England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
HIS HONOUR JUDGE BAILEY
BU304081/4CL07425

		Royal Courts of Justice Strand, London, WC2A 2LL
		11th December 2009

Lord Justice Longmore:

1. This appeal on costs arises from a fraud practised on Axa and other insurers by a number of persons who insured genuine cars against Third Party Fire and Theft. An initial instalment premium was paid and a direct debit system set up but soon after the inception of the insurance, the fraudsters claimed that the car had been involved in an accident for which the owner was to blame. There was therefore an innocent (but usually fictitious) victim who had a claim which was bound to succeed against the driver, who was himself sometimes fictitious and sometimes genuine but unaware that proceedings were to be taken against him. Claims for repairs, hire charges and such like would be made by a claims management firm and those claims would be paid by the insurers to the claims management firm or as that firm directed. Considerable sums thus found their way into the pockets of the fraudsters. The fraud which was considerably more complex than I have described can be seen in all its glory in an extremely detailed and lucid judgment of His Honour Judge Edward Bailey, handed down in the Central London County Court.
2. When Axa realised what was happening they refused to pay further claims; the persons whose cars had been supposedly insured began to bring actions to recover sums for which the car owners were supposedly liable. Axa and other insurers were parties to those proceedings and rather than pay up they decided that those they believed to be the originators of and main participants in the fraud should themselves be joined as Part 20 defendants. The police were apparently uninterested in prosecuting although a prosecution did take place in relation to an allied fraud. In the civil proceedings Axa and the other insurers joined 6 persons including the main fraudster Mohammad Essa Sulaman and his sister Sughra Sulaman.
3. Insurers set themselves a high hurdle. They sought to recover all the sums they paid out in consequence of the false claims and accepted (for the purposes of, at any rate, their primary case) that for that purpose they had to prove that the Part 20 defendants participated in a joint design to defraud insurers or (in some cases) a design limited to specific policies under which payments had been made. After a long and expensive trial which lasted from January to March 2008 they succeeded triumphantly against most of the Part 20 defendants but failed to prove the common design they asserted as against Sughra Sulaman. All the Part 20 defendants were on legal aid. Sughra Sulaman's costs alone are in the region of £450,000. In November 2007 she had made a Part 36 offer in the sum of £7,600 plus costs to date. Not unnaturally after her "victory" she applied for her costs up to 6^th December 2007 on a standard basis and on an indemnity basis thereafter but the judge only awarded her ? of her costs (albeit on both the standard and indemnity basis for the respective periods) because he was satisfied that she had lied to him in two respects in her evidence at the trial. She now appeals to this court with the permission of Moore-Bick LJ.
4. The first lie centred round a Mazda car which was insured in Sughra Sulaman's name. When it had supposedly been in an accident, she telephoned Axa's predecessors in title. If that was for the purpose of notifying the claim that might be evidence of her participation in the common design, although that appears never to have been specifically alleged by the insurers. Alternatively if it was a genuine inquiry as to why her account was being debited when she had never insured the car, the evidence of a second telephone call in which she said she wanted to continue the policy might show she was part of a dishonest conspiracy with her brother as from that time. She claimed, however, in her second witness statement that it was prompted by a bank statement or a letter concerned with her account at Abbey National. When it turned out that that could not be correct because of a confusion over the number of the account, she changed her evidence and, in the course of her oral testimony, she said that it must have been a letter from her insurers that triggered the telephone call. That the judge did not believe. She further claimed that in the course of a second telephone call she asked for the insurance to be cancelled. The judge was sceptical about that also, partly because between the two calls she had spoken on the telephone to her brother and the judge did not believe that her brother would have been happy to allow the insurance to be cancelled and partly because Axa's own note of the call was that she had asked for the policy to be left running.
5. The second lie centred round a cheque made out to Sughra Sulaman for the sum of £5,733.89 which she cashed and then paid the proceeds to her brother. She said at trial that she thought it was money due to Essa from a friend of his but the judge described that as inconceivable and he concluded that she must have known that the cheque represented money which was itself the result of Essa's fraudulent activity.
6. In spite of these lies and in spite of his conclusion that Sughra Sulaman was giving knowing assistance to her fraudster brother, the judge decided that he could not conclude that Ms Sulaman was part of the common fraudulent design to which he found that Essa was a party or that she was otherwise a party to any deceit practised on insurers.
7. But when he came to make his judgment on costs he attached great importance to those lies. Relying on (among other things) a note in the White Book which referred to the costs decision of Mance LJ in the Grupo Torras litigation he awarded Ms Sulaman only one third of her costs.
8. Mr Kuldip Singh QC represented Ms Sulaman at the trial, at the costs application and in this appeal against the costs order. He accepted that he could not realistically challenge the judge's findings that Ms Sulaman had lied to the court about the two matters which I have mentioned but submitted

