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Articles | Fri 7th Sep, 2018
To what extent should a claimant’s dishonest and misleading conduct regarding her ability to work make her liable for costs incurred prior to the date of expiry of a Part 36 offer accepted after the 21-day period? That was the key issue before the Court of Appeal in Tuson v Murphy  EWCA Civ 1461.
Facts and first instance decision
The Claimant suffered injury following a fall from a horse during a lesson at the Defendant’s riding school. She subsequently developed Obsessive Compulsive Disorder (OCD) which was attributed to the accident. Liability was admitted. She gave up her work as a schoolteacher and her claim was initially valued at £1.5 million on the premise that she would be unable to work again.
Subsequent to issuing proceedings, in November 2013 the Claimant obtained a franchise in a playgroup organisation under which she ran “messy play” workshops for children. The Claimant’s witness evidence, Schedule of Loss and expert psychiatric evidence made no mention of the playgroup.
In April 2015 the Defendant’s solicitors became aware of the Claimant’s involvement in the playgroup and informed the Claimant’s solicitors accordingly. The Claimant’s justification for her non-disclosure was that she had never intended to run the playgroup as a business, but had engaged in it as a means of dealing with her OCD.
By letter dated 17 September 2015 the Defendant’s solicitors made a Part 36 offer of £352,060 in full and final settlement. The 21-day period for acceptance of the offer expired on 8 October 2015. The Claimant accepted the offer out of time on 1 December 2015.
The parties were unable able to agree costs in principle so a hearing took place before HHJ Charles Harris QC. The judge ordered the Defendant to pay the Claimant’s costs only up to 1 April 2014 (ie the approximate date of the Claimant’s initial witness statement) and ordered the Claimant to pay the Defendant’s costs thereafter.
In essence the judge’s decision was based on the fact that, “the claimant’s dishonesty was in relation to a period before the Part 36 offer was made. My view is that the “normal” order in the instant case would be unjust because it would mean that the claimant is not sanctioned in any way… for presenting her case on a misleading basis, for failing to disclose discoverable documents and for failing to tell the defendant, the court and the doctors about activities which she engaged in, which clearly cast significant doubt on her assertions about the extent to which she was disabled by OCD”.
The Claimant accepted that she had to pay the Defendant’s costs from 8 October 2015 until her belated acceptance of the offer on 1 December2015 but appealed the judge’s decision that she had to pay the Defendant’s costs from1 April 2014.
Court of Appeal decision
The Court of Appeal found that, “the Claimant’s modest attempts to run a playgroup do not amount to evidence that the Claimant’s disability was fabricated. If they had, the Defendant’s would not have made an unconditional Part 36 offer in excess of £350,000 (allowing for the contributory negligence deduction, valuing the claim at over £400,000). This is not a case of gross exaggeration on the scale of Summers v Fairclough Homes Ltd  1 WLR 2004. But the Claimant’s attempts to run the playgroup were certainly material to her argument that she was, and might remain for a long period, incapable of any work. She plainly withheld the information about the playgroup from her solicitors, since if she had told them I have no doubt that they would have given disclosure of the relevant documents and would not have allowed the first witness statement to be served without any mention of the playgroup. Nor would the Claimant’s employment expert have reported in the terms he did if he had been told about the playgroup. The Claimant clearly made a deliberate decision to withhold the information from her advisers, the Defendant’s advisers and the court, and the reasons given for this in her third witness statement are unconvincing. The judge was in my view entitled to describe her conduct as dishonest and misleading” (paragraph 23).
However the Court disagreed with the first instance judge’s decision, which “did not grapple with the argument that the Defendant’s Part 36 offer was unconditional, rather than a Calderbank offer, and that it was made with knowledge of the Claimant’s material non-disclosure” (paragraph 24).
The Court of Appeal, endorsing what was said by Andrew Baker J in Tiuta PLC v Rawlinson & Hunter  EWHC 3480 (QB), emphasised the difference between:
(a) A case where the facts known to the defendant’s advisers at the time of the Part 36 offer do not change significantly during the period before the delayed acceptance; and
(b) a case where the defendant’s advisers’ assessment at the time of making the Part 36 offer of the true value of the case, based on the facts then known to them, is upset or undermined by subsequent events or subsequently discovered facts.
The Court determined that, “In the first type of case it is highly unlikely to be unjust to apply the default costs rule” (paragraph 35).
The appeals was therefore allowed.
Article by: Oliver Millington
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