England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF MR JUSTICE DOUGLAS BROWN

		Royal Courts of Justice Strand London WC2 Tuesday, 26th March 2002

1. LORD JUSTICE KENNEDY: In this case a large personal injuries claim was settled when the claimant agreed to accept a relatively modest sum. A consent order was made and problems then arose as to the proper judicial approach to the question of costs.

Nature of the claim

2. Kathryn Booth was working as a part-time chambermaid at the Brittania Hotel, Manchester when, on 14th November 1991, she sustained a minor crush injury to her left hand while making a bed. She was nearly 17½ years of age. On 10th November 1994 she began proceedings in the Oldham County Court. In 1995 the defendants paid £1,000 into court. She then reported symptoms which resulted in the diagnosis of reflex sympathetic dystrophy (RSD). That had a dramatic effect on the value of the claim. An order was made that the issues of liability and quantum be tried separately. In November 1996 the defendants increased the sum in court to £2,500. On 10th December 1996, after a two-day trial, judgment was given for the claimant on the issue of liability with costs on County Court scale 2. An order was also made for damages to be assessed. In December 1997, by consent, an order was made transferring the issue of quantum to the High Court. In April 1998 the trial was fixed for five days to start on 9th December 1998.
3. Beginning in February 1997, two months after judgment was given in relation to liability, the defendants' agent made periodic video recordings of the claimant. The recordings were made on 24th February 1997, 12th June 1997, 30th September 1998 and 2nd October 1998. Those recordings, and in particular the last two recordings, showed a full range of movement in the left-hand which, in the firm opinion of the defendants' medical adviser, was not consistent with RSD. By October 1998 her schedule of loss in its final form disclosed a claim for £617,000. On 6th November 1998, just under five weeks before the date fixed for the trial of the issue of quantum, the defendants disclosed their video recordings to the claimant.
4. The claimant consulted with her advisers. On 2nd December 1998 it was agreed between leading counsel that first the claimant should accept the £2,500 out of court. Secondly, the defendants would pay whatever was due to the Compensation Recovery Unit in respect of benefits received by the claimant. The CRU assessment at that stage was £24,552. It was later reduced on appeal to £633.36. Thirdly, the defendants would pay the claimant's costs on the standard basis.
5. On 1st April 1999 the claimant's solicitor lodged their bill of costs, seeking to recover £82,839.86 plus VAT of £13,255.64. The defendants served points of dispute in which they acknowledged that the new Civil Procedure Rules only apply to work undertaken after 26th April 1999 but contended that it is unreasonable to incur costs of £92,000 in respect of a claim settled for £2,500. They asserted that the claimant should recover the costs relating to liability and those relating to quantum, but limited to costs required to prove a claim of £2,500.
6. The defendants expressly made no criticism of the claimant's solicitors but made detailed criticisms of the various amounts claimed. At page 4 of the Points of Dispute the defendants say:

"The defendants will say that it would not be just and equitable for the costs which they say had been unnecessarily incurred in pursuing the matter of quantum to be paid by them and will, upon completion of the assessment, be requested to indicate what proportions of the inter partes costs claimed against the defendants should be met by them and what proportion should be borne by the claimant herself albeit that she is represented with the benefit of a legal aid certificate."

7. There is clearly a typing error in the course of that passage but it does not affect its sense.
8. The claimant's replies to the Points of Dispute drew attention to the consent order and the late disclosure of the video evidence, the two points relied on by Mr Hutton appearing for the respondent/claimant before us today.

Before District Judge Buckley

9. On 15th January 2001 the matter came before District Judge Buckley in Manchester County Court. The defendants' counsel did not abandon the suggestion of a proportionate assessment. The district judge recognised that the claimant's claim collapsed when the video evidence was disclosed, and said that the video evidence could have been disclosed earlier thus possibly restricting the amount spent on costs. She then ordered
10. that the defendants pay all of the liability costs and 60 per cent of the costs in relation to quantum. She examined the individual items claimed and in respect of liability awarded costs in the sum of £16,000. For quantum, after taking into consideration the reduction of 40 per cent, the award was £34,688.33.

Appeal to the High Court Judge

11. The defendants then sought permission to appeal and that was granted by Mr Justice Jack on 23rd March 2001. The grounds of appeal challenged the apportionment as arbitrary giving insufficient weight to what had happened. They also alleged that a false claim had collapsed when video evidence was disclosed and contended that it was wrong to hold that the defendants had acquiesced in the increase of costs.

