England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Rolls Building Fetter Lane,London WC2A 2LL
		15th January 2014

1. LORD JUSTICE LEWISON: 1. On 28 December 2005 Mr Rehill was crossing a road in Bradford city centre when he was hit by a bus. He had been at a controlled pedestrian crossing with the red light against him and he stepped off the near side pavement into the path of the bus. But the bus did not brake as quickly as it might have.
2. 2. Mr Rehill's claim for damages for personal injury eventually came to trial in May 2011 on liability only. Mr Recorder Miller found that the bus driver had been negligent; but that Mr Rehill had been contributory negligent and reduced liability by 30 per cent.
3. 3. The bus company appealed to the Court of Appeal. On 16 May 2012 the Court of Appeal allowed the appeal in part and apportioned liability equally between the bus company and Mr Rehill. That left the question of quantum to be determined.
4. 4. Before the proceedings had actually begun the bus company had admitted liability without qualification. It had also made a number of offers to settle. On 23 April 2007 the bus company made an offer to settle for a net payment of £75,000. That offer was expressed to expire on 1 June 2007. Mr Rehill did not accept it. On 8 November 2007 the bus company made another offer to settle, this time for £100,000. That offer was expressed to be made pursuant to CPR part 36. Mr Rehill did not accept that offer either. It was withdrawn on 18 January 2008, by which time the bus company said that it would be raising questions of contributory negligence. Mr Rehill issued his claim on 17 June 2008 and the bus company's defence, denying liability as well as alleging contributory negligence, was filed on 1 August.
5. 5. The schedule of loss that accompanied Mr Rehill's claim and which he signed under a declaration of truth was largely unquantified. The only substantial quantified item was a claim for £71,500 plus VAT for the cost of building work. This work was work which Mr Rehill alleged was needed in order to adapt his home to accommodate his impaired mobility.
6. 6. On 10 June 2009 the bus company made another offer pursuant to part 36. That was an offer to settle for just under £40,000. The letter making that offer concludes thus:

"This offer is also open for 21 days and is intended to have the consequences of part 36 CPR. Whilst part 36 CPR stipulates the position following an offer, for the sake of clarity if accepted the defendant will pay the claimant's reasonable costs to be assessed if not agreed."

7. 7. The bus company made further offers to settle on 5 October 2010, 2 November 2010, 15 March 2011 and 5 November 2011, none of which Mr Rehill accepted. Eventually, shortly before the scheduled quantum trial, he accepted an offer of £17,500. But the parties were unable to agree the incidence of costs and so that question came back before Mr Recorder Miller on 22 April 2013. The Recorder held that Mr Rehill had failed to beat the Part 36 offer of 10 June 2009 and ordered him to pay the bus company's costs on the standard basis with effect from 2 July 2009. However, that left the costs incurred before that date.
8. 8. The bus company argued that although Mr Rehill's claim was genuine in principle, he had dishonestly inflated it; and that in any event he ought to have accepted one or other of the offers made on 23 April 2007 and 8 November 2007 respectively. In part his dishonesty went to the circumstances of the accident. He had said that he stepped into the road on the off side of the bus, whereas in fact he stepped into the road on the near side of the bus as was demonstrated by the CCTV. The significance of this was that it exaggerated the culpability of the bus driver. More seriously, he had dishonestly exaggerated the extent of his injuries. He had, for instance, arrived at court for the liability trial in a wheelchair and told the judge that he could not walk the length of the courtroom. But the judge accepted the evidence of one of his carers, who had seen him walking up the stairs at home. He had also disputed the medical evidence from all of the professionals, including his own experts, who had said in effect that he had made an excellent recovery from the accident.
9. 9. In his judgment on costs the Recorder said this about this aspect of the case:

"The claimant did try, unhappily, to embellish his claim. He contended in his first witness statement that he was in such a bad way that his house was not suitable because of the stairs. That he had been significantly immobilised for much longer than the evidence of his various carers, whose own evidence he sought to impugn at trial and in maintaining that he had been something of a handy man around the house, whereas evidence from his wife suggested quite the contrary. He also tried minimise his culpability by contending that he had left the pavement from the off side of the bus rather than the near side, although on that last point he suffered in costs in any event because of a notice to admit facts served in December 2009 addressing that point to which he did not respond properly. Indeed, much of the trial was taken up on that issue."

