IF YOU DISCONTINUE AN ACTION THEN YOU’RE (NORMALLY) BE GOING TO PAYING THE COSTS: THE HIGH BURDEN IMPOSED IN AN APPEAL AGAINST A DECISION AS TO COSTS

Anyone attempting to appeal against an order for costs faces an uphill battle. This may be doubly so if the costs order is made presumptively because they have discontinued an action. Here we consider a case where the difficulties of a would be appellant are made clear.

(How an appeal against a costs order can often feel..)

“(1) 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. (CPR 38.6(1)”

KEY PRACTICE POINTS

This case highlights the very limited “escape route” for costs when a party discontinues. Whilst conduct of the receiving party can be an issue even if such conduct is established this may not lead to costs being disallowed in full. Here only 20% of the costs were disallowed.

THE CASE

Charles Elphicke v Times Media Limited [2025] EWHC 1554 (KB)

THE FACTS

The claimant brought an action against the defendant alleging misuse of private information and defamation.  The action was discontinued some six weeks before trial.

THE COSTS APPLICATIONS AT FIRST INSTANCE

After the discontinuance the defendant applied for an interim sum on account of costs.  The claimant applied for an order disapplying the presumption that he should pay the costs.  The Master made an order that the claimant pay 80% of the defendant’s costs.  The judgment at first instance can be found here.

THE CLAIMANT’S ATTEMPTED APPEAL

The claimant sought permission to appeal the orders made.  The judge was here considering the renewed application for permission to appeal.

GROUND ONE

Ground 1: The order that the Appellant pay 80% of the Respondent’s costs

47. The Appellant’s case under ground 1 is that the Master erred in principle and exceeded the discretion available to her in the making of the costs order in several respects.

(i): The allegations of misconduct against the Respondent which opened the CPR 38.6 gateway

48. The Appellant argues that the authorities illustrate that whenever the CPR 38.6 presumption is displaced by misconduct as serious as that found in this case, no order for costs, or a costs order in favour of the Claimant, is appropriate.

49. He relies on Ashany v Eco-Bat Technologies Ltd [2018] 3 Costs LO 38. The claimants had discontinued their claim in circumstances where the principal reason for the claim had been to secure copies of a particular email and where they had, eventually achieved that objective; and where the defendant was found to have behaved unreasonably. The Court of Appeal upheld the Master’s finding that the presumption in CPR 38.6 should be displaced, such that for the first period of time under consideration the claimants should have their costs and for the third period there should be no order for costs: [24]-[39]. However, these were both decisions reached on their own facts, and they do not generate any general principles to be applied in other cases.

50. The Appellant also cites Earles v Barclays Bank [2009] EWHC 2500 (Mercantile). The defendant had succeeded at trial and was therefore prima facie entitled to its costs under CPR 44.3. However, the trial judge, HHJ Simon Brown QC had concerns about the defendant’s conduct with respect to disclosure and electronic disclosure. He therefore decided that the defendant was only permitted to recover 50% of those costs: [67]-[77]. Earles did not involve a discontinuance, so CPR 39.6 was not in issue. It is of no real application to this case.

51. In his supplementary skeleton argument the Appellant refers to Clarke v Guardian [2025] EWHC 222 (KB), for the proposition that the duty to preserve evidence is taken very seriously. However, the Master recognised that the obligation to preserve evidence is an important one in her judgment at [124] and [127]: see [38]-[39] above. The findings in Clarke do not assist the Appellant in showing that the Master’s costs order, consequential on her finding about the nature of this obligation, and the Respondent’s breach of it, was wrong.

52. Therefore, none of these cases generate the principle or “expected” order after the displacement of the presumption in CPR 38.6 for which the Appellant contends. The Appellant was unable to take me to any authority which provides such a gloss on the Brookes guidance. Rather, the guiding principles remain those in Brookes. If a judge decides to displace the CPR 38.6 presumption, applying Brookes, there are a wide range of options open as to the costs order that follows, in the exercise of the judge’s discretion.

