One of the few clear rules about costs is that the losing party normally pays the costs of the successful party (CPR 44.2(2)(a)). If a defendant wants to protect themselves then Part 36 allows them to do so. A claimant can generally be confident that as long as they beat a defendant’s offer then, serious fault aside, they will recover their costs in full. Morrow v Shrewsbury Union Football Club Ltd has caused some to wonder whether this confidence is misplaced. This note suggests that they need not be unduly concerned because the case turned on its particular facts. However, the case does highlight the importance for both sides of taking a realistic approach to quantum and keeping offers under review.
Mr Morrow was watching a rugby match when a rugby post fell and hit him on the head rendering him unconscious. He was then aged 46 and was aged 50 at the date of trial. The defendant accepted liability but the parties were far apart on quantum. The claimant argued that the consequences of the injury meant that he could no longer work as an IFA, a career he would otherwise have pursued successfully until retirement at 65. His claim for future loss of earnings was £946,097.28 which assumed that he would have been promoted. The defendant argued that the claimant had a range of pre-accident problems and the accident had had no appreciable impact on his earning capacity. They maintained that the claimant would have left work shortly after the accident because of his underlying condition. The defendant only offered £829.54 for past losses (as against claimed past losses of over £114,000).
The defendant made a Part 36 offer of £110,000 about 18 months before trial but made no further offer. The claimant made a part 36 offer of £800,000 shortly before trial.
Following a seven-day trial Farbey J concluded that both parties had taken extreme positions and had over-egged their respective cases [main judgment para 220].
The claimant had minimized his pre-existing psychological or psychiatric difficulties; dramatised his post-accident difficulties and refused to countenance any improvement in his symptoms. He had a significant pre-accident history of insomnia, anxiety, stress and fatigue and he described similar symptoms post-accident. However, the Judge found that he suffered from a pre-accident somatoform disorder which was brought to saliency by the accident [main judgment 213]. He also suffered a relapse of pre-existing epilepsy. The combination of fear of further seizures and the more general somatic disorder caused him to be overwhelmed by his work as an IFA and to stop it sooner than he would have done otherwise. But for the accident, he would have worked to 55 and would not have found anything other than minimum wage employment after that.
For their part the defendant relied strongly on an email from the claimant’s wife shortly before the accident where she expressed concerns about his being fatigued and having palpitations. This, they said, showed that the accident had had no real impact on his earning ability and caused them to give a low value to the claim from the start – a position they did not move from. This faced the obvious obstacle that the claimant was in work at the time of the accident and had held down the job despite his underlying condition and despite various adverse life events.
Farbey J gave judgment on the main elements of the claim including general damages at £58,000 and findings about the date of likely cessation of work but for the accident and promotion prospects. The parties then reached agreement on remaining issues. The total sum was £285,658.08, of which about £177,000 reflected lost earnings and pension loss.
The defendant then resisted paying the full costs and argued that there should be a reduction of one third. The judge awarded the claimant 85% of his costs. The 15% reduction took account of the following factors:
- The claimant exaggerated his claim for lost earnings although he was not dishonest. His psychiatric or psychological condition may have made him prone to exaggerate but he was able to instruct and take advice from his lawyers and had capacity: “He chose to put an exaggerated claim to the court”.
- “The extent of the exaggeration is reflected in the gulf between the damages claimed and the damages awarded”. The defendants Part 36 offer was significantly closer to the damages awarded than the claimant’s offer.
- Exaggeration was “built into the structure of the claimant's presentation of his claim, both before and at trial”. It “operated across multiple and cumulative witnesses (the claimant, his wife, his line manager, others who gave evidence on loss of future earnings, the exaggerated instructions that the claimant gave to experts) and across multiple days in court” .
- The claimant’s conduct produced unnecessary expense and had prolonged the trial. However this had not increased costs by as much as a third.
- However, the defendant’s conduct could also be criticized. They had chosen to contest almost every allegation and every issue so that the claimant had to come to court to recover damages. The defendant had not engaged in settlement discussions but it was clear from the claimant’s unrealistic Part 36 offer that negotiations would not have succeeded.
- A 15% reduction reflected the additional costs incurred because of the claimant’s conduct and given the size of the bill it was a meaningful reduction and not one that would encourage other litigants to take up disproportionate court time in the hope of gaining some small advantage.
This case does not open the door to reduced costs whenever a claimant is found to have exaggerated their case or where they fail to recover the bulk of what they have claimed.
The judge did refer to the large disparity between the claimant’s Part 36 offer and what he recovered and to the fact that he had caused unnecessary expense. These two features are not uncommon but they are not the foundation for the decision. That was based on the judge’s finding that this was a case of systematic exaggeration (although not dishonest) and not a simple case where “a claimant has – for whatever reason – simply given an inaccurate picture in a witness statement or in oral evidence”. The discussion about whether the reduction was sufficient to be meaningful suggests that this was as much to mark the court’s disapproval of the way the claimant had pursued his case as it was to arrive at a mathematical assessment of the costs wasted on the exaggerated parts of the claim. Indeed, it seems likely that the reduction would have been larger if the defendant had not borne their own share of the blame for the length of the proceedings in taking every point.
From a claimant point of view the decision highlights the importance of taking a realistic approach to quantum and future employment prospects and in confronting and dealing with adverse medical and employment records.
From defendant’s point of view the case demonstrates the need to “stress test” expert evidence and to keep offers under review. The defendant’s part 36 offer was made relatively early but it appears to have conceded virtually nothing for future earnings and it was not increased as the case developed. At trial the defendant’s psychiatric expert appears relatively readily to have conceded that the claimant could have worked until he was 50-55.