COSTS ORDERS, DISCONTINUANCE AND CPR r.38.6(1): Barker and Barker v Barnett (2015) (QBD)
The court can depart from the usual rule in CPR r.38.6(1) that a Claimant who has discontinued their claim is liable for the costs which a Defendant has incurred and, alternatively, order that the Defendant pay a part of the Claimant’s costs.
The appellants (‘As’) appealed against a costs order made in the respondent’s (‘R’) favour.
R had brought a right of way claim against the As, her neighbours. R had written pre-action letters to the As in an attempt to resolve the dispute, but did not receive a response. A claim was issued in 2013. In February 2014 she filed a notice of discontinuance. R successfully applied to set aside a costs order that she should pay the As’ costs in relation to the discontinued claim. The subsequent order required the As to pay R’s costs until the date of service of the defence, with there being no costs thereafter. The judge accepted R’s submission that he should depart from the usual rule because the As had failed to comply with pre-action correspondence.
The As submitted that there had been no good reason to depart from the general rule in CPR r.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.”
The editorial notes in the White Book 2015 confirm that generally a claimant who discontinues a claim must show some form of unreasonable conduct on the part of the defendant which provides a good reason for departing from the default rule that a claimant is liable for the defendant’s costs up to the date when notice of the discontinuance is served (Nelson’s Yard Management Co v Eziefula  EWCA Civ 235 – failure by the defendant to respond to pre-action correspondence).
The judge had correctly identified the relevant law. He had been fully aware of the factual background. His task was to summarise. The As’ Solicitors had warned them that a costs order might be made against them because they had not replied to pre-action correspondence. The case had been brought to court as a consequence of the As failure to communicate. The judge had correctly had regard to the reasons for the discontinuance put forward by R and had been entitled to find that R’s case was not necessarily hopeless. A generous margin was given to a judge when exercising discretion such as that in r.38.6(1). The court would only interfere with that exercise when the judge in the lower court:
- had not applied the correct principles;
- had not taken into account all relevant considerations;
- had taken into account an irrelevant consideration; or,
- had reached a perverse decision.
Nelson’s Yard was followed.
The appeal was dismissed.
The Principles which Apply on a r.38.6 Application
- When a claimant discontinues 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.
- The fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason for doing so.
- However, if it is plain that the claim would have failed, that is an additional factor in favour of applying the presumption.
- A presumption will not be displaced by the fact 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.
- The claimant will usually need to show a change of circumstances to which they have not themselves contributed in order to displace the presumption
- 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.
Lessons to Be Learned
- Pre-action Protocols must be complied with.
- If a specific pre-action protocol does not apply in the circumstances, the spirit of the Protocol should be followed.
- Communications should be encouraged at all stages of litigation, pre-issue is no exception.
- A party is always at risk of criticism from the court if they fail to correspondent/communicate with their opponents, even if they do not believe the case against them has merit.
- Criticism from the court is likely to result in an adverse costs order.
15th May 2015