(ii): Further allegations of misconduct against the Respondent, which should have opened the gateway

53. The Appellant argues that the Master should have concluded that as well as the failure to preserve evidence and the misuse of witness statements, the CPR 38.6 gateway was opened by two further instances of the Respondent’s conduct: lying in pre-action correspondence and failing to engage in ADR. He submits that once CPR 38.6 had been disapplied, it was properly to be treated as disapplied for all purposes and all conduct therefore fell to be taken into account.

54. The Master summarised the evidence and submissions on the alleged lying at [44]-[47] of her judgment. In essence, the Appellant had pleaded that one of the Defendant’s employees who was a qualified solicitor working in the Defendant’s internal legal department had lied in pre-action correspondence, by asserting that the Metropolitan Police Service had interviewed him over at least two rape allegations, when this was incorrect. The allegation was robustly denied in the Respondent’s Defence, which contained its own version of events. Although some evidence from the Metropolitan Police appeared to support the Appellant’s position, this was a heavily contested issue that would have required live evidence at trial, where it would have been a key issue on liability and quantum.

55. The Master was therefore entirely justified in concluding that this stage of the litigation was “not the venue or time…to determine what were contentious and live issues over behaviour for trial and which were abandoned on discontinuance. To decide otherwise would be to re-litigate those points”: [117]; and that this allegation, and that of failing to engage in ADR, were more apt to be considered (in the absence of a trial) by the Costs Judge, who would have “the full opportunity to consider the material such as letters, attendance notes and so forth in detail and if necessary use her powers under CPR 44.11”: [123]. She observed that such matters commonly arise on detailed assessment. The Master’s reasoning in this regard was not contrary to principle or outside the generous ambit within which reasonable disagreement is possible.

56. This was a different position to that in Ashany, where the Master had been entitled, on information before her, to find that a particular email was included within a Board resolution, and where the proceedings had been discontinued because the claimants had achieved their objective of securing disclosure of the email: [6]. It is also distinguishable from Widlake on which the Appellant also relies. There, the findings of dishonesty against the claimant which led to adverse costs consequences had been made at trial.

57. The Appellant also cites PGF II SA v OMFS Company & another [2013] EWHC (KB) 1288, Laporte & Christian v Commissioner of Police [2015] EWHC (KB) 371 and Wales v CBRE Managed Services Ltd [2020] EWHC (KB) 1050 as examples of cases where a refusal to engage in ADR without a good reason or an inadequate reason may result in a costs reduction. However, in none of these cases, all of which rely on their own facts, had the Claimant discontinued. Accordingly, the CPR 38.6 framework was not in issue.

58.Further or alternatively, the Appellant contends that given the Master considered that the ADR and pre action protocol matters were unclear for the purposes of summary determination, she should have remitted all the conduct issues to detailed assessment. I disagree. It was necessary for the Master to make a costs order setting the overall parameters, with the detailed assessment process then addressing the relevant amounts of costs, including by reference to CPR 44.11.

THE 20% REDUCTION

The claimant argued that the 20% deduction was too low.

“59. The Appellant submits that the 20% reduction in the Respondent’s costs was so low, given the serious nature of the Respondent’s misconduct, that the Master’s decision was outwith the generous ambit of discretion within which reasonable disagreement is possible. I cannot accept this submission. 20% was a substantial reduction, particularly given the high level of the Respondent’s costs claimed. Other Masters may have imposed a greater reduction, others less, but this was a decision comfortably within the Master’s discretion.

60. The Appellant also complains that the Master did not particularise how the 20% was arrived at, except to say that the collateral use of the witness statement was “marginally the more significant” than the failure to preserve evidence. Nor did the Master particularise the mitigation “credit” given to the Respondent. He posited that the Master’s comments suggested that the 20% costs reduction would imply a 9% reduction for the failure to preserve evidence and 11% for the collateral use of the witness statement. These figures are entirely speculative. The Master weighed up the severity of the two aspects of the Respondent’s misconduct and assessed, in the round, that a 20% reduction figure was appropriate. To the extent that this is effectively a “reasons” challenge, the Master’s detailed judgment made sufficiently clear to the Appellant why she had made the decision she did.

