UK: Costs: Engrained Exaggeration Results In Costs Reduction

In a recent case, the High Court used its discretion to reduce the costs of an honest but misleading claimant. Finding exaggeration to be 'engrained' in the claim for loss of earnings, Mrs Justice Farley reduced the costs of the successful Claimant by 15% after the damages for loss of income had been reduced by 75%. The Court found 'it was not disproportionate of the Defendant to seek a reduction'.

Background

In 2016 the Claimant, an independent financial adviser, was injured by a fallen rugby post while watching a game played on the Defendant's rugby pitch. He alleged the injury rendered him unfit for his work and reduced his working capacity to only minimum wage jobs.

The Claimant made a claim for general damages and loss of earnings until the age of retirement, which together amounted to more than £1 million.

Before trial, each party had made a Part 36 offer which was rejected. The Claimant's offer of £800,000 was made close to the trial date and was over seven times the amount of Defendant's offer of £110,000.

The Defendant admitted liability but contested the severity of the injury and the subsequent damages. With no suggestion of dishonesty, the Defendant pointed out the Claimant had made particular use of experts to omit pre-accident psychological conditions which was misleading. In order to rebut the Claimant's unreliable witness evidence, the Defendant carried out further investigation which substantially increased the time and costs in the case.

At trial, the claim was successful but the damages were significantly reduced.

The court concluded that the Claimant could have continued work as an IFA but not until the age of retirement as he had suggested. The awarded damages for loss of earnings made up a quarter of those claimed and less than a third of the Claimant's Part 36 offer. However, because the total damages were higher than the Defendant's pre-trial offer, the Defendant was denied the costs protection from Part 36.

The Defendant requested a 30% reduction of the Claimant's costs owing to the claim's exaggeration and subsequent time-wasting.

Decision

Mrs Justice Farley departed from the usual rules of costs following the event and found 'the balance lies in favour of reducing the award of costs'. She reduced the successful Claimant's costs by 15%.

Her decision was split into two parts:

Referring to Widlake v BAA Ltd, the Judge recognised that usually the 'primary protection for defendants against paying the costs of exaggerated claims is CPR Part 36'. However this case fell outside of the scope of this protection.

Pointing out that although the success of a claimant on some issues and loss on others 'is not normally a reason for reducing an award of costs', she found that the Claimant had incurred unnecessary expense.

In making this finding, she had given considerable weight to the exaggeration 'engrained' in the claim and some to the 'unrealistic' Part 36 offer by the Claimant.

Considering the exaggeration of the claim, the Judge paid attention to the features of:

• The Claimant's 'capacity to instruct and take advice from his lawyers' and choice 'to put an exaggerated claim to the court';
• The lack of realistic intent to settle as shown by the late timing and high value of the Part 36 offer;
• 'The gulf between damages awarded and claimed'; and
• The claim's foundations in the exaggeration: exaggeration was so thoroughly woven into the claim that it was 'built into the structure of the Claimant's presentation of his claim'.

A reduction of 15% was considered 'meaningful' (Welsh v Walsall Healthcare NHS Trust [2018]) and appropriate when taking into account the facts of the case:

• The high overall costs of the lengthy trial;
• The Defendant's own contribution to prolonging the trial; and
• The intent to discourage future litigants to seek similar cost reductions.

What can we learn

• Defendants may be able to rely on CPR 44.2 to reduce a successful claimant's costs where, fundamental dishonesty has not been found, but exaggeration is a prominent structural feature of a claim and results in significant increase to the costs of proceedings.
• Defendants should consider whether a claim is rooted in exaggeration before considering making a request for a reduction in costs. However, defendants do not have a green light to dispute costs to the minute detail where a claimant has exaggerated his claim. The protection this case delivers is not intended as a universal relief from a successful claimant's costs.
• The 15% reduction was fact specific, with the court conducting a balancing exercise taking into accounts the circumstances of the case including parties' offers and general conduct. More generally, exaggeration without a finding of dishonesty is unlikely to produce a significant costs reduction finding under CPR 44.2.
• The courts are reluctant to stray from CPR 36's protection of defendants. Mrs Justice Farley pointed out that the Defendant in this case could have been protected by Part 36 had they listened to the opinion of its own expert on whose assessment the court based the damages decision. It is best practice for defendants to continue to carry out a proper investigation to be able to make a realistic Part 36 offer that provides adequate costs protection

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.