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Widlake v BAA Ltd - Fraudulent exaggeration?
25 November 2009
The Court of Appeal has this week shed some light on the
consequences that follow from the deliberate exaggeration of a
genuine claim.
In Widlake v BAA Ltd [2009] EWCA Civ 1256, the Court of
Appeal found that the claimant had lied to both party’s medical
experts and had grossly exaggerated the extent of her claim with a
view to maximising her compensation.
Widlake suffered a back injury following a fall at work in which
liability was admitted. In two separate medical reports of her own,
she told experts that she had no history of back pain and was not
suffering from any pre-existing or previous symptoms prior to the
accident.
However, the defendant’s expert and one of the claimant’s
experts established that in fact she had a significant pre-accident
history of lumbar symptoms, which the Court found she had
‘deliberately concealed’ in order to increase the amount of
compensation she would recover.
Widlake was awarded damages for the ‘genuine’ part of her claim
(a 12 month aggravation of pre-accident symptoms and commensurate
loss of earnings) which exceeded the defendant’s Part 36 payment in
to Court but was significantly less than the amount she had
originally claimed.
His Honour Judge Seymour, sitting in the High Court, originally
ordered the claimant to pay the defendant’s costs, on the basis of
her dishonest conduct. He considered her actions to be an attempt
to manipulate the civil justice system to such an extent that it
amounted to an abuse of the Court’s process. The right decision?
From a defendant’s point of view, and in the interests of
discouraging the bringing of fraudulent and exaggerated claims:
yes.
The Court of Appeal however, disagreed. They did not accept that
the claimant’s deliberate dishonesty was sufficient to be
characterised as an abuse of process and reaffirmed the general
rule of law; that dishonest exaggeration does not result in the
dismissal of the whole claim.
In determining the issue of costs, the Court carried out a
thorough review of the relevant case law, including the recent
decision in Ul-Haq v Shah (2009) EWCA Civ 542, (2009) RTR
27 and the application of the Civil Procedure Rules (CPR).
The starting point, the Court stated, is to determine who the
successful party was. The claimant had established a genuine claim
because she had suffered injury through the admitted negligence of
the defendant and had also beaten the defendant’s Part 36 payment.
On that basis, she would ordinarily be entitled to her costs.
With reference to Part 44.3(4)(a) of the CPR, the Court of
Appeal accepted that her conduct should be taken into account when
determining the issue of costs and whether the general rule that
the successful party recovers their costs should be departed
from.
Part 44.3(5) allows the Court to consider “whether it was
reasonable for a party to raise, pursue or contest a particular
allegation or issue” and “whether a claimant who has
succeeded in his claim, in whole or in part, exaggerated his
claim”. The Court viewed the exaggeration as an 'allegation'
relevant to the 'issue' of quantum -pursuing the allegation was
unreasonable in the circumstances.
The Court found that Widlake had grossly exaggerated the extent
of her injury and the loss she suffered as a result, but was the
conduct so reprehensible that a penalty should be imposed upon her?
A party can be deprived of costs as a punitive sanction but
disconcertingly the Court accepted that “lies are told in
litigation every day up and down the country and quite rightly do
not lead to a penalty being imposed… there is a considerable
difference between a concocted claim and an exaggerated
claim”.
The Court addressed what effect the dishonest conduct had in
terms of incurring or wasting costs; the defendant had clearly been
put to extra cost, for which they were entitled to be compensated,
and the claimant had incurred additional time and expense which
they were not entitled to recover.
The claimant had, nevertheless, beaten the defendant’s Part 36
offer in respect of the genuine aspects of her claim. The Court
clearly emphasised that Part 36 is the 'shield' behind which a
defendant can protect themselves and that defendants can 'win
outright' by making a sufficient Part 36 offer which the claimant
fails to beat. The defendant in Widlake, despite knowing
the facts from at least the time they obtained their own medical
evidence, failed to make a sufficiently high offer and this was a
significant factor that counted against them.
Balancing these factors, the Court concluded that the
appropriate order would be no order for costs.
In the majority of lower value personal injury claims, paying
the costs of the claim will, more often than not be the most
significant expense to a defendant and any decision that limits a
claimant’s entitlement to recover those costs in circumstances like
this will result in a substantial saving. Widlake is clearly a
positive outcome and a decision that Defendant’s can take heart
from and use to their maximum advantage going forward.
Does the decision leave claimants free to pursue exaggerated
elements of a claim, safe in the knowledge they could still recover
an award for the genuine parts of their claim? Arguably so; the
distinction appears to be whether the dishonest actions of a
claimant amount to fraud. The same cannot be said of claimants’
solicitors, who potentially stand to lose the most from pursuing an
exaggerated claim on behalf of their client if their client’s
conduct results in them being denied a recovery of their costs.
Widlake demonstrates that a claimant who exaggerates a
claim will receive no more than that to which they are genuinely
entitled but, that the existing rules and legal framework can
effectively deal with exaggerated claims by punishing, in costs, a
claimant and their solicitors for pursuing such a claim.
Appropriate screening of claims to identify cases where a
claimant may be exaggerating can assist defendants, as can full use
of Part 36 to protect against those heads of loss that are
considered to be exaggerated or which cannot be challenged
outright.
The issue of costs remains at the discretion of the Court. If
the exaggeration and dishonesty is on a sufficient scale, costs
sanctions against a successful claimant should be argued for. The
issue facing defendants, and for the Courts to continue to
consider, is where that line is drawn.
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