61. For these reasons I conclude that there is no real prospect of success under ground 1.”

THE APPEAL AGAINST THE INTERIM ORDER FOR COSTS

The claimant further ordered that an interim payment on account of costs should not be made.  It is worth noting there that the rules state that an interim order should normally be made “unless there is good reason to do so”.

“Ground 2: The interim payment on account of costs

62. Under this ground the Appellant contends that the Master erred in making an order for an interim payment in several respects.

63. As noted at [18] above, CPR 44.2(8) requires the court to order an interim payment unless there is good reason not to do so. Whether or not there is such a good reason is a matter for the court’s discretion.

64. The Appellant relies on the serious nature of the Respondent’s misconduct and the fact that they had not made remediation to the witness whose statement had been used in breach of CPR 32.12(1). He submits that their actions, which amounted to a serious abuse of process and a contempt, were plainly a good reason for not ordering an interim payment.

65. He seeks support from Isbilen v Turk [2021] EWHC 854. However, Isbilen was a case involving allegations that someone had failed to comply with their obligations under a freezing order to give disclosure of their assets. Consideration was given to contempt proceedings. Ms Pat Treacy (sitting as a Judge in the Chancery Division) concluded that on the facts of that case, issuing a summons under CPR 81.6(3) would be inappropriate. It did not involve interim payments of costs. It therefore offers no real support to the Appellant’s argument.

66. The Appellant contends that the equitable “clean hands” principle and the need, on policy grounds, to protect the administration of justice required the Master to find that these were good reasons for not ordering an interim payment. To the extent that it was appropriate for the Master to take either of these matters into account, she had already done so when making the main costs order, by using the Respondent’s conduct as a reason for the 20% reduction, and in so doing noting that it had gone to the heart of the fairness of the proceedings and that some of it could have had implications for the wider administration of justice: see [38] above.

67. He argues that the serious and multiple nature of the Respondent’s adverse conduct was such that the outcome of detailed assessment was uncertain. Given these uncertainties the Master should have declined to order a payment on account of costs, as Freedman J did in Argus Media v Halim [2020] Costs LR 643 at [42]-[46] in respect of the applications before him. However, Argus Media generates no wider point of principle, especially because it is clear from earlier in the judgment that Fredman J did make an order for payment on account of costs in respect of the costs of the substantive claim: [33]-[41]. I agree with Sir Stephen Stewart that the misconduct issues in this case did not make the outcome of a detailed assessment so uncertain that the Master erred in ordering payment on account.

68.In any event, the Master expressly took into account the fact that the Respondent’s conduct led to a heightened level of uncertainty about the detailed assessment process. She did so by reducing the level of the payment on account of the costs of the claim from the starting point she had adopted of 90% of budgeted costs to 80%, after the application of the 20% sanction; and by only ordering a payment on account of 50% of non-budgeted costs, including the costs of the applications: see her reasons set out at p.4 of the 19 November 2024 order.

69. The Appellant referred to Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 at [25] (where an interim payment of 80% of costs was ordered) and MacInnes v Gross [2017] 4 WLR 49 at [26] (where a payment of 90% of budgeted costs was ordered). These cases do not illustrate any hard and fast rule as to what is a reasonable amount for an interim payment.

70. In reality this ground raises no arguable case that the Master erred in principle or exceeded the generous ambit within which reasonable disagreement is possible, per Islam (see [25] above). The Appellant merely disagrees with the Master’s decision that she should not “double penalise” the Respondent by refusing to order an interim payment, having taken the conduct issues into account in relation to the primary costs order. This was an approach that was well within her discretion.

71. Accordingly this ground is not arguable.

THE COSTS OF THE APPLICATIONS

The claimant had been ordered to pay 80% of the costs of the applications. His appeal against this issue was equally unsuccessful.

“72. The Appellant contends that the Master erred in deciding that he should pay 80% of the Respondent’s costs of the two applications before her. He argues that he had been substantially successful on his application: he had met the high threshold of securing the disapplication of the CPR 38.6 presumption and reduced his costs liability due to the Respondent’s serious misconduct. The Respondent had also substantially succeeded on their application. On that basis, the Master should have made no order for costs on the applications. Alternatively, the Master should have ordered costs in the case or reserved the issue to the Costs Judge for determination once the detailed assessment process had concluded.

