CPR 38.6 Presumption Partially Displaced By 20% Due To Collateral Use Of Witness Statements

ELPHICKE V TIMES MEDIA LIMITED [2025] EWHC 1554 (KB)

In Elphicke v Times Media Limited [2025] the court considered whether the presumption under CPR 38.6(1) that a discontinuing claimant pays the defendant’s costs should be displaced due to the defendant’s conduct, and the appropriate quantum of an interim payment on account. The Appellant discontinued his defamation and misuse of private information claim six weeks before trial, triggering the CPR 38.6 presumption. The Respondent sought an interim payment of £260,000, while the Appellant cross-applied to extinguish or reduce his costs liability, alleging misconduct including breaches of CPR 32.12(1) through wrongful collateral use of witness statements and failure to preserve evidence under CPR 31. Master McCloud found the Respondent’s admitted breaches—particularly the misuse of witness statements—sufficient to open the CPR 38.6 gateway but limited the displacement to a 20% reduction, ordering the Appellant to pay 80% of the Respondent’s costs on the standard basis. She rejected the Appellant’s argument that misconduct justified refusing an interim payment, holding this would amount to double penalisation, and ordered £229,848.41 (80% of budgeted and 50% of unbudgeted costs). The Appellant’s renewed application for permission to appeal was refused by Mrs Justice Hill, who upheld the Master’s exercise of discretion under Brookes v HSBC Bank [2011] and the proportionality principle in Abbott v Long [2011].

Describing the two failures as “serious”, the Master observed that the Respondent’s very late acceptance that there was a breach in relation to the witness statements was an aggravating factor: [127]. Balanced against that were the “internal steps taken to seek to improve working methods” within the Respondent which were “relevant and mitigating”: [128]. However, there had not been a voluntary or other open statement to the public accepting that the material was wrongly used or that The Times had taken steps to prevent it happening in future. The impact on potential witnesses in other cases of seeing witness material appearing in newspapers before it has been given in court, especially in a case where rape allegations were referred to, even if taken down from the internet afterwards, was a factor the court had to take into account. So too was “the basic necessity to abide by rules and court orders, and the duty of the court to ensure that litigants obey those rules and orders, and the placing at risk of the fairness of the trial had one taken place in this case”: [128]. Reiterating the need to be proportionate and the guidance in Abbott, at [129] the Master concluded that it was appropriate to “mark the seriousness of the failures in this case, of which the misuse of statements is marginally the more significant, by way of a variation to the default order such that the [Appellant] shall pay 80% of the [Respondent’s] costs on the standard basis to be assessed if not agreed”. All other alleged misconduct was a matter for the Costs Judge under CPR 44.11: [129]-[130].

Citations

Brookes v HSBC Bank plc [2011] EWCA Civ 354 A claimant who discontinues bears the burden of showing a good reason to depart from the presumption that they will pay the defendant’s costs, which generally requires demonstrating a change of circumstances caused by the defendant’s unreasonable conduct. Nelson’s Yard Management Co Ltd v Eziefula [2016] EWCA Civ 235 When considering the costs implications of discontinuance, courts should not determine whether the claim would have succeeded at trial, reaffirming the principles in Brookes. Ashany v Eco-Bat Technologies Ltd [2018] 3 Costs LR 38 Displacement of the CPR 38.6 presumption may lead to a costs order in favour of the claimant or no order for costs where misconduct by the defendant justifies such departure. Earles v Barclays Bank plc [2009] EWHC 2500 (Mercantile) A party’s unreasonable conduct in disclosure, particularly in relation to electronic documents, can justify a reduction in their recoverable costs despite their success at trial. Clarke v Guardian News and Media Ltd [2025] EWHC 222 (KB) A party’s failure to preserve key evidence once on notice of likely proceedings can amount to serious misconduct and may influence the court’s decision on costs. Fox v Foundation Piling Ltd [2011] 6 Costs LR 961 Departure from the standard rule that costs follow the event should not be undertaken too readily, even where misconduct is argued. Abbott v Long [2011] EWCA Civ 874 Where costs are affected by misconduct not causing a waste of costs, any sanction must be proportionate and significant misconduct may justify a penalty, though courts must exercise caution. Widlake v BAA Limited [2009] EWCA Civ 1256 Although egregious misconduct, such as dishonesty, may justify costs penalties, not every untruth in litigation warrants a punitive order on costs. AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507 An appellate court may interfere with a costs discretion only where the judge has erred in principle or the result was plainly wrong after considering relevant and irrelevant factors. Roache v News Group Newspapers Ltd [1998] EMLR 161 A costs award involving discretion can only be reversed on appeal where it falls outside the reasonable range of outcomes or was based on material error. - Islam v Ali [2003] EWCA Civ 612 An appeal against a discretionary costs decision should be allowed only where the judge has exceeded the generous ambit within which reasonable disagreement is possible. Augousti v Matharu [2023] EWHC 1900 (Fam) A real prospect of success under CPR 52.6 exists where there is a realistic, not fanciful, chance of success and not necessarily a more-likely-than-not outcome. Re R (A Child) [2019] 2 FLR 1033 Realistic prospects of success for permission to appeal under CPR 52.6 do not require a probability of success but require more than merely arguable grounds. AO v LA [2023] EWHC 83 (Fam) The threshold for permission to appeal involves a real and not speculative prospect of success, typically requiring a likelihood of at least 25%. PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 A refusal to engage in alternative dispute resolution without a good reason may justify a costs sanction, reflecting the overriding objective. Laporte and Christian v Commissioner of Police of the Metropolis [2015] EWHC 371 (QB) A failure to engage in alternative dispute resolution where expected can amount to unreasonable conduct and affect the court’s costs decision. Wales v CBRE Managed Services Ltd [2020] EWHC 1050 (QB) The court may impose costs sanctions on a party who unreasonably fails to respond to or participate in ADR efforts prior to trial. Isbilen v Turk [2021] EWHC 854 (Ch) Allegations of contempt arising from non-compliance with disclosure obligations may inform the court’s approach to costs when such misconduct impacts the process. Argus Media Ltd v Halim [2020] Costs LR 643 Serious conduct issues may constitute a good reason under CPR 44.2(8) not to order an interim payment on account of costs. Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm) Interim payments on account of costs of up to 80% of the total may be appropriate where the paying party’s liability is clear and misconduct is not determinative. MacInnes v Gross [2017] 4 WLR 49 Courts may award interim payments amounting to 90% of approved budgeted costs where the party entitled to costs is clearly successful and there is no good reason to postpone payment.

