Case No: B3/2007/1123
Neutral Citation Number: [2008] EWCA Civ 1476
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SOUTHAMPTON COUNTY COURT 
(MR RECORDER BARRIE)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Tuesday, 11th November 2008

Before:

LORD JUSTICE PILL
LADY JUSTICE ARDEN
and
LORD JUSTICE LONGMORE

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Between:

	MORGAN 	Respondent/Claimant
	
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UPS	
Appellants
/Defendants

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(DAR Transcript of 
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A Merrill Communications Company
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Mr Q Tudor-Evans (instructed by Barlow Lyde & Gilbert) appeared on behalf of the Appellants.
Mr G Aldous QC(instructed by Simpkins & Co) appeared on behalf of the Respondent.
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Judgment
Lord Justice Pill:

1.	This is an appeal against a decision of Mr Recorder Barrie made at the Southampton County Court on 11 May 2007.  The Recorder ordered UPS Limited (“the appellants”) to pay the costs of Mr Paul Morgan (“the respondent”) in a personal injury action which he had brought against them.  

2.	The order was part of a judgment in which, as amended, the Recorder had given judgment for the respondent in the sum of £43,550.14 and interest thereon of £778.98.  The court ordered that the total of £44,329.12 be paid to the respondent less the interim payment of £5,000.  It was further ordered that the sum of £38,700 in court be paid out to the respondent’s solicitor in part satisfaction of the judgment.  It will be seen that the respondent beat the payment in, which had been made very much earlier under the former provisions in the Rules, by £629.10.  

3.	The appellants had earlier appealed against the award of damages.  The appeal was dismissed by a constitution over which I presided on 17 April 2008.  Both Sir Peter Gibson and I considered that the award of £22,800 by way of loss of earning capacity was generous, but not so generous that the court should interfere with it.  The decision of this court has little bearing upon the costs issue before the Recorder which this court now has to determine.  

4.	The respondent was injured in the course of his employment with the appellants on 2 October 2001.  He sustained what the judge described as a nasty fracture to his left wrist.  Damages for pain, suffering and loss of amenity were assessed at £16,500 and special damage at £4,750.14.  Three operations were conducted, the third in February 2003.  

5.	In my judgment in the earlier appeal I referred to the disability in this way, at paragraph 28:

“He has a small, but significant, disability as a result of the accident which affects the range of work he can do.  There is a small risk of post-traumatic arthritis in the long term.”

It was in the same paragraph that I stated that my conclusion that the award should be upheld was reached not without hesitation.  

6.	I take the chronology from the skeleton argument helpfully supplied by Mr Aldous QC on behalf of the respondent, which Mr Tudor-Evans accepts. 

7.	Proceedings were issued on 22 September 2004.   In February 2005 the respondent’s treating doctor, Mr Hargreaves, advised further surgery.  In April, May and July 2005 the respondent was covertly videoed, and the videos were disclosed in September 2005.  Also in that month the respondent underwent two procedures recommended by Mr Hargreaves.  On 18 October 2005 the appellants made their payment into court under the former provisions in the Rules.  In February 2006 the appellants set out their case on damages: they denied that the respondent had any significant residual disability and alleged that he had exaggerated the extent of his disability to the doctors.  By evidence they sought to establish that the operation conducted by Mr Hargreaves was unnecessary.  Three joint orthopaedic statements were obtained from the doctors who had examined him.  These were placed before the Recorder.  The respondent himself did not accept the comparatively limited view which the doctors took of the extent of his disability.  By a schedule of March 2006 the respondent claimed over £200,000.  That was reduced to £91,000 in a schedule served in May 2007.  A Part 36 offer was made under the new provisions in the Rules in the sum of £60,000 on 4 January 2007, and a further offer to accept £55,000 on 7 March 2007: that is, about two months before the hearing.  

8.	Shortly before the hearing before the Recorder the appellants offered to allow the respondent to take the sum paid into court plus a contribution of £10,000 towards his costs.  The respondent was minded to accept that offer, provided that the £10,000 by way of costs was in addition to the costs up to the date of the payment into court.  That was not what the appellants were offering, and the offer as made was not accepted.

9.	A part of the claim was a claim for past loss of earnings in the sum of £46,000.  The respondent’s evidence before the Recorder, accepted on this point, was that he planned to earn his living as a mechanic.  His ability to do aspects of that work was limited by the injury he had sustained.  In his judgment the Recorder made comprehensive findings against the respondent as to his credibility.  Those findings related not only to the difference between his view of his disability and that of the doctors but, for example, to whether he had been paid for work which he had done since the accident.  

