England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Aldershot & Farnham District Registry
His Honour Judge Marston
Claims 4AF01667 and 4NE05545

		Royal Courts of Justice Strand, London, WC2A 2LL
		18/12/2007

Lord Justice Waller :

Introduction

1. This is an appeal from a ruling of His Honour Judge Marston on costs following his handing down of a judgment in a personal injury action. He had awarded the three claimants damages in the modest sums of £1000, £400 and £600 which he had held to flow from the negligent driving of the defendant. The judge awarded the claimants only 60 % of their costs.
2. They are dissatisfied with that order maintaining they were the successful party and there was no reason why they should not get 100%. They appeal with permission of Moses LJ. The defendant is also dissatisfied with the order but would only seek permission to cross appeal and seek a reduction in the award of costs, if we were to find that the judge had in some way misdirected himself. That shows an appreciation also recognised by Mr Williams for the appellants that it will be in rare circumstances that the court of appeal will interfere with the exercise of a judge's discretion in relation to costs. To interfere with any exercise of discretion, this court must take the view that the judge has misdirected himself or has made a decision with which it does not agree and outside the generous ambit where reasonable disagreement is possible.
3. How one might ask has a point arisen on costs in this way in respect of these small claims? The answer is as follows. Where claimants make claims and recover sums of £1000 or less and where defendants can establish that the claims were exaggerated so that they are tried inappropriately on the fast track or the multi track at great expense, the defendants seek to limit the costs recoverable from them to the fixed sums applicable to the small claims track. An example of a defendant succeeding in so arguing is provided by Devine v Franklin [2002] EWHC 1846(QB) a decision of Gray J who, on appeal from the decision of a District Judge who had not accepted the argument, allowed the appeal but did not limit recovery to fixed costs exercising the discretion to award further costs where a party had behaved unreasonably (see CPR 27.14(2) (g)). One point made before the judge in this case was that if it is the exaggeration which has caused the claim to be on the fast or the multi track the defendants are somewhat trapped because if (applying the rules pre-April this year) they make a part 36 payment in or as per the new rules make a part 36 written offer and it is accepted, the result will be that a claimant who accepts such an offer obtains an order for his costs not limited in any way. That they say is unfair- unfair because the costs should be limited to the costs available on the proper track. I shall return below to the question whether it is true that defendants can do nothing to protect themselves but before doing so deal with a further problem which is relevant to this case.
4. What also sometimes happens, and happened in this case, is that a defendant or more accurately insurers allege not only that the claim is exaggerated but that it is in fact dishonest. This case was about a very minor incident in which the defendant's car bumped into the back of the car in which the claimants were travelling and the defendant's insurers alleged that the impact was so slight that it was impossible for the claimants to have suffered any physical injuries. They alleged that the claimants were dishonest in making any claim to have been injured at all. The defendants obtained an engineer's report in order to establish the extent of the forces that would be operating on those in the car with such a minor bump and expert medical evidence so as to demonstrate that no real injury could have been caused by the accident. These particular insurers would appear to be conducting a considerable campaign in relation to low velocity accidents and the reports of their experts show all the signs of adaptation from already standard reports.
5. The allegation of dishonesty is a serious one and with that allegation being made the District Judge was bound to direct that the claims should be tried as a multitrack case. It is not clear whether without the allegation the claims as made would have been fast track or multi track; nor indeed is it clear whether if the claims had been limited to the sums ultimately awarded that the claims would simply have been allocated to the small claims track but there is certainly some chance that they would have been. CPR 26.8 sets out the matters to which the court should have regard when allocating, and the financial value of a case is the first matter. Furthermore where there are two or more claims the court does not aggregate the claims in considering the financial value. What it is possible to say is that by pleading the claims the way they did, the claimants ensured that the claims would not be allocated to the small claims track. The pleading might have led to the claims being multitrack as opposed to fast track even without the serious allegation of fraud as opposed to bone fide over optimism, but the defendant's insurers' allegation of dishonesty ensured a multi track trial and the increase in costs that that entailed. The fact that the case was multitrack did increase the costs and with the charge being made of fraud the period of trial was extended over some days.
6. In the result the most important issues at the trial that ultimately took place were whether the claimants had brought a dishonest claim or whether they had brought an exaggerated claim albeit honestly. We were told that the costs of the claimants including solicitors' success fee were in the region of £80,000; the costs of the defendants about half of that. If the case had been a fast track case without any issue as to dishonesty we were told the claimants' costs would have been about £8,000- £10,000 and the defendants' about £6,000. If the case had been allocated to the small claims track then the fees would have in part been fixed and otherwise very much less than the fast track.

The judge's judgment following the trial

7. The judge in his judgment following the trial dismissed any allegation of fraud or dishonesty. He recognised that the defendant's case i.e. that the "Delta velocity" resulting from the minor bump that took place was not sufficient for the claimants to have been injured, involved an assertion that "the claimants here are lying or, at the very least, massively exaggerating their injuries". So far as the first claimant's evidence and injuries were concerned he summarised the position after a review of her evidence in the following terms:-

"So on her oral evidence we have an accident that took place, we have an impact equivalent to a car stalling, we have some bruising caused to her but she was a hundred per cent better within a couple of weeks, we have some minor pain caused to Bryony who was, according to her mother, fine within the next couple of days, although she did cancel her dancing rehearsals for about two weeks thereafter"

8. His view of the 3rd Claimant was as follows:-

"I will compare what she said to me with what she said to the Claimant's medical expert later in this judgment, but I do have to say that I found this lady's evidence vague and, at time, contradictory. I gained the impression that she wasn't deliberately setting out to lie to me but that she was quite immature, was not used to expressing herself very clearly and was also struggling to remember things."

9. Having reviewed the defendant's evidence which he accepted in its entirety as to the seriousness or otherwise of the accident he made the following findings of fact:-

"I think I am therefore in a position to make some findings of fact about the accident itself. First of all it was caused by the Defendant as she accepts in that her car rolled forward a matter of a few feet at most and impacted against the back of the 1^st Claimant's car. The impact, I find, caused no damage that was visible on the Claimant's car and was the equivalent of a stall, the occupants of the car being pushed forwards and then back by the forces of the impact which I find took place, at the fastest, at about 5 or 6 miles per hour and caused, if any damage, very minor damage to the Claimant's car. I find that the 1^st Claimant has given a truthful account in her evidence of the injuries that were sustained by her daughter and I also find that Miss Lynas has given, at the end, a truthful account of the injuries that she sustained. It is quite difficult to pick this account out of her evidence but I have done so. The reason why her evidence is difficult to understand is from those factors which I have outlined in my assessment of her. I will return to the issue of the 1^st Claimant's injuries subsequently in this judgment."

