Costs of issues abandoned

Should a party expect to recover costs in relation to heads of claim which they have abandoned?

In AEI Ltd v Phonographic Performance Limited [1999] 1 WLR 1507, Lord Woolf MR stated:

“…it is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed.”

Referring to this judgment Longmore LJ, in Summit Property Ltd v Pitmans (A Firm) [2001] EWCA Civ 2020, at paragraph 16, approved this view and went further:

“In my judgment, it is also no longer necessary for a party to have acted unreasonably or improperly before he can be required to pay the costs of the other party of a particular issue on which he (the first party) has failed. That is the substance of what the Master of the Rolls was there saying.”

Again, in Dudley Fleming v Chief Constable of Sussex [2004] EWCA Civ 643, Potter LJ observed at paragraph 36:

“The principles are too well known to require to be set out in detail. The pre-CPR working rule to be found in the judgment of Nourse LJ in Re Elgindata Ltd (No 2) 1 WLR 1207 was modified by the observations of Woolf Lord in AEI Rediffusion Music Ltd v Phonographic Performance Ltd to the effect that it is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs on a particular issue on which he has failed.”

So the test for recovery is not necessarily one of whether it was reasonable to pursue that head of claim.

In Shirely v Caswell [2001] 1 Costs LR 1, Chadwick, LJ, giving the judgment of the Court of Appeal:

“The costs of issues abandoned, or not pursued at trial, ought, prima facie, to be disallowed against the party incurring them on an assessment of the costs of that party by the costs judge – because, again prima facie, they are costs which have been unnecessarily incurred in the litigation.”

Burton J said, in Nugent v Goss Aviation [2002] EWHC 1281 (QB):

“On an assessment the costs judge, who will prima facie disallow costs in respect of issues abandoned or not pursued, as the Court of Appeal has directed to do in Shirley v Caswell, will in any event disallow the costs of any claims which were positively struck out.”

So, the starting point is that a party should not expect to recover the costs of issues abandoned.

However, the law abhors certainty and so the Court of Appeal has jumped to the rescue. This is what they had to say about abandoned heads of claim in Motto v Trafigura [2011] EWCA Civ 1150:

“So where a claimant told a … representative, and bona fide and reasonably believed, that he or she had suffered a certain type of damage as a result of the injury, then it would be right to recover the necessary, reasonable and proportionate cost of making the claim to recover for that damage.”

And further, and more bizarrely still:

“I do not consider that, absent special facts, it was unreasonable to have pleaded all heads of damage communicated by the client, with a view to amending them out or not pursuing them if and when they could not be sustained. Once a potential claimant was identified, it was sensible to add him or her as a party, and, rather than risking the cost, delay and uncertainty of adding to the heads of damage, I would have thought it perfectly sensible to include any head of damage which had been identified by the potential claimant, unless it was fanciful or some other special reason was apparent for not pleading it. Similarly so far as pursuing and investigating such heads of damage.”

So, bung in everything you can think of at the outset and expect to be able to recover the costs of the same.

Ten years worth of costs law ignored.

6 thoughts on “Costs of issues abandoned

  1. Couldnt agree more. I suspect that there are many sets of Pods out there in cases heading for D.A. where the Paying Party has made challenges on the recoverability of the cost of work undertaken in support of abandoned Heads of Claim, citing the cases Simon refers to. In my experience in the Provinces, Costs Judges tend to go with the most uptodate Authorities and therefore if the Receiving Party Advocate is up to speed, there are a lot of Part 47 offers that seemed sound at the time that are going to come up short with very expensive consequences when Motto is produced! Any feedback on Motto being applied in these circumstances would be helpful.

  2. A point well made Simon but do you not think that the very unusual circumstances of the Motto case take it out of the norm,at least so far as abandoned issues are concerned?

  3. I see sense in both sides of the fence.

    I always thought it was harsh if costs were disallowed if you investigated something but didnt pursue as the case evolved even if it was, based on the evidence that was available at the time, reasonable to pursue initially.

    Equally I see why Defendant’s object.

    Surely Motto just applies the Francis v Francis and Dickerson test to the whole thorny issue

  4. “However, the law abhors certainty and so the Court of Appeal has jumped to the rescue. ”

    That has just entered my top ten list of favourite legal quotations! Like all the most memorable quotations it’s short, succinct and pithy. Of course it’s also horribly true.

  5. I am afraid that I think Simon is quite wrong.

    He has muddled two distinct lines of authorities.

    AEI, Summit, etc, concern the powers of TRIAL JUDGES. Exercising the CPR 44.3 jurisdiction, they may disallow the costs of issues on which the otherwise successful party has lost, merely because he has lost. You do not need to show that the issue was pursued unreasonably.

    Where, however, a party is awarded his costs in princple, subject to assessment, the powers of the costs judge are different. He must allow the receiving party 100 pc of his reasonable costs. Obvious, but see Lahey v Pirelli.

    So, to disallow the costs of an issue, even if an abandoned issue, the costs judge must conclude that the issue was unreasonably pursued. Simply because, in the result, a party has dropped a point it does not follow he was unreasonable to raise it. Whether it was reasonable will be judged without hindsight, from the perspective of the “sensible solicitor, sitting in his chair.”

    So, the approach in Motto is both correct and orthodox. If I injure a pregnant woman, who subsequently miscarries, who obtains a gynocalogical report on the miscarriage, only to be advised it had a congenital cause, why should I not pay the cost of the report, and any associated legal costs? The claimant was reasonable in exploring the issue – her solicitor would have been negligent not to – and on any view, the cause of the expense was my tort.

    Shirely v Caswell is an obiter aside on an unargued point, by a Chancery judge who knew little about costs. He does not even purport to decide anything. It is nothing more than a statement of what that judge believed to be the practice on taxation (as he doubtless thought of it). In fact, the belief was wrong.

    The SCCO applies, rightly, the approach in Francis v Francis & Dickerson, approved inter alia in U v Liverpool CC. I have never known Shirely v Caswell to be applied. It is not an authoritative decision.

  6. Whilst I agree that Francis approach should be applied as per my previous comment wasn’t Shirley clarified by Dooley v Parker?

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