This case considered the issue of conduct by one party, where there was evidence that they had exaggerated their claim and how that affected costs, where a Part 36 Offer had been made.
Background
The claimant (F) issued proceedings against his employer (P) for over £280,000 after he fell whilst carrying a heavy piece of equipment across a building site, injuring his back.
Liability had been agreed but not quantum, as evidence was obtained demonstrating that F was exaggerating his claim, namely that:
i) At the start of the claim P had obtained surveillance evidence which showed that a year after the accident, F was able to walk and was fully mobile without a limp.
ii) Although a medical expert had concluded that the accident had accelerated pre existing degenerative changes in his disc, F had exaggerated his injuries during examination.
Following an initial low net offer of £28,550.79 which was rejected and withdrawn, P made a slightly increased net offer of £31,702.53, which F accepted.
First Instance
The Court considered the issue of costs and held that from the expiry of the first offer, P was the successful party and that F should pay those costs. The judge stated that even if he was wrong about who the successful party was, F’s conduct alone justified his departing from the general rule under CPR Rule 44.3(2), that the losing party should pay the entire costs of the action, making F pay P’s costs from the first offer to date.
On Appeal
By the time F appealed against the order that he was to pay these significant costs, both parties were agreed that he was the successful party. The only issue was whether his conduct was enough to justify the departure from CPR Rule 44.3 (2).
Held:
1) Where one party made a Part 36 offer, but settled at a greater sum, Rule 36.14 had the effect of changing the court’s general discretion in respect of costs.
- Parties were free to make Calderbank offers outside of the Part 36 framework and where a party had done so and then achieved a better result, the court’s discretion was wider, though it might well be appropriate to order the party rejecting the Calderbank offer to pay all the costs since the date of its expiry.
- Where the Claimant recovered more than the Defendant had offered, but less than he had previously offered to accept, he was normally the successful party under Rule 44.3(2). The starting point then was that he should recover his costs.
- Next, should there be any adjustment to reflect the costs relating to any issue which the successful party had lost on? Should the unsuccessful party be compensated for costs it had incurred by reason of the successful party’s unreasonable conduct? In a personal injury action, the fact that the Claimant had won on some issues but lost on others was not normally a reason for depriving him of part of his costs.
- Despite the Claimant deliberately exaggerating his claim, this was not, in certain circumstances, a reason for depriving him of his costs. A Defendant with surveillance evidence was well able to protect his position by making a modest Part 36 offer. However, in other cases the fact that the successful party had failed on certain issues might constitute a good reason for awarding him only a specified proportion of his costs.
(2) Here, there was no justification for departing from the norm under Rule 44.3(2) and F was entitled to all his costs. The judge at first instance had incorrectly assumed that P was the successful party.
However, the main conduct issue was the exaggeration of his claim. The amount F recovered in damages was significantly less than his pleaded claim and this was due to the affect of both the surveillance evidence and the medical evidence. Despite this, the judge had expressly declined to make any finding that F was guilty of any misrepresentation, and in those circumstances the Court of Appeal court could not substitute such a finding. It was clear that from an early stage, P had evidence showing that F was exaggerating his claim, yet it had not made a realistic offer until late in proceedings.
(3) There was a continuous and mistaken tendency of first instance and occasionally Court of Appeal judges to undermine the CPR rule 44.3(2), creating great uncertainty amongst future litigants. The upcoming amendment to rule 36.14 will expectantly formulate a more clarified approach to this area of litigation.
The Appeal was allowed.
Tactics
From a tactical point of view, when Defendants are dealing with personal injury claims, where a Claimant has a strong case on liability but quantum is inflated, the Defendant’s remedy is to make a modest Part 36 offer as soon as possible. If not, then the Defendant may not gain any cost protection. This position could be changed by obtaining evidence proving that the Claimant is dishonest.