i) the lies which Ms Sulaman told were not greatly consequential to the case as a whole or even to the individual case against Ms Sulaman which, after all, she had won;

ii) it was, therefore, too harsh to deprive Ms Sulaman of two-thirds of her costs for those reasons;

iii) the judge had not satisfactorily enunciated any other reason for his order save that he relied on a White Book reference to and his own recollection of the Grupo Torras litigation both of which failed accurately to state the true position in that case;

iv) to the extent that the judge intended to say either that Ms Sulaman's lies increased the length of the trial or that she should be penalised for the lies she had told, he did not keep those concepts separate or give proper particulars as to the extent that the trial had increased or proper reasons for the penal consequences that he imposed;

v) the judge had ignored the Part 36 offer made by Ms Sulaman which the insurers failed to beat;

vi) the exercise of discretion was, therefore, flawed and we should exercise a fresh discretion which would lead to the consequence that Ms Sulaman should recover all her costs;

vii) the judge failed to make any order that some of the costs should be recoverable from a date earlier than the date of his order of 12^th December together with interest running from that date; indeed he failed to make any order for the costs to carry interest at all.

9. Mr Marven (who had not appeared for the insurers at the trial or on the costs application below) contested all these points and invited the court to read paras 352 and 361 of the judgment as containing general criticism of the way in which Ms Sulaman conducted herself in relation to the proceedings, which went wider than lies she had told on the two specific topics I have identified.

General approach

10. This court is always in a difficult and, indeed, invidious position when an appeal is made on costs after a lengthy trial. This judge was intimately involved with the entire case against six Part 20 defendants over a number of months. He must have taken time to read into the case before the trial which was itself spread over 3 months and he then took two months to consider his judgment before sending the initial draft to the parties. This court just dips its toe into the case for one day, although it was a long day preceded by such reading time as the exigencies of our lists permit. In spite of all the help counsel gave us we cannot begin to have the same feel for the case as the judge and before we interfere we must be satisfied that something has given very seriously wrong. That is a high hurdle for any appellant to surmount.
11. For my part I am most reluctant to accede to any submission that a decision on costs after a long trial is insufficiently reasoned. The initial judgment speaks for itself and does not have to be extensively referred to in the costs judgment. The part of the original judgment which deals with Ms Sulaman consists of 47 closely reasoned paragraphs (paras 315-362); the costs judgment has 14 paragraphs relating to Ms Sulaman (paras 35-48). It is easy enough to understand why the judge did what he did; elaborate judgments on costs are to be strongly discouraged.
12. I would also deprecate excessive reliance on authorities. We were provided with about 20 authorities but each of these turned on their own facts. Occasionally one can find a useful statement of principle but it is not permissible to conclude that because a defendant lied in one case and forfeited some of his costs, so it should happen in another. Some of the notes in the White Book do give useful guidance on questions of principle but I would respectfully regard the reference to the Grupo Torras case in 44.3.2 as unfortunate. The judgment is unreported and given before the current computerised system applicable to judgments of the Commercial Court came into place. It could not be placed before the judge on the costs application and there is force in Mr Singh's submissions that the judge was not entirely accurate in his own recollection of the case and that the notes in the White Book to some extent understate the true nature of the defendants' conduct. The main point, however, is that is not usually helpful to compare factual details in one case with factual details in another.

Ms Sulaman's lies

13. These are set out in detail in the original judgment and I have already attempted to summarise them. The truth of the matter is that Ms Sulaman told lies about both the first telephone call and the second telephone call. In relation to the first call the judge said (para 348):-

"Whatever triggered the phone call Sughra Sulaman has been caught out giving detailed evidence as if from recollection which cannot be correct. It ill lies in Sughra Sulaman's mouth to complain that the insurers have misled her about her own bank account or that they have failed to investigate the matter thoroughly so as to prevent her falling into error by closely following documents when preparing her statements."

In relation to the second call the judge said (paras 350-351):-

"On the face of the note of the second call Essa persuaded Sughra Sulaman to allow the policy to keep running, and so she rang back and told A Quote that the insurance should be maintained in operation. In the course of cross-examination insurers suggested to Sughra Sulaman that she was persuaded by Essa to become a party to the common design between these two telephone calls.