10. So far as the extent of any injury was concerned he found as follows so far as the second and third claimants were concerned :-

"With these two injuries, if they were sustained, we are on the very outside edge of injury that will sustain a claim, the sort of claims which are dealt with in the Small Claims Court usually. In his oral evidence Mr Newman said this of the occupants of the car at the end of his cross-examination; "As I have said before, at the time [of the accident] they would have suffered transitory and ephemeral symptoms" but he went on to say "This did not include the left sided bruise" – that is the bruise purportedly shown in the photograph that I have already referred to of the 1^st Claimant. I have to say here that in my view the mechanism did exist for transitory and ephemeral symptoms to be suffered by the Claimants and it seems to me that what I have, dealing with the 2^nd and 3^rd Claimants, is precisely that and I take that from the oral evidence of the 2^nd Claimant's mother and from Miss Lynas herself. These sorts of injuries in both cases fall within the bracket of perhaps £400 - £1,000 damages per person and I propose to award £400 to the 2^nd Claimant and £699 for the 3^rd Claimant because her symptoms lasted longer than Bryony's."

11. Despite the judge's adoption of the language of Mr Newman "transitory and ephemeral" (by which the doctor was seeking to describe something that was not a physical injury), the judge was clearly finding that some injury was suffered and valuing it.
12. So far as the first claimant is concerned he starts by saying this:-

"The position with regard to the 1^st Claimant is, I think, more complicated. I have found that she has a propensity to exaggerate some of the facts of this matter, for instance the crying children in the back of the car, for instance at one point thinking that she had a bruised rib, for instance effectively saying that she was finding it difficult to breathe and, in particular, telling the expert that it took her two months to recover but on oath to me saying it took only a couple of weeks."

13. He then examines the evidence of Mr Older for the first claimant and Mr Newman for the defendant and concludes in the following way:-

"I therefore have to decide whether the Claimant here is telling the truth or not. It seems to me that my assessment of this witness, even given the propensity that she has to exaggerate on some matters, leads me to the view that on the balance of probabilities she is telling the truth here. I just don't see that this lady came to Court to deliberately lie which is what she would have to have done not just in Court but to the expert witness, to the hospital and also to have fabricated the photograph. Therefore I find that Mrs Hall sustained bruising of the left chest wall causing symptoms for two months and then fully recovered and I find that this happened because, although the Delta V was low, she wasn't expecting an incident of any sort and she had turned and was talking to her children in the back of the car. So her injuries are very similar to those sustained by the other two Claimants, save for the bruise. I have had an opportunity to look at the latest edition, edition 8, of the Judicial Studies Board Guidelines on general damages in personal injury cases and I can find very little assistance there for injuries of this minor severity. For general damages Mr Brennan suggests £1,750. I think that this is too high particularly because she recovered so quickly and I make a finding that the injuries that Mrs Hall suffered can be compensated for by damages of £1,000."

14. Thus in summary the judge acquitted the claimants of dishonesty but awarded them damages on a scale which would in fact fall within the small claims jurisdiction and was much less than they claimed. He thus acquitted of dishonesty and found that the claimants had suffered injuries caused by the accident, but he found some exaggeration in that the injuries were much less serious than the claimants were alleging.

History of the actions

15. The judge did not deal expressly in his judgment with a possibility which Mr Higgins sought to put before us. Mr Higgins sought to persuade us that even if at the trial the claimants were acquitted of dishonesty, at the very least the claimants must have been dishonest or exaggerated their injuries to an even greater extent than they were doing at the trial, in the way that they presented their injuries to the original medical experts and in the way as a result they pleaded their original case. This is he submitted was highly relevant to the question of costs. In summary the history reveals the following picture. The accident occurred on 2^nd April 2003. All claimants (Bryony through her mother) consulted solicitors. Offers were made to the solicitors of all claimants by the insurers immediately - £750 to the first claimant and £350 to the second claimant plus £350 to cover disbursements (see letter dated 10/4/03 page 238); and £700 to the third claimant plus £350 to cover costs and disbursements (see letter dated 10/04/03 page 243). Those offers were not accepted pending a medical examination. The first claimant saw Mr Sahir Shaikh on 5^th July 2003; the second claimant saw Dr Platt on 5 June 2003; and the third claimant saw Dr Sullivan on 23^rd October 2003. Proceedings were commenced by the first and second claimants and separate proceedings by the third claimant in April/May 2004 all claimants relying on the medical reports they had obtained and thus on what they had told the doctors. All pleadings were attested to with a statement of truth as required by the rules.
16. The defendants put in defences. They had obtained an engineer's report on 26 August 2003 in which he had concluded from the lack of damage to the car in which the claimants were travelling that the car of the defendant couldn't have been travelling at more than 4 mph, and expressed his opinion as follows:-

"It is my opinion that the impact was so minimal that there would have been very little but in all probability no transfer of energy to the occupants of the claimants vehicle without such transfer of forces personal injury is not possible as alleged."

17. In those defences it was asserted that it was not accepted that any injury had taken place and also asserted that if the award was no more than £1000 the defendant would seek an order that costs be limited to a maximum of fixed costs; (see page 97 defence to first and second claimants; so far as the third claimant is concerned we do not seem to have the original defence but the plea was there in the amended defence of 26 October 2004).
18. In July 2004 the defendants obtained reports from Raymond Newman an orthopaedic surgeon and traumatologist and he expressed opinions in all three cases that with the impact at the low velocity it was the claimants could not have suffered the injuries claimed or that if any injury was suffered they would have been of a trifling nature and transient in their longevity. He said further as far as the first claimant was concerned it was impossible for her to have suffered a rib fracture of any kind at the low velocity, but in addition pointed out that if her torso had hit the steering wheel as suggested it would have been a rib on the right side and not on the left side which would have been affected.
19. What then occurred was that the claimants all went to a different medical expert in August 2005 abandoning the reports on which the case had been pleaded. This was figuratively described by Mr Higgins as the claimants "ducking under the radar". The expert then consulted Mr Older the only expert called by the claimants at the trail. None of the others consulted by the claimants was called although their reports would be in the bundle so as to enable Mr Higgins to cross-examine by reference to them. Compare says Mr Higgins what Mr Older was told by the claimants once they knew of the stance being taken by the defendant's insurers with what they had said to the previous experts – a point no doubt put by Mr Higgins with some force when cross- examining the claimants at the trial. The first claimant is reported by Mr Older as having told him that she was totally "asymptomatic two and a half to three months after the accident" leading to Mr Older's opinion that "Mrs Jane Hill sustained bruising of the left side of her chest wall, causing symptoms for two months. She has made a full recovery and has had no problems for the past two years and three months, nor will she in the future", whereas over 6 months after the accident Mr Sahir Shaikh's report indicates she was telling him of the possibility of a rib fracture on her left side and that she still had discomfort to the left side of her chest which that doctor opined should recover within 6 to 9 months.
20. So far as the second claimant is concerned Mr Older describes discomfort to her neck which resolved within two weeks, to be compared with Dr Platt being told of significant pain over two weeks with the pain diminishing over time but still being experienced in June two months after the accident.
21. So far as the third claimant is concerned Mr Older was told of the accident having caused pain and stiffness to her neck and that any discomfort or stiffness in the neck had resolved after two months; to be compared with a complaint to Dr Sullivan that symptoms relating to her back had been worsened and only reverted to pre-accident level six months after the accident.

