Fox v Foundation Piling Ltd

A personal injury claimant who recovers more than the defendant offered will normally be the successful party for costs purposes. The comparison concerns the claimant’s net recovery, excluding payments to the Compensation Recovery Unit. A withdrawn Part 36 offer loses its automatic costs consequences but remains an admissible settlement offer within the general costs discretion.

The starting point is that the unsuccessful party pays the successful party’s costs. Adjustments may reflect discrete unsuccessful issues or costs caused by unreasonable conduct. An inflated claim does not automatically justify an adverse costs order, particularly where the defendant possessed surveillance evidence, failed to make a sufficient offer and the claimant accepted a realistic offer promptly. Proven dishonesty may require different treatment.

The claimant, an employee of the defendant, sought damages for injuries sustained in a workplace fall. Liability was agreed subject to a 12.5% deduction for contributory negligence. His claim initially reflected substantial continuing disability, but surveillance evidence and revised medical opinions substantially reduced its value.

The defendant made a Part 36 offer of £63,000, including payments to the Compensation Recovery Unit. It later withdrew that offer and proposed a settlement giving the claimant a larger net payment, although the overall payment was smaller. The claimant accepted the substantive settlement terms, leaving costs for determination.

Judge Bullimore in Sheffield County Court ordered the claimant to pay the defendant’s costs after 20 October 2008. He treated the defendant as successful during that period and alternatively relied on the claimant’s conduct. On appeal, the defendant conceded that the claimant was the successful party but sought to uphold the order on conduct grounds. The central issue was whether the settlement offers, exaggeration or conduct justified departing from the usual costs order.

Appeal allowed unanimously. Jackson LJ delivered the judgment, with which Moore-Bick and Ward LJJ agreed.

1. The claimant was the successful party. The relevant comparison was between the net sums payable to him, excluding payments to the Compensation Recovery Unit. His final net recovery of £31,702.53 exceeded the £23,550.79 offered earlier. The starting point under rule 44.3(2)(a) of the Civil Procedure Rules was therefore that the defendant should pay his costs (paras 33, 46–47 and 51).

2. A withdrawn Part 36 offer ceased to attract the consequences prescribed by rule 36.14. It remained an admissible offer under rule 44.3(4)(c) and could be considered within the general costs discretion. The requirement that an offer remain available was supported by CvD [2011] EWCA Civ 646. Pankhurst v White [2010] 3 Costs LR 402, which involved special features and the former rules, did not establish that an offer withdrawn under the current rules retained automatic costs protection. The uncertain possibility of accepting the earlier offer and then successfully challenging the benefits assessment did not justify treating that offer as preferable (paras 42–43 and 53–55).

3. The general costs discretion allowed adjustments for discrete unsuccessful issues and costs caused by unreasonable conduct. Here, the claimant’s inappropriate appeal against permission for expert evidence had already attracted a specific costs order. It had not added uncompensated costs to the action. Both parties had contributed to delay, and the defendant could have accelerated matters by disclosing its surveillance evidence earlier (paras 47–49 and 56–57).

4. The substantial reduction in the claim reflected both the surveillance evidence and the acceleration of pre-existing degeneration. The claimant realistically accepted those matters when settling. The judge had expressly declined to find misrepresentation, and the appellate court could not substitute such a finding. The case resembled Morgan v UPS [2008] EWCA Civ 1476: the defendant possessed evidence revealing exaggeration but delayed making a realistic offer, which the claimant then accepted promptly (paras 58–60).

5. The judge had exercised his discretion on the mistaken basis that the defendant was successful. Re-exercising that discretion, the court found no justification for departing from the usual costs order. The defendant was ordered to pay the claimant’s costs of the action, assessed on the standard basis, subject to specific costs orders already made. Different considerations could arise where dishonesty was proved (paras 61–64).

• Court of Appeal (Civil Division): In [2011] EWCA Civ 790 , allowed the claimant’s appeal and replaced the adverse costs order with an order that the defendant pay the claimant’s costs of the action, subject to existing specific costs orders.
• Sheffield County Court: Judge Bullimore delivered a reserved costs judgment on 28 January 2010. He ordered the claimant to pay the defendant’s costs after 20 October 2008, principally because he regarded the defendant as successful during that period and alternatively because of the claimant’s conduct.
• County Court proceedings: The personal injury claim began in the Central London County Court. Liability was resolved by agreement, subject to contributory negligence. The substantive claim subsequently settled, leaving costs for judicial determination.