10.	In his judgment on costs the Recorder stated that the respondent had beaten the payment into court “only by a whisker”.  He noted the finding in his judgment on damages that the respondent had not been truthful with the court or with the doctors.  He noted that the respondent had not been candid with the court about his working history.  The Recorder referred to the case of Painting v The University of Oxford [2005] EWCA Civ 161.  He concluded, at paragraph 52:

“In this case the Claimant, no doubt on advice, did take account of the significance of the video evidence and the conclusions of the medical experts, and took account of it not only under the veil of Part 36 by offering in January 2007 to settle for £60,000 and in March 2007 to settle for £55,000, but also openly by revising the terms of the schedule to reduce very substantially the claim for future loss even to the point as I have found of overlooking some genuine aspects of Mr Morgan’s injury.

53.  The second thing is that when I look at the broader picture of who has won and who has lost in relation to these issues that go beyond pure quantification, although it is right that I have found the Claimant has not been truthful, I have also found that the Defendant pursued an argument in relation to Mr Hargreaves’ operation that was wholly without merit, and it was a bold case to put forward in the pleadings.  Although expressly in the Amended Defence it is said that no criticism of Mr Hargreaves is intended in the sense that he acted properly on the symptoms that were known to him, it must have caused Mr Hargreaves at any rate concern to confront this allegation because it must have cast doubts on his own examination and clinical decision.

54.  The third factor that I need to take into account is that the payment into court by the Defendant was very close indeed and, although before the CPR it was invariably the case that a payment into court was all or nothing even if it was beaten or not beaten only by a few pence, it is appropriate under the CPR to take a broader view of costs issues and to consider issues about the conduct of the claim applied to both sides.  That applies not only about duration and so on but also the history under Part 36.  Obviously when the Defendant looks back with hindsight it is a shame that there was not any room for further movement, but that is very much with the benefit of hindsight and I understand that.

55. It is therefore only after giving careful consideration towards these issues that I come in the end to a very simple decision.  I do not think the fact that the allegation against Mr Hargreaves was pursued is a sufficient reason for allowing the Claimant costs on an indemnity basis, particularly in a context where on the other non-assessment issue of exaggeration the Claimant lost.  I do not think the fact that the payment into court was only beaten by a whisker is a sufficient reason for departing from the usual order in circumstances where the Claimant has been showing an active and realistic willingness to be flexible in the light of the video evidence and the views of the doctors.  Although I have found against Mr Morgan in terms of his truthfulness, the impact of that on the size of the claim has been very small in marked contrast with Mrs Painting’s case where she pursued to trial a claim for £400,000.

56. There are points therefore to be made on either side, and is not without anxiously considering all of them that I come to the conclusion that I should make a simple order that the Defendant pay the Claimant’s costs to be assessed on the standard basis if not agreed.”

11.	For the appellants Mr Tudor-Evans submits that the Recorder failed to ask himself the central question: who was the real winner in this litigation?  Initially, he submits, the respondent had grossly exaggerated his claim.  He continued to be unrealistic in the sum he was prepared to accept.  Effectively, it is submitted, the Recorder was punishing the appellants for making an accurate assessment of the overall value of the claim.  The Recorder was wrong to find the appellants’ stance on Mr Hargreaves’ operation to be “wholly without merit”.  I see some force in the criticism of the strength with which the point is put, but the Recorder was entitled to find that costs were wasted on that account and that it was the responsibility of the appellants.  Mr Tudor-Evans accepts that cases are fact sensitive.  He submits that there is an error of law in the Recorder elevating matters in the claimant’s favour too high in his overall assessment and not adequately considering the factors in the defendant’s favour.  From the date of payment in, the respondent waited 18 months to receive any award and was branded a liar in the process.  The Recorder’s decision went beyond the wide discretion open to him. 

12.	Neither before the Recorder nor before this court has detailed reference been made to the relevant rules.  The Recorder plainly had Part 36, to which he referred, in mind.  The Rules changed with effect from 6 April 2007, and while the Recorder was not expressly referred to CPR 36.1, Mr Tudor-Evans submits that the Recorder should have had regard to it.  36.14(1) provides that:
“This rule applies where upon judgment being entered -- 
(a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or
(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.”

13.	The consequences that follow are set out in paragraphs 2 and 3.  Paragraph 4 provides: 
“In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case including --
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
(c) the information available to the parties at the time when the Part 36 offer was made; and
(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.

The general provisions as to costs are at Rule 44.3(1). 
“The court has discretion as to --
(a) whether costs are payable by one party to another;
(b) the amount of those costs; and
(c) when they are to be paid.”

In paragraph 2: 
“If the court decides to make an order about costs --
(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
(b) the court may make a different order.”

