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 vs HSBC Bank Plc and other
cases, the claimants sought to discontinue their claims following
certain high-profile decisions of the courts (seeCarey &
Others vs HSBC Bank Plc & Others in February’s Motor
Finance) that had gone against them. Unusually, they sought
their costs from the defendant lenders.
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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.
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By GlobalDataA good decision therefore for lenders who wish to
claim their costs where unmeritorious Consumer Credit Act claims
against them are discontinued.
The author is a partner at
Wragge & Co
