Citation: [2015] EWHC 459 (TCC)
Nature of case:
This was a hearing to determine the appropriate allocation of costs for a discontinued counterclaim, in circumstances where the defendant had brought Part 20 proceedings against the claimant’s father after suspecting him, on scant evidence, of having traded in partnership with the claimant. This resulted in an unnecessary disclosure application and the preventable trial of a preliminary issue and the TCC found that on the facts there was no good reason for disapplying the usual presumption that the discontinuing party was liable for the wasted costs.
The claimant, Simon Cockell (SC), had initially brought proceedings against the defendant (Mr Holton) to recover sums owed for building repair work at his home. Mr Holton had then counterclaimed on account of defective work against both SC and his father, Keith Cockell (KC).
Mr Holton claimed to have discovered, after construction work had begun, that SC was an undischarged bankrupt and that, despite trading under the name ‘Cockell Building Services’, he had in fact been using an account in the name of ‘Keith Cockell, trading as Cockell Building Services’. On this basis he had concluded that SC was not a sole trader but was actually trading in partnership with his father, KC. He had therefore counterclaimed against both SC and KC.
KC had then made an application for summary judgment arguing that the claim against him was bound to fail. A hearing was directed which was to include, if necessary, a trial of the preliminary issue of whether SC and KC carried on business in partnership. Mr Holton later made applications against both SC and KC for extensive specific disclosure directed to this issue.
At the hearing that followed further disclosure was ordered by the judge but on unusual terms, in that it was to be limited to certain named lawyers in Mr Holton’s legal team. This was a procedure usually reserved for situations where the court had strong reservations about the likely relevance of the disclosure or where the documents were unusually sensitive. Nothing came of the disclosure exercise and Mr Holton applied to discontinue his claim against KC on the condition that KC and SC pay all of his costs of pursuing that claim, which was strongly opposed by KC and SC.
It was argued by SC and KC that there was never any basis for the allegation of partnership and that Mr Holton, after discovering that SC was an undisclosed bankrupt, had wanted to find a basis for joining KC who appeared to be a man of substantial means.
Deciding the matter in favour of SC and KC, Mr Justice Edwards-Stuart found that in the circumstances there was no good reason for dissapplying the presumption set out in CPR 38.6(1) that the discontinuing party should pay the other party’s costs.
He concluded that the disclosure application had been a fishing expedition. It had yielded nothing but had involved KC and SC in considerable time and expense. Both KC and SC were entitled to their costs of that application on the indemnity basis.
Applying the principles set out in Teasdale v HSBC Bank plc [2010] EWHC 612 (QB), he confirmed that (i) a simple re-evaluation of the legal or commercial merits of the claim was not sufficient to displace the presumption set out in CPR 38.6(1); (ii) that the claimant needed to show a change of circumstances since the claim was made that justified him in withdrawing it; and (iii) that it was implicit in that that the claim must have been properly and reasonably brought in the first place. He went on to find that the claim had never been viable from the outset, meaning that no amount of changes in circumstances could have saved Mr Holton from liability to pay the costs on discontinuance, but even if he was wrong on that, there had been no change of circumstances in any event. KC was therefore entitled to his costs of the claim against him on an indemnity basis.
SC would also be entitled to recover from Mr Holton the costs that he had incurred in relation to the allegation that there had been a partnership between him and his father, although those costs would not be awarded on the indemnity basis.
Counsel: William Webb appeared on behalf of the Claimant, Simon Cockell
