COSTS LIABILITY TRIGGERED ON ISSUE, NOT SERVICE

In Webb Resolutions Ltd v Countrywide Surveyors Ltd [2016] Ch Div (4 May 2016)

 

a High Court Deputy Master held that a defendant in a case where the claim was issued but then abandoned before service was entitled to costs of and incidental to the claim.

 

The dispute was about two matters:-

 

• whether a costs liability was triggered by issue, rather than service;

 

• if so whether costs should include pre-action costs as well as costs after the issue of the claim.

 

The court held that the issue of the Claim Form fundamentally changes the position concerning a liability for the other side’s costs as Section 51 of the Senior Courts Act 1981 and CPR 44 applied, whereas they did not apply if proceedings had not been issued.

 

There may be a dispute on assessment of costs as to exactly how much the defendant’s expenditure could be said to be “costs of and incidental to” the claim but in the court’s view all of the expenses that followed as the direct consequence of the Pre-Action Letter of Claim would be incidental to the claim eventually issued.

 

The court held that it would be wrong to ignore the considerable expense the defendant had had to incur in dealing with the claim, and to disregard the way in which the claimant had throughout been aware of how disproportionate the costs were to the size of the claim.

 

The claimant had mentioned this in correspondence. He also held that, just because the claimant would not have incurred a liability for costs had no claim had been issued, it did not follow that where a claim had been issued, the court should not make an order for costs.

 

Costs are always in the discretion of the court once proceedings have been issued and each case will depend upon its facts.

 

However this case does seem to be at odds with the decision in

 

Citation Plc v Ellis Whittam Ltd [2012] EWHC 764 (QB)

 

where a High Court Judge sitting in the Queen’s Bench Division ordered the claimant to pay the defendant’s costs only from the date of service of the claim form, saying:-

 

“As to the costs up to the service of the claim form, I make no order. If the Claimant had not commenced the proceedings (and I have held that it ought not to have commenced the proceedings) then the Defendant could not have sought an order for its costs for that period to be paid by the Claimant. The fact that the Claimant did commence proceedings in this case ought not to lead to the result that it becomes liable to pay to the Defendant costs which it would not have been liable to pay if it had not commenced proceeding.”

 

Many think that the Citation case was wrongly decided but these cases demonstrate that, surprisingly, there is a lack of clear case law on what costs a defendant can expect to recover when proceedings are issued but then almost immediately terminated.

 

Simon Gibbs, in his always excellent Legal Costs Blog, makes the point that a claimant would always expect to have pre-issue costs paid, whether proceedings had been issued or not, but a defendant is not in the same position where the claim is successfully defended pre-issue.