The judge's ruling on costs

22. I now come to consideration of the judge's ruling on costs. The judge was referred rightly to CPR 44 .3 which provides so far as material as follows:-

"(1) The court has discretion as to –

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(2) If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order.

. . .

(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(c) any payment into court of admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequently under Part 36 apply."

23. Mr Brennan who then represented the claimants submitted that the claimants were the successful party and sought an order for their costs. So far as all claimants were concerned they were he submitted successful on the issue which had turned the case into a three to four day case, i.e. whether the claims were fraudulent. They were also the successful party because the defendant was going to have to pay damages and there was no part 36 payments into court and no offer which prejudiced their position. The offers although technically inadmissible being "without prejudice" but not "without prejudice as to costs" were indeed relied on by Mr Brennan then representing the claimants because in relation to the first and second claimants, the judge's awards had in fact beaten those offers. Mr Brennan furthermore had arguments as to why the third claimant should not be prejudiced by the offer made to her although she had not beaten that offer. The points he made repeated by Mr Williams before us were in fact applicable to all three offers and in so far as the argument was being run by the defendant's insurers that what the judge awarded was only just in excess of those offers, it is relevant that the points applied to all. The points made by Mr Brennan and Mr Williams before us on the basis that the claimants had suffered some injury (as the judge found) were as follows. The offers were being made within days of the accident before the claimants could conceivably have obtained advice from a medical expert. The offers did not state how long they were open for acceptance. In his written submissions before the judge Mr Higgins was suggesting 21 days by an analogy with the position under Part 36 a period which ran out long before the claimants had obtained or reasonably could have obtained medical advice. The offers did not make it clear that a failure to accept might have a costs impact. The offers were clearly withdrawn once the defendant's insurers were mounting their full attack on the honesty of the claims. Once the honesty of the claims was being challenged the defendant's insurers did not make a part 36 payment into court or make any offer at all.
24. On behalf of the defendants it was argued in reliance on CPR 44.3(4) the court could take account of the offers made and take account of the fact that the claimants had been found to have exaggerated their claim. Mr Higgins argued that all the claimants had ultimately recovered was what they could have recovered on the small claims track. The inflation of their claims had caused the case to be tried on the multitrack and they should only recover the fixed sum applicable to a small claims trial up to the date when they should have accepted the offers and pay the defendant's insurer's costs thereafter. In any event the very fact that claimants had exaggerated their claims was something the judge could take into account in considering what order to make.
25. So, on the one side it was being said they should recover 100% of their costs and the other it was being said after the date when the offers expired they should recover 100% of their costs. The difference between the parties was extreme. The judge ruled in the following terms. First he said that the claims were bound to be fast track cases. That was of course true on the basis that they were pleaded but if they had been pleaded on the basis that the first claimant would limit her case to £1,000 (as awarded by the judge) and the others to figures awarded by the judge, the claims might have been small claims. He does not consider that possibility. He furthermore did not deal with the question of who was responsible or the more responsible for the cases becoming multitrack. That was an important aspect to consider because if as the claimants would say it was simply the challenge to the dishonesty of the claims that caused the cases to be placed on the multitrack that would be one thing, but if it was the inflation (as the defendant would say) of the original claims that might be another.
26. He then found answering the question as to who won difficult. He considered the result of the defendant's insurers allegation of dishonesty concluding that he had not found that the claimants evidence was so exaggerated as to be rejected and then he said this:-

"5. However, it goes a bit further than that, because what I have done is I have confined the claim to very narrow limits indeed: £1,000 for Mrs Hall; £400 for her daughter, and £600 for Caroline Lynas. Those sums are less than were being argued for. I think in Jill Hall's case the total of damages requested was something like £3,500, and certainly in Bryony's case and Miss Lynas's case £1,000 was looked for.

6. Should the order for costs reflect that? In other words, that what was achieved here was much less than was contended for and, of course, that again is one of the rationales that is made in the point in the Oxford case where the calculations were done that the claimant actually recovered something like 10% of what she was asking for which, to the Judges in that case, answered the question: "Who won?" pretty effectively. I have thought about this very carefully and it seems to me that I need to reflect what has happened here and I can do that by making a somewhat mixed order, because offers were made and not accepted.

7. In Jill Hall's case the offer was exceeded by a very small amount of money; in Bryony's case only a little more, and in Caroline Lynas's case the offer was not exceeded at all. Those are offers that were made early on in the proceedings and it is right to say that there would have been some difficulties about accepting them and there were no payments into court. But there was a point there where the defence were very close to the orders that I actually made, and it seems to me that that should again be reflected in the costs order.

8. I asked about whether I had the capacity to make an order that was for, effectively, a percentage of the costs that had been asked for and I do have that power. It is quite clear under 44.3 that the Rules equip me with a capacity to make more or less whatever order I think is appropriate in all the circumstances, having balanced up the various issues that I have to deal with.

9. In this case, to reflect the totality of the case and to reflect the offers that were made; the conduct during the course of the case and so on, I am going to make a global order for costs and the order that I make is that the defendant will pay the claimants' costs and the figure will be 60% of the claimants' costs. I do that on a very rough reckoner that I hope reflects what actually happened in this case."

