Discontinuance ruling “does not affect” previous costs orders
An order to discontinue an action does not have any effect upon interlocutory cost orders, the High Court ruled last week.
In Dar Al Arkan Real Estate Company & Anor v Al Refai [2015] EWHC 1793 (Comm), Mr Justice Andrew Smith said that “nothing either in CPR 38.6 or elsewhere in the CPR states in terms that prima facie discontinuance reverses (or otherwise affects) previous costs orders, nor is it obvious that this is their necessary implication…
“Costs are often assessed summarily and paid accordingly, and it is not easy to identify a legal mechanism to require a recipient to disgorge costs already paid, there being good consideration for the payment at the time that it was made: the recipient might have altered his position on the basis of the payment…
“As a matter of policy, it would be surprising if the CPR provides for harsher consequences on a litigant who discontinues a claim or part of a claim than are typically visited on one who pursues an invalid claim or arid litigation to the bitter end. Surely a litigant who comes to appreciate that there is no point in pursuing a claim or part of one is to be encouraged to discontinue it promptly.”
In doing so, the judge said he disagreed with the ruling of Lord Justice Pill in Safeway Stores Ltd v Twigger [2010] EWCA Civ 1472, in which he said that, by discontinuing their claim against a defendant, the claimants “accepted that it is not a valid claim against” him.
Andrew Smith J said: “Pill LJ did not, I think, mean that this is always the implication of discontinuance: certainly, it is not unusual (to give just one of many possible examples) for a claim to be discontinued when it is learned that a defendant is uninsured or otherwise not worth suing. In this case, I can well understand that, settlement having been reached with the other defendants (on terms of which I am unaware), the claimants did not wish to pursue this expensive litigation against Mr Al Refai alone. I do not infer that they accepted that they had no valid claims against him.”
Judge refuses to give weight to withdrawn part 36 offer
The High Court last week rejected the suggestion that a withdrawn part 36 offer should be given greater weight than other factors when deciding whether to award indemnity costs.
In Gulati & Ors v MGN Ltd [2015] EWHC 1805 (Ch) – the Mirror newspaper phone hacking case – a part 36 offer on behalf of the actress Sadie Frost was withdrawn after 21 days when it was not accepted, but she went on to beat the offer in court.
Mr Justice Mann recorded that her counsel’s submissions “seemed to invite me to treat it as being tantamount to an offer which was entitled to the part 36 consequences notwithstanding its failure to maintain its status as such an offer by reason of its withdrawal… He relied particularly on the fact that without such a consequence a non-part 36 offer by a claimant would not carry any particular incentive for acceptance”.
The judge said: “To make such an order in those circumstances, absent any other unreasonable behaviour which goes sufficiently beyond the norm in litigation, would in my view be novel… It would involve the introduction of an award of indemnity costs for behaviour which was not necessarily unreasonable, or unreasonable to a sufficient extent beyond the norm.
“I do not consider that, without part 36, it would be correct to formulate that principle. It seems that it took the enactment of part 36 to introduce the concept of the payment of indemnity costs to claimants who made offers which they beat, and part 36 contains a number of requirements, all of which have to be fulfilled before the consequences of CPR 36.17 are attracted.
“Mr Sherborne’s submissions involve the substantial by-passing of the part 36 requirements. That would not only be novel (which is not, of itself a bar, but it does not help); it would be contrary to the thrust of Court of Appeal authority…
“It therefore seems to me that, as a beaten offer, Ms Frost’s one-time part 36 offer has no great significance. It could play a part in a general assessment of the reasonableness or unreasonableness of the defendant’s conduct, but it cannot be elevated to a position comparable to a living part 36 offer merely because it has been beaten. This conclusion means that, in the circumstances, the part 36 offer, having lost its normal consequences as a result of its withdrawal, loses much of its significance. It takes its place alongside the other factors relied on by Ms Frost, but in fact adds little.”