Dhillon & Anor v Siddiqui & Ors

On discontinuance of an academic claim, the court should determine costs by applying the general discretion in CPR 44.3, rather than allowing procedural form to dominate the just outcome. The ordinary rule remains that the unsuccessful party pays, but the court may make a different order having regard to all the circumstances, including changes that made the claim academic, the parties’ conduct, the state of the evidence and the effect of case-management decisions. A claimant who reasonably pursues a claim against a secondary defendant does not thereby obtain protection from adverse costs if the claim is not established. Multiple defendants should not be pursued merely to cater for remote contingencies.

The claim arose from alleged negligent tax advice concerning a dividend paid by Electro Controls Limited to Hosta Limited. The claimant pursued personal tax and corporation tax claims against former advisers and accounting firms. The corporation tax claim had been tried separately, with findings adverse to the advisers. The personal tax claim was adjourned because HMRC had indicated that it did not intend to pursue liability under section 739 ICTA 1988, although a real risk of resiling from that position had initially remained.

By April 2010, the parties agreed that an assessment could no longer be raised and that the personal tax claim was academic. The claimant discontinued it. The court had to determine the appropriate costs orders against the advisers and the Haines Watts defendants, together with reserved costs from earlier hearings.

1. Disposal. The personal tax claim had become academic because an assessment could no longer be raised. The court granted permission to discontinue the claim.
2. Applicable approach. The court rejected a formalistic application of CPR 38.6(1). The proper approach was to exercise the general discretion under CPR 44.3, taking account of the circumstances and the parties’ conduct. The guidance in RBG Resources Plc v Rastogi remained illuminating, but was not treated as imposing restrictive constraints. The authorities concerning claims made academic by a defendant’s or third party’s act, including Jass v Blackburne, provided guidance rather than an automatic rule.
3. The personal tax claim had not been tried, so disputed facts could not be resolved for costs purposes. However, there was sufficient established or incontrovertible material to exercise the discretion, consistently with BCT Software Solutions v Brewer. The advisers’ denials had been contradicted by the earlier factual findings, their position on section 739 was unsupported, and the HMRC letter had unexpectedly transformed the case. The advisers had also refused an indemnity which would have ended the proceedings.
4. The advisers, Marlborough and Charterhouse were ordered to pay the claimant’s costs not already covered by earlier orders up to and including 30 April 2007. Thereafter there was no order as to costs.
5. The claim against Haines Watts was secondary and the key agency issue had never been determined. The claimant had continued to pursue Haines Watts to cover remote contingencies, even after the advisers agreed to indemnify them. The claimant therefore had to pay Haines Watts’ outstanding costs, subject to the separate order concerning reserved hearings.
6. No order for costs was made in respect of the hearings before HHJ Pelling QC and Mr Justice Vos.