Sughra Sulaman's evidence however is rather different to what might be supposed on the face of the note. At para 23.12 of her second statement (see above) Sughra Sulaman says that she explained the effect of her telephone calls to Essa who 'then said that the insurance should have been cancelled and, if it had not, then I should cancel it.' Notwithstanding her concern about having money coming out of her account, and Essa saying that the policy should have been cancelled all along, Sughra Sulaman then proceeded to keep the policy alive. This because she was concerned that her card might be cancelled. There is some irony here given that the card used was her sister's not hers. In oral evidence however Sughra Sulaman contradicted her statement. She said that she did want to get across to the A Quote employee where she says that she asked the lady to cancel the insurance during the first call, she said that this was during the second call."

14. Then in para 352 the judge said:-

"There is no question that Sughra Sulaman has got herself into a terrible tangle here. The insurers' accusation that, in effect, she is prepared to give false evidence to fit in whatever factual material presents itself for comment is not misplaced …. Sughra Sulaman is, I regret to say, a witness who is prepared to be untruthful when she thinks that in doing so she will assist her brother Essa."

Although these comments of the judge are made in relation to the Mazda part of the case and cannot be treated an entirely general, they do relate to more than just a single inconsequential lie. The whole Mazda area of the case (confused as it was) was made much more confused by the fact that Ms Sulaman said things in relation to both telephone conversations which could not possibly be true.

15. In relation to the cheque the judge disbelieved her account that she thought it was money due to Essa from a friend. He then in his para 361 headed "conclusion" said:-

"Reaching my overall findings on Sughra Sulaman has not been straightforward. She has done herself no credit in the witness box. Her loyalty to Essa has become somewhat frayed at the edges, but she still remains ready to be untruthful on his behalf. I am quite satisfied that she was aware when she paid in the Axa cheque that this had not been honestly come by; she was giving knowing assistance to a fraudster."

Mr Singh said that this conclusion related only to the cheque but I do not read it that way because he talks of his "overall findings" and, again, I think Mr Marvin is justified in saying that the comment applies to both the Mazda and the cheque parts of the case and, although confined to those parts of the case, are of general import in that context.

16. In the light of these lies it seems to me that the judge was entitled to make an order depriving Ms Sulaman of some part of the costs she would otherwise recover. The only question can be how much.
17. The complaint that there was insufficient calculation by the judge of the time and expense taken up by these lies is misconceived. Any such calculation is bound to be speculative. It is not sufficient to say (as Mr Singh does) that the question in these matters only took 35 minutes or even any particular time. Lies maintained and repeated in a complex case are insidious. If Ms Sulaman had said from the beginning of the trial that she could not recall the circumstances in which she made the telephone calls to the insurers but (in accordance with insurers' note) that she finally did ask them to carry on with the policy and she accepted she was dishonestly assisting Essa to obtain money to which he was not entitled in relation to the cheque, the case against her might well have taken a completely different course. So indeed might the case against Essa. But it is incontrovertible that the litigation was made more difficult and the judge's task more intractable as a result of Ms Sulaman's lies.
18. When one adds to that that the judge was undoubtedly entitled to express his disapproval of Ms Sulaman's lies, quite apart from their precise effect of their trial process, it becomes even more difficult to attack his discretion. The fact that the judge is so entitled is recognised in the recent case of Widlake v BAA [2009] EWCA Civ 1256. Indeed it would be odd if the judge in charge of the trial process could not express his disapproval in this way. There is, in my judgment, no need for the judge to apportion different parts of his order between lies which prolong the trial process and lies of which he merely disapproves.

Part 36 offer

19. Mr Singh complains that the judge's order has, in effect, ignored the offer made by Ms Sulaman of £7,600 which was in fact the amount of the cheque together with interest made in November 2007. It is not, of course, true to say the judge has actually ignored it because the costs order he did make in Ms Sulaman's favour (? of her costs) is to be ? of her standard costs up to 6^th December 2007 and ? of her indemnity costs thereafter. The question is whether that is a sufficient recognition.
20. It is true that insurers did not reply to or negotiate around that offer. That will often count against a litigant as it did against the fraudulent claimant in Painting v University of Oxford [2008] EWCA Civ 161. But this is a very different case. Here insurers were bringing what was inevitably a loss – making action in order to establish the principle that fraudsters cannot assume they can get away with their frauds because it will be too expensive and time-consuming to prove the frauds to the satisfaction of a judge. It would be wrong to assume that the case could settle if Ms Sulaman's offer was accepted. Moreover it was she that was the liar not an honest person making an offer. She never said that she accepted liability because she knew that cheque was a dishonest cheque; the insurers' case could, moreover, never be helped by the acceptance of what was evidently a tactical (without admission of liability) offer. Although the judge did not formulate these reasons for only taking the offer into account in the way he did, one can well understand why he did not take it into account to any great extent.

