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

The court treated the Claimants' amendment deleting allegations of deceit, dishonest assistance and unlawful means conspiracy from the originally issued (though unserved) claim form as a discontinuance for the purposes of CPR Part 38. Applying its general costs discretion under section 51 of the Senior Courts Act 1981, the court held that the First Defendant (Rayner Essex) was entitled to recover the costs occasioned by those discontinued claims, including pre-action costs, because the allegations of dishonesty were speculative, lacked satisfactory explanation and were outside the norm. The court exercised its discretion to order that costs be assessed on the indemnity basis but declined to order immediate assessment, deferring detailed assessment until the conclusion of the remaining proceedings pursuant to CPR r.38.6(2)(b).

Background and parties: The First Claimant, Stubbins Marketing Limited (SML), issued proceedings arising from a 1 April 2016 transaction. Rayner Essex LLP acted as SML’s accountant at the time. SML's pre-action letter of claim (30 June 2021) and the initially issued claim form included allegations of dishonesty and related causes of action which were later removed by amendment to the claim form (20 April 2022).

(i) Nature of the application: The First Defendant brought an application seeking an order that the Claimants pay the Defendant’s costs of responding to the 30 June 2021 letter of claim on the indemnity basis as those allegations were baseless and abandoned; alternatively costs under CPR Part 38, and an immediate assessment and payment on account.

(ii) Issues framed by the court: (a) Whether the Claimants' amendment amounted to a discontinuance under CPR Part 38; (b) whether the defendant could recover pre-action costs occasioned by the discontinued claims; (c) whether costs should be assessed on the indemnity or standard basis; and (d) whether the assessment should be conducted forthwith or deferred until the conclusion of the proceedings.

(iii) Reasoning and decision: The court accepted that the deletion of causes of action from the originally issued claim form should be treated as a discontinuance for CPR Part 38 purposes (and, in any event, that the court’s discretion under s.51 permitted the same outcome). Pre-action costs are recoverable where incidental to issued proceedings. Considering authorities and the circumstances, the court found the dishonesty allegations to be speculative, inadequately explained and “outside the norm”, and that the defendants had been put to significant expense defending those allegations. Accordingly the court ordered costs of the discontinued claims on the indemnity basis. However, the court declined to order immediate detailed assessment, directing that assessment should await the conclusion of the remainder of the proceedings so that apportionment could be conducted by the Costs Judge with the benefit of the trial outcome. The court directed an order in favour of Rayner Essex in the terms described.

The application by Rayner Essex is allowed. The court treated the Claimants' amendment deleting allegations of deceit, dishonest assistance and unlawful means conspiracy as a discontinuance under CPR Part 38 (and, in any event, exercised its discretion under section 51 to the same effect). The Claimants were ordered to pay the First Defendant’s costs occasioned by the discontinued claims, including pre-action costs, to be assessed on the indemnity basis. Detailed assessment was deferred until conclusion of the remaining proceedings under CPR r.38.6(2)(b). The Order was made in favour of Rayner Essex.