Brookes v HSBC Bank Plc

On discontinuance, CPR r 38.6(1) presumptively requires the claimant to pay the defendant’s costs. A departure requires cogent reasons and will be unusual.

A claimant does not displace the presumption merely because discontinuance avoids a trial, is commercially prudent, or follows a belief that the claim had merit. The claimant assumes the litigation risk and, if unwilling or unable to carry the claim through to judgment, will ordinarily bear the costs imposed on the defendant.

The court should consider the real nature and purpose of the proceedings. A claimant who sought a declaration of unenforceability, rather than simply statutory information, and discontinued when authority showed that case would fail, has not achieved substantive success justifying a different costs order.

Two credit-card customers appealed against costs orders made after they discontinued claims against their banks. The claims followed requests under section 78 of the Consumer Credit Act 1974 for copies of their credit agreements.

Each claimant sought relief extending beyond production of documents, including declarations that the agreements were unenforceable. In Carey v HSBC Bank Plc [2009] EWHC 3417 (QB), Judge Waksman held that a reconstituted agreement could satisfy section 78. The claimants then discontinued.

Judge Waksman dismissed their applications to displace the ordinary costs consequence of discontinuance, ordering Ms Brookes to pay HSBC’s costs and Mr Jemitus to pay 90% of Bank of Scotland’s costs. The central issue was whether the claimants had obtained the relief for which they had properly brought proceedings, so that CPR r 38.6(1) should be displaced.

1. Both appeals were dismissed. The judge’s costs orders disclosed no error in principle and his exercise of discretion could not be faulted.

2. CPR r 38.6(1) presumptively requires a discontinuing claimant to pay the defendant’s costs. The claimant bears the burden of showing cogent reasons for a different order. Such reasons will usually arise only in unusual circumstances. Avoiding a trial is the ordinary consequence of discontinuance and cannot itself justify departure from the rule.

3. A claimant who starts proceedings assumes the risk of the litigation. Even a claim that might have succeeded does not, without more, displace the presumption. Practical, financial or pragmatic reasons for discontinuance do not suffice. A change of circumstances will ordinarily need to be unconnected with the claimant and accompanied by unreasonable conduct by the defendant.

4. The court must examine the real nature of the claim. Ms Brookes did not bring proceedings merely to obtain information to which she was entitled under section 78 of the Consumer Credit Act 1974. She sought to establish that only the original agreement would suffice, thereby making the agreement unenforceable. Her claim was discontinued after Carey v HSBC Bank Plc established that a reconstituted agreement was sufficient. The claim was therefore doomed to fail.

5. The same analysis applied to Mr Jemitus. His claim also sought to establish unenforceability and further relief. Once the bank supplied the agreement, the claim collapsed; the claim concerning credit-reference reporting could not succeed merely through non-compliance with section 78. Neither claimant had shown grounds to depart from CPR r 38.6(1).

• Court of Appeal (Civil Division): Dismissed both appeals and upheld the costs orders.

• High Court, Queen’s Bench Division, Manchester District Registry, Mercantile Court: His Honour Judge Waksman Q.C. dismissed the claimants’ applications to displace the usual costs consequence of discontinuance. Ms Brookes was ordered to pay HSBC’s costs; Mr Jemitus was ordered to pay 90% of Bank of Scotland’s costs.