UK: Weekly Update - A Summary Of Recent Developments In Insurance, Reinsurance And Litigation Law - 26/11

Last Updated: 20 July 2011
Article by Nigel Brook

This Week's Caselaw

Fox v Foundation Piling

Court of Appeal ruling on Part 36 offers and the effect of exaggeration of injuries on costs

The claimant beat the defendant's Part 36 offer. One of the arguments which the Court of Appeal was required to consider was the effect of the claimant's exaggeration of his personal injury. Jackson LJ reviewed the prior caselaw on this topic. He noted that in a personal injury action, the fact the claimant has won on some issues and lost on others is not normally a reason for depriving the claimant of his costs.

Further, the fact that the claimant has deliberately exaggerated his claim may also in certain circumstances not be a good reason for depriving him of part of his costs. Although in this case the claimant's ultimate recovery fell far short of the original pleaded claim (in part because of video evidence showing that he was less disabled than claimed), the judge at first instance found no misrepresentation by the claimant. Although that was "perhaps surprising", the Court of Appeal could not substitute a finding of fact which the judge expressly declined to make. In any event, where quantum is inflated, the Court of Appeal said that the defendant's remedy was to make a modest Part 36 offer at the first opportunity. The situation might be different if dishonesty by the claimant is proven.

Jackson LJ also welcomed the forthcoming change to the Part 36 rules (due to come into force on 1 October 2011) which will reverse Carver v BAA [2008]. In that case, it was held that the court was entitled to take into account all the circumstances of a case (and go beyond a mere financial comparison) when deciding whether a claimant had failed to obtain a judgment more advantageous than a defendant's Part 36 offer.

Shovelar & Ors v Lane & Ors

Whether costs consequences of Part 36 should be applied

At first instance in this case, the judge refused to apply the costs consequences set out in Part 36 after the claimants beat their (rejected) Part 36 offer to the defendants at trial. The claimants appealed and the Court of Appeal considered the grounds on which the judge had based her decision that it would be unjust to award additional costs:

  1. The size of the costs meant that it was not possible for the defendants to accept the offers made: Although the Court of Appeal had some sympathy for this argument (here, over £320,000 had been spent fighting over a £134,000 estate), it held that this was not a good reason to refuse the Part 36 consequences because: "the amount of the costs which would have to be paid is a matter for assessment by the costs judge and it is the costs judge who will question, and will no doubt question very closely indeed, whether the costs claimed were necessary and proportionate".
  2. The nature of the case was such that the outcome could not be certainly predicted until after evidence had been given: The Court of Appeal held that this was not a good reason: "It is almost inevitable in all litigation that the nature of the outcome cannot be certainly predicted until after the evidence has been given and even then there is no certainty as to the outcome until the judge has decided the case on that evidence". In this case, it would have been better for the parties to mediate rather than litigate.
  3. The fact that the offer was not accepted could be properly taken into account under Part 44 when determining what order for costs ought to be made: The Court of Appeal held that Part 36 is a separate self-contained code which must be applied - Part 44 cannot be taken into account. In the words of Ward LJ, "Part 36 trumps Part 44".

Accordingly, the appeal was allowed.

Anglo Irish Asset Finance Plc v Riddell

Whether court can order security for costs where the defendant brings a counterclaim

The defendant applied for an order that the claimant provide security for costs. Although the judge concluded that there was reason to believe that the claimant would be unable to pay the defendant's costs, he held that it would not be just to make the order because of the defendant's counterclaim which raised substantially the same issues as the claim. In so doing, the judge referred to the Court of Appeal decision of Crabtree v GPT [1990].

On appeal, the defendant sought to argue that Crabtree did not establish a general principle or rule that where the defendant has a counterclaim raising the same issues as the claim, the court will not order the claimant to provide security for costs. The Court of Appeal held that the evidence now available shows that the claimant would not be unable to pay the defendant's costs.

For that reason alone the appeal should be dismissed. However, the Court of Appeal also went on to consider the Crabtree case. It was a "fair summary" in prior caselaw to refer to "the general rule" established by Crabtree (although it was "ironic" that in the case itself, Bingham LJ emphasised that "there can be no rule of thumb in cases of this kind"). The judge had not misapplied Crabtree in this case. The defendant's offer to give up its counterclaim if security was offered added nothing: "It did not justify making an order that the court would not otherwise have been willing to make".

Where a counterclaim raises the same issues as a claim, (so it may well be a matter of chance who is the claimant and who is the defendant), it will not usually be just to order security for costs (although the court must always have regard to the particular circumstances of the case).

Broster & Ors v Galliard Docklands & Anor

Alleged negligent construction and damage to the "thing itself"

Weekly Update 44/10 referred to the case of Linklaters v McAlpine, in which Akenhead J considered the scope of the rule in the House of Lords case of Murphy v Brentwood [1991] that a duty of care does not cover damage caused to the "thing itself". Akenhead J has considered this issue again in this case. Here, the claimant homeowners alleged negligence by builders when constructing a common roof over a terrace of houses. Having reviewed the relevant caselaw, the judge concluded that it was necessary to consider the structure in question "as a whole and to avoid any artificiality in practically considering the structure".

He held that there was no realistic prospect of establishing that the builders owed a duty of care to the owners for physical damage to their houses caused by the roof. The houses had been built as one construction (albeit for separate and multiple occupation). Thus: "It would be wholly artificial to argue that the segment of the roof over each individual terraced unit was to be considered as separate from the whole roof or indeed that the roof as a whole was to be considered as separate from the walls of the units below. It follows that there is damage "to the thing itself"."

Pannone Ltd v Aardvark

Extension of time following a consent order

In this case, an order was made by consent that the claimant should file and serve its reply and defence to a counterclaim by no later than 1pm on 26 October 2009. The order further provided that if the claimant did not comply "the Claimant's claim be struck out and the Defendant have permission to enter judgment in full for its counterclaim". The Claimant was a few minutes late in filing and serving the required statement of case. The Court of Appeal considered whether the judge had been correct in holding that time should be extended for filing and serving the statement of case. The issue in this case was whether the judge had the power to grant an extension in the case of a consent order.

The Court of Appeal concluded that "There is a world of difference between a case management decision made at the instance of one party to which the other party makes no objection...and a genuine settlement of a substantive dispute as to the parties' rights". In this case, the court had had the power to grant relief from a sanction as a result of failure to comply with the order. It made no difference here that there had been a consent order: "Where however the agreement is no more than a procedural accommodation in relation to case management, the weight to be accorded to the fact of the parties' agreement as to the consequences of non-compliance whilst still real and substantial will nonetheless ordinarily be correspondingly less, and rarely decisive."

F&C Alternative v Barthelemy

Settlement agreement conditional on court not handing down final judgment

The judge provided a draft judgment to the parties (in order for them to check for typographical errors or obvious factual errors). The parties then reached a settlement agreement which was conditional on the court not handing down the final judgment in open court. An application was therefore made for the court not to hand down the judgment, so that the settlement agreement could take effect. In these circumstances the court has a discretion how to proceed, weighing aspects of the public interest along with the wishes and interests of the parties to the proceedings (see Prudential Assurance Co. Ltd v McBains Cooper [2001] and Liverpool Roman Catholic Archdiocesan Trustees v Goldberg (No. 3) [2001]).

Sales J decided that he should not grant the application. This was partly because the judgment addresses a range of legal issues which he considered it would be in the public interest to be made the subject of a published judgment for the development of the law and guidance to others. It would not be possible or appropriate to try to produce a partial judgment which did not go fully into the facts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nigel Brook
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