Submissions on the appeal

27. For the appellant Mr Williams submits on the appeal that actually the case is quite a simple one. What caused this case to become multitrack was the defendants' case that the claim was fraudulent. Indeed that was the real issue between the parties over the four day trial. The winners on that issue and thus the successful party were the claimants. In any event if one approached the case simply on who has to pay at the end of the day, the claimants succeeded in recovering a money judgment and there were no offers on which the defendant's insurers were entitled to rely which prevented the claimants being winners. He further submits that defendant's insurers make allegations of dishonesty at their own risk. There was nothing to stop the defs making part 36 payments in or indeed if they wished to persist in their suggestion that costs should not be paid other than on some limited basis they could have made a Calderbank offer reflecting that position. The defendants did none of those things.
28. He accepts that having identified the successful party one must then have regard to the factors in 44.3(4) and that if there were offers that might make a difference as to who the successful party was and he accepts that if there was exaggeration the court could pay some regard to that.
29. So far as the original offers were concerned, he submitted strictly they were inadmissible since they were offers to settle and therefore "without prejudice" and not marked as they should have been "without prejudice save as to costs". He accepted however that, since the original offers were placed before the judge by Mr Brennan, the judge and the Court of Appeal are entitled to take them into account. But he says they were made at a time when it was almost impossible for the claimants to have made a proper assessment of their case and were withdrawn once the fraud issue was raised so that they have little if any impact. In any event the offers were beaten in two of the cases and thus irrelevant to those cases.
30. He submits that it is in fact quite clear who won. He submits therefore the court must start from the position that generally winners will get their costs. He submits the offers do not alter matters and the only point which might be taken relates to exaggeration. But that must be seen in the context of the defendant seeking to prove fraud and the claimants defeating that claim together with the fact that the defendant could have protected the position with a part 36 payment in or a properly worded offer. There is no reason why he submits that if the claimants wanted to protect their position so far as fixed costs were concerned in the event of recovery under the £1000 limit they could not have done that by a properly worded letter "without prejudice save as to costs". The judge thus misdirected himself and or was outside the generous ambit where reasonable disagreement was possible and the claimants should have 100% of their costs.
31. For the defendant Mr Higgins submits the claimants certainly exaggerated their injuries when commencing the proceedings which had an impact on the track the case would be allocated to. He submits it would have been unthinkable that the insurers would have mounted the attack they did if the claims had all been within the small claims jurisdiction as the judge's awards show they should have been. He relies on the offers originally made and submits that the aggregated sum which has been recovered over and above those offers simply shows that the proceedings should not have been pursued in the way the claimants pursued them. The sums recovered dictated that the claims should have been in the small claims track and in fact that should have led to the judge only ordering the fixed costs applicable to that track.
32. Reliance was placed independently on the conduct of claimants in exaggerating their claims and reference was made to various authorities such as Oxford University v Painting where this court held that the judge had not taken sufficiently into account the gross exaggeration of the claimant's claim. In that case – she had claimed over £400,000 and recovered some £30,000 that sum it should be said beating a part 36 payment into court. The court of appeal awarded the defendants their costs despite the part 36 payment in.

Was there a misdirection?

33. Did the judge misdirect himself? In my view it is arguable that he did. As regards who the winner was, it seems to me that whichever way one looks at it and even with some sympathy for the defendant's insurers it is difficult to say the first two claimants at the very least were not the winners. Those claimants won on the main issue fought out over four days as to whether the claims were dishonest and they beat any offer that had ever been made. It is true they could have been said to have lost the issue as to whether there was any exaggeration but the fact that money was going to be paid and there was no offer that beat the awards seems to me to answer the question as to successful party. So far as the third claimant is concerned the only thing that could be said to place her in a different position is the fact that she did not beat the offer made to her at the outset. But that offer was withdrawn before she had any opportunity to obtain medical advice. Furthermore once the defendant's insurer raised the question of honesty the defendant insurers could have made a further offer "without prejudice save as to costs" but they did not. The original offer therefore can count for very little. The third claimant was thus also entitled to be viewed as the successful party.
34. Having identified the successful party however there is a special feature of this case. It is a feature that the judge could be said not to have fully grappled with in his judgment on costs but that judgment was extempore and I suspect that it is the feature which led him ultimately to make the order he did. What the judge awarded were sums within the small claim limits and the pleaded claims were certainly not the claims that the claimants sought to establish at trial. The claims made did cause the defendant's insurers to allege dishonest exaggeration and that lead to the claims being allocated to the multitrack. Is the responsibility for that allocation all down to the defendant? If the claims had been less inflated they might well have been disposed of on the small claims track and if they had been less inflated, it is possible but one simply does not know that the defendant's insurers would not have mounted the attack that they did. In my view it would be unfair to lay 100% of the responsibility for the case being tried on the multitrack at the defendant's insurer's door.
35. If one accepts for the present that the judge may have misdirected himself and this court were exercising its discretion afresh, it is still legitimate to gain some guidance from what a judge who has tried the whole case has felt is the right result on costs.
36. In my view he did reach the right result or a result with which we should not interfere. The way I would reason the matter would be on the following lines. First technically the claimants are the winners but it is relevant in considering what costs should be recovered in a multitrack case that they only recovered sums at the small claims level. Second the claimants bear some responsibility for the fact that the claims were ultimately tried in the way they were. The pleaded claims may not be dishonest and, indeed the judge having acquitted the claimants of dishonesty, it would be quite wrong for this court to convict of dishonesty, but the claims as originally made were on any view exaggerated and opportunistic, something that the courts should on any view discourage as reflected in CPR 44.3(2) (a) and (5) particularly (5) (d). Third, both parties could have made realistic part 36 offers "without prejudice as to costs" but the greater responsibility for failing so to do falls on the defendant's insurers. It was not sufficient for them to warn in the defence that if sums within the small claims range were all that was recovered they would be likely to seek fixed costs. They should have made the offer of whatever sum they were prepared to pay "without prejudice save as to costs" offering a sum to cover costs or at least reserving their position on the costs aspect. In a case where doubt exists as to whether the claim would have been small claims or fast track a sensible offer in relation to costs must carry weight under CPR44.3(2)(d). Fourth the original offers withdrawn as they were before the case escalated carry very little weight.
37. That seems to me to lead to a conclusion that the defendant's insurers should have to pay a substantial portion of the claimants' costs incurred in fighting a multitrack case but also to a considerable reduction being required. That is the result which the judge intuitively reached and I would not disturb his assessment.

