Painting v University of Oxford

Beating a payment into court under Part 36 does not conclusively determine liability for costs. The court must assess all the circumstances, including who was the effective overall winner, the parties’ conduct, the issues on which each succeeded and any offers to settle.

A successful claimant’s deliberate exaggeration is a particularly important consideration. The court may also take account of the claimant’s failure to negotiate or make a counter-offer. An appellate court may interfere where the costs judge omits or gives insufficient weight to these material factors, so that the order falls outside the generous ambit of reasonable disagreement.

The claimant suffered injuries in an accident at work. The University admitted liability, subject to a 20 per cent deduction for contributory negligence. She claimed about £400,000 but recovered £25,331.78 after the deduction. The recorder found that she had deliberately exaggerated the duration and severity of her injuries, yet ordered the University to pay all her costs because she had beaten its reduced Part 36 payment of £10,000.

The University appealed from the costs order made in Walsall County Court. The central question was whether the recorder had exceeded the permissible ambit of his costs discretion by giving inadequate weight to the claimant’s exaggeration, the University’s success on the principal issue and the claimant’s failure to negotiate.

1. Appeal allowed. The recorder’s costs order fell outside the generous ambit within which reasonable disagreement was possible. Although he had considered the exaggeration, his overall assessment gave excessive weight to the inadequacy of the Part 36 payment and insufficient weight to the realities of the litigation.

2. Under Rule 44.3 of the Civil Procedure Rules 1998, beating a Part 36 payment is a relevant and often decisive factor, but it is not conclusive. The court must consider all the circumstances, including conduct, success on individual issues and admissible offers. The question of who was the effective overall winner was therefore material.

3. The assessment hearing was overwhelmingly concerned with whether the claimant had exaggerated her injuries. The University succeeded on that central issue. Once exaggeration and the appropriate cut-off date had been found, quantification was largely agreed or readily calculable. Viewed objectively, the University was the real winner even though the damages exceeded its £10,000 payment.

4. The recorder also failed to give sufficient weight to the strong likelihood that the claim would have settled earlier and at modest cost but for the exaggeration. Costs after the payment was reduced had been incurred almost entirely in preparing for and trying the exaggeration issue.

5. Longmore LJ agreed. Deliberate or fraudulent exaggeration was an especially important form of conduct for the costs assessment, although the rules themselves did not distinguish intentional from unintentional exaggeration. The claimant’s failure to make an offer, counter-proposal or other attempt to negotiate was also significant under the procedural regime, in which negotiation was expected to be reciprocal.

6. The order below was set aside. The University was ordered to pay the claimant’s costs down to 25 February 2004, and the claimant was ordered to pay the University’s costs thereafter. The appeal costs were payable by the claimant on the standard basis up to 18 January 2005 and on the indemnity basis thereafter, with no order for interest.

1. Court of Appeal (Civil Division): In [2005] EWCA Civ 161, the court allowed the University’s appeal, set aside the recorder’s costs order and substituted a divided costs order.
2. Walsall County Court: Mr Recorder Morse QC awarded the claimant £25,331.78 after the agreed deduction for contributory negligence and ordered the University to pay all her costs. The damages award was not appealed.