Reliance on Grupo Torras

21. Mr Singh submitted that the judge ought to have stated his preliminary conclusion about costs, and then, if necessary, seen whether authority supported that conclusion. Instead he stated that Mance LJ had deprived a liar of ? of his costs and so he mechanistically decided to do the same.
22. Although the form of the judgment on costs lends some credence to these submissions, it is, I think, an unfair attack on the judge. I have already said that judges should be careful about relying on the facts of one case to come to the same conclusion in another case on different facts. That is not what the judge did. He was entitled to take his previous judgment as read without repeating the detail of his fact finding. He made clear in para 43 of the costs judgment the basis on which he was coming to his conclusion namely the knowing assistance, the untrue witness statements and the untrue oral evidence. His comparison with individuals in the Grupo Torras case may have been misplaced but was not so misplaced as to vitiate his discretion.
23. In these circumstances I do not consider that the judge's decision to award Ms Sulaman only one-third of her costs was outside the wide area of his discretion. One notes that in Widlake v BAA (of course, on different facts) the court deprived the lying claimant of the whole of her costs even though she had beaten the payment-in. I would dismiss the appeal on costs.
24. As to Mr Singh's seventh submission, I see no reason why interest on costs should be payable from any date earlier than the order. They carry interest automatically at the judgment rate which is beneficial to Ms Sulaman since at 8% it is higher than any current rate. I would not disturb the judge's order in this respect because, even though it does not say so in terms, interest at 8% will be payable in any event pursuant to section 17 of the Judgments Act 1838 (as amended) and CPR 40.8.

Post-Script

25. We asked Mr Singh in whose interest this appeal was being brought. Ms Sulaman had the benefit of legal aid and is now living in Canada and is at no personal risk of paying the costs of her own litigation out of her own pocket. Mr Singh responded that, although he was acting for Ms Sulaman, he was really protecting the interest of the Commission for Legal Services and of the taxpayer. It was explained that the Legal Services Commission had made contracts (in normal form) with solicitors and counsel for Ms Sulaman which provided for standard fees (and disbursements) in the event of recovery from the claimants but "reduced" fees to the extent that no recovery could be made from the claimants. It seems therefore that the persons who stand to benefit from the appeal if it succeeds are Mr Singh and his solicitors. They thus have a direct interest in the outcome of this appeal. That makes the task of this court all the more distasteful, since Mr Singh has argued this appeal with both ability and moderation. But it is axiomatic that all appeals have to be decided as if the Legal Services Commission were not involved and as if it was only Ms Sulaman's interests that are affected by the outcome of the appeal. That is, of course, what I have sought to do.

Lord Justice Aikens:

26. I agree.

Lord Justice Sedley:

27. I agree with the judgment of Longmore LJ in every respect save one. I consider that the decision to deprive the appellant of two thirds of her costs was unjustified either by the facts or by the judge's reasoning and was disproportionate.
28. Taking it shortly, since Longmore LJ has set out with care all the base material, one starts from the proposition that, other things being equal, the appellant was entitled to her costs. The reduction was on the face of it considerably greater than was warranted by the two untruths, told under pressure of events, including a confusing mistake made by Axa's lawyers, and of a misplaced sense of family loyalty (or possibly fear). The judge was entitled to hold these nevertheless against Ms Sulaman. But they had not appreciably prolonged the trial – certainly not to an extent commensurate with the reduction. The reduction was punitive in character, and while this is permissible, it still has to bear some proportion to the issues as a whole.
29. Secondly, the judge's explanation not only fails, in my respectful view, to justify the reduction but comes closer than is appropriate to translating or transposing the facts of one decided case into those of another. It would be an error to suppose (and counsel for Axa does not invite us to suppose) that an outcome which commended itself to one judge in one particular case has somehow set a benchmark for other cases. Far from allaying the concern that the reduction of two thirds was far too high, the judge's reasons seem to me to increase it.
30. For these reasons I would for my part allow the appeal to the extent of increasing the award of costs to the appellant from one third to two thirds.