Lady Justice Smith :

Introduction

38. This case concerns the approach which the court should make to an award of costs in a case in which the successful claimant is said to have exaggerated her claim and, for that reason and others, the length and complexity of the trial has become disproportionate to the value of the claim and the importance of the issues raised.

The Course of Events leading to Trial of the Action

39. The three claimants, Mrs Jill Hall, her 12 year old daughter Bryony and Miss Caroline Lynas, who was aged 17, were all travelling in Mrs Hall's car on 2 April 2003 when it was struck from behind by a car driven by Mrs Kim Stone, the defendant. The claimants' car was stationary at the time and the defendant's vehicle was moving at only about 4 to 5 miles per hour. The impact was a minor shunt. Within a few days, Mrs Hall and Miss Lynas had consulted separate solicitors who claimed damages on their behalf from the defendant's insurers. The insurers admitted liability and, on 10 April, offered to settle Mrs Hall's claim for £750 and Bryony's for £350. In addition, the insurers offered to pay reasonable disbursements and £350 plus VAT towards costs. Miss Lynas was offered £700 and a similar contribution to costs and disbursements. Neither letter stated for how long the offer was to remain open and neither was headed 'without prejudice save as to costs' or gave any other warning to the claimants that the letters would be relied on in any future argument as to costs. At the time these offers were made, each of the claimants was still suffering from symptoms caused by the accident and none had yet consulted a doctor for medico-legal purposes.
40. The offers were not accepted and, in due course, each claimant consulted a doctor for the preparation of a medico-legal report. In a report dated 31 October 2003, Mr Sahir Shaikh, (a doctor at the Guildford Sports and Physiotherapy Clinic who was not of consultant status), opined that Mrs Hall had suffered a soft tissue injury to the chest and 'probably' a rib fracture. She had had pain and discomfort in her chest and some back pain. At the time of examination in July 2003, she was complaining of an intermittent ache in the chest following heavy physical exercise. He anticipated that the discomfort in the chest would resolve within the next 6 to 9 months. Whether he meant 6 to 9 months from the date of examination or from the date of his report is not clear. But on any view, he was saying that the effects of the accident would last about a year.
41. Bryony was examined by Dr J M Platt, whose qualifications included membership of the Royal College of Physicians but who I think was in general practice. He reported that, immediately after the accident, Bryony was shocked and shaken; she had pain in the neck and back. This was worse the following day and remained 'significant' for two weeks. After that time, the pain diminished and she was able to resume her dancing class. At the time of examination in June 2003, she was complaining of neck stiffness in the mornings. These residual symptoms were expected to resolve within a further month or two and there would be no long term effects.
42. On 23 October 2003, Miss Lynas was examined by Dr T J Sullivan who I think was a general practitioner. He stated that the accident had resulted in shock and distress. Miss Lynas was immediately aware of discomfort in the lower back. The next day she also had discomfort in the neck. The lower back discomfort had resolved within 6 months. The neck symptoms had occurred daily for about 3 weeks; thereafter the symptoms were intermittent. At the time of examination, the neck symptoms occurred only rarely, usually after prolonged immobility.
43. The medical reports were disclosed to the defendant's insurers whose reaction was to question Mr Shaikh about various aspects of his report, in particular whether he had been aware that the impact had occurred at low speed. He acknowledged that he had been unaware of that and admitted that he would not be able to comment on the forces released in such an impact. It was apparent from these exchanges that the defendant's insurer was going to allege that Mrs Hall's account of her injuries was fabricated.
44. In early 2004, all three claimants issued proceedings with particulars of claim exhibiting the medical reports just described. All three sought damages in excess of £1,000 but not exceeding £5,000. In July 2004, the defendant obtained medical reports on all three claimants from Mr Raymond Newman, a consultant orthopaedic surgeon, who opined that it was extremely unlikely that the claimants had suffered any injury at all in the collision but, if any injury had been suffered, it had been trifling, ephemeral and transient, lasting no more than a few hours. The defendant also obtained an engineer's report dealing with the forces which would have been released in an impact such as had occurred in this case.
45. The draft defences made it plain that the defendant regarded the claims as dishonest. At a case management conference in October 2004, the claims were consolidated into one action and the action was allocated to the multitrack. The defence, in its eventual re-amended form, admitted liability but pleaded that the claimants had suffered no damage; the claims for damages were fabricated or dishonestly exaggerated. In the alternative, if the claimants had suffered some damage it was de minimis and should not sound in damages. In the further alternative, the defendant warned the claimants that, if they recovered some damages but less than £1,000, she would contend that the claims should have been brought in the small claims track. The claimants' costs should be limited to those which would be awarded in that court and they should have to pay the defendant's costs occasioned by the matter being litigated in a costs-bearing track.
46. In August 2005, each claimant was examined by Mr John Older, a consultant orthopaedic surgeon. In respect of each claimant, the reports were more thorough; Mr Older had examined such contemporary clinical records as were available. In each case, the symptoms described as attributable to this accident were somewhat less serious than those described in the earlier reports. So, for example, in respect of Mrs Hall, Mr Older observed that she had gone to the Accident and Emergency Department complaining of pain in the left side of the chest and lower back. Examination was normal except for some tenderness on the left side of the chest. She was referred for x-ray because of the possibility of a rib fracture but no x-ray was in fact taken. She was given analgesics and advised to see her GP. She saw her own doctor the following day and was advised not to drive for 7 to 10 days. A visible bruise appeared on the side of her chest. She was unable to look after her children for a week and did not attend the gymnasium for two months. She told Mr Older that her symptoms had completely resolved within two and a half to three months of the accident. As Waller LJ explained in paragraphs 20 and 21 of his judgment, there were also some differences between Mr Older's reports on Bryony and Miss Lynas and the reports of Dr Platt and Dr Sullivan.
47. Mr Older's reports were disclosed to the defendant and were relied on at the trial. The earlier reports were abandoned. They were put before the judge at trial only because the defendant's counsel wished to cross-examine on them. During the hearing of the appeal before us, counsel for the respondent (the defendant below) submitted that it was plain that the claimants had instructed a new medical expert because they had been 'rumbled' and needed to back track. They were trying to 'get below the radar'. The judge made no such finding and I for my part would not be prepared to infer such a motive behind the decision to instruct Mr Older. It seems to me just as likely that the claimant's solicitor decided that the existing medical experts were going to be outclassed and outgunned by Mr Newman. Mr Older was of a status comparable to Mr Newman whereas the other doctors were not.
48. Before the action came on for trial, there were several more case management conferences, the details of which do not matter for present purposes. I mention them only because the way in which the case was being conducted resulted in the escalation of costs. It is pertinent to note that, in their schedules of loss, the claimants were seeking damages of £3000, £1250 and £2750 respectively.

