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Notice of discontinuance

Setting aside notice of discontinuance

In Advantage Insurance Co Ltd v Stoodley (1) and Trinity Lane Insurance Co Ltd (2), a Queen’s Bench Division Master considered the law in relation to setting aside a notice of discontinuance.

CPR 38.4(1) reads:

“(1) Where the claimant discontinues under rule 38.2(1) the defendant may apply to have the notice of discontinuance set aside.”

This was a dispute between insurance companies as to who was liable to indemnify the guilty party in a road traffic accident claim. It was a Part 8 claim.

In Stati and others v The Republic of Kazakhstan, the Commercial Court adopted the principles set out in High Commissioner for Pakistan in the United Kingdom v National Westminster Bank plc that the court has a discretion which it should exercise with the aim of giving effect to the overriding objective of dealing with cases justly and at proportionate cost. It is not necessary to establish an abuse of process, although that would be a powerful factor in favour of granting an application to set aside. In Johnson v Gore Wood, the court said that there should be finality in litigation and the fact that a party should not be vexed twice in the same matter was relevant to the issue of setting aside a notice of discontinuance.

CPR 38.7 gives this principle force in limited circumstances:

“38.7. A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if –

(a) he discontinued the claim after the defendant filed a defence; and

(b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim.”

Here, there was no defence as such as it was a Part 8 claim, and so the court doubted that CPR 38.7 would bite, but held that that did not detract from the general principle upon which the rule is based. The master set aside the notice of discontinuance, stating that the clear purpose of the claim was to achieve an overall resolution of the insurance position as between the insurance companies.

CPR 1.4(2)(i) imposes a duty upon the court to further the overriding objective by active case management including “dealing with as many aspects of the case as it can on the same occasion.” All matters should be raised so that they could be properly and efficiently dealt with. One party could not “keep its powder dry” for another case; that was likely to be an abuse of process.

Indemnity costs ordered on late discontinuance

In PJSC Aeroflot – Russian Airlines v Leeds and another (Trustees of the estate of Berezovsky) and others, the High Court ordered the claimant to pay the defendants’ costs on an indemnity basis, following its application to discontinue the claim shortly before trial and without any explanation.

The court considered that where a claimant made serious allegations of fraud, conspiracy and dishonesty as here, and then abandoned those allegations, an order for indemnity costs was likely to be the just result, unless the claimant could explain why it had decided those allegations were bound to fail. This was on the basis that such conduct deprived the defendant of any opportunity to vindicate its reputation. It followed the approach in Clutterbuck and another v HSBC plc and others.

The court also considered that circumstances “out of the norm” justified indemnity costs and took into account factors including inaccurate statements made by the claimants during interlocutory proceedings and the aggressive stance adopted by the claimants during the litigation. In particular, the judge criticised correspondence from the claimant’s solicitors following the death of the second defendant as “losing sight of any basic standard of decent and compassionate behaviour.”

The court did not consider it appropriate to take failure to mediate into account assessing costs, because where allegations of fraud and serious wrongdoing were made, proceedings were intrinsically unsuitable for mediation. This would have penalised the defendants for exercising their right to have their reputations vindicated at trial. Generally it is risky to rely on an argument that the parties would have been unable to agree a mediator as good reason for refusing to mediate.

Indemnity costs on discontinuance

In Two Right Feet Limited (in liquidation) v (1) National Westminster Bank Plc (2) Royal Bank of Scotland Plc (3) KPMG LLP, the Mercantile Court (now the Circuit Commerical Court) ordered a discontinuing claimant to pay the defendants’ costs on the indemnity basis, rather than the standard basis. Discontinuance triggers an automatic liability for costs in favour of the defendant on the standard basis and here the defendants sought indemnity costs.

CPR 38.3 provides that a claimant may discontinue a claim by filing and serving a notice of discontinuance on the other parties and, under CPR 38.6(1):

“Unless the court orders otherwise, the 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…”

CPR 44.9(1) deems that to be a costs order on the standard basis. In Atlantic Bar and Grill Limited v Posthouse Hotels Limited, the court held that the reference in CPR 38.6 to a court ordering otherwise allows a court to order indemnity costs.

CPR 44.2 deals with the court’s discretion to order indemnity costs and provides, among other things, that in deciding what order, if any, to make about costs:

  • The court will have regard to all the circumstances, including the conduct of the parties, which includes conduct before as well as during the proceedings.
  • In particular the extent to which the parties followed the Practice Direction and any Pre-Action Protocol.
  • Whether  it was reasonable for a party to raise, pursue or contest a particular allegation or issue.
  • The manner in which a party has pursued or defended its case or a particular allegation in issue and whether a claimant, who has succeeded in the claim in whole or in part, has exaggerated its claim.

Here, the court held that various matters took the case out of the norm, including the claimant’s failure to engage in the Pre-Action Protocol, the exaggeration of quantum, failure to comply with a court order in relation to the appointment and instruction of a single joint expert and a “thoroughly misconceived” approach to disclosure.


This is a sensible decision on the facts and is a reminder that a notice of discontinuance does not automatically restrict the costs order to one on a standard basis.

In personal injury cases, where qualified one-way costs shifting (QOCS) applies, the court can still examine the issue of fundamental dishonesty when discontinuance has taken place, so as to determine whether QOCS should be disapplied and the claimant should have the automatic costs order against it enforced. Indeed, the court can, of its own motion, set aside the notice of discontinuance to allow such an enquiry to take place.

