Hall & Ors v Stone

A claimant who recovers damages against a defence denying all entitlement is ordinarily the successful party for costs. Recovering less than claimed does not, without more, give the defendant partial success. The focus is whether the defendant prevailed on an issue that had material costs consequences.

Exaggeration may constitute relevant conduct under the costs rules. Any reduction requires identified conduct that affected the proceedings or their costs. A claimant should not be penalised for rejecting an early offer made before reasonable medical assessment where the offer was withdrawn and never renewed.

Three claimants recovered modest damages for injuries caused by a low-speed collision. The defendant had admitted liability for the collision but alleged that the claims were fabricated or dishonestly exaggerated. After a four-day multitrack trial, the judge rejected dishonesty but found that the injuries were less serious than claimed. He awarded damages of £1,000, £400 and £600.

The judge ordered the defendant to pay 60% of the claimants’ costs, relying on the amounts recovered, the parties’ conduct and early settlement offers. The claimants appealed. The central question was whether those matters justified reducing the costs of claimants who had defeated the principal allegation and obtained judgments for damages.

1. Appeal allowed by a majority. Smith LJ, with whom Lloyd LJ agreed, held that the claimants were, to all intents and purposes, the successful parties. They recovered damages despite a defence that they were entitled to nothing, defeated the central allegation of dishonest fabrication and faced no effective settlement offer. The mere fact that their damages were lower than claimed did not give the defendant partial success.

2. Partial success under rule 44.3(4) is fact-sensitive. The focus is whether the losing party succeeded on an issue that carried costs consequences. Merely keeping damages below the sum claimed does not ordinarily make a defendant a victor or partial victor. A materially exaggerated claim may produce a different result where exaggeration is a central issue with important costs consequences, as illustrated by Painting v Oxford University [2005] EWCA Civ 161.

3. Exaggeration may be considered as conduct under rule 44.3(4)(a). Here, however, the trial judge had acquitted the claimants of conscious exaggeration and had not identified conduct by them that escalated the proceedings or increased costs. The initial medical reports were abandoned and would have played no part at trial had the defendant not used them on credibility. The multitrack trial principally resulted from the insurers’ decision to allege dishonesty.

4. The early offers did not justify a costs reduction. They were made before the claimants could reasonably obtain medico-legal advice, were not stated to remain open and were never renewed. Once the medical reports were disclosed, the defendant maintained that nothing was payable. A defendant wishing to contest an inflated valuation while protecting its costs position could make an appropriately framed offer dealing with both damages and costs.

5. The defendant was ordered to pay all the claimants’ costs except those attributable to obtaining the first set of medical reports, upon which the claimants ultimately did not rely.

Waller LJ dissented. He considered that the exaggerated and opportunistic presentation of the claims contributed to the form and expense of the trial. Although the claimants were technically successful and the defendant bore greater responsibility for failing to make a protective offer, he would have upheld the order for 60% of their costs.

1. Court of Appeal (Civil Division): By a majority, allowed the claimants’ appeal in [2007] EWCA Civ 1354, set aside the 60% costs order and awarded all costs except those attributable to the abandoned first medical reports.
2. Aldershot and Farnham District Registry: His Honour Judge Marston awarded the claimants damages of £1,000, £400 and £600, rejected the allegation of dishonesty and ordered the defendant to pay 60% of their costs.