The Hearing

49. The hearing lasted 4 days. Evidence was called as to the manner of happening of the accident. The judge found that the impact was at no more than 5 to 6 mph. There was no damage to either vehicle. As to the evidence about the forces or energy released in such an impact, the judge accepted Mr Older's opinion that it was possible that the kind of injuries such as these claimants complained of had been caused in the accident. It appears from the judgment that Mr Newman made some concession in oral evidence and accepted that the claimants might have had 'transitory and ephemeral symptoms'. It appears that, although in his reports Mr Newman had made it plain that the most he was prepared to accept as a result of this accident was symptoms lasting a few hours, in oral evidence he had accepted that the symptoms which he described as 'transitory and ephemeral' could have lasted rather longer. The judge accepted that the forces were sufficient to cause symptoms lasting a week or two.
50. In her oral evidence, Mrs Hall described her injuries in much the same way as she had described them to Mr Older except that she told the judge that she had recovered in about two weeks. She produced a photograph of the bruise to the left side of her chest. The defendant contended that it was fraudulent. The judge said Mrs Hall had given a truthful description of her symptoms but that she had a tendency to exaggerate. She had not attempted to deceive the court. The photograph was genuine.
51. Mrs Hall gave an account of Bryony's symptoms which was broadly in line with those reported by Mr Older. The judge accepted that evidence. Miss Lynas gave evidence broadly in accordance with what she had told Mr Older. The judge found her evidence confusing and vague. However he put this down to her difficulty in expressing herself and did not think that she was deliberately exaggerating her symptoms.
52. In short, the judge rejected the charge of fraud in respect of each of the claimants. He held that all the claimants had suffered the symptoms described in the oral evidence. Of Bryony and Miss Lynas, he said that the injuries were 'on the very outside edge of injury that will sustain a claim, the sort of claims which are dealt with in the small claims track usually'. He awarded £400 for Bryony and £600 for Miss Lynas. Of Mrs Hall, he said that her symptoms were similar but she had also had a bruise to the side of her chest. He assessed damages at £1000.

Costs

53. The submissions on costs fell to be considered under the rubric of CPR 44.3 which has been set out by Waller LJ at paragraph 22 of his judgment. I shall not set it out again.
54. Although the judgment was dated 23^rd September 2006, it was not handed down until 27 March 2007 on which occasion the claimants applied for costs. Mr Paul Higgins for the defendant opposed the application contending that the boot should be on the other foot; the claimants should have to pay the defendant's costs or that, in the alternative, there should be no order for costs. He said that the claims should have been started in the small claims track, limited to £1,000. If that had been done, the defendant would not have fought them and would not have bothered to allege fraud. Accordingly, if the claimants were to recover any costs, they should be limited to those appropriate to a small claim. Mr Higgins' second point related to the offers which had been made on 10 April 2003. Although these were without prejudice and not admissible, Mr Brennan counsel for the claimants waived privilege and permitted the court to see them. Mr Higgins' submission was that the defendant had been the winner because the claimants had collectively recovered only £2,000 which was very little more than the £1,800 they had collectedly been offered on 10 April 2003. Mr Higgins also submitted that the claimants had not taken part in any attempts to settle the claims. They had made Part 36 offers to settle shortly before trial but they had recovered considerably less than they had then offered to take. When the judge pointed out that the defendant could have protected herself on costs by making a Part 36 payment into court, Mr Higgins responded that that was inadequate protection as she could not do so without incurring liability to pay costs up to that time.
55. Mr Brennan argued that these claims could never have been allocated to the small claims track. Even stripped of exaggeration, Mrs Hall's injuries might well have attracted more than £1000 and therefore no district judge would have limited her claim by allocating it to the small claims track. Once her claim was in the fast track, the others had to follow. The judge indicated that he accepted that submission.
56. As to who had won the action, Mr Brennan submitted that the claimants had won. Mrs Hall and Bryony had recovered more than they had been offered on 10 April 2003 and, although Miss Lynas had not, that offer should not be taken into account; it had been made at too early a stage and, by the time she could have given it proper consideration, it had been withdrawn.
57. As to the argument on exaggeration, Mr Brennan submitted that there was a difference between a claim that had merely been pitched too high and one where the claimant was shown or must be presumed to have exaggerated deliberately. He drew a distinction between the present case and that of Painting v Oxford University [2005] EWCA Civ 161, where the claimant had advanced a claim for about £400,000 which was grossly exaggerated and had recovered about £25,000. The Court of Appeal held that the fact that the claimant had recovered more than the Part 36 offer of £10,000 did not make her the winner. She had lost on the real issue in the case which was whether she was exaggerating. Mr Brennan submitted that this case was very different. Here we had a case of the claimants' representatives pitching the claim a little high but the main issue was whether or not the claimants were dishonest. The judge indicated that he accepted that the margins of difference in the present case were very narrow and quite unlike those in Painting.
58. Finally, Mr Brennan submitted that the defendant could and should have protected herself by making a suitable Part 36 offer at an early stage. The claimants should not be criticised for not involving themselves in negotiation; it was perfectly clear from an early stage that there was no chance of settlement because the defendant's stance was that the claimants were lying.
59. The Judge began his ruling on costs by saying that he accepted the claimants' argument that this matter could not have been dealt with in the small claims track. He was of the view that the claim would have been 'so near the margins of a small claim' that no district judge would have allocated it to the small claims track and the other claims would have been 'dragged' with it into a costs-bearing track.
60. He then turned to the question of who was the successful party. He said that he found it difficult. The claimants had won on the issue which had 'started the war', namely whether they had suffered any injury at all. However, the claimants had recovered less than was being argued for. At trial, Mrs Hall was seeking £3,500 and Bryony and Miss Lynas were each seeking £1,000. The judge concluded that he ought to reflect the fact that the claimants recovered less than they were seeking by making 'a mixed order'.
61. The judge then considered the offers which had been made and rejected. Mrs Hall's and Bryony's had been exceeded by only a small amount and Miss Lynas's not at all. The judge noted the early stage at which they were made and acknowledged the difficulties the claimants would have had in accepting them. He noted that there were no 'payments into court'. However, he considered that the offers were very close to the orders he had made in the event and thought that that should be reflected in the costs order.
62. Finally, the judge noted that he had a wide discretion under CPR 44.3, to be exercised after balancing all the various issues. He decided that the defendant should pay 60% of the claimant's costs.

