Hope Capital Limited & Anor v Alexander Reece Thomson LLP
[2023] EWHC 3157 (KB)
Stubbins Marketing Limited & Ors. v Rayner Essex LLP & Anor.
16 March 2023
[2023] EWHC 515 (Ch)
High Court
A company sued its accountants for bad advice, making serious accusations of dishonesty. The company later dropped those accusations. The judge said the company has to pay the accountants' legal fees for defending against those serious (but false) accusations. The judge will decide exactly how much later, after the main case is finished.
Key Facts
- •Stubbins Marketing Limited (SML) sued Rayner Essex LLP (Rayner Essex) and Gisby Harrison for alleged negligence in connection with a 2016 transaction where SML sold most of its business and assets.
- •Rayner Essex acted as SML's accountant, auditor, and business advisor at the time of the transaction.
- •SML's initial Letter of Claim contained allegations of deceit, dishonest assistance, and unlawful means conspiracy against Rayner Essex.
- •SML later amended its Claim Form, removing the allegations of deceit, dishonest assistance, and unlawful means conspiracy.
- •Rayner Essex applied for its costs on an indemnity basis, arguing the removed allegations were baseless.
Legal Principles
Costs of proceedings are in the court's discretion.
Section 51, Senior Courts Act 1981
Procedure for discontinuing all or part of a claim.
CPR Part 38
A 'claim' is distinct from a 'remedy'; abandonment of a remedy doesn't automatically constitute discontinuance.
Galazi v Christoforou [2019] EWHC 670 (Ch)
Amendment of a claim can be treated as discontinuance; court retains discretion under Section 51.
XX v YY [2021] EWHC 3014 (Ch)
Court's costs jurisdiction is engaged once proceedings are issued, even if not served.
GREP London Portfolio II Trustee 3 Limited v BLFB Limited [2021] EWHC 1850 (TCC)
Presumption that defendant recovers costs when claimant discontinues; claimant must show good reason to depart.
Brookes v HSBC Bank plc [2012] 3 Costs LO 285
Failure of fraud or dishonesty claim is a factor, but not automatic grounds, for indemnity costs.
Libyan Investment Authority v King [2023] EWHC (Ch)
Outcomes
Rayner Essex awarded costs related to the discontinued parts of the claim.
SML's amendment removing serious allegations was treated as a discontinuance; court exercised discretion under Section 51.
Costs assessed on the indemnity basis.
Serious allegations of dishonesty were made and later abandoned without sufficient justification; Claimants' conduct was deemed outside the norm and speculative.
Costs assessment to occur after the conclusion of the main proceedings.
This approach simplifies the assessment process, considering the complexity of the case and the involvement of a third party.
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