Commentary - Paying the penalty for exaggerated claims

In a court case, the unsuccessful party will, as a general rule, be ordered to pay the costs of the ...

In a court case, the unsuccessful party will, as a general rule, be ordered to pay the costs of the successful party. However, under Civil Procedure Rules 44.3, the court has discretion to make a different order.

In deciding what order to make, the court must have regard to all the circumstances. These may include the conduct of the parties, both before and during proceedings, whether it was reasonable for a party to pursue or contest a particular issue, and whether a claimant has exaggerated their claim.

Liability was resolved at an early stage in Painting v University of Oxford (2005) but the matter proceeded to an assessment of damages hearing.

The claimant contended she had a serious ongoing injury, and valued her claim at £400,000. The defendant initially paid £185.000 into court but, after obtaining helpful video evidence, withdrew all but £10,000. Judgement was ultimately awarded for just over £25,000.

At first instance, the judge awarded the claimant costs on the basis that, although she had exaggerated, the money in court was a sum she could never have been expected to accept. The Court of Appeal reversed the decision, relying on the fact that:

- the defendant was the "real winner" because the sum awarded was much nearer the defendant's valuation;

- most of the time at trial was spent on the exaggeration issue, which the defendant won;

- had it not been for the exaggeration issue, the claim would have settled early and for modest damages;

- the claimant had throughout sought exaggerated damages and at no stage tried to negotiate settlement.

The Court of Appeal ordered the defendant to pay the claimant's costs up to the point where the £10.000 was left in court, and the claimant to pay the defendant's costs thereafter.

A further example of this approach was seen in E Ivor Hughes Education Foundation v Leach (2005) The claimant sued for £610,000, which included a claim for £60,000 for alleged false expenses claims. The defendant denied and counter-claimed, but also paid £5000 into court in relation to the expense claim only. The claimant accepted the payment in, abandoned all of the remainder of the claims, and sought payment of all costs from the defendant.

As the defendant was awaiting the outcome of their employment tribunal for wrongful dismissal, the counter-claim against the claimant was stayed.

The judge held the defendant should pay the costs of the expense claim, but that the claimant should bear their own costs, and the costs of the defendant, in relation to all other elements of the claim.

As the expenses claim was settled for £5000, the court ordered the claimant's costs were to be determined under CPR Part 27, which allows for fixed costs to be recovered.

These cases show the court is willing to penalise those who exaggerate claims with costs orders against them.

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