73. Again, the decision as to what costs orders to make on the applications was a matter for the Master’s discretion; and she gave unusually detailed reasons to explain her decision.

74. The Appellant’s primary case across both applications was that he should pay none of the Respondent’s costs. The Master had ultimately ordered that he pay 80% of them. Although he had succeeded on his point of principle, in that the CPR 38.6 presumption was displaced, this was only to a very limited degree; and not nearly as much as the Appellant had sought. He had not, therefore, substantially succeeded: rather, the Respondent had.

75. In those circumstances, the Master was fully justified in ordering that the Appellant pay the Respondent’s costs of the applications, in the exercise of the general rule under CPR 44.2(2)(a) to the effect the unsuccessful party will be ordered to pay the costs of the successful party. In these circumstances there was no obvious basis for making no order for costs or ordering costs in the case.

76. The Master entirely understandably limited the Respondent’s costs recovery to 80%, to reflect precisely their percentage of success on their application.

77. These decisions were not arguably wrong.”

SOME OTHER COMPELLING REASON FOR AN APPEAL

The claimant argued that there was “some other compelling” reason for an appeal.  This was not accepted.

“Ground 4: CPR 52.6(1)(b)

78. The Appellant contends that permission should be granted because there is “some other compelling reason” for the appeal to be heard under CPR 52.6 (1)(b).

79. He argues that the legal profession and public would benefit from a judgment giving guidance as to how costs decisions should be made in cases involving breaches of the CPR of the kind that occurred in this case which are not only very serious but very rare. He suggests that there is no known authority addressing the costs consequences of the collateral use of a witness statement; and only one addressing those consequences where there has been a failure to preserve evidence when on notice of the need to do so (Earles: see [50] above).

80. I disagree. The Court of Appeal gave clear guidance as to the application of CPR 38.6 in Brookes. Decisions as to how to apply that guidance in a particular case are inevitably fact-specific. They rely on judicial discretion. A High Court judge hearing this appeal could do no more than consider whether the Master’s approach to the misconduct issues found in this case involved an error of principle or exceeded the generous margins of that discretion. For the reasons given under grounds 1-3 above, I do not consider that the Appellant’s grounds of appeal in this respect have real prospects of success.

81. In all these circumstances there is no other compelling reason for the appeal to be heard under CPR 52.6(1)(b).”

ALLEGED PROCEDURAL IRREGULARITIES

This point was also found not to be arguable.

“Ground 5: Alleged procedural irregularities

82.
The Appellant contends that the Master’s orders were unjust because of serious procedural irregularities in the proceedings under CPR 52.21(3)(b).

The factual background

83. The Appellant argues that he had understood from exchanges with the Master during the hearings that the issue of what percentage reduction, if any, to make from the costs claimed would be addressed after her judgment on the issues of principle had been handed down. For example, on 14 March 2024, the Master had said that it was “probably best we do not go into amounts, because I am not going to be making a principled decision until we know what is happening, if you see what I mean, and then, given the outcome, we can hear argument over quantum.”

84. Having received the draft judgment on 19 September 2024, the Appellant emailed the Master contending that it would be procedurally unfair to proceed without a further hearing in relation to “amounts, quantum and percentage related matters” because he had not been able to address these issues in detail.

85. On 5 October 2024 the Master responded as follows:

“I do not accept that a party would think that I was intending to leave over the entire question of the consequences of the breaches (in respect of which I imposed a 20% reduction with quantum to be determined) but I do go along with Mr Elphicke as to the interim payment aspect (which is the ‘percentages’ reference in the transcript at 5F).”

86. The Master explained that as she had, by this point, retired, for her to conduct another hearing could take months to arrange due to the need for her to be authorised to sit in retirement and other matters, such that she considered that the more efficient approach was for written submissions to be made on the issue of the level of the interim payment.

