

In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

(a)

the conduct of all the parties;

(b)

whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c)

any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.

(5)

The conduct of the parties includes –

(a)

conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;

(b)

whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c)

the manner in which a party has pursued or defended its case or a particular allegation or issue;

(d)

whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim; and

(e)whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution.

...

(6)

The orders which the court may make under this rule include an order that a party must pay –

(a)

a proportion of another party’s costs;

(b)

a stated amount in respect of another party’s costs;

(c)

costs from or until a certain date only;

(d)

costs incurred before proceedings have begun;

(e)

costs relating to particular steps taken in the proceedings;

(f)

costs relating only to a distinct part of the proceedings; and

(g)

interest on costs from or until a certain date, including a date before judgment.

(7)

Before the court considers making an order under paragraph (6)(f), it will consider whether it is practicable to make an order under paragraph (6)(a) or (c) instead.

…”