PI Practitioner – each issue a particular topic is highlighted, citing some of the useful cases and other materials in that area.

Costs consequences of fraudulent or exaggerated claims

Ul-Haq & Others v Shah [2009] EWCA Civ 542, CA

In this case the Court of the Appeal considered the question whether the genuine part of a claimant’s claim could be struck out by reason collateral dishonesty. Delivering the leading judgement, Smith LJ noted that “[the judge] can mark his disapproval of the way in which the court’s time and the parties’ money has been wasted by an order for costs”.

Costs awards are likely to have a powerful effect in cases involving allegations of dishonesty, where trial costs are frequently (but usually necessarily) disproportionate to the often modest awards of damages. Penalising a claimant in costs, as was demonstrated in Ul-Haq, can result in a net loss (even after the award of damages) for a claimant who has exaggerated or acted fraudulently.

Widlake v BAA [2009] EWCA Civ 1256, CA

In a claim for personal injury sustained after falling down a flight of stairs, the trial judge found that, contrary to the claimant’s pleaded case, the consequences of her fall were comparatively minor and that she had deliberately concealed her history of back problems from her medical experts in an effort to increase her level of compensation.

Dealing with the costs of the claim, the trial judge found that the real winner of the trial had been the defendant, and ordered the claimant to pay the defendants costs. In doing so, he concluded that by setting out to mislead her own medical experts, the claimant had sought to manipulate the civil justice system on a grand scale. The Court of Appeal held that the trial judge had misdirected himself in characterising the claimant’s actions as an attempt to manipulate the civil justice system, and it was therefore necessary for the Court of Appeal to exercise its own discretion with regard to the costs of the case.

Following the reasoning of Ward LJ (delivering the leading judgment), the first question to determine was which party was unsuccessful. Has the Claimant established a claim for damages and beaten the Defendant’s Part 36 payment? If so the default position is that the Defendant should pay the Claimant’s costs.

Consideration should then to be given to the factors which may justify a departure from the general rule, and in particular, the conduct of the parties. For those purposes, conduct includes whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue, and whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.

Once the conduct has been identified, the court should go on to examine its causative effect. To what extent did the claimant’s lies and gross exaggeration cause costs to be incurred or wasted?

The punitive element of the costs rules may be engaged where “the misconduct is so egregious that a penalty should be imposed upon the offending party”.

Summers v Fairclough Homes [2012] UKSC 26, SC

The Supreme Court heard the Defendant’s appeal against the Claimant’s award of £88,000 on grounds that the claim should have been struck out by reason of the claimant’s dishonesty. It held that whilst it had the power to strike out a claim, the circumstances in which it would do so were exceptional, and it would not be appropriate to exercise that power in the instant case.

Although there appeal was not against the costs decision of the trial judge, guidance was given on costs issues in cases involving dishonest exaggeration, and the potential deterrent effect that adverse costs orders could have. Firstly, Lord Clarke (delivering the judgment of the Court) approved the principles emanating from Widlake. He went on to note that it would be “entirely appropriate in a case of this kind to order the claimant to pay the costs of any part of the process which have been caused by his fraud or dishonesty and moreover to do so by making orders for costs on an indemnity basis. Such cost 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.”

October 4, 2012 · Editorial Team · Comments Closed
Posted in: News