Sheinberg v Abdon & Ors

Under CPR 38.6, a claimant who discontinues is presumed liable for the defendant’s costs. The claimant bears the burden of showing a good reason to depart from that rule. Unreasonable conduct by the defendant may justify departure, particularly where it caused or materially contributed to the proceedings. The court should assess conduct before and during the proceedings without deciding the substantive merits unless necessary. The possibility that the claimant would have succeeded is not, by itself, sufficient. Even where departure is justified, the court must assess the claim as a whole and may make no order as to costs where part of the claim was bound to fail and the practical result substantially reflected the defendant’s earlier proposals.

The claimant brought a Part 8 claim concerning the management of a residents’ management company, including the filing of statutory accounts and the convening of a general meeting under section 306 of the Companies Act 2006. The claim against the second and third defendants was later discontinued after a general meeting had taken place and various resolutions had been passed.

The issue was whether the court should disapply the usual costs consequence under CPR 38.6 because of the defendants’ conduct, and, if so, what costs order should be made.

1. Applicable principles. CPR 38.6 creates a presumption that a claimant discontinuing proceedings pays the defendant’s costs. The claimant must show a good reason for departing from it. The relevant circumstances include the parties’ conduct under CPR 44.2, including pre-action conduct, the reasonableness of pursuing or contesting issues, and the manner in which the case was conducted.
2. The six principles summarised in Brookes v HSBC Bank plc [2011] EWCA Civ 354 were applicable. The claimant’s prospects of success were not, without more, a sufficient reason. A change of circumstances will ordinarily need to be attributable to unreasonable conduct by the defendant. Cogent reasons and unusual circumstances are generally required.
3. The approach in Nelson’s Yard Management Co v Eziefula [2013] EWCA Civ 235 confirmed that the court may consider unreasonable conduct without determining disputed issues on the merits. Conduct before proceedings may be relevant where it provides a good reason to depart from the default rule.
4. The defendants had acted sufficiently unreasonably. They had resisted a general meeting, failed to engage properly with proposals concerning the accounts, delayed agreement to estimated accounts, advanced revised feeder documents at a late stage, and opposed a meeting without proposing an adequate mechanism for resolving the outstanding disputes.
5. The defendants’ conduct did not justify ordering them to pay the claimant’s costs. The claim seeking an immediate order concerning the accountants was bound to fail, and the general meeting achieved in substance what the defendants had proposed in correspondence, although the meeting made the result binding on the company.
6. The appropriate order was no order as to costs.