Morrow v Shrewsbury RUFC – Part 36 offers and exaggeratio

In the matter of Morrow v Shrewsbury RUFC, Mrs Justice Farbey considered whether it would be just for a Claimant who had exaggerated their claim to recover costs after succeeding at trial, and if not, what would be a reasonable and just deduction to those costs.

Background

The Claimant in this matter was injured by a collapsing rugby post while watching a game of rugby on the Defendant’s pitch. Liability was admitted by the Defendant.

Prior to the incident, the Claimant had worked as an Independent Financial Advisor and he claimed that as a direct consequence of the incident, he was now unfit for work and sought to claim losses in relation to his earnings. It was alleged that had the Claimant continued to work, he would have been promoted and would have seen a substantial increase to his earnings. The Claimant claimed losses in excess of £1,000,000, including losses of earnings totalling £946,097.28.

The Defendant made a Part 36 offer of £110,000 around 18 months before trial. The Claimant made a Part 36 offer of £800,000 shortly before trial.

Trial

The argument raised by the Defendant was that the Claimant was fit for work and the index incident did not impact his ability to work and that the case put forward by the Claimant was misleading, rather than dishonest.

The Defendant was unsuccessful in relation to causation however, the most time consuming element of the trial was the Claimant’s loss of earnings claim. The Defendant stated that the Claimant had described his post-incident issues in extravagant terms and failed to mention his pre-existing conditions to various experts throughout the claim.

The judge was in no doubt that the Claimant had exaggerated his loss of earnings claim, as the upward trajectory of his earnings was not proven, but she did not find him to be dishonest. The judge suggested that the Claimant’s psychological condition may have made him more prone to exaggeration and to pursue a claim beyond what common sense would dictate.

During the course of the trial, the Defendant’s expert conceded that the Claimant would have worked as an IFA until their 55th birthday but no longer as a consequence of the index incident.

The Claimant was awarded £285,685.08 in damages, beating the Defendant’s Part 36 offer but only recovering 36% against the Claimant’s Part 36 offer.

Costs consequences

The fact that the Claimant had no option other than to proceed to trial in order to recover damages, and that he had beaten the Defendant’s Part 36 offer gave rise for the Claimant to seek payment of his reasonable costs in addition, in line with CPR 44.2(2)(a).

The Defendant contested this as they argued that the Claimant’s exaggerated claim took up a significant amount of time.

Justice Farbey agreed with the Defendant’s perspective and while the Claimant had capacity to litigate, he chose to put an exaggerated claim to the court that directly lead to an increase in unnecessary expense. Consideration was also given to the Defendant’s Part 36 offers or rather the failure to pitch a Part 36 offer at the true value of the claim. The Defendant’s own expert was of the view that the Claimant would have likely worked to the age of 55 but for the incident. Had the Defendant made a reasonable Part 36 offer in line with their own expert’s view, they would have enjoyed costs protection at trial from such an exaggerated claim.

Justice Farbey applied a reduction of 15% to the Claimant’s costs entitlement as she maintained this was broadly appropriate. The deduction was based on the facts of the claim and, given the length of the claim, the 15% reduction was meaningful in terms of the quantification of costs.

Analysis

This case only highlights the importance of correctly quantifying a claim as exaggeration, even in the absence of dishonesty, can have adverse effects even if the Claimant is successful. The Court would have had in mind not only the increase of costs to the Defendant as a direct result of the exaggeration but also the spirit of the overriding objective. The Court would have allocated significant resources to a claim that was disproportionate to it’s true value.

When faced with a claim that is exaggerated, the Claimant’s solicitor will be best placed to manage their client’s expectations and should aim to encourage them to make a reasonable and realistic Part 36 offer that would have offered costs protection had they been required to proceed to trial.

Likewise, the Defendant’s solicitor should also be encouraged to make a realistic Part 36 offer based on the true value of the exaggerated claim.

The tragic reality in this matter was that both the Claimant and the Defendant had failed to consider the true value of the claim, with the Claimant only recovering 36% of their Part 36 offer and the Defendant making an offer that transpired to only be 38% of damages. The Claimant should have identified that they would have significant difficulties in proving the upward trajectories of the Claimant’s earnings and the Defendant should have assessed that the Claimant would have been able to work to the age of 55 but for the index incident, particularly as this was the opinion of their own expert.

Had either party made a Part 36 offer based on the true value of the claim, not only was there potential for the claim to settle without incurring the costs and resources of the trial, but the protection offered to either party would have altered the costs consequences of the claim drastically.