When is a Claimant liable for pre-action costs?

Section 51 of the Senior Courts Act 1981 confers discretion on the court in respect of “the costs of and incidental to all proceedings”. It has long been understood that the reference to costs “of and incidental” to proceedings covers pre-action costs. A recent decision illustrates how the jurisdiction to award pre-action costs works in practice and highlights the difference that issuing a claim form makes.

Webb Resolutions Ltd v Countrywide Surveyors Ltd (4 May 2016) concerned an allegation of surveyor’s negligence when valuing a modest residential property in August 2007. The Claimant purchased the mortgage from the original lender and after it had repossessed the property alleged it had suffered a loss of £31,148.04. A claim form was issued on 7 August 2013 to prevent the limitation period expiring but was never served. The Defendant issued an application for its costs, which had largely been incurred pre-issue.

In granting the Defendant’s application, Deputy Master Nurse noted three factors (a) the considerable expense the Defendant had been put to, (b) the Claimant had been aware of the disproportionate course it was on (its pre-issue costs exceeded £60,000), and (c) there is a clear difference in section 51 of the Senior Courts Act 1981 and the CPR once a claim form is issued.

The judgement contains a number of helpful references and reminders for parties seeking to recover their pre-action costs, including an endorsement of Tugendhat J.’s observation in Citation plc v Ellis Whittam Ltd [2012] EWHC 764 (QB) that “The requirement that the parties engage in pre-action correspondence was deliberately imposed …with a view to extending the period during which each party would conduct its case on the basis that it was not incurring a liability to pay the other party’s costs if no action was commenced.”