Paragraph 4: 
“In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including --
(a) the conduct of all the parties”

Paragraph 5: 
“The conduct of the parties includes --
(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed any relevant pre-action protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended his case or a particular allegation or issue; and
(d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.”

14.	In Carver v BAA Plc [2008] EWCA Civ 412 this court upheld the decision of a trial judge in a defendant’s favour in a personal injury case where the award of £4,686.26 inclusive of interest exceeded the payment into court by £51.  Ward LJ, with whom Rix and Keene LJJ agreed, stated at paragraph 28: 

“For money claims as well as for non-money claims the same questions arise under CPR [36.]14(1) namely, under (a) whether the judgment is ‘more advantageous’ than the offer”.

At paragraph 32 Ward LJ stated that “No reasonable litigant would have embarked upon this campaign for a gain of £51”.  At paragraph 33, he stated: 

“The judge was entitled to order the claimant to pay the defendant’s costs after the time to accept the payment in had expired.”

Ward LJ noted that the judge had thought worthy of condemnation “the manner in which the litigation had been pursued”.  An offer which was reasonable and not derisory had met with no response and no counterproposal.  Even when the exaggerated claim was withdrawn late in the day no counterproposals were forthcoming.

15.	In Painting, to which Mr Tudor-Evans has referred, this court disturbed the trial judge’s findings on costs in a personal injury case in which about £400,000 had been claimed and a payment of £184,000 paid into court and not accepted.  Only £10,000 remained in court.  In the event the sum of £25,331.78 was awarded.  Maurice Kay LJ stated at paragraph 21: 

“The two-day hearing of the trial was concerned overwhelmingly with the issue of exaggeration, and [the defendant] won on that issue”.

The defendant was “in real terms the winner”.  The judge stated that there was “a strong likelihood” that, but for the claimant’s exaggeration, the claim “would have been settled at an early stage and with modest costs.”  At no stage did the claimant show any willingness to negotiate or put forward a counterproposal.  Maurice Kay LJ stated:
 
“It must not be assumed that beating a Part 36 payment is conclusive.  It is a factor and will often be conclusive, but one has to have regard to all the circumstances of the case.”

16.	Agreeing with Maurice Kay LJ, Longmore LJ underlined that the exaggeration of the claimant was intentional and also underlined her failure to make any attempt to negotiate.  

17.	There is strong authority that the judge does have a broad discretion.  Recently, in Straker v Tudor Rose (a firm) [2007] EWCA Civ 368 Waller LJ stated: 

“The key issue is whether the judge misdirected himself.  It is well known that this court will be loath to interfere with the discretion exercised by a judge in any area but so far as costs are concerned that principle has a special significance.  The judge has the feel of a case after a trial which the Court of Appeal cannot hope to replicate and the judge must have gone seriously wrong if this court is to interfere.”

18.	 On its facts this case has considerable differences from either of those cases cited in which orders in a defendant’s favour were made.  In my judgment the Recorder was entitled, in the exercise of his discretion, to make the order he did.  The reasons on which he relied were tenable reasons.  He certainly had the flavour of the case, having conducted the trial on quantum in which hotly contested issues arose.  This is not a case where the respondent’s exaggeration as claimant was the only issue which took the time of the court.  On the question of damages, in particular loss of earnings, the claim was not an easy one for reasons which appear both in the judgment of the Recorder and in the judgments delivered in this court.  The margin by which the offer was beaten was a narrow one, as the Recorder fulsomely recognised.  There were, however, substantial issues in this case and I am not prepared to accept that counter-offers made, and there is no doubt counter-offers were made, were wholly unreasonable.  In those circumstances the Recorder was entitled to reach the overall conclusion he did: that because the payment into court was insufficient, albeit by a small margin, that the claimant should be awarded his costs. 

19.	For those reasons I would dismiss this appeal.

Lady Justice Arden: 

20.	I agree.

Lord Justice Longmore:

21.	I regard this case as different from Painting.  In that case Mrs Painting, as claimant, made no attempts to negotiate despite her obvious exaggeration of her claim.  In this case, however, the claimant did accept the effect of the contents of the video evidence that had been procured and reduced his claim accordingly, both openly and in the course of “without prejudice” negotiations.  The exaggeration and untruthfulness which the Recorder found in this case was taken into account by him, and although some judges might well have reduced the claimant’s entitlement to all his costs, without reason I cannot say, for my part, that any reasonable judge must have done so.  This is a matter which, in paragraph 26 of Painting, I said did need to be addressed. The judge did address the matter but concluded that nevertheless, for reasons which he gave, the defendants should pay the claimant’s costs.  That was within the broad discretion which any judge has on the matter of costs.  

22.	I agree therefore that this appeal should be dismissed.

Order: Appeal dismissed