Before Douglas Brown J

12. The appeal was heard by Mr Justice Douglas Brown at Manchester. Counsel for the defendant, Mr Van Tonder, contended that the proportionate approach was wrong. The assessment should have been on the basis of what it would have been reasonable to expend to pursue a claim worth only £2,500.
13. Counsel for the claimant pointed to the defendants' written invitation to the district judge in the Points of Dispute to adopt a proportionate approach and contended that more guidance as to costs should have been given when the settlement was being discussed, if necessary with evidence being called. As it was, the district judge had to exercise her discretion and it should not be interfered with unless she was plainly wrong.
14. The judge in the judgment which he delivered on 17th May 2001 accepted the claimant's case "altered dramatically when the videos were served, and the advice of leading counsel was obtained upon them". He considered it was important that counsel for the defendants before the district judge did not withdraw or amend the written invitation to the district judge on page 4 of the Points of Dispute to adopt a percentage approach. As to that, Mr Justice Douglas Brown said:

"These points of dispute may not be pleadings in the traditional sense, but written representations of a party's case which have to be formally served, and unless they are withdrawn, they stand as part of the party's case, and in my judgment the District Judge was fully entitled to accept the defendant's written invitation to deal with the matter on a proportionate basis, and in doing so she was without doubt exercising a discretion."

15. The judge turned to consider whether it would be proper on appeal to interfere with the district judge's exercise of her discretion and he declined to do so. He concluded:

"In all the circumstances, particularly as in this case the defendant made a tactical decision not to disclose the card on the table approach earlier, the District Judge was, in my view, fully justified in the approach she made. The defendants, of course, are entitled to make a tactical decision. It may not always be an easy decision, but when making it they must bear in mind that there may well be a costs consequence of a decision to leave the placing of the cards on the table until a month before the hearing."

16. When granting permission to appeal to this court, Lady Justice Hale wrote:

"(1) There is a point of principle as to what costs (if any) are reasonably incurred by a claimant in pursuing a claim for damages for personal injuries which he or she knows (or must be taken to know) have not been suffered: cf Ford v GKR Construction Ltd [2000] 1 WLR 1397, per Judge LJ at p 1401D.

(2) There is a point of practice as to how the paying party is to go about challenging the reasonableness of incurring costs when this may depend upon disputed facts but the case has quite properly been settled.

(3) Given that those points meet the criterion in the Access to Justice Act 1999, s 55 (1), the appellant should also be permitted to argue that the judge erred in concentrating upon the Points of Dispute, and in particular the passage quoted from p 4 rather than the passage on p 3 putting the case as the appellant now does."

17. The passage on page 3, to which she refers, I have already summarised. It reads in full thus:

"The defendants will concede the claimant is entitled to recover such costs as related to the issue of liability, which was decided on 10th December 1996, but will not concede that the claimant is entitled to recover any of the expense in pursuing the matter of quantum over and above that required to prove the claim for £2,500.00."

Defendants/Appellants' approach here

18. Before us, Mr Van Tonder for the appellants/defendants has submitted -

(1) where a claimant accepts a payment into court of £2,500 and repayment to the Central Recovery Unit of benefits received, she should, in the absence of a special direction, only recover such costs as are reasonable having regard to the sum recovered, and a simple percentage division of costs is unlikely to achieve that result. A special direction might, for example, be appropriate in relation to a test case.

(2) Cards on the table is right in principle, but inconclusive video evidence cannot be served early because it is inconclusive and can be circumnavigated. In this case it was the later video evidence which was the more compelling.

(3) Before the district judge the defendants never sought a proportionate discount and the Points of Dispute should not have been treated as they were by Mr Justice Douglas Brown.

For respondent

19. For the respondent Mr Hutton has emphasised the content of the consent order in December 1988. The claimant was to recover costs on the standard basis, not, for example, on County Court scale 1 or as if this had been from the outset a claim for £2,500. It was, he submits, for the trial judge - in this case for the judge making the consent order - to decide what the order should be in relation to costs and for the district judge to give effect to that order.
20. In fact, the costs were much higher than they need have been because the defendants were so slow in obtaining and disclosing video evidence. In the meantime the case was, by consent, transferred to the High Court, medical evidence was assembled and leading counsel was instructed. Mr Hutton submits that the defendants should not benefit from their dilatoriness. If they have to pay a large sum to the claimant by way of costs they are, at least to some extent, the author of their own misfortune.
21. Mr Hutton submits that the district judge carried out a proper balancing exercise. She recognised the late collapse of the claim, but balanced against that the late disclosure of video evidence in order to arrive at her apportionment before proceeding to look at and to discount many individual items. Mr Hutton submits that this court should not interfere with her exercise of her discretion.
22. I, for my part, recognise the importance of not interfering with the exercise of discretion unless it can be shown that what was done was plainly wrong. I consider that in this case that test is satisfied.
23. In this case the district judge had to approach her task as indicated by Ord.62,r.12 RSC which provides:

"(1) On a taxation of costs on the standard basis there shall be allowed a reasonable amount in respect of all costs reasonably incurred and any doubts which the taxing officer may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the paying party;"

