ALLEGATIONS OF DISHONESTY LEAD TO INDEMNITY COSTS AGAINST THE DEFENDANT: THE HIGH RISK STRATEGY OF BUILDING HIGH WALLS ON LOW FOUNDATIONS
In the previous post I reported on the decision in Kilbey -v- Arien Contractors Ltd (KilbeyJudgment) and noted that there had been an award of indemnity costs against the defendant. I am grateful to barrister Hannah Godfrey for sending me a copy of her note on the subsequent judgment on costs. (One feature of this judgment, also noted by the claimant’s solicitors, is that the allegations of dishonesty were reported in the press as the trial progressed as being already established. It would be interesting to see whether any retraction was made).
IN THE HIGH COURT OF JUSTICE Claim No. HQ17P02647
QUEEN’S BENCH DIVISION
B E T W E E N
ARIEN CONTRACTORS LIMITED
CLAIMANT COUNSEL’S NOTE OF EX TEMPORE JUDGMENT
OF HIS HONOUR JUDGE MICHAEL YELTON
DETERMINING COSTS APPLICATION BY THE CLAIMANT
13 DECEMBER 2019
On hearing Counsel for the Claimant and Counsel for the Defendant:
I have earlier handed down judgment for the Claimant of about £217,000. The schedule of loss claimed more than that, but for reasons I give in my judgment I did not think that was made out although it was certainly supported by medical evidence.
The Defendant decided, at a late stage, to assert that the Claimant was being dishonest and did so assert explicitly for the first time in a counter schedule dated 28/10/19 shortly before trial.
The Defendant pursued allegations of dishonesty and I rejected them completely. I made the point in my judgment that that case was not supported by any medical evidence from the Defendant or by any other evidence. I rejected the Defendant’s submissions made in reliance on the surveillance and social media. One of the consequences of that (the assertion of dishonesty) was that there was widespread reporting of those allegations as if they were already established.
The Claimant says no sensible offer was made by the Defendant before trial and says he should have his costs on the indemnity basis on two main grounds:
(1) the offer history; and
(2) The manner in which the allegations of dishonesty were pursued.
The Claimant made an offer to settle for £175,000 in 2017 and made it clear that it would be withdrawn as it was made at a time when there was a window of opportunity to settle.
The Defendant didn’t settle, made a much lower offer then offers went quiet until shortly before trial the Claimant made an offer much higher than I have awarded and then the Defendant an offer of £150,000, about 50% less than the amount I have awarded. Then on 26/11 the Claimant made a lower offer, but still considerably higher than what I have awarded.
In a case where liability is not in dispute it is for a Defendant to protect its position by making suitable Part 36 offers. That’s what Part 36 is there to do and the Defendant did not do that. Offers were made but were considerably too low.
In my judgment I was quite critical of the Defendant for the way they pursued allegations of dishonesty when not supported by medical evidence particularly as the Defendant’s expert Dr Padfield was categorical when cross examined by counsel for the Claimant that he did not think that the Claimant was dishonestly exaggerating.
That was a high risk strategy by the Defendant, building high walls on low foundations.
I was referred to various authorities regarding the discretion to award costs on the indemnity basis, but the general propositions I think are agreed: that it is a matter for the court’s discretion but the court should not exercise that discretion unless there is something taking the case ‘outside the norm’.
It is clear these cases turn on their facts. The most relevant case I was referred to is Clarke v Maltby (Costs)  EWHC 1856 (QB). The Defendant in that case decided to adopt a similar approach, made allegations of dishonesty against the Claimant, as she was a city solicitor therefore there would have been further repercussions and she might have been subject to professional misconduct proceedings. The Claimant is not a solicitor but allegations were made against him. In that case it was said that fraud should have been pleaded and I said that in my judgment in this case. I have been reminded of the Court of Appeal case of Howlett and another v Davies and another  1 WLR 948, even after that the fact remains that parties are entitled to know the case vs them. The Claimant should have his indemnity costs after service of the counter schedule on 29 October 2019 (allowing one day for service). The Defendant decided to make allegations of dishonesty without in my judgment having a sufficient basis or bases for making those allegations. For those reasons, the Defendant must pay the Claimant’s costs on the standard basis to 29 October 2019 and thereafter on an indemnity basis.
Noted by Hannah Godfrey, Counsel for Claimant
(The highlighted text were not in the original note, I have made these for ease of reference).