10. 10. However, the Recorder did not accept that Mr Rehill should have to pay the costs incurred before 2 July 2009. His reasons were: first at the time when the offer of April 2007 was made, there was uncertainty about Mr Rehill's prognosis. That uncertainty persisted through to the early part of 2008 when the offer of November 2007 was first made and then withdrawn. The uncertainty was not dispelled until July 2008. Second, although Mr Rehill's conduct had been reprehensible, it was not:

"So egregious as properly to warrant any further penal order of costs, either in terms of indemnity costs or in terms of making the claimant pay the costs pre July 2009."

11. 11. The Recorder therefore ordered the bus company to pay Mr Rehill's costs on the standard basis up to 1 July 2009. One of the agreed terms of settlement, which is recorded in paragraph E of the schedule to the order which he made, says:

"Neither party shall be prevented from raising issues of conduct in any detailed assessment proceedings."

12. 12. With the permission of Sir Stanley Burnton the bus company now appeals. Mr Jefferies QC on behalf of the bus company, appearing with Mr Peter Freeman, makes two broad submissions. First, the Recorder was wrong in principle in not giving the earlier offers the same weight as would be given to a Part 36 offer. He was wrong to have said that Mr Rehill acted reasonably in refusing the offer because Mr Rehill must have known at the time his real claim was not worth as much as the offers. Second, the Recorder was wrong in principle in minimising Mr Rehill's dishonesty in advancing his case and in effect letting him off without any penalty for his dishonest conduct. That is wrong in principle because there is a public interest in discouraging dishonest claims.
13. 13. Mr Ferm on behalf of Mr Rehill says that the Recorder's decision was correct. He says first that the correct starting point was the terms of the offer on 10 June 2009 by which the bus company agreed to pay Mr Rehill's costs incurred before that date. Second, there was no proper reason for departing from those terms. As from the date of the earlier offers, Mr Rehill's prognosis was uncertain and the effect of his exaggeration of his claim was a question for the Recorder to evaluate. Other judges might not have been so generous to Mr Rehill, but that was a question for the judge's discretion. Third, it was still open to the costs judge on the detailed assessment to exercise the power under CPR Part 44.14 either to disallow some of Mr Rehill's costs or to order him to pay part of the bus company's costs to the extent that costs had been incurred in advancing or combating a dishonest case.
14. 14. I begin with the effect of the withdrawn offers of April and November 2007. It is clear from CPR Part 36.14(6)(a) that the automatic consequences attaching to a subsisting Part 36 offer do not apply to an offer that has been withdrawn. Such an offer falls within CPR part 44.3, which requires the court to take into account any admissible offer to settle. The effect of a withdrawn offer was considered by this court in Trustees of Stokes Pension Fund v Western Power Distribution South West PLC [2005] EWCA Civ 854; [2005] 1 WLR 3595. In that case Dyson LJ, with whom LJ Auld agreed, said:

"If a claimant should have accepted an offer within 21 days then on the face of it the consequence should be that he is entitled to his costs up to the date when the offer should ordinarily have been accepted and the defendant is entitled to his costs thereafter. Usually the mere fact that an offer is withdrawn after the date when it should have been accepted should not lead to a different result."

15. He added in paragraph 43:

"There may be circumstances where the court holds that the claimant acted reasonably in not accepting the offer within the 21 day period and where the offer was withdrawn before the time when the claimant should have accepted it. In that situation the withdrawal of the offer may have a very real effect on the order that should be made in respect of costs but that is very different from the present case."

