Maggie Otto & Ors v Inner Mongolia Happy Lamb & Ors

An application for an interim remedy within an existing claim is not itself a separate claim for the purposes of CPR Part 38. Deliberate non-pursuit of the application is therefore not a discontinuance and does not attract the automatic costs consequence in rule 38.6. The court may permit withdrawal under rule 3.1(2)(m), on appropriate terms. Costs remain discretionary. Although the successful party will ordinarily receive its costs, the court may depart from that rule where the opposing party’s conduct caused the costs to be incurred.

The petitioners brought an interim injunction application in proceedings under Part 30 of the Companies Act 2006. They sought to restrain the use of company funds to pay the legal expenses of other respondents. After further evidence was served, the petitioners decided not to pursue the injunction but sought their costs. The respondents argued that the application had been discontinued under CPR Part 38, so that the petitioners were liable for their costs. The issues were whether withdrawal constituted discontinuance and, if not, what costs order was appropriate.

1. Withdrawal was not discontinuance. The claim for the purposes of CPR Part 38 was the petition, namely the statutory claim alleging unfairly prejudicial conduct. An interim injunction was a procedural measure intended to preserve the position pending trial, not a separate claim. Its deliberate withdrawal therefore did not amount to discontinuance under rule 38.1, and rule 38.6 did not apply (paras 10–16).
2. Power to permit withdrawal. No specific rule governed the termination of an interlocutory application that was not pursued. Applying the approach in Parrot Pay Ltd v Goddington Pierce Ltd [2023] EWHC 2774 (Ch), and adhering to the view previously expressed in Agents Mutual v Moginnie James Ltd [2016] EWHC 3384 (Ch), the court held that CPR rule 3.1(2)(m) empowered it to permit withdrawal on such terms as it considered appropriate, including costs. Withdrawal was accordingly permitted (paras 17–18).
3. Costs. Costs were discretionary under section 51(1) of the Senior Courts Act 1981 and CPR rule 44.2. The respondents were the successful parties on the stand-alone application because the injunction had been withdrawn. The general rule would therefore have required the petitioners to pay their costs. However, the court had to consider all the circumstances, including conduct. Applying Kastor Navigation Co Ltd v Axa Global Risks (UK) Ltd [2004] 2 Lloyd's Rep 119, the relevant successful party was assessed by reference to the application itself, not the wider litigation (paras 19–20).
4. The petitioners had acted reasonably in seeking an explanation for payments from company funds and in withdrawing once the respondents’ further evidence made success unlikely. The represented respondents had failed to provide the explanation earlier and had served evidence late. Their conduct caused the costs. The respondents were therefore ordered to pay the petitioners’ costs, to be summarily assessed on the papers (paras 21–27).