Clutterbuck & Anor v HSBCc Plc & Ors

Where a claimant discontinues proceedings containing allegations of fraud, the court will generally order the claimant to pay the defendant’s costs on the indemnity basis. The seriousness of such allegations requires the defendant to incur the expense of defending them, and discontinuance abandons the allegation in the same practical way as an unsuccessful fraud claim at trial. The court retains its discretion, but conduct which causes unnecessary expense may reinforce an indemnity order.

The claimants brought proceedings against 15 defendants. Their claim against the eleventh defendant alleged deceit and, alternatively, negligence arising from representations said to have been procured by him.

The eleventh defendant sought to strike out the claim. The claimants sought to amend their particulars, but accepted before the Master that the proposed amended pleading required further redrafting. They did not provide a further draft. After an unsuccessful attempt to remove the matter from the list, they discontinued the entire action.

The eleventh defendant then sought an order that his costs be assessed on the indemnity basis. The central issue was whether discontinuance of a claim alleging fraud, together with the conduct of the proceedings, justified that order.

1. Application granted. The claimants were ordered to pay the eleventh defendant’s costs of the proceedings on the indemnity basis, to be assessed on that basis if not agreed.

2. Under CPR 38, discontinuance ordinarily required the claimants to pay the eleventh defendant’s costs on the standard basis. The court nevertheless had jurisdiction to order otherwise, including by directing indemnity costs.

3. Allegations of fraud are serious. If a fraud claim proceeds to trial and fails, the ordinary approach is to award the successful defendant indemnity costs because the defendant has had no real choice but to defend the allegation. The discretion remains available where countervailing circumstances make such an order inappropriate.

4. The same approach applied where the claimant discontinued rather than took the fraud claim to trial. Discontinuance abandoned the fraud allegation after the defendant had incurred substantial costs in serving a defence, seeking strike-out, and resisting amendments which would have retained the allegations. Jarvis plc v PricewaterhouseCoopers [2000] 2 ECLC 368 supported that conclusion.

5. The claimants’ subsequent conduct did not justify any departure from that approach. Their failure to produce a further properly redrafted pleading, followed by discontinuance after the application could not be removed from the list, reinforced the appropriateness of an indemnity order.

The judgment records no appeal. It arose from interlocutory case-management steps in the High Court, including applications to strike out and to amend the particulars of claim, before the claimants discontinued the proceedings.