16. 15. So the question for the Recorder on this part of the case was whether Mr Rehill acted reasonably in not accepting one or other of those offers. In deciding whether the usual costs consequences of a live part 36 offer should be varied, CPR Part 36.14(4)(c) requires the court to have regard to the information available to the parties at the time when the Part 36 offer was made. That must also apply to a consideration of whether an offeree is reasonable in declining a Part 36 offer that has subsequently been withdrawn.
17. 16. The Recorder considered some of the medical evidence available to the parties at the time and he concluded at paragraph 7:

"Whilst again in retrospect it would obviously have been sensible and advantageous to have accepted either of those earlier offers, in my judgment it was only prudent and reasonable in 2007 to await medical progress. The claimant was a relatively young man of 47. There was an admission of full liability at that time. Issues of contributory negligence had not yet been raised, or at least in any detail and there was some significant surgery still to be undertaken. It is a matter of fact and degree and this level of uncertainty as to the final outcome went far beyond simply letting nature take its course, time being a healer, or even routine risk free surgery. There was a substantial element of uncertainty, not with standing the treating physician's expressed opinion that orthopaedically the claimant had made an excellent recovery after an about a year."

18. 17. However, the question was not simply what did the medical experts say or even, as Mr Ferm submitted, whether a competent legal adviser should have advised Mr Rehill to accept the offer. If for example Mr Rehill had been misleading his lawyers and physicians his reasonableness must, as it seems to me, be judged on what he himself knew rather than on what they knew. The agreed statement of the experts, albeit not available at the date of the offer, was that Mr Rehill had reached the end of his recovery period from the orthopaedic injuries two years after the accident; that is to say by December 2007. Both experts also agreed that there had been at least elements of exaggeration in what he had told the doctors. The clear evidence of Mr Taggart was that Mr Rehill had been discharged from the care of the orthopaedic surgeon in October or November 2007. He had already been seen by his carers running up the stairs at home before his move to his new accommodation.
19. 18. Although Mr Ferm submitted that there was at that time a risk that Mr Rehill might suffer residual loss of mobility, Mr Rehill must have known in December 2007 that there was no genuine claim for the cost of adapting his accommodation; the claim made in the original schedule of loss served in the summer of 2008. The reality was that there was no significant uncertainty about Mr Rehill's orthopaedic condition and it was the financial consequences of the orthopaedic injuries that bulked up the value of claim.
20. 19. Although the Recorder may have been justified in saying that there was uncertainty about the prognosis for Mr Rehill's abdominal injuries, those injuries could never have accounted for the bulk of the financial value of the claim. The revised schedule of loss quantified the claim at just over £103,000. The claim for building cost had been abandoned by that stage. Even that revised claim included a number of highly questionable items. But even so, the whole claim only exceeded the amount of the November offer by £3,000.
21. 20. In my judgment the Recorder overlooked the agreed medical evidence of the experts in coming to his conclusion and overlooked his own findings in the liability trial about Mr Rehill's mobility. He also failed to evaluate the consequences of the uncertainty in financial terms, or to see how the uncertainty fed into the heads of claim. I would hold that this vitiates the Recorder's evaluation of the evidence and hence the exercise of his discretion in that respect.
22. 21. In my judgment it was unreasonable for the reasons that I have given for Mr Rehill not to have accepted the offer of November 2007, which was not withdrawn until January 2008. I do not think it is possible to say the same about the April offer; at that time there was still some orthopaedic uncertainty. Mr Rehill was still under the care of the orthopaedic surgeon and had not yet undergone the MRI scan. However, in my judgment Mr Rehill ought to pay the bus company's costs with effect from 21 days after the date of the November offer.
23. 22. What then, of Mr Rehill's dishonesty? Mr Jefferies' powerful submission is that the Recorder was wrong in not marking the court's disapproval of the dishonest prosecution of an inflated claim. He points to the judgment of Lord Clarke JSC giving the judgment of the Supreme Court in Fairclough Homes Limited v Summers [2012] UKSC 26; [2012] 1 WLR 2004 at paragraph 53:

"As to costs, in the ordinary way one would expect the judge to penalise the dishonest and fraudulent claimant in costs. It is entirely appropriate in a case of this detained order the claimants to pay the costs of any part of the process which had been cause bid his fraud or dishonesty and moreover to do so by making orders for costs on an indemnity basis. Such costs orders may often be in substantial sums, perhaps leaving the claimant out of pocket. It seems to the court that the prospect of such orders is likely to be a real deterrent."

