Costs News

21 January 2021
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Party that effectively discontinued through amendment ordered to pay costs

A claimant that effectively discontinued a number of claims by a radical amendment to the particulars should have to pay the defendant’s costs of the abandoned cause of action, the High Court has ruled.

RG Carter Projects sued CUA Property for £14m for alleged misrepresentations. In the alternative, it claimed extensions of time pursuant to a building contract and declaratory relief as to the proper sum due on its final account.

RG sought permission to amend its case to abandon the misrepresentation claim, abandon one head of claim on which an extension of time was previously sought and reduce its claim on the final account. The overall effect was to reduce the value of the claim to £1.9m.

The question before the court was the appropriate costs order. The claimant said it should pay the costs of and occasioned by the amendments.

The defendant contended that a conventional order like that would not compensate them for the work wasted in defending the abandoned heads of claim, arguing that the amendments amounted in substance to the partial discontinuance of the claim.

In RG Carter Projects Ltd v CUA Property Ltd [2020] EWHC 3417 (TCC), Mr Justice Pepperall ruled that the deletion of the discrete cause of action in misrepresentation “was in substance a discontinuance of a part of RG Carter's claim and not just the abandonment of a claim for a particular remedy”.

Having considered what would have been the costs consequences had RG served a notice of discontinuance, he said that where the cause of action was “simply abandoned”, with substantial costs wasted, “an award of costs on the conventional basis would cover the defendant's costs of amending his defence to delete the now-redundant answer to the abandoned plea, but would not recompense such defendant for the costs of investigating the original case or of pleading the first defence”.

The judge continued: “On such facts, the usual order would not be just and the appropriate order will often be to award the defendant not just the costs of and caused by the amendment, but also the costs in respect of the abandoned cause of action.” This is what he ordered.

But he rejected CUA’s request that the costs were paid on the indemnity basis. RG was “careful” to stop short of pleading fraud in its misrepresentation claim, he observed, and the court should “generally be wary of departing too readily” from the usual rule that costs on discontinuance should be payable on the standard basis.

Pepperall J said: “In my judgment, it would be wrong in principle and a perverse disincentive to claimants' undertaking a proper review of their claims to order costs on the indemnity basis simply because, rather than pursuing a bad case to trial, a claimant takes a proper decision to discontinue.

“Of course, there may be cases where the very issue of a speculative, weak, opportunistic or thin claim is abusive because the claimant never intended to pursue the matter to trial. Such cases aside, the court should, save where fraud is alleged, ordinarily start from the position that costs should be on the standard basis.”

He accepted that the fact RG realised for itself that its misrepresentation claim was “doomed to failure at such an early stage in this litigation” – before either the exchange of witness evidence or disclosure – might well indicate that the claim was always so thin or speculative that it should never have been made.

“Nevertheless, the claim was not pleaded in fraud and I am unable on the material before me to conclude that it was nothing more than an abusive attempt to extort money in settlement for a known bad claim.

“Indeed, if the matter had been so obviously clear, CUA would no doubt have applied for summary judgment or applied to strike-out the claim.”

The judge ordered that the costs, if not agreed, would be assessed as part of the detailed assessment at the conclusion of the proceedings, and that RG pay £100,000 on account.

He rejected CUA’s request for an immediate detailed assessment, saying “it would be unnecessarily expensive and wasteful of scarce court resources” to risk two detailed assessments.

“Further, if one waits until the end of the case there is at least the possibility, should CUA succeed in its defence to the remaining case, that there will never be a need to untangle the costs of the abandoned claims from the rest of the pre-amendment costs.”

Steven Walker QC and Peter Land (instructed by Kennedys) for the claimant. Anneliese Day QC and George Woods (instructed by Costigan King) for the defendant.

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