Stubbins Marketing Limited & Ors. v Rayner Essex LLP & Anor.

An amendment deleting causes of action from an issued but unserved claim form may be treated as a discontinuance for costs purposes, even if it is not a formal discontinuance under CPR Part 38. The court retains a broad discretion under Senior Courts Act 1981, section 51, and may impose the same costs consequences as formal discontinuance. Pre-action costs are recoverable where they are incidental to the proceedings as issued. The presumption that a defendant recovers costs of discontinued claims may be displaced only for good reason. Indemnity costs are not automatic merely because allegations of fraud or dishonesty are abandoned, but may be appropriate where speculative and serious allegations were pursued without adequate foundation. Assessment should ordinarily await conclusion of the remaining proceedings.

The claimants sued their former accountants and solicitors in connection with a 2016 sale of business assets. Their letter of claim alleged deceit, dishonest assistance, unlawful means conspiracy, breach of fiduciary duty, breach of contract and negligence. After receiving a detailed response, they issued a claim form containing the serious allegations, but later amended the unserved claim form to remove deceit, dishonest assistance and unlawful means conspiracy.

The first defendant sought the costs incurred in responding to the abandoned allegations, on the indemnity basis, together with immediate assessment and payment on account. The issues were whether the amendment amounted to a discontinuance, whether pre-action costs were recoverable, the appropriate basis of assessment, and when assessment should occur.

1. Discontinuance and jurisdiction. The deletion of particular causes of action from an issued claim may fall within CPR Part 38. Even if the amendment of an unserved claim form was not technically a formal discontinuance, it should on these facts be treated as one. The court’s costs jurisdiction was engaged when the claim form was issued, whether or not it had been served.
2. Costs of the abandoned claims. Under CPR r.38.6 there is a presumption that a claimant discontinuing claims pays the defendant’s costs relating to them. The same result was justified under section 51 of the Senior Courts Act 1981. Pre-action costs were recoverable because they were incidental to the proceedings as issued. The first defendant was therefore entitled to the costs of and occasioned by the discontinued claims.
3. Timing. The costs should not be assessed immediately. It would be easier after trial to identify the expenditure that would not have been incurred but for the abandoned allegations. Assessment was therefore to await conclusion of the remaining proceedings.
4. Basis of assessment. The court rejected any automatic rule that failed allegations of fraud or dishonesty require indemnity costs. The relevant question remained what order was just in the circumstances. Here, the allegations were serious, speculative and unsupported by satisfactory evidence. They were pursued through the letter of claim and issued claim form, then abandoned without adequate explanation. That conduct was outside the norm and justified indemnity costs.
5. Scope of costs. The costs order was confined to costs relating to the discontinued part of the proceedings. A costs judge could not simply award all costs of the letter of claim and response, because substantial work would probably have been required even if the claim had been confined to professional negligence.

First-instance decision. No appellate history was stated in the judgment.