Sulaman v Axa Insurance Plc & Anor

A trial judge has a wide discretion to reduce the costs recoverable by a successful party whose lies made complex litigation more difficult. The reduction may reflect both the effect of the misconduct on the proceedings and the court’s legitimate disapproval of it. The judge need not calculate the precise time attributable to the lies or divide the reduction between compensatory and disapproving purposes.

An unaccepted Part 36 offer remains relevant, but it does not dictate the costs outcome. Its weight depends on the litigation’s circumstances, including the offeror’s conduct and whether acceptance could realistically have resolved the wider dispute.

The appellant was joined as a Part 20 defendant to civil proceedings concerning an extensive insurance fraud. The insurers failed to prove that she participated in the alleged common fraudulent design, although the trial judge found that she had knowingly assisted her brother and had lied in her witness statements and oral evidence.

She had made a Part 36 offer which the insurers did not beat. The Central London County Court nevertheless awarded her only one third of her costs, on the standard basis before the relevant Part 36 date and on the indemnity basis thereafter.

She appealed against the reduction and the absence of an express award of interest. The central questions were whether the judge’s treatment of her misconduct fell within his costs discretion, whether sufficient effect had been given to the Part 36 offer, and whether interest should run from an earlier date.

1. By a majority, the appeal was dismissed. Longmore LJ, with whom Aikens LJ agreed, held that an appellate court should interfere with a costs decision following a lengthy trial only where something had gone very seriously wrong. The trial judge had a far greater understanding of the case, and his reasons could be read with his detailed merits judgment. Elaborate judgments on costs should be discouraged.
2. The appellant’s lies were neither isolated nor inconsequential. They made an already complex area of the case more confused and rendered both the litigation and the judge’s task more difficult. The trial judge was therefore entitled to deprive her of part of the costs which she would otherwise have recovered. A precise calculation of the time and expense caused by maintained lies would have been speculative.
3. A costs reduction could also express legitimate judicial disapproval of lies, independently of their measurable effect on the trial. The judge did not have to apportion the reduction between costs caused by the misconduct and the element reflecting disapproval. The award of one third was within the wide ambit of his discretion.
4. The appellant’s Part 36 offer had not been ignored because the costs awarded after the relevant date were assessed on the indemnity basis. The insurers’ failure to respond did not require greater recognition. Acceptance would not necessarily have settled the wider fraud litigation, and the offer was made without any admission concerning the appellant’s dishonesty.
5. Factual costs decisions should not be used as benchmarks for other cases. Although the trial judge’s comparison with the unreported Grupo Torras litigation was misplaced, it did not vitiate the exercise of discretion.
6. Interest did not need to be ordered expressly. It ran automatically at the judgment rate under section 17 of the Judgments Act 1838, as amended, and rule 40.8 of the Civil Procedure Rules 1998.

Sedley LJ dissented on the amount of the reduction. He considered that depriving the appellant of two thirds of her costs was disproportionate and punitive beyond what the lies and their effect on the trial justified. He would have increased recovery to two thirds.

1. Court of Appeal (Civil Division): By a majority, dismissed the appellant’s appeal against the costs order and left the award of one third of her costs undisturbed: [2009] EWCA Civ 1331.
2. Central London County Court: His Honour Judge Bailey rejected the insurers’ substantive case against the appellant but, because of her dishonest evidence and knowing assistance to her brother, awarded her only one third of her costs. The judgment’s citation is not stated.