England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MANCHESTER COUNTY COURT
(HIS HONOUR DEPUTY CIRCUIT JUDGE MORGAN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		9th February 2010

Lord Justice Ward:

1. This is another appeal against the costs order made at the conclusion of a trial for damages for personal injuries. On 27 April 2009 His Honour Deputy Circuit Judge Morgan, sitting in the Manchester County Court, ordered that there be judgment for the claimant against the first defendant in sum of £4,357 together with interest of £60 totalling £4,417 to be paid within 28 days, but he then ordered the second defendant to pay 40% of the claimant's costs and the claimant to pay 60% of the second defendant's cost to be assessed if not agreed. The claimant appeals with permission granted by Goldring LJ.
2. This was a claim for damages arising out of road traffic accident caused by the negligent driving of the first defendant's vehicle. The particulars of claim pleaded that liability for the accident was admitted by the first defendant in a contemporaneous letter written at the time of and at the scene of the accident, a copy of which admission was attached to the particulars of claim.
3. The first defendant did not defend and did not appear at the hearing. The second defendant is the first defendant's insurers. In their defence, the insurers clearly put the claimant to proof and more robustly asserted in the interlocutory stages of this case that the claim was a fraudulent one. For that reason the case was moved from the fast track to the multi-track. I should add that it was not until the closing submissions advanced on behalf of the insurers that the concession is made that this was a genuine accident.
4. The claimant claimed damages for his pain, suffering and loss of amenity arising from the minor whiplash injury he suffered, and he was awarded £2,000 under that head. As the judge noted, the special damages claim was more complex. He claimed credit hire charges for a period of 148 days while his own car was unrepaired. That claim, according to the schedule of his loss, was worth some £9,890, although the judge had calculated it to be some £7,245.
5. The judge found that the claimant was a man who could have afforded to pay for the car to be repaired right away or as soon as the other side had freed the car from inspection and cleared him to have the repairs done. The claimant clearly had a duty to mitigate and the judge found that he failed to discharge the burden which lay upon him to prove that it was reasonable for him to hire an alternative car for that length of time. The claimant called a witness from the car hire company who produced a sequence of hire agreements. The judge was satisfied that these forms were drawn in sequence from the same book at the same time, even though their dates purported to be different. He said:

"This, of course, makes me wonder about whether or not [the witness] ever intended to charge the claimant for the hire if he did not bother apparently to draw up any hire forms until he was required to do so for the purpose of these proceedings. I again wonder whether, in fact, the claimant will ever be charged these sums if he fails to recover them from the second defendant."

6. So the judge found it was reasonable for the claimant to hire a car, but on spot rates and for a reasonable period only, which the judge considered to be 21 days at £40 per day. So, by the judge's calculation, that was £840 for hire charges. He also awarded storage charges for 21 days at £15 per day: another £315. In the result, the claim for special damage was reduced to £1,055.
7. The claimant schedule of loss also claimed the cost of repairs in the sum of £2,900 but that claim was no longer pursued. What happened was that the claimant sold the car to a Mr Keogh for £3,500, and, assessing that the value of the car in good repair was £6,000, he claimed the difference of £2,500. The judge found Mr Keo to be a thoroughly unreliable witness. He had had the car repaired for £1092. The judge assessed that to be the difference in value of the car and so awarded that sum. He also awarded £110 for miscellaneous heads of special damage. The result is that the claim for special damages pleaded at £16,413.50 was reduced to £4,357.
8. Argument ensued as to the proper order for costs that should follow in those circumstances. The deputy judge held:

"It is true that the claimant succeeded on liability during the course of this hearing but it is also true that an enormous part of the bundle of documents and, therefore, a great deal of the evidence related to the issue of damages. On that issue it seems the defendants had been more or less successful. What I am going to do is to bind them in this way: I order that the second defendant should pay 40% of the claimant's costs and that the second defendant should recover 60% of its costs because of the question of those issues. That, of course, will have to be assessed by the Costs Officer if not agreed."

