Gregson v Hussein CIS Insurance

In a costs appeal, the general rule remains that the unsuccessful party pays the successful party. A claimant who recovers damages under every head is successful even if the amount awarded is substantially below the sum claimed. Exaggeration may justify a reduction in the claimant’s costs, particularly where it caused wasted costs. A defendant that pursues an unreasonable fraud allegation to trial may face a costs penalty, especially where it could have admitted liability and made a Part 36 offer. If an issue-based order is justified, a percentage of the successful party’s costs is generally preferable to requiring that party to pay the opponent’s costs where no discrete issue can be isolated.

The appellant claimed damages following a road accident caused by the first respondent. The first respondent did not defend the claim. The second respondent, his insurer, denied liability and alleged that the claim was fraudulent, causing the case to move from the fast track to the multi-track.

The Manchester County Court awarded the appellant £4,357 plus interest, substantially less than the sum claimed. The judge found that the credit hire and vehicle evidence substantially reduced the damages, and ordered the insurer to pay 40% of the appellant’s costs, with the appellant paying 60% of the insurer’s costs. The appeal concerned the proper application of the costs discretion, the effect of exaggeration, the insurer’s conduct, and the absence of a Part 36 offer.

Appeal allowed. The Court of Appeal altered the costs order so that the second respondent was required to pay 75% of the appellant’s costs.

1. The court considered the authorities on costs appeals, including Painting v University of Oxford [2005] EWCA Civ 161, Hall & Othrs v Stone [2007] EWCA Civ 1354, Biffa Waste Services Ltd & Anor v Maschinenfabrik Ernst Hese GmbH & Ors [2008] EWHC 2657 (TCC) and Widlake v BAA Ltd [2009] EWCA Civ 1256. Costs decisions are fact-sensitive. The trial judge has a wide discretion, and an appellate court is slow to interfere. It may intervene where the discretion was exercised on an incorrect basis and may then exercise the discretion afresh.
2. Under the Civil Procedure Rules 1998, the starting point was that the unsuccessful party should pay the successful party’s costs. The appellant was the successful party because he established liability and recovered damages. A different order required proper justification.
3. The judge wrongly treated the insurer as successful on the issue of damages. The appellant recovered damages under every head of claim. The fact that the amounts claimed were reduced did not make the insurer successful on that issue.
4. The appellant’s exaggeration was relevant conduct under CPR 44.35. It could justify a reduction in costs because it extended the trial and caused wasted costs. However, the judge made no finding that the appellant himself had acted dishonestly.
5. The insurer’s continued pursuit of a fraud allegation was unreasonable, particularly in the face of the first respondent’s written admission. The insurer could have admitted liability and confined the case to damages. Its failure to make a Part 36 offer also counted against awarding it costs.
6. Where an issue-based costs order is justified but no discrete issue can be isolated, the usual approach is to award the successful party a percentage of its own costs, rather than require that party to pay a percentage of the opponent’s costs.

• Court of Appeal (Civil Division): [2010] EWCA Civ 165, 9 February 2010. Appeal allowed and the costs order varied.
• Manchester County Court: 27 April 2009. Judgment for the claimant against the first defendant for £4,357 plus interest. The second defendant was ordered to pay 40% of the claimant’s costs, and the claimant was ordered to pay 60% of the second defendant’s costs.