24. She had to ask herself what costs (i.e. what items of expenditure) were reasonably incurred and what would be a reasonable amount to allow in respect of each of those items in order to establish quantum against the background that, at the end of the day, the sum accepted was £2,500 and repayment of benefits to the CRU.
25. In the context of this case that, to my mind, means that the district judge should have started by going through the bill of costs and ruling out all of those items she considered to be unjustified (for example, almost all of the medical fees, cost of retaining leading counsel, etc.). That would, no doubt, have left some items which were plainly reasonable as items, even if questionable in amount, and other items where it would be difficult if not impossible to disentangle what was reasonable from what was unreasonable even having regard to the way in which rule 12 (1) required that doubts be resolved. At that stage, but not at any earlier stage, it would, in my judgment, be appropriate for the district judge to consider awarding a percentage of the sum claimed, but the percentage awarded would have to be such that at the end of the exercise the total sum awarded by way of costs could be regarded as reasonable having regard to the amount of damages obtained. In other words, the district judge must give herself an opportunity to look at the result in the round before concluding her arithmetic. In the present case her approach was wrong because in particular it deprived her of that opportunity and resulted in a conclusionthat it was reasonable for the claimant to expend about £57,000 in order to recover £2,500 and to require the defendants to pay 60 per cent of the sum expended. That, in my judgment, must be nonsense.
26. I accept of course that the district judge must work within the ambit of the order made in relation to costs, whether it be a consent order or an order made after a contested hearing. But such an order does not in any way deprive the district judge of the powers expressly granted to her by rule 12 (1). In a particular case, as in Ford v GKR Construction [2000] 1 WLR 1397, to which our attention was invited and to which I have already referred, it may be appropriate to allow a claimant to recover certain costs which would not have been incurred if the defendants had chosen to obtain and disclose relevant information at an earlier stage. In that case the trial judge came to the conclusion that video evidence obtained during a prolonged adjournment could have been obtained earlier, and justified him in allowing the claimant to recover her costs although she failed to beat the payment into court. This court declined to interfere with that exercise of discretion. But it is to be noted that in that case the claimant was found not to be deliberately lying, and exaggerating her case. At page 1401 D Lord Justice Judge said:

"If the judge had concluded that the claimant had been demonstrated by the video evidence to be a malingerer, dishonestly exaggerating her symptoms, I have little doubt that he would have taken the view that, even if the video evidence had arrived late, the claimant should not be permitted to escape the consequences of the revelation, even late, of her attempted fraud. That is a matter of speculation and is not this case."

27. In the present case, as it seems to me, in the absence of any explanation from the claimant, the financial facts speak for themselves, and as Lord Justice Judge said a little earlier at 1401 B:

"Every case and every consequential costs order depends upon the individual facts of the case."

28. As Lady Justice Hale indicated when granting permission to appeal in this case, this case, on the face of it, concerns a claimant pursuing a claim for personal injuries which she knows or must be taken to know have not been suffered. I see no reason why, even though the video evidence was completed and disclosed relatively late, the defendants should be required to bear any part of the costs she expended in that unreasonable pursuit.
29. I am also, for my part, unable to accept the point taken by Mr Justice Douglas Brown in relation to page 4 of the Points of Dispute. It seems to me that at a fairly late stage a percentage approach or perhaps even a lump-sum approach may have a part to play but the defendants' case before the district judge was clearly as indicated on page 3 of the Points of Dispute. I find it impossible to accept that the district judge was misled by what followed.
30. I would therefore remit this case to District Judge Buckley so that the claimant's costs can be re-assessed in accordance with the terms of this judgment unless those cost can now be agreed. Nothing in this judgment should be taken to be indicative of any wish on my part to circumscribe the wide discretion which Ord.62,r.12, and now CPR 44.4, give to taxing officers and costs judges. But in this particular case, for the reasons I have given, I am satisfied that the approach adopted led to a result which cannot be sustained.
31. For those reasons, in my judgment, the appeal should be allowed.
32. LORD JUSTICE JONATHAN PARKER: I agree that this appeal should be allowed for the reasons my Lord has given. I add a few words of my own on the question whether, as the district judge concluded, the defendants were, in part, the author of their own misfortune in not disclosing the video evidence earlier. In my judgment, a claimant who pursues an exaggerated and inflated claim for damages must expect to bear the consequences when his costs come to be assessed. Moreover in the absence of special circumstances a claimant who knows, or who must be taken to know, that his claim for damages is unsustainable in whole or in part cannot, in my judgment, be heard to assert that a defendant who has disclosed evidence which establishes the unsustainability of the claim ought to have disclosed that evidence at an earlier stage in the proceedings.
33. In Ford v GKR Construction, to which my Lord has referred, the trial judge concluded that the claimant had not appreciated that her claim for damages was exaggerated and the Court of Appeal necessarily proceeded on that basis. In the instant case, in my judgment, the inference is irresistible that at all material times the claimant knew that her claim to be suffering from the condition known as RSD was a false claim.
34. I accordingly reject Mr Hutton's submissions based on late disclosure of the video evidence by the defendants.
35. SIR SWINTON THOMAS: I agree with both judgments and, accordingly, I agree that the appeal should be allowed.
Order: Appeal allowed with the costs here and below. Costs of appellants to be set off against costs respondent recovers on quantum. If that be not sufficient against sum already paid in respect of liability such set off not to take place until after conclusion of taxation in respect of whole hearing