9. We have been referred to various authorities, particularly Painting v University of Oxford [2005] EWCA Civ 161; Hall & Othrs v Stone [2007] EWCA Civ 1354; Biffa Waste Services Ltd & Anor v Maschinenfabrik Ernst Hese GmbH & Ors [2008] EWHC 2657 (TCC); and Widlake v BAA Ltd [2009] EWCA Civ 1256. I bear all that is said in those cases very much in mind, having recently looked at them carefully and closely in Widlake. I particularly bear in mind that all cases are fact-sensitive and that the best approach to an appeal of this kind is to apply the rules contained in CPR 44, acknowledging that the trial judge has a wide discretion on costs and that this court should always be slow to interfere with it.
10. The starting point, however, as the rules set out, for determining how the court is to exercise its discretion is the general rule that the unsuccessful party will be ordered to pay costs of the successful party. Here we have a claim for damages for personal injuries which was being defended, right up to the conclusion of the trial before the judge, defended on the basis that it was fraudulent. The claimant succeeded in establishing liability and he succeeded in recovering damages. He was therefore, without question, the successful party in that litigation, as I think Mr Power properly concedes. So the starting point is that he should recover his costs unless the court is properly able to make a different order. CPR 44.3(4) is now in play in deciding what order, if any, to make about costs. The court must have regard to all the circumstances, including a) the conduct of both parties; b) whether a party has succeeded on part of this case, even if he has not been wholly successful; and c) any payment into court or admissible offer to settle.
11. So how does that apply? The claimant succeeded on all parts of this case even though he was not wholly successful. The defendant made no payment into court. The conduct of both parties is the factor which requires close analysis. CPR 44.35 gives examples of relevant conduct, such as b) whether it was reasonable for a party to raise, pursue or contest, a particular allegation or issue; c) the manner in which a party has pursed or defended his case or a particular allegation or issue; d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.
12. Let me first consider the second defendant's conduct. It raised and pursued to the conclusion of the hearing the very serious allegation that this was a trumped up fraudulent claim even in the face of the first defendant's admission in writing, which was annexed to the particulars of claim. As a result, the case was assigned to the multi-track. There is force in the submission made to the judge that, if the second defendant had wanted to limit the loss, it ought to have admitted liability at the start of the case and set the matter down for assessment of damages, which could have taken a day on the fast track. In the circumstances, alleging fraud was an unreasonable allegation to raise and pursue as far as it was.
13. So far as the claimant is concerned, it cannot be said that it was unreasonable for him to raise and pursue his claim. He recovered damage under every head of claim. His conduct, which is relevant, is that it may be said, and indeed has to be said, that he exaggerated his claim. In argument the judge put to counsel for the claimant that he had only recovered a very small amount owing against the amount he had claimed. That is an exaggeration and the judge was entitled to take it into account even though it did not expressly feature in the short ruling he gave and which I have already recited. It was clearly a matter which the judge had to bear in mind and, in my judgment, did bear in mind.
14. What troubles me about the judgment is that the judge took the view on the issue of damages that it was the second defendant which was more or less successful. That, in my view, is not a correct analysis. On the issue of damages the claimant was wholly successful. He recovered judgment under every head. Particular allegations which he raised and pursued, relating to the measure of damages, are a different matter. There the allegation was that his loss amounted to £X, whereas the judge found that it was only the lesser figure of £Y. The judge was critical of both witnesses called in support of the claim, but, whether surprisingly or not, the fact is that he did not make adverse findings against the claimant. He was pressed in the course of argument to deal with the fraudulent conduct of the claimant, but nowhere in the exchanges between counsel or in his ruling or in his judgment on the main issue, does he find any dishonesty on the part of the claimant himself, however dishonest he found the two witnesses to be.
15. So this is a case in which the relevant conduct is exaggeration, and no more. The way a defendant has to protect himself against the exaggerated claim is to make a Part 36 offer. Here none was made by the insures, not even in the face of a Part 36 offer made by the claimant in a sum which we had not seen but which obviously is above that which was ordered by the judge, otherwise it would have been shown to him.
16. I regret therefore to say that the judge was in error in approaching this on an issue basis in respect of which the defendant was the more or less successful. In the result, the appeal should be allowed, but we are in a position to exercise our own discretion. The cardinal features may already have emerged from what I have said, but I can summarise them as follows:

1) The claimant was the successful party, so he should be entitled to his costs unless there is good reason to deprive him of them.

2) The second defendant was in no sense a successful party, and the judge was quite wrong to order the claimant to pay any part of his costs. If there was to be an issue-based cost, then, unless there was a discreet issue to which costs could clearly be attributed, the usual way of dealing with that to make assessment easier for the costs judge is to order the successful party to receive a percentage of his costs not to order the claimant to pay a percentage of the defendant's costs.

3) The claimant succeeded on all the issues, namely of negligence and damages. It was reasonable for him to claim for both the general and special damages whereas his conduct can be condemned insofar as he exaggerated his claim for special damage. I would take into account the fact that that exaggeration of his claim extended the time of the trial and caused a waste of costs so it had a causative effect.

4) The insurers could have, and should have, protected themselves against a false or exaggerated claim by making the Part 36 offer but chose not to do so.

17. Endeavouring therefore to achieve the over riding objective of dealing with costs justly, I would order the second defendant to pay 75% of the claimant's costs. I would allow the appeal and alter the order below to that extent.

Lord Justice Wall:

18. I agree.

Lord Justice Wilson:

19. I also agree.

Order: Appeal allowed and order for costs made