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Key Points

Where a claimant discontinues proceedings, there is a rebuttable presumption under CPR 38.6 that the defendant is entitled to its costs; the burden lies on the claimant to demonstrate a good reason for departing from this default position. [14–15]
Serious misconduct by the successful party, even if not causative of additional costs, may justify a partial or full departure from the usual costs presumption, provided the court is satisfied that such a departure is a proportionate response. [34–35, 38–42]
The existence of pre-action or procedural misconduct which cannot be summarily determined by the court at the costs stage may be more appropriately addressed by the Costs Judge at detailed assessment under CPR 44.11. [37, 52–55]
In exercising discretion to depart from the CPR 38.6 costs presumption, the court may impose a percentage reduction in the successful party’s recoverable costs as a means of marking serious litigation misconduct. [23–24, 39, 42, 59]
The decision to order an interim payment on account of costs under CPR 44.2(8) remains the default position, notwithstanding respondent misconduct, unless the extent and uncertainty of such conduct would render the subsequent detailed assessment outcome wholly unpredictable. [43, 67–68, 70]

“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.”

Key Findings In The Case

The Respondent’s misuse of the Appellant’s witness statement after proceedings were discontinued constituted a serious breach of CPR 32.12(1), which the Respondent belatedly admitted after initially denying for approximately nine months; this conduct was found to go to the heart of the fairness of the proceedings and justified a partial departure from the usual CPR 38.6 costs presumption [27–28, 38–39, 124–127].
The Respondent failed to preserve relevant evidence—specifically, a journalist’s telephone data—despite being on notice of likely proceedings, constituting a further serious breach affecting the integrity of the litigation and contributing to the court’s decision to vary the costs order under CPR 38.6 [29, 38–39, 124–127].
The Master declined to rely on additional allegations of misconduct—including alleged false statements in pre-action correspondence and failures to engage in ADR—when determining liability for costs, concluding that these were best addressed at detailed assessment under CPR 44.11 due to the need for further factual inquiry [37, 52–55, 123].
Despite the misconduct, the Master found it appropriate to mark the Respondent’s breaches by reducing its recoverable costs by 20% rather than disapplying the CPR 38.6 presumption entirely, concluding that such a reduction constituted a proportionate sanction in line with principles from Abbott v Long [42, 59–60, 129].
The Master held that an interim payment on account of costs was still appropriate under CPR 44.2(8), ordering payment of 80% of budgeted costs and 50% of unbudgeted costs; she rejected the argument that the Respondent’s misconduct created sufficient uncertainty to dislodge the default presumption in favour of an interim payment [45–46, 67–68].

“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."

Background

The Appellant, Charles Elphicke, a former Member of Parliament, commenced proceedings against Times Media Limited on 17 April 2019 regarding three articles published in The Sunday Times. The claims were brought in misuse of private information for all three articles and in defamation for two of them. The defamatory meaning alleged was that there were reasonable grounds to suspect the Appellant was guilty of rape.

Following the exchange of witness statements and approximately six weeks before the scheduled trial, the Appellant discontinued the claim on 22 March 2022. This discontinuance triggered the presumption under CPR 38.6 that the discontinuing party would pay the other party’s costs.

On 30 June 2022, the Respondent applied for an interim payment on account of costs in the sum of £260,000, relying on the CPR 38.6 presumption. The Appellant subsequently cross-applied on 6 January 2023 for an order disapplying this presumption, seeking to extinguish or reduce his costs liability to the Respondent.

Master McCloud heard the applications over three hearings spanning from 14 February 2023 to 14 March 2024. On 14 October 2024, she handed down a comprehensive judgment ordering that the Appellant pay 80% of the Respondent’s costs on the standard basis, to be assessed if not agreed, and that he make an interim payment. Following written submissions on the quantum of the interim payment, on 19 November 2024 the Master ordered payment of £229,848.41 within 28 days, including an element for the Respondent’s costs of the applications.

