Cost on discontinuance of claim

15.07.10

 

This article was written by Greg Standing, partner in Wragge & Co LLP's finance, insolvency, recoveries and sales team and published in the July issue of Motor Finance.

When a claimant discontinues its claim, the usual position is that it has to pay the defendant's reasonable legal costs. This is the general presumption under the Civil Procedure Rules and applies unless there is good reason for it not to.

In Teasdale v HSBC Bank Plc and other cases, the claimants sought to discontinue their claims following certain high profile decisions of the courts (see Carey & Others v HSBC Bank Plc & Others in February's Motor Finance) that had gone against them. Unusually, they sought their costs from the defendant lenders.

Given the number of cases involved, the court provided guidance on dealing with costs on discontinuance.

The court held that the burden is firmly on the claimant to show there is good reason not to apply the presumption. The presumption will remain in place where:

• Had the claimant continued it would have or might well have succeeded at trial. This is an argument often advanced by the claimant. However, the court takes the view the claimant has chosen not to have a trial and it should not therefore attempt to second guess what might have happened at trial.
• The claim is discontinued for practical, pragmatic or financial reasons rather than a lack of confidence in the merits of the claim. A simple commercial re-evaluation of the claim is not sufficient.
• There has been a change of circumstances since the claim started, such as the defendant has run out of money having spent it all on defence. Again, this is just one of the risks of litigation.
• Something is produced in disclosure or in the defence which makes the claimant re-evaluate the merits of its claim. See below as to the defendant's conduct.

The presumption may not apply where the defendant:

• Renders the claimant's claim worthless of its own initiative by, for example, embarking on other unsuccessful proceedings which leads to insolvency/bankruptcy.
• Perversely encourages the claimant to commence proceedings knowing it has a defence that it unreasonably refused to disclose pre-commencement.
• Engages in conduct deserving of having the presumption disapplied, such as an unnecessarily aggressive approach or an unreasonable or unjustified stance taken in negotiations.

The court held that a change of circumstances was just the starting point. If the change was unconnected to the defendant's behaviour, it was unlikely to be sufficient. In these cases, there was no good reason to disapply the presumption and the defendants were entitled to their costs.

Comment

A good decision therefore for lenders who wish to claim their costs where unmeritorious Consumer Credit Act claims against them are discontinued.

For further information about this published article, contact Kathryn Hobbs on +44 (0)121 685 2785, Rebecca Davies on +44 (0)121 685 3819, Gayle Redding on +44 (0)121 685 2708 or Rebecca Lum on +44 (0)121 260 9973

This published article may contain information of general interest about current legal issues, but does not give legal advice.