The Appeal

63. The claimants (now the appellants) appeal against this apportionment of costs, contending that the judge should have given them 100%. The defendant (now the respondent) seeks first to uphold the judge's decision but in the alternative contends that, if this Court decides to set aside the judge's decision, the order replacing it should be more favourable to her. Before us, the appellants were represented by Mr Benjamin Williams and Mr Higgins appeared, as below, for the respondent. The submissions of both counsel were conspicuously clear and economical.
64. Mr Williams acknowledged that in order to succeed he would have to show either that the judge had made an error of principle or that he had reached a decision outside the range of reasonable outcomes and was thus plainly wrong.
65. He submitted that the judge had erred in principle. First, the judge seemed not to accept that the appellants had won, which they had. They had won on the main issue of whether they were lying or whether they had in truth suffered some injury of consequence. Allegations of fraud had been made against them; this had caused the case to be 'catapulted' into the multitrack and had extended the hearing to 4 days, with expert witnesses called on each side. The defendant had won on only short points (the precise assessment of damage) which had not been causative of any additional costs.
66. Second, the judge was wrong to have placed any weight on the fact that the appellants had beaten the early offers by only a narrow margin and in one case had failed to beat it. It had been entirely reasonable for the appellants to reject them at that early stage. The offers were withdrawn and no further offer had ever been made, whether under Part 36 or by Calderbank letter.
67. Mr Higgins submitted that the respondent had been put in an impossible position by the claimants' conduct of the action. At the start, they had pitched their claims far too high, in reliance on their early medical reports. They must have lied to the first set of doctors. There were stark differences between what they said to the first set of doctors and what they later said to Mr Older. If the claims had been properly advanced, they would have been settled at an early stage without any allegation of fraud being advanced. If it had ever been necessary to take proceedings, they should have been begun in the small claims track.
68. Second, the respondent had been the winner to a real extent. The first appellant, Mrs Hall, had sought over 3 times what she was eventually awarded. Although the judge had acquitted her of dishonesty, he had found that she had exaggerated.
69. Mr Higgins also repeated the submission he had made below that it was not right to say that the respondent could have protected herself by making a Part 36 payment or offer. If she had done that, she would have still been liable for the appellants' costs up to 21 days after the offer was made. That was not adequate protection.
70. He submitted that the judge had been right to reduce the costs to which the appellants were entitled to recover. In fact, if the judge had given proper weight to the extent to which the respondent had won and the extent to which the appellants' conduct had escalated the costs, he would have made an order more favourable to the respondent.

