DISCONTINUING CLAIMANT STILL HAS TO PAY DEFENDANT’S COSTS: CLAIMANT CANNOT PASS RISKS ON TO ANOTHER DEFENDANT

In BAE Systems Pension Funds Trustees Ltd v Bowmer & Kirkland Ltd [2018] EWHC 1222 (TCC) Mrs Justice Jefford refused the claimant’s application for an order that it should not have to pay the costs of a defendant it discontinued against.  The judge refused to make an order that a remaining defendant be liable for those costs.

KEY POINTS

• There may be some circumstances in which a court can order that, upon a claimant discontinuing against one defendant, another defendant shall pay that defendant’s costs.
• A claimant issuing late may be reasonable in issuing against a number of defendants.
• However the fact that a claimant was reasonable in issuing against a number of defendants was not a reason for displacing the normal principles in relation to costs.
• A late-issuing claimant took the risks in relation to suing a number of defendants and consequent risks as to costs.
• The court refused to order “otherwise” and the claimant remained liable to pay the costs of the defendant against whom it had discontinued.

THE APPLICATION

1. “This is an application pursuant to CPR Part 38.6, which provides 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 the notice of discontinuance was served on the defendant. In other words, where a claimant discontinues, there is a presumption that he will pay the costs of the defendant against whom he discontinues, unless the court otherwise orders.”

The claimant sought an order that the costs of the defendant it was discontinuing against (Geotherma) be paid by the first defendant in the action (Bowmer & Kirkland Limited).

THE BACKGROUND

The claimant was the freehold owner of a building. It was not directly involved in the original construction of the building (a warehouse). Construction took place in 2004, however warranties were given, which operated as deeds, and the limitation period was in 2016.

There were certain defects in the building and shortly before the expiry of the limitation period the claimant issued proceedings against a number of parties involved in the construction.

THE JUDGE’S COMMENTS ON THE CLAIMANT’S DECISION TO PROCEED AGAINST A NUMBER OF DEFENDANTS

1. In those circumstances, BAE could not be criticised for having commenced proceedings against all possible defendants. That is the sensible approach where a limitation period is about to expire and a claimant may be unclear about the financial or insurance position of potential defendants. However, it does seem to me, in principle, that the claimant then takes the risk that the proceedings against one or more of those defendants may transpire to be ill-judged or inappropriate, and also, as Ms Sinclair QC has submitted on behalf of Bowmer & Kirkland, the claimant takes the risk that the defendants will not have all documentation and information at their fingertips in relation to a stale claim.

THE CLAIMANT’S APPLICATION

It became clear that one of the defendants, Geortherma, had not been involved at all in the work that was defective.  The claimant then discontinued the action against them, but sought a “different” costs order under CPR 38.6.

THE JUDGMENT

The judge set out the history of the litigation and then considered the application.

1. 1. Thereafter, BAE served its notice of discontinuance on 3^rd November 2017 and made this application. Both before and after it did so, it sought B&K’s agreement to pay Geofirma’s costs. A complaint is made of a failure to engage in that correspondence. I make no comment on that. It does not seem to me to be material to this application.

   2. Turning then to the application itself, as I have said, the nature of the application is that I should make an order that displaces the presumption of a normal order under Part 38.6 that the claimant should pay the cost of the defendant against whom they have discontinued.

   3. Mr Lamont recognises that there is no authority in which, on discontinuance, a costs order has been made against another defendant to the proceedings. But he argues, rightly in my view, that I have a wide jurisdiction in respect of costs under Part 44, and that it would be open to me to make such an order if I were minded to do so. He says that it would be appropriate for me to make such an order in this case because B&K have acted unreasonably. Had they indicated, as they ought to have done earlier, that there was no evidence that Geofirma’s works included lime stabilisation works, BAE would have discontinued earlier and Geofirma’s costs would, in whole or in part, have been avoided.

   4. Ms Sinclair QC on behalf of Bowmer & Kirkland argues, firstly, that the application is fundamentally misconceived. She says that because, in effect, it asks for a Sanderson order. That is an order that an unsuccessful defendant pays the costs of a successful defendant directly. That sort of application arises at the conclusion of a trial where there is potentially a successful and an unsuccessful defendant. In this case, there is a quasi-successful defendant, Geofirma, who have been let out of this action, but there is no unsuccessful defendant, and she says, therefore, that it is simply not open to me to make an order under Part 38.6 that she should pay costs of another defendant.

   5. I am not persuaded, as I have already indicated, that that is right and 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.

   6. I do, however, accept Ms Sinclair’s submissions that the cases in relation to Sanderson orders provide some (and I underline the word “some”) guidance as to how I should approach this matter. She has drawn my attention, in particular, to what was said in Irvine v Commissioner of Police for the Metropolis [2005] 3 Costs LR 380, at para.15, where the Court of Appeal cited with approval the decision of the judge below, where she had said this:

“It does seem to me that this is a case where, as in all cases, parties and their legal teams have to take a careful and close look at the basis on which they seek to bring in another party to proceedings and to make a judgment for themselves on the basis of the information available to them as to whether or not they are likely to succeed in claims against those parties. They 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”.

.

1. As I say, that gives me some guidance, but only some guidance, because, in this instance (that is, an application made under Part 38.6), the reasonableness or otherwise of commencing proceedings against a defendant is not the test by reference to which the default position applies or otherwise. The simple fact that it was reasonable or not to commence and pursue proceedings is not itself a factor that displaces the default presumption.

2. In any case, I have already said that I do not consider that it was unreasonable of BAE to commence proceedings against Geofirma, but the risk that they took was that those proceedings might turn out to be ill-judged. Further, as I have also observed, they pleaded a positive case that Geofirma had carried out lime stabilisation works and was in breach of the contract in certain respects in doing so. That repeated, if you like, the taking of the risk that those allegations would not be made out. This was further, as Ms Sinclair QC has submitted, not a case in which BAE was put up to making those allegations by Bowmer & Kirkland, who had never, as such, pointed the finger at Geofirma and had said from the outset that no lime stabilisation works had been carried out by anybody.

3. It simply does not seem to me, in those circumstances, that the request that was made for clarification of the extent of Geofirma’s works could somehow have the effect of transferring that risk on to Bowmer & Kirkland. Up until the date of the Case Management Conference, which, as I have said, was a little over five months from the letter of claim, it does not seem to me that Bowmer & Kirkland could 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.

4. By the time of the Case Management Conference when that issue was ventilated, an order was made by me which was intended to clarify the position or flush out whether there was any further information to be provided by Bowmer & Kirkland that would justify a claim against Geofirma. Bowmer & Kirkland complied with the court’s order, and it goes too far to say that, in the spirit of case management or cooperation in the modern conduct of litigation, they ought to have gone further in making the other parties and, in particular, the claimant aware of the conclusion that they had reached (as to whether there should be Part 20 proceedings) at a significantly earlier stage than I had ordered, so as to obviate the incurring of any costs by Geofirma. That was not the order that I made. It seems to me quite unfair to suggest that Bowmer & Kirkland ought to have complied with some other timetable.

5. For all those reasons, I will dismiss this application. I find that the normal position on costs will apply pursuant to Part 38.6, because there will be no order of this court to the contrary.