Volume 3, Issue 4: July 2010
PERSONAL INJURY BRIEFING
COSTS ISSUE
“I can believe anything, provided that it is quite incredible.” Oscar Wilde (1854-1900), The Picture of Dorian Gray, 1891.
In this issue:
 Resisting costs orders in favour of fraudulent but
successful parties: Widlake v BAA and Sulaman
v AXA & Direct Line in context By Andrew
Spencer
 Jackson implementation: “Faith in Parliament?”
By Simon Murray
Resisting costs orders in favour of fraudulent but successful parties: Widlake v BAA and Sulaman v AXA & Direct
Line in context
Fraudulent and consciously exaggerated claims are all too common. Laws LJ considered in Molloy v Shell UK Limited [2001]
EWCA Civ 1272 that claimants who lie and grossly exaggerate
their claims could be guilty of “a cynical and dishonest abuse of
the court’s process” and questioned whether, when “faced with
manipulation of the civil justice system on so grand a scale, the
court once it knows the facts should entertain the claim at all
save to make the claimant pay the defendant’s costs”. Since
then, the Court of Appeal made clear in Shah v Wassim Ul-Haq
[2009] EWCA Civ 542 that there was no general rule of law that
the dishonest exaggeration of a genuine claim should necessarily result in the dismissal of the whole claim. Indeed, Smith LJ
went so far as to characterise Laws LJ’s suggestion as “wishful
thinking”. Rather, if despite the damage to the claimant’s credibility resulting from lies or exaggeration he manages to prove
some loss, he will receive compensation for that.
But what costs orders are appropriate where a party has lied or
exaggerated but been successful in the whole or in part of his
case?
The CPR emphasise that whilst the starting point is that costs
should follow the event, this is not the end of the matter. The
court can make a different order, having regard to all the circumstances. This specifically includes conduct before, as well
as during the proceedings. Conduct includes the manner in
which a party has pursued or defended his case or a particular
allegation or issue, and notably whether there has been exaggeration.
There is no question, then, the court has power to deprive a
successful party of part or all of his costs – or even order that
party to pay the other side’s costs – for reasons of conduct, including lying or exaggerating.
These points arose in Painting v University of Oxford [2005]
EWCA Civ 161. The claimant had deliberately misled medical
experts and told lies to the court valuing her claim on a full liability basis at half a million pounds. The defendant, relying on
video evidence, argued that the claim was worth tens, rather
than hundreds, of thousands. The judge considered this was a
case of deliberate exaggeration. But the claimant still
beat the payment in by a considerable margin, and the
judge awarded her her costs. On appeal this order was
reversed and the claimant was ordered to pay the defendant’s costs from the date of the payment in. The
defendant was considered the real winner. The costs
order also reflected the fact of the claimant’s fraud but for the exaggeration the claim was likely to have
settled - and the claimant’s own failure to negotiate.
Jackson v Ministry of Defence [2006] EWCA Civ 46 is
a similar case to Painting. However, unlike Painting the
judge at first instance reflected the fact of exaggeration
by allowing the claimant only 75% of his costs. The
Court of Appeal refused to interfere, commenting that
whilst they might have made a different order, the judge
correctly applied the right test. Although there might
seem to be a conflict between these two cases, it is
notable that on appeal the defendant accepted that the
facts of Jackson were less stark than Painting, and only
sought to reduce the claimant’s costs further, rather
than seeking to recover the defendant’s own costs.
The point arose again in Widlake v BAA Ltd [2009]
EWCA Civ 1256. This case is notable because the
Court of Appeal specifically noted that “the court is entitled in an appropriate case to say that (…) misconduct
is so egregious that a penalty should be imposed upon
the offending party. One can, therefore, deprive a party
of costs by way of punitive sanction”. The Court of Appeal judgment provides a useful example of the balancing exercise that should be carried out in such a case.
The starting point was that the claimant was the successful party. The defendant had failed to make a sufficient Part 36 offer. However, exaggerating the claim
made it heavily contested, preventing it from settling.
The defendant had been put to unnecessary expense.
The claimant had failed to negotiate. And her dishonesty should be penalised. The result was that there
should be no order as to costs.
These cases all concern claimants. But these principles
apply just as much where the lying but successful party
is the defendant, as Sulaman v AXA and Direct Line
[2009] EWCA Civ 1331 shows. There, the appellant
was one of a number of defendants accused of a largescale fraud. The defendant, alone of the defendants,
was held not liable. However, the judge found that she
had told lies in evidence and had given knowing assistance to a fraudster. The Court of Appeal upheld the
judge’s decision that, on account of her lies, she should
only recover one third of her costs. The litigation was
made more difficult by the appellant’s lies. The judge
was entitled to express disapproval of them.