Discussion

71. CPR 44.3(2) requires the court to consider who is the unsuccessful party. The judge found the question difficult and expressed doubt about it. I do not think he should have done. It seems to me clear that the appellants had won. First, they had recovered damages in the face of a defence which asserted that they were not entitled to a penny. Second, there was no Part 36 offer. Nor was there any informal offer which would have entitled the judge to hold that the respondent had won. The first two appellants had beaten their April 2003 offers, albeit by a narrow margin. Miss Lynas had not beaten her offer but it seems to me clear that this should not have been held against her. The judge had acknowledged that the offer had been made at so early a stage that it would have been very difficult for Miss Lynas to give it proper consideration. By the time she was in a position to consider it, it had been withdrawn. Third, this was not a case (such as Painting) in which a defendant could claim to have won on such an important issue that he could properly regard himself as the victor even though the claimant had beaten a part 36 offer. In Painting, the issue of exaggeration had been central to the case and the claimant had lost. Here the central issue of dishonest fabrication of symptoms had been resolved in the appellants' favour. The question whether they had exaggerated (as opposed to fabricated) their symptoms was secondary. In the event, the appellants were acquitted not only of dishonest fabrication but also of conscious exaggeration. In my view, despite the fact that the appellants did not recover as much as they contended for, they were, to all intents and purposes, the winners.
72. The judge clearly thought that the claimants had won to a substantial extent otherwise he would not have awarded them any costs but he thought that they had not succeeded altogether because they had not recovered as much as they had contended for. That question is best considered under the rubric of CPR 44.3(4) which requires the judge to consider whether a party has succeeded on part of his case even though not wholly successful. It seems to me that that provision is designed to allow the judge to take into account on costs the fact that the losing party actually won on one (or more than one) issue in the case. I do not think it means that the judge can cut down the costs of the successful party merely because he has not done quite as well as he had hoped.
73. What amounts to partial success will be a matter of fact and degree and will be case-sensitive. The focus should be on the partial success of the losing party on an issue with costs consequences. The mere fact that the defendant has succeeded in keeping the damages down below the sum claimed by the claimant will not necessarily make him the victor or even a partial victor. Of course, where, as in Painting, the main issue in the case was whether the claimant had grossly exaggerated the claim and that issue had important costs consequences, it will be open to the judge to hold that the defendant was the victor. But if the claimant's exaggeration was no more than to put his case rather high, it does not seem to me that a defendant who has not made an effective and admissible offer can be regarded as the victor. I would accept that exaggeration by a claimant may be taken into account as 'conduct' under CPR 44.3(4)(a). However, for a defendant to regard himself as a winner or even partial winner on an issue of exaggeration, the exaggeration must be an important feature of the claim with costs consequences.
74. In the present case, it cannot be said that the respondent won on any issue or any part of her case. She succeeded only in keeping the damages down but, as she was contending throughout that there should be no damages at all and as she made no effective offer of settlement, that cannot amount to partial success. To the extent that the judge thought that the respondent had had partial success, I think he was in error.
75. Part 44.3(4) also requires the judge to take into account the conduct of the parties. He had to consider whether there was any 'conduct' which was relevant to the issue of costs.
76. It appears that the judge took the appellant's conduct into account but it is difficult to see exactly what conduct he had in mind. In his costs ruling, he made no specific observations about the appellants' conduct; nor did he make any findings as to the effect on the proceedings of any exaggeration. The judge did not say that the claimants had lied to the first set of doctors. Mr Higgins submitted that they must have done. I agree that it looks as though they did but the judge did not say so. The appellants were cross-examined on the content of the early medical reports; if the judge had thought they had been dishonest at those consultations, one might have expected him to say so. He did not and he acquitted them generally of any dishonest exaggeration. I do not think that this court should infer that they had deliberately exaggerated their symptoms when speaking to those doctors.
77. However, even if there were either a finding or an irresistible inference that the claimants had lied or exaggerated their symptoms to the first set of doctors, whether consciously or unconsciously, I do not think that would warrant any abatement of their costs. Mr Higgins submitted that the appellants' conduct in exaggerating their injuries had effectively caused the escalation of this action from one which should have taken place in the small claims track into a 'state trial' on the multitrack. The judge had rejected that argument so that cannot have been the basis on which he abated the appellant's costs. In the course of argument, the judge said that Mrs Hall's claim would always have had to be in the fast track and that would have dragged the others into the fast track as well. It is clear from his remarks that he was referring to Mrs Hall's claim as he had found it to be. As I understand it, there is no dispute that, once the case was in the fast track and it was clear that the parties were going to call experts, the trial could not take place in one day and the action was bound to be allocated to the multitrack.
78. Mr Higgins submitted to us that it is now clear that the claims should have been brought in the small claims track and the judge was wrong to say that it would have been bound to go into fast track. However, I cannot accept that. With the benefit of hindsight, we can see that Mrs Hall's claim could just have squeezed into the small claims track. But, at the time, even if her claim had been advanced with all modesty, no one could have said that it should go into the small claims track; it could well have turned out to be worth, say £1,250, and it would have been unfair to her to cap the claim at £1000 in advance by making it a small claim. Thus I cannot accept that it was the appellants' conduct which resulted in the claim being allocated to the multitrack. If anything, that was caused by the decision of the respondent's insurers to allege dishonesty. If the only issue had been a correct assessment of quantum (given that the appellants had put their claims too high) the case might have been dealt with in one day in the fast track.
79. Nor does it appear to me that the initial exaggeration of the claims had any real effect on the costs of the action. The early medical reports were abandoned – so the claimants ought not in any event be entitled to recover the costs of obtaining them - but they were replaced by Mr Older's reports and would not have played any part in the hearing had the respondent's counsel not chosen to use them against the claimants on issues of credibility.
80. Mr Higgins submitted that, if the appellants' claims had not been exaggerated in the early stages, the respondent would never have bothered fighting them at all. I can see the force of Mr Higgins' argument but I am not prepared to draw the inference he seeks. I note that the judge made no finding about that. If the respondent's attitude had been that she was prepared to pay a modest sum for these injuries but not the inflated sums which were being sought, her remedy was to make appropriate offers, without prejudice save as to costs.
81. On the basis of the judge's rulings and his observations in the course of argument, it does not appear to me that there was any conduct that the judge could have taken into account against the appellants. He certainly had not identified any. Yet, at paragraph 9 of his ruling, he said he would make a global order 'to reflect the offers that were made, the conduct during the course of the case and so on'. He seems to have had in mind the fact that the appellants and/or their advisers advanced the claim on quantum rather high. However, at no stage does he suggest that this resulted in any escalation of costs. In my judgment, the judge fell into error by purporting take conduct into account against the appellants without identifying the conduct which he had in mind.
82. CPR 44.3(4) also required the judge to have regard to any admissible offer to which Part 36 did not apply. The judge appears to have taken account of the fact that Mrs Hall and Bryony refused offers in April 2003 and only beat them by a small margin. He also took account of the fact that Miss Lynas failed to beat her April 2003 offer. I am not for a moment saying that it is not open to a judge to take account of the fact that a party has failed to beat an offer by a small margin. In these days where both sides are expected to conduct themselves in a reasonable way and to seek agreement where possible, it may be right to penalise a party to some degree for failing to accept a reasonable offer or for failing to come back with a counter offer.
83. However, in my view, the judge erred in penalising the appellants for their failure to accept these offers. In respect of Miss Lynas, the judge held that it would have been difficult for her to accept the April 2003 offer; it had been made at too early a stage, before she had had the chance to take medico-legal advice. The same must be true of the other appellants. It cannot properly be held against these appellants that they refused those offers at that time. If those offers had been held open until after the appellants had had the chance to recover from their injuries and to seek medico-legal advice, and if the appellants had then rejected those offers, I would say that the judge would have been entitled to penalise them on costs. But that did not happen. The offers did not specify for how long they were to remain open. Mr Higgins submitted to the judge that, by implication, they remained open for 21 days. There was no suggestion that they were available for acceptance in late 2003 when the first medical reports were to hand. The offers were never renewed. True it is that the appellants did not come back to the respondent's insurers and ask if the offers could be renewed; nor did they make a counter-offer. But I do not think they can be criticised for that. When the appellants disclosed their medical reports, the portcullis came down and the drawbridge went up. The stance was 'not a penny'. Accordingly, I would hold that the judge erred in regarding the appellant's attitude to the April 2003 offers as something he could take into account in reduction of their entitlement to costs.
84. The result is that I am of the view that the judge erred in principle and that his decision must be set aside. He erred in his approach to who was the successful party. He took conduct into account without specifying what conduct he had in mind or explaining what effect it had had on the proceedings. He was wrong to take the early offers into account.
85. I would therefore exercise my discretion afresh and would order the respondent to pay all the costs with the exception of the costs attributable to the first set of medical reports, upon which the appellants did not in the end rely. I reach that conclusion for reasons which I have already explained in some detail. The appellants were to all intents and purposes the successful parties. There was no conduct on the appellants' side which was of such consequence as to warrant any reduction in their entitlement to costs. The respondent did not enjoy any partial success such as should entitle her to an abatement of the appellants' costs. Nor should the appellants suffer any abatement on account of their attitude to the offers of April 2003 or their failure to attempt settlement at a later date.
86. I do not consider that there is any unfairness in the result. The respondent's insurers elected to defend these claims on the basis that they were dishonest and that no injury had been caused. They chose to stand or fall on that contention and they fell. If they had had an alternative case, that damage had been suffered but not as serious as was contended, they could have made a Calderbank offer at any stage, even before proceedings began. They could also have paid in after proceedings had commenced although I accept Mr Higgins's submission that, in a case of this kind, payment in after the commencement of proceedings may leave the defendant with a substantial liability for costs. But the real protection for this respondent in this case was a Calderbank letter in say, late 2003, making an offer for damages and a proposal for costs.
87. For these reasons, I would allow the appeal.

Lord Justice Lloyd :

88. I, too, would allow this appeal, to the extent and for the reasons given in the judgment of Lady Justice Smith.