Summary

Where claimants had deleted a claim by amendments to the particulars of claim, the claim was in substance discontinued and CPR r.38.6 applied so that the claimants were liable for the defendant's costs of the discontinued claim down to the date of discontinuance.

Facts

The applicants (R) applied for an order that the respondent (G) should pay the costs of their action seeking G's removal as a trustee of three family trusts under which R and G were beneficiaries. R were shareholders of a builders' merchants company. G was the chairman and managing director of the company and had a minority shareholding larger than the combined shareholding of R. The family trusts also had a significant minority shareholding in the company. R sought G's removal as a trustee alleging, inter alia, that G was responsible for the issue of a large number of shares to another company in order to engineer a position of dominance for himself and that his performance as a trustee in respect of the distribution of trust income was unsatisfactory. R also sought compensation on the ground that, by reason of G's breach of trust, they had lost the chance of selling their shares, but later deleted that claim by making amendments to the particulars of claim. G defended the action but in due course applied for an order removing himself and two other trustees, and replacing the three of them with an independent trustee. The parties reached substantial agreement based upon the order and subsequently the order was made. However, each side maintained that the other should pay its costs. R submitted that G should pay their costs of the proceedings. R further submitted that CPR r.38.1(2) protected them from being liable for G's costs of the compensation claim as that was not in truth a case of discontinuance of a claim.

Held

(1) The allegations made against G had not been made out. G had not done anything to endanger the trust property. There was no maintainable allegation against him of want of honesty, want of capacity or want of reasonable fidelity. R were simply dissatisfied about the fact that G was the chairman and managing director of the company and that they were not getting the advantages they would like to get through personally owning substantial shareholdings in the builders' merchants company. However, friction or hostility between trustees and beneficiaries was not of itself a reason for the removal of a trustee. If G had remained as a trustee and R's claim for an order removing him had been tried, the claim would have failed. (2) In substance the deletion of the compensation claim was a discontinuance. Under CPR r.38.6, the normal rule was that a claimant who had discontinued his claim was liable for the defendant's costs of the discontinued claim down to the date of discontinuance. That principle applied in the instant case. CPR r.38.1(2) did not protect R from being liable for G's costs of the compensation claim. That rule contemplated only the sort of case where the claimant had been claiming two remedies in respect of the same substantive wrong. In the instant case, the claim for G to be removed as a trustee for the future and the claim against him for compensation were different claims, albeit brought within one legal action. In any event, the court would exercise its discretion and direct that R pay G's costs of the claim for compensation. (3) The court would hear further submissions before making a costs order in respect of the costs attributable to the claim for G to be removed as a trustee. However, it was the court's provisional view that R should pay G's costs of defending the claim for his removal from office as a trustee, such costs to be assessed on standard basis if not agreed.

Judgment accordingly.