The points that emerge, then, are:-
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The court will start by looking at who is the “winner”. In
some cases, where a trial is all about exaggeration, the
claimant can win “on paper”, and recover some money or
beat a Part 36 offer, but the defendant can, in reality, be the
winner and recover its costs (Painting).
Thereafter, the court will look at the matter in the round to
see whether a different order should be made.
The Court is entitled to mark its disapproval of lies by reducing the costs otherwise recoverable or even in a serious
case ordering the successful party to pay the other side’s
costs (Widlake, Sulaman). This is so even if the lies have
not caused costs to increase.
Often, costs will have increased because of the lies. For
example exaggeration may well prevent a case from settling
at an early stage, or lies might prolong a trial. Where this
has been the effect, the court can make the party at fault
pay for these increased costs (Painting, Widlake).
Jackson implementation: “Faith in Parliament?”
indeed more pressing matters in the legislative timetable. It
is of note therefore that there was been no Civil Justice Reform Bill in the first Queen’s speech.
Further, the collapse of the attempt by the previous administration, in its death throes, to cap success fees in defamation cases to 10% is instructive. MPs from all parties agreed
that this measure would undermine access to justice. This
was said of a pretty discrete corner of the law, because
there are perhaps 200 libel actions issued each year. What
is more, defamation proceedings are not usually commenced by people who cannot afford to litigate. If that measure was unable to command support of the House of Commons, is it likely that the broader measures will meet with
more success?
Is it really realistic to expect the coalition Government to
wish to put through measures which can be portrayed by
opponents or the media either as reducing access to justice
or allowing lawyers to take fees from the awards made to
people injured in accidents? Furthermore the removal of the
indemnity principle could also cause considerable dissent
from litigating constituents. Not all Defendants are insured
and it will readily appear inequitable that an uninsured ordinary person or small business can be sued, successfully
defeat the claim and then still have to bear his own costs of
resisting that unsuccessful claim.
Like Personal Injury litigation groups within chambers and
solicitors’ firms up and down England and Wales, the chambers PI group has been considering the potential impact of
the smorgasbord of changes proposed by Lord Justice
Jackson in his much discussed report on costs in civil proTurning then to the second hurdle: Government economists
ceedings.
are apparently currently working out whether the Jackson
Fear not - this is not to be yet another article on the merits proposals will increase or decrease central government
and demerits of his various proposals – instead it is the pur- spending. If it is determined that they will increase spending
pose of this article to assess, or rather speculate about, the it is highly unlikely that the reforms will come to pass. Given
prospects of some or indeed any of the Jackson proposals the pressures to cut public spending the adoption of any of
becoming a reality following the general election.
Jackson’s proposals which would require public funds, such
as a CLAF, are unlikely to be implemented in the near fuThe new Government has officially been enthusiastic in ture. If the actuaries decide that the package of proposals
general terms at the idea of reducing the costs of litigation. may save money (although it is hard to see how directly)
However the major Jackson proposals face two daunting then we may see the pace of reform accelerated in order to
hurdles: first many of the proposals would require primary meet the required expenditure cuts.
legislation, this hurdle raises the question as to whether
there is the parliamentary will, or the time, to put though the It is also important to bear in mind that on the 15th June 2010
necessary Bills in the near future, and second any major the Prime Minister appointed Lord Young of Graffham to
change will be ruthlessly assessed by the Ministry of Justice look again at health, safety and compensation issues. Lord
for any possible impact which might increase government Young may or not comment on the Jackson proposals, or
spending.
indeed he may come with some thoughts of his own. The
Government is unlikely to act until he has reported.
Taking each hurdle in turn, Lord Justice Jackson himself
recognised in his report that his proposals would require All in all it is likely that some of the less significant, and less
primary legislation (indeed he has said that he “had faith in contentious, recommendations in the Jackson report will
parliament” to enact his proposals).
probably be enacted, because to do so would require only
some administrative action by the Court Service. Two examThe reason for primary legislation is clear, the whole ples of such recommendations are the proposals in relation
scheme of conditional fees, success fees and after the to small business disputes – that a High Court Judge should
event insurance is currently enshrined in statute which be appointed in charge of the Mercantile courts “whose role
would require either repeal or very significant amendment. will be to include streamlining procedures and preparing a
Primary legislation would probably also be required to im- court guide”, and the re-formatting of the bill of costs form.
plement the abolition of the indemnity principle and the proAs for the rest of Jackson’s proposals it may well be that
posed one way costs shifting.
they end up, to mix metaphors, either in the box marked “too
Given the ferocity of the attacks on the proposals, particu- difficult” or in the long grass.
larly by Claimant personal injury practitioners, that the removal of the success fees will compromise the delivery of
Editor:
access to justice [and at no cost to the taxpayer] this will
mean that there would be substantial political interest in the
Jack Harding
measures when they are placed before Parliament.
The reality, given the current political and economic condition of the country, is that there other more pressing issues
on the plate of the new Lord Chancellor, Ken Clarke, and
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