Claimant Fails to Shift Costs Burden to Remaining Defendant After Discontinuing Against Another? BAE Systems Pension Funds Trustees Ltd v Bowmer & Kirkland Ltd [2018] EWHC 1222 (TCC)

In pre-QOCS cases, or cases where QOCS protection does not apply, there is a presumption that the claimant will pay the costs of the discontinued defendant party. In the recent case of BAE Systems Pension Funds Trustees Ltd v Bowmer & Kirkland Ltd [2018] EWHC 1222 (TCC), the claimant attempted to avoid liability for costs, where the claim was only discontinued against 1 defendant party.

The key facts of this case comprised a claimant, which protectively issued proceedings against 4 defendants to safeguard its position on limitation (1 month before expiration), without having complied with the relevant Pre-Action Protocol.

Proceedings were stayed to ensure compliance with the Protocol. During this period, the claimant’s letter of claim, particulars of claim and defendant responses/defences were exchanged.

Satisfying the directions given by Mrs Justice Jefford at the CMC (5 months after the letter of claim), the 1st defendant wrote to all parties confirming that it would ‘not serve a Part 20 claim and/or contribution notice against the second defendant’, as ‘no evidence ... emerged to support the claimant's pleaded allegations’.

Shortly after this admission, the claimant filed a notice of discontinuance against the 2nd defendant and made an application, pursuant to CPR 38.6. This application requested that the court depart from the default position by ordering the 1st defendant to pay the 2nd defendant’s costs.

1.PNG

At the hearing, claimant counsel conceded that ‘there is no authority in which, on discontinuance, a costs order has been made against another defendant to the proceedings’.  However, the judge agreed with the claimant that she had a ‘wide jurisdiction in respect of costs under Part 44 ... to make such an order ...’ if she saw fit.

Claimant counsel argued that an order of this type was ‘appropriate’ because the 1st defendant had ‘acted unreasonably’. The source of alleged ‘unreasonableness’ was the 1st defendant’s alleged lack of engagement while proceedings were stayed, which had the effect of delaying the eventual discontinuance.

Jefford J described this argument as ‘unfair and overstated’, as the claim was brought in respect of a construction project completed over 12 years before the claimant sent its letter of claim. She reasoned that ‘any party could expect a reasonable time in which to ascertain its position and that of the other parties’. The 1st defendant could not be ‘criticised for the time that they had taken or were taking to investigate matters which had occurred many years earlier, and in circumstances where they themselves were not making and had not made any positive allegation against Geofirma [the 2nd defendant].

Further, the judge considered that the claimant had been intentionally unclear about the details of the claim. She interpreted that the claimant had ‘anticipated’ that a claim could be ‘justified’ against the 2nd defendant and ‘did not wish to take the risk of continuing on the basis of information that they ... had’.

Counsel for the defendant submitted that the claimant was effectively requesting a Sanderson order, under which, for example, an unsuccessful defendant at trial is obligated to pay the costs of a successful defendant. In BAE, the defendant argued that because there was a ‘quasi-successful defendant but no unsuccessful defendant’, CPR 38.6 should not be exercised to displace the claimant’s liability for costs.

Jefford J did not agree with the defendant’s interpretation, stating, at paragraph 30:

‘I am not persuaded ... that there are no circumstances in which a court could order a defendant to pay the costs of another defendant against whom proceedings have been discontinued. I say that given the wide jurisdiction of the court and the possibility of envisaging unusual circumstances, for example, where a claimant had been positively misled by one defendant into suing another, where such an order might then be appropriate. But that is not this case, and the absence of any authority in which such an order has been made seems to me to be some indication, at least, of how unusual such a case would be’.

Sanderson cites Irvine v Commissioner of Police for the Metropolis [2005] 3 Costs LR 380, at paragraph 15, as guidance for when Sanderson orders may not be suitable:

‘They [claimant legal representatives] cannot expect, simply because one party seeks to lay the blame at the door of another, that they can necessarily pursue that other party at the expense of the one who is pointing the finger. Parties must give careful thought to how they are going to pursue their claims’.

Applying this guidance, Jefford J concluded, at paragraph 32, that:

‘The simple fact that it was reasonable or not to commence and pursue proceedings is not itself a factor that displaces the default presumption’.

Although it was not unreasonable for the claimant to commence proceedings and plead a positive case against the 2nd defendant, the judge considered that risk of doing so ‘might turn out to be ill judged’.

On the facts of this case, the judge found in favour of the defendant and the claimant’s application was dismissed.

By protectively issuing the claim against multiple defendants, the claimant had taken a ‘risk that the proceedings against one or more of those defendants may transpire to be ill-judged or inappropriate ...’ This risk resulted in costs liability.

Full text judgment can be accessed here.