Is entitlement to costs automatic following discontinuance of proceedings? Rokvic -v- Peacock [2014] EWHC 3729 (TC)

In Rokvic -v- Peacock [2014] EWHC 3729 (TC) the Claimant invited the Defendant to pay the outstanding sums due whereby the Claimant would discontinue proceedings. The Claimant wrote to the Defendant and stated that; “We confirm that if Peacock pays our client for the £43,892.37 our client will discontinue the court proceedings and will thereafter negotiate in good faith with a view to achieving overall settlement. However, unless and until that sum is paid by Peacock our instructions are to continue with court proceedings and obtain a judgment to enforce the full amount claimed with interest thereof”. The Judge noted that there was no specific reference to the Claimant’s legal costs in the correspondence sent to the Defendant. The Claimant acknowledged receipt of the sum of £43,892.37 on 24 September 2014 and subsequently raised the issue of costs. The Claimant maintained that they should be entitled to costs. The Defendant argued that in contractual terms a deal had been done and that they did not have to pay costs. The Judge determined, much to the relief of the Claimant that as a matter of discretion that she be entitled to her costs of the proceedings.

The CPR is clear about the liability for costs in cases where discontinuance occurs. CPR 38.5(1) states that “unless the court orders otherwise, a Claimant who discontinues is liable for the costs which a Defendant against whom the Claimant discontinues incurred on or before the date on which notice of discontinuance was served on the Defendant.” This is because usually where a Claimant discontinues it recognises that there is a fundamental flaw in the pleaded case. It is evident in this case that discretion ought to be given as the Claimant was stating it would discontinue the claim if the full amount due was paid by the Defendant. It wasn’t the case that the claim had weak merits but moreover once the sums due paid there was no claim to pursue. Indeed the Claimant’s legal costs were only incurred as a direct result of the Defendant’s failure to pay the agreed sums. Interestingly, the Defendant did not attempt to suggest that their costs should be payable rather that they should not be liable to pay any of the Claimant’s legal costs. The Defendant’s approach clearly supports the Judge’s decision to apply discretion as set out in CPR 38.5.

The lesson here is, be clear when making any offer of settlement and ensure that any proposal made is exclusive of and subject to payment of the costs of the proceedings. This case ought not to set a precedent but act as a reminder to litigators of the need to set out settlement terms properly. If you have any questions or queries in relation to this blog please contact Sean Linley(sean.linley@clarionsolicitors.com and 0113 3363327) or the Clarion Costs Team on 0113 2460622.

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