Be careful if you go to court!

A recent decision of the Court of Appeal confirms that it is only in very exceptional circumstances that a Claimant who discontinues her claim will be able to claim costs from a Defendant.

The decision in Brookes v HSBC Bank PLC [2011] EWCA Civ 354 concerns an appeal from the decision that when the Applicant discontinued her claim she was liable to pay the Defendant’s costs in the proceedings. The Applicant brought an action against her credit card issuer in respect of an alleged failure to produce a true copy of the signed credit agreement in accordance with Section 78 of the Consumer Credit Act 1974. Before the end of the litigation the credit card issuer was able to provide the requested copy documents to the Applicant, such that it fulfilled its duty under Section 78.

Upon analysis by the Applicant’s solicitors it was found that the agreement was compliant with the relevant legislation and was therefore fully enforceable and as such, the Applicant discontinued her claim. She sought her costs in the proceedings from her lender, claiming that the purpose of the litigation was to obtain a copy of the agreement, and therefore after having obtained a copy of the agreement it was the responsible action for her to discontinue her claim.

However, the Judge concluded that the real purpose of the Applicant’s proceedings was not to obtain a copy of the agreement, but to establish that in the absence of a copy of the original agreement that the debt was unenforceable, and once it became clear that the lender had complied with its obligations that claim was bound to fail.

In accordance with the court’s principles, developed in the case of Far Out Productions v Unilever [2009] EWHC 3484, where a Claimant discontinues proceedings there is a presumption that a Defendant should recover his costs. It is only in rare circumstances that this presumption does not apply, usually only in cases where a Defendant causes a change in circumstances through his unreasonable conduct which in all the circumstances would provide a good reason for departing from the rule. As this was not an exceptional circumstance, the Judge awarded costs to the Defendant. This decision was upheld by the Court of Appeal.

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