CPR 38.6 | Post-Discontinuance Conduct Can Be Considered

1. Whether to depart from the usual costs order on discontinuance:
   • Under CPR 38.6, a claimant who discontinues is usually liable for the defendant’s costs.
   • Elphicke sought to depart from this rule, citing alleged misconduct by the Times.
2. Whether conduct occurring after discontinuance could be considered:
   • The Times argued that only conduct before discontinuance should be relevant.
   • Elphicke contended that post-discontinuance conduct (such as misuse of witness statements) should be considered.
3. The scope of the court’s discretion under CPR 38.6:
   • Whether a causal link between the alleged misconduct and the discontinuance was necessary.
   • Whether the court could consider all conduct or only that which led to the discontinuance.
4. The relevance of various alleged misconduct by the Times:
   • Failure to preserve evidence when on notice of proceedings.
   • Misuse of witness statements for collateral purposes after discontinuance.
   • Alleged untruthful statements in pre-action correspondence.
   • Alleged failures to engage in Alternative Dispute Resolution (ADR).
5. Whether to make an interim payment on account of costs:
   • The Times sought £260,000 as an interim payment.
   • Elphicke argued against this, or for a reduced amount, based on the alleged misconduct.
6. The appropriate forum for considering certain allegations of misconduct:
   • Whether some issues should be left for a Costs Judge at detailed assessment.
7. The application of CPR 44.2 (court’s discretion as to costs) in the context of discontinuance:
   • Whether CPR 44.2 could be applied independently of CPR 38.6, or only if the ‘gateway’ of CPR 38.6 was satisfied.
8. The potential ‘lacuna’ in the rules:
   • Whether there was a gap in the court’s power to address misconduct occurring after discontinuance but before assessment proceedings.

Judge’s findings

In her last jugment before retirement, Master Victoria McCloud determined that conduct occurring after discontinuance could be considered when deciding whether to depart from the usual costs order:

“I do not see anything in the wording of CPR 38.6 quoted earlier in this judgment or in the case law such as Brookes which fetters the court’s discretion in principle to depart from the default costs order. It is certainly likely to be the case that the usual situation for application of CPR 38.6 is where some event took place (a change of circumstances) – such as very late production of a deed in the case of Hewson v Wells where the Claimant was caused to discontinue by reason of the event or conduct prior to discontinuance. But there is nothing in the rule to imply that conduct after discontinuance cannot be relevant and the Brookes decision does not require (but merely envisages that ‘usually’) a change of circumstances of that sort. Neither a change of circumstances nor a causal linkage are mandated by the rule or the authority even if those would be the norm (and Mr Elphicke’s express position was that this case is very far from the norm, involving as it does misuse of statement for collateral purposes and, he says, other matters making this not a ‘usual’ case).” [103-104]

She also found that CPR 44.2 could only be applied if the ‘gateway’ of CPR 38.6 was satisfied:

“Only if the court decides to depart from the default rule does the court gain its usual jurisdiction in terms of what orders to make and why, about costs. Costs are not at large unless the high standard of CPR 38.6 is met. Otherwise the ‘swarms’ of applications to make non-standard costs orders, not following the event, the buzzing and stings of which the Court of Appeal in Fox v Foundation Piling were keen to evade, would emerge. It would I think be contrary to the point of CPR 38.5 and 38.6 if costs were simply ‘at large’ and one could escape the strictures of CPR 38.6 by praying in aid CPR 44.2.” [113]

The judge then moved on to decide that the Times’ failure to preserve evidence and misuse of witness statements were serious enough to justify departing from the usual costs order:

“In my judgment failures to preserve evidence especially when on notice to do so and where the evidence could reasonably be expected to be of real relevance, and misuse of statements for collateral purposes are both serious matters. In the latter case the fact of the very late acceptance that there was a breach is an aggravating factor.

“The internal steps taken to seek to improve working methods are relevant and mitigating. There has not been a voluntary or other open statement to the public accepting that the material was wrongly used, or that the Times has 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 is one which this court must take into account. There is also 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.” [127-128]

Consequently, she ordered a reduction in the costs payable to the Times:

“Reminding myself of the need to be proportionate and of the indications in Abbott v Long, cited above, I consider that it is 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 Claimant shall pay 80% of the Defendant’s costs on the standard basis, to be assessed if not agreed.” [129]