KB-2023-003483 - [2025] EWHC 1799 (KB)

Under CPR 38.6(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 Brookes v HSBC Bank [2011] EWCA Civ 354 at [6], Moore-Bick LJ, with whom Arden LJ and Ward LJ agreed, gave the following guidance on the application of the CPR 38.6 presumption:

“(1)

when a claimant discontinues the proceedings, there is a presumption by reason of CPR 38.6 that the defendant should recover his 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 he will usually need to show a change of circumstances to which he has not himself 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.”

These principles were approved by the Court of Appeal in Nelson’s Yard Management Co v Eziefula [2013] EWCA Civ 235, [2013] C.P. Rep. 29, Ashany v Eco-Bat Technologies Ltd [2018] EWCA Civ 1066; and more recently by Soole J in BB v Khayyat [2025] EWHC 379 (KB).

In Nelson’s Yard, Beatson LJ (with whom Arden LJ and Ryder J agreed) made the following observations about the process of displacing the CPR 38.6 presumption:

“30.

The hurdle to displace the default rule in CPR r.38.6(1) is also a high one. A claimant who discontinues must (see Moore-Bick L.J.’s sixth principle in Brookes v HSBC Bank) generally show some form of unreasonable conduct on the part of the defendant which provides a good reason for departing from the rule. The height of this hurdle can be illustrated by two examples.

31.

First, the mere fact that a claimant has got all or almost all he could reasonably hope to achieve from the proceedings has been said not to justify a claimant from relying on the avoidance of a trial which would be solely about liability to recover costs as justifying a departure from the default rule: see Patten L.J. in Messih v MacMillan Williams [2010] EWCA Civ 844 at [28], [30] and [31]. In Brookes v HSBC Bank , after referring to what Patten L.J. stated, Moore-Bick L.J. observed (at [10]) that a claimant who seeks to persuade the court to depart from the default rule must provide cogent reasons and is unlikely to be able to satisfy the court that there is good reason to do so save in unusual circumstances. In Messih’s case, the achievement by the claimant of what he had sought from the proceedings by a settlement with one of a number of defendants did not justify disapplying the rule when he discontinued against other defendants.

32.

The second example concerns the position of disputed material. It is clear that once there is to be no trial, it is not the function of the court considering costs to decide whether or not the claim would have succeeded: see Walker Wingsail Systems, Re [2006] 1 W.L.R. 2194 , per Chadwick L.J. at [12], and H.H. Judge Waksman’s second principle in Teasdale v HSBC Bank Plc [2010] EWHC 612 (QB) at [7(2)]. But it is also clear (see Moore-Bick L.J.’s sixth principle in Brookes v HSBC Bank) that it is the function of the court to consider whether the unreasonableness of a defendant’s conduct provides a good reason for departing from the default rule.”

The White Book 2025 at paragraph 38.6.1 sets out a series of cases where the CPR 38.6 presumption has been considered. Mr Stacey contended that these cases illustrate the wide range of circumstances in which the presumption has been displaced. I note, for example, the following: (i) Aegis Group Plc v Inland Revenue [2005] EWHC 1468 (Ch), where the defendant’s costs were reduced to reflect their failure to comply with the judicial review pre action protocol; (ii) RBG Resources Plc (In Liquidation) v Rastogi [2005] EWHC 994 (Ch); [2005] 2 BCLC 592, where the defendant’s unreasonable and unjustified stance in negotiations for settlement was considered a good reason to order that he should be deprived of a proportion of his costs on discontinuance; and (iii) Hewson v Wells and Ors [2020] EWHC 2722 (Ch), where the defendant’s late disclosure of an important deed document, 18 months after the claimant’s initial request, with no explanation, led to displacement of the presumption. However, the 3 month period between the complete deed being provided to the claimant and the notice of discontinuance tipped the balance away from making a costs order in the claimant’s favour.