Under Jackson LJ’s (as he then was) proposals for fixed costs in the new intermediate track, there will be a costs liability once a letter of claim has been sent, even if proceedings are never issued. This reinforces the point that, for all intents and purposes, the Pre-Action Protocols are now part of the court process, with potentially severe costs penalties for failing to follow those protocols.

QOCS, discontinuance and strike-out and other things

In Shaw v Medtronic Corevalve LLC and others, the Queen’s Bench Division refused to set aside a notice of discontinuance and refused to give permission to the defendants to enforce a costs order in a QOCS case. The discontinuance was not an abuse of process and although there were elements of the claim outside the ambit of QOCS protection, they were either not pleaded, or were de minimis and did not add to the costs.

Previously, the court had set aside permission to the claimant to serve the first and third defendants out of the jurisdiction; the claim against the fourth defendant was struck out and the claimant then discontinued against the fifth defendant. Now, the claimant sought permission to amend the particulars of claim against the second defendant, who was the only remaining defendant. The first, third and fifth defendants applied for leave to enforce the costs orders made against the claimant.

The judge refused permission to the claimant to amend against the second defendant and then struck out the claim against that defendant. Thus the position in relation to claim was:

  • First defendant: service set aside.
  • Second defendant: struck out.
  • Third defendant: service set aside.
  • Fourth defendant: struck out.
  • Fifth defendant: discontinued.

CPR 44.15 reads:

“Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the proceedings have been struck out on the grounds that –
(a) the claimant has disclosed no reasonable grounds for bringing the proceedings;
(b) the proceedings are an abuse of the court’s process; or
(c) the conduct of –
(i) the claimant; or
(ii) a person acting on the claimant’s behalf and with the claimant’s knowledge of such conduct,
is likely to obstruct the just disposal of the proceedings.”

In relation to the first and third defendants, the claim had not been struck out, even though the judge held that the claimant had disclosed no reasonable grounds for bringing the proceedings and had said that, had the claim form been served within the jurisdiction, he would have struck the claims out as having no reasonable grounds. However, as the claim was served outside the jurisdiction, the appropriate remedy was to set aside service.

Neither had the claim been struck out against the fifth defendant: it had been discontinued. Thus, CPR 44.15(1)(a), relating to strike out, could not apply in relation to any of these three Defendants.

Setting aside discontinuance

The fifth defendant sought an order setting aside the notice of discontinuance, so as to allow the court to consider striking out the claim on the basis that the claimant had no reasonable grounds for bringing the proceedings. That would have the effect of bringing the matter back within the CPR 44.15(1)(a) exception to QOCS.

The judge refused, saying that:

“… the Claimant had a right to discontinue under CPR rule 38.2. It was a proper use of that power, and to be encouraged, for the Claimant to recognise… that her claim against the Fifth Defendant was not sustainable and to discontinue that claim (Paragraph 53).”

The court recognised that it had power under CPR 38.4 to set aside a notice of discontinuance if there had been an abuse of process in serving it. The rule itself is silent as to when the power should be exercised.

The judge held that the facts here were not an abuse of process “or anything sufficient to justify setting aside the Notice of Discontinuance (Paragraph 58).” It left open the possibility that servicing the notice of discontinuance to avoid the claim being struck out on the no reasonable grounds basis, and thus triggering disqualification from QOCS protection, could be an abuse of process justifying the setting aside of the notice of discontinuance.

A claim made for the benefit of the claimant other than a claim to which this section applies

This exception is interpreted to mean a non-personal injury claim. There is an inherent problem with this exception, which is to be found in CPR 44.16(2)(b), and where the court’s permission to enforce a costs order is required.

The problem is that CPR 44.13(1) provides:

“(1) This Section applies to proceedings which include a claim for damages –
(a) for personal injuries;

Thus the whole of the claim does not need to be for personal injuries and the protection is not limited to the personal injury element. If it were otherwise, the wording would have been something like:

“… which includes claim for damages for personal injuries, but only to those parts of the claim that are for personal injury.”

Even the judge got confused, referring to CPR 44.12(1). That deals with set-off.

Nevertheless the judge’s rulings at paragraphs 60 and 61 are useful guidance as to how such hybrid claims may be treated:

“60. This sub-rule applies if the Claim Form and Particulars of Claim include a claim which falls outside the scope of CPR 44.12.1. There were only two candidates for such a claim. The first is the claim for misrepresentation and deceit. This is referred to in the Claim Form, but not pleaded in the Particulars of Claim, as I noted in paragraph 12.2(d) of the First Judgment. I therefore ignore it. The second is the free-standing claim in unjust enrichment, but, as I said in paragraphs 32 to 35 of the First Judgment, it was unclear whether the Particulars of Claim did include a free-standing claim in unjust enrichment. Moreover, the Claimant did not obtain permission to serve the Claim Form out of the jurisdiction insofar as it contained a free-standing claim in unjust enrichment. Consequently, there was no such claim against the First and Third Defendants and CPR 44.16.1(b) does not apply to them.

61. Assuming that there is a pleaded free-standing claim in unjust enrichment against the Fifth Defendant, it overlaps entirely with the claim for restitutionary damages. The additional costs incurred in dealing with the free-standing claim are minimal and it would not be just to make an order under section 44.16.1(b) on that account. I would have reached the same conclusion in relation to the First and Third Defendants if I had found that CPR 44.16.1(b) applied to them.”

The judge also suggested that the Civil Procedure Rules Committee may care to reconsider the scope of CPR 44.15(1)(a).

Underwoods Solicitors Kerry Underwood

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