England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CAMBRIDGE COUNTY COURT
(HIS HONOUR JUDGE O'BRIEN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		28 October 2011

LORD JUSTICE LONGMORE:

1. This is an appeal against an order for costs made by HHJ O'Brien after a trial dealing with a road accident of a kind that has, at any rate historically, sometimes been called a low velocity impact. It has been extremely well argued on both sides and the court is grateful for the assistance it has received.
2. On 10 January 2008 the defendant's coach made contact with a Mercedes car in front of it, being driven by the claimant shortly after they both moved forward from a traffic light, which had just turned green in Cambridge. The claim was for transient soft tissue injuries, minor damage to the claimant's car (which was nevertheless said to have cost over £3000 to repair with the necessity of the car being taken to Birmingham to achieve that repair) and the cost of hiring a replacement vehicle for the repair period in the sum of £6891.
3. The judge found that there was personal injury. He assessed that at an agreed figure, if he was to make that finding, of £1400; he assessed the damage to the car as being to the value of £250. He disbelieved the claimant, who gave a graphic account of the exhaust hanging down after the accident and said that that was plainly exaggerated. He gave no hire costs but did say that there should be three days' loss of use which he valued at £100. So the sum total of the claim which the judge accepted was £1750.
4. The most contentious parts of the case had been, firstly, whether the low velocity impact was capable of being a tort which caused injury or damage and also the claim that it had been necessary for the car to be taken to Birmingham. When it came to the argument on costs, the judge was shown a letter to the claimant's solicitors from the defendant's solicitors on 20 March 2008 which was received after the letter before action but before any proceedings had been issued, under cover of which the defendant's solicitors had sent a cheque for £3200 payable to the claimant by way of what they called interim payment. After stating that they had authority to accept service of any proceedings, the letter proceeded:

"Please find attached a cheque in the sum of £3200 made payable to your client, Mr Mustafa Ali. This payment is made without an admission of liability and is made in order that your client may mitigate his loss whilst their own investigations and negotiations are continuing. It should not be regarded as an admission or concession in any way. Should it transpire that Stagecoach are not liable for cause of the accident in part or at all or any agreed settlement or court ordered settlement is less than this interim payment, then we shall seek recovery of any over payments from your client. Please make sure that he is aware of this. In that regard we require confirmation that the payment is accepted on the above basis."

5. They then asked for an undertaking that any money over and above that which was eventually recoverable would be repaid by the claimant. Then the letter says this:

"This payment should enable your client to either repair his vehicle or purchase a replacement vehicle or otherwise mitigate his alleged loss. If your client fails to utilise these monies in a reasonable and prompt manner it will be drawn to the attention of the court in any future proceedings. If he is in a credit hire vehicle, that hire should cease seven days after the date of this letter."

6. In the light of that letter the judge decided that the claimant who had only recovered £1750 was effectively the losing party because he also ordered that there should be judgment for the defendant on what he called the counterclaim for £3200. As a result of coming to the conclusion not merely that he was entitled to take the letter of 20 October into account as an equivalent to an offer, but also the fact that, since the interim payment was to be repaid, overall the claimant was the losing party, he ordered that there should be no order for costs up to 9 April 2008, which was 21 days from the date on the letter of 20 March and that the claimant should pay two-thirds of the defendant's costs from 10 April to be assessed if not agreed. In his reasons the judge said that the claimant had won on the personal injury issue but had lost on both the repair and the hire charge issue, and had therefore lost two issues out of three.
7. The claimant had been given permission to appeal by Stanley Burnton LJ on the basis that the judge made an error of law in treating the letter of 20 March as an offer or the equivalent of an offer. Mr Benjamin Williams for the appellant says that the judge was wrong because the letter of 20 March was only an interim payment and the only actual offer ever received pursuant to part 36 was an offer by the defendant to pay £200 provided that the claimant pay the defendant's costs which of course the claimant easily bettered. He submitted that an interim payment is entirely different from an offer because an interim payment cannot be "accepted" and thus conclude the litigation. He did not assert that the judge was not entitled to have any regard to the letter at all because it was an open letter, but to treat it as equivalent to an offer, as the judge clearly did by selecting the 21-day period for costs to begin to run, was, he submitted, an error of approach. If he made that good, his second submission was that the matter was open for us as a matter of our discretion and that we ought to say that the claimant was the winning party since he bettered the only offer that was made and that, although the claimant could have accepted the payment and not issued proceedings and waited for proceedings to be issued by the defendant for the return of the interim payment, that was a fanciful way of looking at the overall position. Mr James Benson for the defendant submitted that the payment was equivalent to an offer because what the claimant should have done on receipt of the letter of 20 March was to cash the cheque, which he did, and then not issue proceedings; since the claimant got £3000 and in the end only recovered £1750 in the proceedings, the defendant was clearly the winner and the judge's exercise of discretion should in any event not be disturbed.
8. I, for my part, do think that the judge fell into understandable error by giving the letter of 20 March excessive weight. It does look as if he did treat it as if it were equivalent to an offer and in my judgment it is not. What the letter did was to provide something by way of interim payment which was always to be recoverable. If the claimant either failed or failed to recover as much as the amount of the interim payment, it carried no offer as to costs incurred so far and it was therefore not the equivalent of an offer under CPR 44.3(4)(c) which states:

"The court must have regard to any payment into court or 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 consequences under part 36 apply."

9. So it was clearly open to the judge to consider the letter but in my judgment he gave it too great a weight by considering that it was the equivalent of an offer which it was not. It does not seem to me to be right to say that the claimant should not recover costs because he should have pocketed the cheque and see what happened. The court cannot assume that a defendant who makes all the reservations, that the letter of 20 March did, will not recover the interim payment once he has an expert report, especially an expert report of the kind that was given by this joint expert which said that the accident could not have happened in the way the claimant described and might well have been a staged accident. An offer is intended to achieve finality if it is accepted. This was not an offer which was capable of being accepted and thus achieve finality.
10. Therefore I fear I do think the judge fell into error in giving the letter the weight that he did. It therefore falls to this court to exercise its own discretion in the matter. Mr Williams submits, as I have already recorded, that it was inevitable on receipt of the expert's report that the litigation would have to take place. He emerged the winner. But it does not seem to me to be as simple as that. I have already said that the judge was entitled to take the letter of 20 March into account and taking it into account the judge could not shut his eyes to the fact that at the end of the day the claimant was, in fact, the paying party. That to some extent has to be reflected in any order, so does the fact that the claim for repair to the car and for hire charges failed as abysmally as it did. Although we have been, naturally enough, referred to the case of Hall v Stone [2007] EWCA Civ 1354 (which makes the point that mere exaggeration does not mean that a claimant is to be deprived of his costs if no proper offer has been made by the defendant), it seems to me that the judge would have been perfectly entitled to take into account the measure by which the claim in fact failed.
11. Doing the best one can in these circumstances, I, for my part, accepting the judge's natural scepticism of the claimant's position after the findings that he had made, would think it right, having had due and proper regard to the letter of 20 March, that neither side should recover their costs. My proposal would be that the right order should be that there be no order as to the costs of the trial. To that extent I would allow the appeal.

LORD JUSTICE ETHERTON:

12. I agree.

Order: Appeal allowed.