Hall v Stone – costs order following failed allegation of fraudulent exaggeration [2007] EWCA Civ 1354

The three claimants were involved in a minor shunt in which they were struck from behind by the defendant. The defendant’s car was moving at about 5 miles per hour and the claimants’ car was stationary. The defendant’s insurers admitted liability and, before the claimants had consulted doctors for medico-legal reports, offered to settle the first claimant’s claim for £750 and her daughter’s for £350. The third claimant was offered £700. The offers, which did not comply with Part 36 and were made “without prejudice” rather than “without prejudice save as to costs”, were rejected and subsequently the claimants made claims for £3,000, £1,250 and £2,750 respectively. The defence made it clear that the defendants regarded the claims as dishonest, concluding in the light of their consultant orthopaedic reports that had the claimants suffered any injury it would have been trifling. The offers were withdrawn once the defendants’ insurers decided to mount a full attach on the honesty of the claims. The trial lasted four days because of the allegations of fraud. The sums sought at trial were £3,500, £1,000 and £1,000.

The judge found that the claims were honest – the claimants had suffered the symptoms described in the oral evidence - and awarded them £1000, £400 and £600 respectively. He considered the awards to be very close to the early offers and decided that the defendant should pay 60% of the claimants’ costs.

The claimants appealed, contending that they should have been awarded all their costs. The Court of Appeal (by a majority) allowed the appeal and awarded the claimants all their costs, save for those of obtaining the first set of medical reports which were not relied upon. The claimants had succeeded on the issue of fraud. There had been no Part 36 offers and the first and second claimants had beaten the offers which were made. By the time the third defendant had enough information to consider her offer, it had been withdrawn. It was open to the defendant’s insurers to make revised offers but they chose not to. It was clear from an early stage that there was no chance of settlement because the defendant’s stance was that the claimants were lying.

Comment: it is easy to see how the parties became locked into this litigation given the minor nature of the shunt and the inflated claims which were initially made. Nonetheless allegations of fraud cannot be made without risk that the court will find that the claims were exaggerated without any dishonesty on the part of the claimants. The defendant’s undoing was the unsatisfactory nature of the offers made, their withdrawal at a relatively early stage in the proceedings and the failure to make revised Part 36 offers as a back-up should the fraud allegation fail to stick at trial. The Court of Appeal contrasted this case with that in Painting v University of Oxford where the injured claimant recovered £25,000 having claimed £500,000. Even though the claimant beat the defendant’s Part 36 offer of £10,000, the court concluded that the defendant was the real winner. The claimant had exaggerated her claim and misled her expert to such an extent that she was not entitled to her costs from the end of the 21 day period despite beating the offer. In the present case, the exaggeration was of a different scale and the claimants were not found to have behaved dishonestly.