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Widlake v BAA - 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 partys 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 defendants expert and one of the claimants 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 defendants 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 defendants 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 Courts process. The right decision? From a defendants 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 claimants 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 defendants 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 defendants 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 claimants 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 Defendants 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 clients 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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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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