Since pre-action protocols were introduced, parties have incurred significant costs prior to proceedings being issued as they attempt to clarify the key issues in dispute with a view to resolving matters without the need for litigation. While the courts have held that, in principle, pre-action costs are recoverable, the recent decision in Lobster Group v Heidelberg Graphic Equipment emphasises the difficulties in recouping such costs.
Section 51 of the Supreme Court Act 1981 provides that the award of costs “of and incidental to” proceedings is in the court’s discretion. In Re Gibson’s Settlement Trusts [1981], it was held that pre-action costs were, theoretically, incidental to proceedings and so fell within this section 51 discretion. This was confirmed by the Court of Appeal in Callery v Gray [2001] in which Lord Woolf held that “costs awarded will include costs reasonably incurred before the action started, such as costs incurred in complying with a pre-action protocol”.
