The question of whether a claimant had to pay the defendant's costs incurred after issue but before service was considered in 2014 in Clydesdale Bank plc v Kinleigh Folkard & Hayward Limited.
In 2012, Clydesdale issued a "protective" claim against KFH alleging that they had negligently overvalued a property. In fear of limitation issues, Clydesdale invited KFH to enter into a standstill agreement in its Letter of Claim five days prior. But, given the short notice, KFH failed to respond in time.
Extensions to serve proceedings were agreed and considerable correspondence, making reference to the Pre-Action Protocol, soon exchanged between the parties. For want of evidence proving causation and loss, however, Clydesdale later abandoned its claim before serving proceedings.
Hot on the heels of the Bank's decision, KFH issued an application for its costs incurred in correspondence. Clydesdale argued that: (i) the correspondence should be viewed as "pre-action" communications, as it made reference to the Pre-Action Protocol and, therefore, were not costs of or incidental to proceedings; and (ii) the Court did not have jurisdiction under the Senior Courts Act 1981 (the Act) to award costs, which were not of or incidental to proceedings.
To this, Master Bragge held that despite the "pre-action" style correspondence, such communication nonetheless took place after proceedings had started. As such, the Court had jurisdiction under s.51 of the Act. The Master confirmed that it is the issue of the Claim Form that triggers s.51 jurisdiction, not its service, and as such KFH was entitled to its costs from the Bank.
In May 2011, Webb sent a Letter of Claim under the Pre-Action Protocol to Countrywide alleging that they had overvalued a property in 2007.
Webb made offers to settle the claim on several occasions – all of which were rejected. With the limitation date fast approaching, and absent a standstill agreement, a damages claim for £27,000 plus interest was issued in August 2013. Countrywide's reluctance to advance settlement talks, however, plus the claim's low value led Webb to decide not to serve the proceedings on proportionality grounds allowing the Claim Form to "expire".
Relying on Clydesdale, Countrywide issued an application for its pre-action and post issue costs. Though, in contrast to Clydesdale, in which KFH had incurred most of its costs post issue, Countrywide had incurred substantial pre-action costs in correspondence with Webb during the two years prior to issue. Webb accepted that the Court had discretion to award Countrywide its costs under the Act, and that those costs may include pre-action costs. The question, therefore, was how should the Court exercise its discretion?
Webb contended, amongst other points, that it should only pay Countrywide's costs incurred post issue, and brought several authorities to Master Nurse's attention to support its stance. The Master dismissed them all, however, stating that the issue of the Claim Form "fundamentally changes the position", and that it would be wrong to ignore the "considerable expense" that Countrywide had incurred and Webb's own acknowledgment of the "disproportionate expense of the course it was on". The Master concluded that Countrywide were entitled to all costs that flowed after the Letter of Claim had been sent.
Limitation is an ever-present issue for claimants, often leaving them with little option but to issue a claim in order to preserve their cause of action. The decisions in Clydesdale and Webb Resolutions, however, flag the risk that the claimant may be left to foot the defendant's bill for pre-action and post issue costs should they issue but then choose not to serve proceedings. So what lessons can be drawn?
McGlinn v Waltham Contractors Limited (2005 WL 1650593); Whittaker v Ford and Warren (2015 WL 7769321); Citation Plc v Ellis Whittam Ltd  EWHC 764 (QB).
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