Civil Procedure Rules – Discontinuance of proceedings – Appellants issuing then discontinuing proceedings against respondent concerning excavation works – Judge dismissing appellants’ application for costs and ordering them to pay respondent’s costs – Whether appropriate to disapply default rule in CPR 38.6 – Appeal allowed
The appellants were all freehold or leasehold owners of premises in Nelson’s Yard, Camden. In January 2008, they issued proceedings in respect of excavation work carried out by the respondent, which they contended was within one metre of the rear wall of the yard such that the respondent should have served prior notice on them, pursuant to section 6 of the Party Wall etc Act 1996, before commencing the work. They further asserted that the work had been carried out without planning permission and that the respondent had repeatedly refused requests by the appellants for access to ascertain the state and condition of the rear wall and foundations of their properties. The appellants claimed that there was a real risk that the excavation work had weakened or caused damage to their foundations. They sought injunctive relief to restrain the respondent from carrying out further development pending the agreement of an award under the 1996 Act, and to require him to permit access for inspection of the rear foundations, and damages.
The respondent disputed many of the allegations but accepted that he had not responded to four pre-action letters received from the appellants’ solicitors between May and July 2007 relating to those matters. After the proceedings had been issued, there were a number of developments which led the appellants to serve notice of discontinuance of proceedings. The appellants applied for their costs on the grounds of the respondent’s obstructive and truculent behaviour throughout. The judge rejected that application and ordered them to pay the respondent’s costs.
The appellants appealed. They contended that the judge should have exercised his discretion to depart from the “presumption” or “default” rule in CPR 38.6 that, unless the court ordered otherwise, a claimant who discontinued was liable for the costs incurred by the defendant on or before the date of service of the notice of discontinuance.
Held: The appeal was allowed.
(1) When a claimant discontinued proceedings, the burden was on that claimant to show a good reason for departing from the presumptions under CPR 38.6 that the defendant should recover his costs. The fact that the claimant might have succeeded at trial was not a sufficient reason for doing so. The mere fact that the claimant’s decision to discontinue might have been motivated by practical, pragmatic or financial reasons, as opposed to a lack of confidence in the merits of the case, was insufficient to displace the presumption. A claimant would usually need to show a change of circumstances to which he had not himself contributed and which had been brought about by some form of unreasonable conduct by the defendant.
(2) A judge was given a generous margin when exercising a discretion such as that in CPR 38.6(1). An appellate court would only interfere with its exercise where the judge in the lower court had not applied the correct principles, had not taken into account all relevant considerations, had taken into account an irrelevant consideration, or had reached a perverse decision outside the ambit of reasonable decisions open to him or her on the facts. The hurdle to displace the default rule in CPR 38.6(1) was also high. Once there was to be no trial, it was not the function of the court considering costs to decide whether or not the claim would have succeeded on its merits; its function was to consider whether the unreasonableness of a defendant’s conduct provided a good reason for departing from the default rule: Solutia UK Ltd v Griffiths [2001] EWCA Civ 736, Re Walker Wingsail Systems plc [2006] 1 WLR 2194, Teasdale v HSBC Bank plc [2010] EWHC 612 (QB) and Messih v MacMillan Williams [2010] EWCA Civ 844 considered.
(3) In the present case, although the judge had referred to the failure to respond to the pre-action correspondence, he had erred in principle in concluding that consideration of its consequences would involve him in a consideration of the merits of the appellants’ claim. Alternatively, he had failed to take into account such failure, which was a relevant consideration in the exercise of his discretion. Accordingly, the judge had acted outside the generous margin of appreciation and his order had to be set aside.
(4) It was neither proportionate nor appropriate to remit the matter to the judge. Given the reasonableness of the appellants’ perception of the danger to their wall and foundations, the failure of the respondent to respond to the four pre-action letters that he had received from the appellants and their solicitors was unreasonable conduct that justified disapplying the default rule. In the circumstances, the appellants had had little choice but to issue proceedings and they were entitled to protect their position and continue to seek to ascertain the respondent’s stance after proceedings had been filed. The appropriate order was that the respondent should pay the appellants’ costs of the action up to the date when the defence was served, with no order for costs thereafter.
Duncan Kynoch (instructed by Sharpe Pritchard) appeared for the appellants; Jonathan Davey (instructed by Pinsent Masons) appeared for the respondent.
Eileen O’Grady, barrister