24. 23. If the overall effect of the Recorder's order was had Mr Rehill would be entitled to recover the costs of advancing a dishonest case then I would agree that he would have erred in principle. But I do not consider that that is the effect of his order. In Ultraframe UK Limited v Fielding [2006] EWCA Civ 1660; [2007] 2 All ER 983 this court held that costs incurred in promoting a dishonest case cannot be said to have been "reasonably incurred" and that such a point could be raise odd a detailed assessment, at least if the judge said that it could be. Waller LJ said at paragraph 34:

"It seems me that consideration of a party's conduct should normally take place both at the stage when a judge is considering what order for costs he should make and then during assessment. But court will want to ensure that dishonesty is penalised but that the party is not placed in double jeopardy. Ultimately the question is one of the proper construction of the order made by the judge."

25. 24. He added at [37] that if as a matter of interpretation of the judge's order the dishonest party is prevented from recovering his costs and fighting a dishonest case then there is no error of principle. Mr Ferm confirmed that the power to disallow costs or the power to order Mr Rehill to pay part of the bus company's costs pursuant to CPR Part 44.14 would be open to the costs judge and that the Recorder had not pre judged that issue.
26. 25. CPR Part 44.14 applies where the conduct of a party or his legal representative before or during the proceedings was unreasonable or improper. Sub rule (2) goes on to provide:

"Where paragraph 1 applies the court may (a) disallow all or part of the costs which are being assessed or (b) order the party at fault or his legal representative to pay costs which he has caused any other party to incur."

27. 26. Properly applied, the exercise of that power would itself result in the disallowing of any part of Mr Rehill's costs incurred in advancing a dishonest case and might also result in his having to pay the bus company's costs of combating that dishonest case. Once one appreciates that the agreed terms recorded in paragraph E of the schedule to the order allow the bus company to contend on the detailed assessment that Mr Rehill should not be entitled to recover his costs of advancing a dishonest case the judge's observation about a further penal order for costs becomes intelligible. It must also follow that the judge's observations about Mr Rehill's conduct cannot be taken as having been intended to bind the costs judge, not least because that would be to go behind the terms of the agreed paragraph E.
28. 27. Although in his written argument Mr Ferm stressed the terms of the offer of 10 July 2009, I do not consider that conformably with Ultraframe UK Limited v Fielding an offer to pay Mr Rehill's "reasonable costs" can be interpreted as an offer to pay the costs incurred in advancing a dishonest case.
29. 28. It is also pertinent to observe that since I would order Mr Rehill to pay the bus company's costs from 21 days after the November offer there will be very little in terms of legal costs that are left because proceedings were not begun until June 2008. So the reality is that the bus company will in practice recover its legal costs. I would not have allowed the appeal on the second ground alone, although many, myself included, might think that the judge was too generous to Mr Rehill. That is the nature of a discretion; different people exercise it in different ways.
30. 29. For these reasons I would allow the appeal by substituting an order that Mr Rehill should pay the bus company's costs with effect from 30 November 2007, being 21 days after the date of the November 2007 offer.

30. I add the following postscript. The appeal was heard, and judgment delivered, in the course of a single day. That accorded with the time estimate. In those circumstances, under PD 44 para 13 the general rule is that the court will assess costs summarily; and in order to enable the court to do that the parties must file schedules of costs not less than 24 hours before the hearing. Neither party complied with the practice direction. The consequence was that the court was unable to assess the costs of the appeal which we ordered Mr Rehill to pay to the bus company. As is well known the court had become more insistent in recent months about compliance with orders and practice directions since that is now part of the overriding objective. In order to mark our disapproval of the bus company's failure to comply with the practice direction we ordered it to pay the costs of any detailed assessment in any event.

31. LORD JUSTICE FLOYD: I agree.