87. On 14 October 2024, the Master handed down the judgment. On 29 October 2024 the parties made their respective written submissions on the level of the interim payment. On 31 October 2024, the Respondent made some further written submissions. These were brief, consisting of three paragraphs, so far as concerned the issue of the level of the interim payment, and responded to new points the Appellant had made in his submissions. The Appellant contended that the further unsolicited submissions from the Respondent contained “claims of fact and submissions of law that are in error” and asked for time to respond, or for a further oral hearing.

88. On 6 November 2024, the Master replied as follows:

“Thank you, I shall consider the original sets of submissions. I will then view the supplemental submissions from D, and if I consider that they may alter my view formed without them, I shall invite you at that stage to send submissions in rebuttal. The process of evaluating an interim payment is intended to be straightforward and typically takes minutes at a hearing, and I have a duty to keep things proportionate.”

89. On 15 November 2024 the Master emailed as follows:

“I did not find myself needing to apply the ‘supplemental’ submissions of D so as to affect my decision and therefore do not need to call on Mr Elphicke to rebut those.”

Submissions and analysis

90. First, the Appellant contends that any reasonable person, would think, as he did, that he was being told not to address the percentage, amounts and quantum matters until it was known whether that would be necessary (ie after the “principled decision” whether to disapply CPR 38.6 and whether or not to make no order for costs) had been made.

91. He argues that it was procedurally unjust for the Master to have proceeded to give a judgment involving any issue of percentage reductions from the costs sought by the Respondent as he had not had the opportunity to advance detailed submissions on this issue, whereas the Respondent had done so. This created an unfairness that could not be cured.

92. However, in my judgment it is clear from the Master’s comments that she was only intending to defer matters of quantum, not matters of potential percentage deduction from costs, as a result of the Respondent’s conduct.

93. Moreover, at the 14 March 2024 hearing, once the Appellant had made detailed submissions to support his primary case that there should be no order as to costs or that the court should otherwise impose heavy sanctions, he did refer to the potential “discount approach” the court might make under CPR 44.2. The Master indicated that he should address what was effectively his “alternative” suggestion, inviting him to make any “suggestion in relation to a proportion approach” which he had. The Appellant then argued that the court should “reduce or extinguish the defendant’s costs by reason of the defendant’s repeated rule breaking” [my emphasis] before making submissions on percentage discount issues: see pp.47F-49A of the transcript.

94. Accordingly, the Master had explicitly indicated that if the Appellant wished to address percentage issues (in the alternative to his primary submission of no costs order) he should do so, and he did. The content of the Master’s 5 October 2024 email (see [84] above) was therefore entirely appropriate.

95. Second, the Appellant contends that it was procedurally unfair for the Master to have permitted the Respondent to make further unsolicited written submissions, while refusing him permission to reply: the Respondent had effectively had “another bite of the cherry” which was unfair.

96. This is unsustainable. The Master’s 6 November 2024 email made clear that she did not refuse the Appellant permission to reply to the Respondent’s further submissions: on the contrary she said that if the Respondent’s further submissions affected her view she would invite him to respond: [87] above. The Master’s 15 November 2024 email made clear that the Respondent’s further submissions had not affected her decision and it was therefore unnecessary for the Appellant to respond to them: [88].

97. Third, the Appellant argues that the Master should have listed a further oral hearing: the above process had placed the parties on an unequal footing and an oral hearing would have remedied that position.

98. I disagree. The hearing of the parties’ respective applications had already occupied three hearings of half a day each. The Master was fully entitled to consider that it would be consistent with the overriding objective for further submissions on the narrow question of the level of the interim payment to be made in writing rather than orally. I observe that decisions on costs issues, including on wider questions of principle rather than merely the level of an interim payment, are routinely made on the basis of written submissions only. If the Master had considered that the overriding objective required a further oral hearing, appropriate arrangements could have been made notwithstanding her retirement.

99. Further, as Sir Stephen Stewart’s order observed, none of the other grounds take issue with the amount of interim payment ordered. Accordingly, there is nothing to suggest that the alleged procedural shortcomings in the second and third points above would have made any difference to the overall outcome.

100. Accordingly, this ground is not arguable.”