Erica Brookes v Hsbc Bank Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Lady Justice Arden,Lord Justice Ward |
| Judgment Date | 29 March 2011 |
| Neutral Citation | [2011] EWCA Civ 354 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case Nos: A3/2010/0904 & 0902 |
| Date | 29 March 2011 |
[2011] EWCA Civ 354
Before: Lord Justice Ward
Lady Justice Arden and
Lord Justice Moore-bick
Case Nos: A3/2010/0904 & 0902
9MA06132 & 9MA08155
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
MERCANTILE COURT
HIS HONOUR JUDGE WAKSMAN Q.C.
Mr. Lawrence West Q.C., Mr. David Uff and Mr. James Malam (instructed by MSB Solicitors) for Miss Brookes and Mr. Jemitus
Miss Sonia Tolaney and Mr. James MacDonald (instructed by Addleshaw Goddard LLP) for HSBC Bank Plc
Mr. Fred Philpott (instructed by SCM Solicitors) for Bank of Scotland Plc
Hearing dates: 23 rd February 2011
Lord Justice Moore-Bick:
Section 78 of the Consumer Credit Act 1974 ("the Act") imposes an obligation on a creditor under a regulated agreement for running-account credit to give the debtor on receipt of written notice a copy of the executed agreement (if any), together with certain information as to the state of the account. Failure to comply with that obligation renders the debt unenforceable while the request remains unfulfilled. Agreements under which banks make credit cards available to customers are regulated agreements for running-account credit and so fall with section 78 of the Act.
In 2009 a large number of claims were started by holders of credit cards in the North West of England against card issuers seeking relief based on section 78. The issue at the heart of most, if not all, of these cases was whether that section obliged the creditor to provide a copy of the original credit agreement as executed by the creditor and the debtor and all subsequent variations (as the claimants maintained), or whether it was sufficient for the creditor to provide the relevant information originally derived from the original agreement and later variations but retrieved for the purpose from its records (as the card issuers maintained). The question was of importance because in many cases card issuers had difficulty in locating copies of the original agreement, but had much less difficulty in providing the information it contained from their records. In most cases the real object of the proceedings was not to obtain a copy of the original agreement but to establish that the bank was unable to comply with the requirements of section 78, so that the debt became to all intents and purposes permanently unenforceable.
In the event, many of these cases were transferred to the Manchester Mercantile Court where His Honour Judge Waksman Q.C. selected a number of test cases which gave rise to questions that could conveniently be decided as preliminary issues. All the remaining claims were stayed pending his decision. On 23 rd December 2009 he delivered judgment in the case reported as Carey v HSBC Bank Plc [2009] EWHC 3417 (QB), [2009] CTLC 103, in which he held, among other things, that a creditor was not obliged by section 78 to provide the debtor with a copy of the original agreement, but could meet its obligations by providing the information contained in that agreement drawn from other records. There was no appeal against Judge Waksman's judgment and as a result of it the litigation has been resolved. In many cases the proceedings were simply discontinued.
On 8 th March 2010 seven cases, including the two that are the subject of these appeals, came before Judge Waksman on applications by the claimants for orders that the defendants should bear all or part of their costs. In a careful and detailed judgment he dismissed the applications made by both Ms. Brookes and Mr. Jemitus, each of whom now appeals against his decision.
The judge's starting point was rule 38.6(1) which provides as follows:
"Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant."
Having referred to the rule and a number of authorities dealing with orders for costs on discontinuance, including RTZ Pension Property Trust v ARC Property Developments [1999] 1 All ER 532, RBG Resources plc v Rastogi [2005] EWHC 994 (Ch) http://www.bailii.org/ew/cases/EWHC/ Ch/2005/994.html, In re Walker Wingsail Systems Plc [2006] 1 W.L.R. 2194, http://www.bailii.org/ew/cases/EWCA/Civ/2005/247.html Official Receiver v Doshi [2007] BPIR 1135, Maini v Maini [2009] EWHC 3036 (Ch), and Far Out Productions v Unilever [2009] EWHC 3484, http://www.bailii.org/ew/cases/EWHC/ Ch/2009/3484.htmlthe judge formulated a number of principles which can be conveniently summarised as follows:
(1) when a claimant discontinues the proceedings, there is a presumption by reason of CPR 38.6 that the defendant should recover his costs; the burden is on the claimant to show a good reason for departing from that position;
(2) the fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason for doing so;
(3) however, if it is plain that the claim would have failed, that is an additional factor in favour of applying the presumption;
(4) the mere fact that the claimant's decision to discontinue may have been motivated by practical, pragmatic or financial reasons as opposed to a lack of confidence in the merits of the case will not suffice to displace the presumption;
(5) if the claimant is to succeed in displacing the presumption he will usually need to show a change of circumstances to which he has not himself contributed;
(6) however, no change in circumstances is likely to suffice unless it has been brought about by some form of unreasonable conduct on the part of the defendant which in all the circumstances provides a good reason for departing from the rule.
Applying those principles the judge came to the conclusion that in both of the cases now before us the claimant should pay the bank's costs of the proceedings, less a small reduction in the case of Mr. Jemitus.
In my view the judge fairly summarised the effect of the authorities to which his attention had been drawn and indeed the principles he derived from them were not in dispute. Since his decision, however, further guidance has become available in the form of this court's decision in Messih v MacMillan Williams [2010] EWCA Civ 844, the circumstances of which make it particularly relevant to the present appeals. In that case the claimant brought proceedings against two firms of solicitors seeking damages for the loss of a commercial lease, which, he alleged, had been caused by their separate failures to give him proper advice. He settled the action with the first defendant (LMA) on terms that it paid him almost the whole of the amount he claimed and abandoned its right to pursue a claim for contribution against the other (MW). Having thus obtained all that he could reasonably hope to achieve by the proceedings, he discontinued the claim against the second defendant and sought an order that he be under no liability for its costs. Patten L.J. identified the question that arose for decision in the following way:
"28…. the appeal does, I think, raise, in relatively stark terms, a question, the answer to which could be of some general application in similar cases. The argument for MW challenges as contrary to principle the Recorder's conclusion that a claimant who has achieved what amounts to the satisfaction of his whole claim against one set of defendants can rely upon the avoidance of a trial on liability against the remaining defendants to recover costs alone as justifying a departure from the ordinary rule that on discontinuance a claimant should pay the defendant's costs."
The claimant argued that by settling the claim with the first defendant he had obtained all that he had been seeking and that by discontinuing against the second defendant he had acted reasonably and responsibly by avoiding the need for a trial with its attendant costs and use of court time. Despite that, the court did not accept that there was sufficient justification for departing from the rule. Patten L.J., with whom Elias and Ward L.JJ. agreed, said:
"30. No judge encourages litigation about costs and a major theme of the CPR is the avoidance of unnecessary disputes and the costs which they can generate. But the avoidance of the costs of a trial is the necessary consequence of any discontinuance and cannot, of itself, justify a departure from the normal rule that the discontinuing party pays the other side's costs up to the date of discontinuance. There has to be something more than that to justify that departure. Otherwise the normal rule would be displaced in every case.
31. In this case there was nothing more. As already mentioned, the claimant knew what MW's position was and that it wished to contest its liability for the claim. The claimant made his decision to discontinue notwithstanding this and in the knowledge that the settlement with LMA made no provision for the payment of MW's costs against the claimant as opposed to those of the third party proceedings. By doing so Mr Messih removed the ability of MW to establish its defence and left the court in the position of being unable to determine what the outcome of the trial is likely to have been. The circumstances were therefore the quite usual consequences of a decision to discontinue and I can see nothing in them to justify the order which the Recorder...
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