Messih v McMillan Williams & Ors

Under rule 38.6 of the Civil Procedure Rules 1998, a claimant who discontinues ordinarily pays the defendant’s costs incurred before discontinuance. The claimant bears the burden of showing a good reason for another order.

A material change of circumstances may provide such a reason, but it is not a threshold requirement. The court must assess all matters relied upon in the particular case. Saving trial costs and court time cannot by itself displace the normal rule, because those benefits arise whenever proceedings are discontinued. Satisfaction of a claim against one defendant does not ordinarily deprive another defendant, against whom a separate cause of action was pursued, of its costs following discontinuance.

The claimant sued two firms of solicitors for losses arising from the forfeiture of commercial leases. He settled his claim against the first firm for £21,500 and costs. He then discontinued the separate negligence claim against McMillan Williams, which had consistently denied liability.

Under rule 38.6 of the Civil Procedure Rules 1998, discontinuance ordinarily made the claimant liable for McMillan Williams’ costs. The Recorder instead made no order for costs, principally because settlement had removed the substance of the claim and discontinuance had saved trial costs and court time.

McMillan Williams appealed. The central issue was whether those circumstances constituted a sufficient reason to depart from the normal costs rule.

1. Appeal allowed unanimously. Rule 38.6(1) of the Civil Procedure Rules 1998 establishes that a discontinuing claimant ordinarily pays the defendant’s costs incurred before service of the notice. The defendant begins with an entitlement to those costs, and the claimant must justify a different order: [2010] EWCA Civ 844, paras 26–27.

2. Re Walker Wingsail Systems plc [2006] 1 WLR 2194 establishes the normal rule and the need for a good reason to depart from it. A material change of circumstances may supply a sufficient justification, depending upon its nature. It is not, however, a threshold test which must be satisfied before the court can exercise its discretion. The court must consider all matters relied upon and decide whether, viewed together, they justify another costs order: paras 27–28.

3. The avoidance of trial costs, professional time and court time could not by itself justify departure from the normal rule. Those benefits necessarily result from every discontinuance. Treating them as sufficient would displace the rule in every case: para 30.

4. The settlement with the other solicitors did not provide the required additional justification. McMillan Williams had always intended to contest liability. Discontinuance deprived it of the opportunity to establish its defence and left the court unable to determine the likely outcome. These were ordinary consequences of discontinuance: para 31.

5. The claimant had advanced separate causes of action against two firms based on different retainers. Joining both firms in one action did not alter the costs consequences which would have followed had separate proceedings been brought. Satisfaction of the claim against one firm did not override the other firm’s entitlement to costs when the claimant chose not to pursue it: paras 32–33.

6. The claimant was ordered to pay McMillan Williams’ costs up to the date of discontinuance. His application for permission to appeal the Recorder’s costs order for the application below was dismissed: para 33.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The claimant was ordered to pay McMillan Williams’ costs up to the date of discontinuance. The claimant’s related application for permission to appeal was dismissed: [2010] EWCA Civ 844.

2. Central London Civil Justice Centre: Mr Recorder Cohen QC directed that there should be no order for costs following discontinuance of the claim against McMillan Williams. He later refused permission to appeal.

3. Permission proceedings: Jacob LJ refused permission on the papers. Lloyd and Moore-Bick LJJ granted permission on a renewed application.