The Appellant’s application for permission to appeal was refused on the papers by Sir Stephen Stewart on 21 March 2025, leading to this renewed application before Mrs Justice Hill on 10 June 2025.

Costs Issues Before the Court

The primary costs issue was whether the presumption in CPR 38.6(1) should be displaced. This rule provides that unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant incurred on or before the date of discontinuance. The Master was required to apply the guidance in Brookes v HSBC Bank [2011] EWCA Civ 354, which established that the discontinuing party bears the burden of showing good reason for departing from this presumption.

The Master had to determine whether the Respondent’s conduct constituted sufficient grounds to displace the CPR 38.6 presumption. The conduct issues included admitted breaches of CPR 32.12(1) through wrongful collateral use of witness statements in publications after discontinuance, and alleged failures to preserve evidence when on notice of proceedings. Additional allegations included lying in pre-action correspondence and failing to engage in alternative dispute resolution.

If the presumption was displaced, the Master needed to determine what costs order would be appropriate in the circumstances. This required consideration of the seriousness of any misconduct found and the principle of proportionality set out in Abbott v Long [2011] EWCA Civ 874.

The Master also had to determine whether to order an interim payment on account of costs under CPR 44.2(8), which creates a presumption in favour of such payments unless there is good reason not to do so. The quantum of any interim payment required assessment of budgeted and unbudgeted costs.

Finally, the Master needed to determine the costs of the applications themselves, applying the general rule under CPR 44.2(2)(a) that the unsuccessful party pays the successful party’s costs.

The Parties’ Positions

The Appellant argued that the Respondent’s misconduct was sufficiently serious to justify complete displacement of the CPR 38.6 presumption. He relied particularly on the admitted breach of CPR 32.12(1) through publication of witness statement material in newspapers and social media after discontinuance. He characterised this as causing significant damage to the administration of justice, particularly given the sensitive nature of rape allegations referenced in the case.

The Appellant also alleged that the Respondent had breached its duty under CPR 31 and PD31B to preserve evidence, specifically citing the loss or destruction of a journalist’s electronic telephone information. He further contended that the Respondent had lied in pre-action correspondence about police interviews and had failed to engage properly in alternative dispute resolution.

On the interim payment issue, the Appellant submitted that the Respondent’s serious misconduct, which he characterised as amounting to contempt and abuse of process, constituted good reason not to order any payment on account. He invoked equitable principles regarding clean hands and policy considerations about protecting the administration of justice.

The Respondent defended its entitlement to costs under the CPR 38.6 presumption. Whilst acknowledging the breach of CPR 32.12(1), the Respondent had taken internal steps to improve working methods. It denied the allegations of lying in pre-action correspondence and failures regarding alternative dispute resolution, maintaining these were contested issues that would have required determination at trial.

The Respondent argued for an interim payment at the conventional level of 90% of budgeted costs, submitting that any misconduct issues had already been addressed through the primary costs order and should not result in double penalisation by refusing an interim payment.

The Court’s Decision Below

Master McCloud had concluded that the Respondent’s admitted breaches were sufficient to open the CPR 38.6 gateway but only to a limited extent. She found that the wrongful collateral use of witness statements and failure to preserve evidence were “unusual” failures that “went to the heart of the fairness of the proceedings”. The misuse of witness statements was deemed marginally more significant due to its potential implications for the wider administration of justice.

However, the Master declined to make findings on the contested allegations of lying in pre-action correspondence and failures regarding alternative dispute resolution. She held that determining these heavily disputed issues would effectively re-litigate matters abandoned on discontinuance. These issues were deemed more appropriate for consideration by the Costs Judge during detailed assessment under CPR 44.11.

In exercising her discretion on the appropriate costs order, the Master balanced the seriousness of the proven misconduct against mitigating factors, including the Respondent’s internal remedial steps. Applying the proportionality principle from Abbott v Long, she concluded that a 20% reduction from the Respondent’s costs was appropriate, ordering the Appellant to pay 80% of the Respondent’s costs on the standard basis.

On the interim payment issue, the Master rejected the Appellant’s arguments that the misconduct constituted good reason to refuse any payment on account. She held that using the misconduct as grounds for refusing an interim payment would constitute double penalisation, having already factored it into the primary costs order. She ordered an interim payment calculated at 80% of budgeted costs (after applying the 20% sanction) and 50% of unbudgeted costs, totalling £229,848.41.

Regarding the costs of the applications, the Master found that the Respondent had succeeded in defending its entitlement to costs save for the 20% reduction. She therefore ordered the Appellant to pay 80% of the Respondent’s costs of the applications, reflecting the Respondent’s degree of success.

Mrs Justice Hill, hearing the renewed permission application, found no arguable error of principle or excess of discretion in the Master’s approach. She emphasised that decisions under CPR 38.6 are fact-specific and that the Master’s detailed consideration fell well within the generous ambit of judicial discretion. Permission to appeal was refused on all grounds.

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