Discontinuance is governed by Part 38 of the Civil Procedure Rules. All that is required in most cases is for the claimant to file and serve a notice of discontinuance (although in certain circumstances the court's permission is required). The general rule is that a claimant discontinuing its claim is liable to pay the other side's costs although the court has discretion to make an order in different terms.

Part 38.7 provides:

"A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if-

  1. he discontinued the claim after the defendant filed a defence; and
  2. the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim."

A recent case has highlighted that permission of the court to bring a fresh claim following an earlier discontinuance might not easily be given and it also considered the inter-relationship between an application for permission under Part 38.7 to start a fresh claim following discontinuance and an application to strike out a second claim under Part 3.4(2)(b) (on the basis that the proceedings were an attempt to litigate issues which had already been decided by the court - often referred to as Henderson v Henderson abuse of process).

Westbrook Dolphin Square Limited v Friends Provident Life and Pensions Limited [2011] was a case concerning a claim for collective enfranchisement under Chapter I of Part I of the Leasehold Reform, Housing and Urban Development Act 1993 ("the Leasehold Reform Act"). The Leasehold Reform Act makes provision for service of notices by qualifying tenants and sets out the procedure that is to be followed thereafter.

The case concerned a group of buildings in Pimlico which included 1,223 flats as well as leisure facilities. A complicated corporate structure was put in place to acquire the underleases of the flats involving 612 SPV Jersey companies ("the SPVs") and notices were served pursuant to the Leasehold Reform Act. Friends Provident, the freehold owner, served counter-notices disputing that the SPVs were qualifying tenants entitled to exercise the right to collective enfranchisement on a number of grounds.

A court claim was issued seeking declarations that the SPVs were qualifying tenants. Five working days before the trial the SPVs served a notice of discontinuance in respect of the whole claim. The reason given was that "in the light of the significant fall in capital values since that date it is no longer commercially appropriate to seek to determine a price as at [24 September 2007]" (being the date of the initial notice). However, the letter also indicated that further steps would be taken by the SPVs under the Leasehold Reform Act to acquire the building on more favourable terms.

The SPVs subsequently issued new notices which were identical to the first save in respect of the date, the proposed price and the way in which the notices had been executed by the SPVs. Friends Provident denied that the SPVs were qualifying tenants on largely the same grounds as before. The case returned to court and Friends Provident applied to strike out the claim.

Arnold J noted with surprise that neither counsel could find any authority on the application of CPR 38.7. However, he decided that there was an analogy between an application under Part 38.7 and an application to strike out a case as an abuse of process under Part 3.4.(2)(b). He concluded that the difference between the two was that under Part 38.7 the onus lies upon the applicant to show that there should be permission to bring the new claim whereas under Part 3.4(2)(b) the onus was on the defendant to show that the new claim is an abuse of process. Arnold J cited Lord Bingham in the case of Johnson v Gore Wood in relation to Henderson v Henderson abuse of process:

"The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in earlier proceedings if it was to be raised at all...It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been...That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before."

The court concluded that the new claim arose out of substantially the same facts as the previous claim. The notices differed slightly but the notices were just procedural preliminaries rather than the principal facts out of which the claims arose. The key question before the court had not changed and so the arguments the court needed to consider in the two claims were largely the same.

Counsel for the SPVs argued that as the Leasehold Reform Act envisaged the service of successive notices it followed that successive claims could also be issued. The court disagreed and refused permission for the second claim to be brought on the basis it amounted to an abuse of process. Arnold J was of the view that the original claim should have been pursued to trial to establish the SPVs' right to collective enfranchisement at which stage they could have withdrawn the first notice. They could then have proceeded to serve a fresh notice under which their right to collective enfranchisement could not be called into question.

The case dealt with the question of discontinuance but it is a word which is sometimes confused with dismissal, a concept often used when parties agree to settle matters on a "drop hands" basis by way of consent order. As set out in the case above, a claimant needs leave from the court to issue new proceedings based on the same or similar claim if the notice of discontinuance is served after a defence has been filed. The claimant in a discontinued claim might therefore get a second bite at the cherry if it can persuade the court that it should be entitled to do so. A consent order dismissing a claim operates as a final judgment determining all of the issues in the claim in the favour of the defendant. The claimant who has agreed to the dismissal of its claim is very unlikely to be able to re-open matters.

It is therefore important to understand the difference between discontinuance and dismissal to avoid a position where a claim you thought was settled has been resurrected or that a claim you thought could be restarted cannot be. Likewise very careful thought should be given to discontinuing a claim if a further claim on substantially the same facts is contemplated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.