The leading Judgment was delivered by Coulson LJ with the Lady Chief Justice and Asplin LJ agreeing. This was a second appeal, a first appeal having been refused by Smith J.

This RTA case was one that was dealt with on its own facts.  However, the interesting point arises as to how a court should deal with costs when fundamental dishonesty allegations have been made, but were not successful.

Background

 

This case involves a RTA that occurred all the way back in May 2017. The three Claimants (now appellants) claimed that the First Defendant drove his van into their car. Conversely, the First Defendant alleged that the First Claimant pulled out from a parked position into the side of his van. The Second Defendant was the insurer of the First Defendant.

Fundamental Dishonesty – Pleadings, Amendment and Trial

 

The Defence raised issues of credibility and honesty, but did not plead fundamental dishonesty.

An Application to amend the Defence to include allegations of Fundamental Dishonesty was refused at a CCMC, with the Judge (who ended up being the trial judge) commenting at that stage that:

‘The matters put forward, in my judgment, come nowhere near what is required to be able to plead fraud and/or fundamental dishonesty. They are matters as to the happening of the accident and I should say that in road traffic accident claims it is often the case that the parties’ accounts are entirely different but this is what the court is faced with day in, day out.’

It was accepted that the allegations could be raised in any case following cross-examination of the Claimants, and did not need to be pleaded.  The court reminded practitioners, though, that such allegations should only be made if appropriate to do so and in accordance with professional obligations.

At trial the Claimants succeeded.  Neither party was found to be dishonest, but rather that recollections differed.  It was not put to the First Defendant that he was dishonest.

Costs – the background

 

The appeal in this case lay in relation to how costs should be dealt with.

The Claimant conceded that costs up to the point Fundamental Dishonesty allegations were first made should be on the standard basis.

Further, there was a Part 36 offer made by the Claimants, with Judgment being more advantageous to the Claimant.  It was conceded by the Defendants that costs from such point should be dealt with on the indemnity basis.

However, there was a period in between these two points which the Claimants argued also should be on the indemnity basis, on the basis that the fundamental dishonesty allegation had failed.

At trial, the Judge did not award indemnity costs for this period.

Findings

 

Coulson LJ found that an award for indemnity costs was always a significant victory for a receiving party.  It was noted that budgets at CCMCs can be adjusted to take into account allegations of fundamental dishonesty.

The Court also reminded itself of the ‘very wide’ discretion as to costs for trial judges, and so the difficulty for any appellant as to appeals in relation to costs.

 

 

Firstly, the Court found that there was no presumption, or ‘starting point’, which set out that failed fundamental dishonesty allegations would attract indemnity costs.  The court was wary of creating rules which were not found in the CPR.

The ultimate decision is for the trial judge on all the facts of the case.

Secondly, it was found that the trial judge’s Judgment did cover the relevant tests and did set out sufficient detail.  It was noted that the Judge had all the material facts having heard the case for the previous 2 days.  Submissions on the cost point were short, and to the point, as was the Judgment.  It was noted that this was not a case where such fundamental dishonesty allegations were accompanied by evidence from investigators, covert footage or similar.  The case essentially continued as for any other contested RTA case.  This was an important reason for the trial Judge coming to the conclusion she did.

Thirdly, Coulson LJ did not find that the trial judge’s finding was perverse.  The trial judge did give a number of reasons which may have supported the awarding of indemnity costs, but ultimately decided that the ‘high hurdle’ for indemnity costs had not been met.

It was noted that other Judges may have come to a different view (which Coulson LJ stated would have included him), and although criticism was made of the Defendants, the view which the trial judge came to was within the width of discretion allowed to her.

However – there was a warning

 

So although the appeal was not successful, a warning was given by Coulston LJ:

“… But nothing that I say there is intended to detract in any way from this statement of the obvious: that, because the making of a dishonest claim will very often attract an indemnity costs order against a claimant, a failed allegation of dishonesty will very often lead to the making of an indemnity costs order against the defendant, on the simple basis that “what is sauce for the goose is sauce for the gander”: see Tomlinson LJ in Manna v Central Manchester University Hospitals NHS Foundation Trust [2017] EWCA Civ 12; [2017] 1 Costs L.R. 89 at [42]. A defendant who makes allegations of this kind therefore runs a very significant risk that, if the allegations fail, indemnity costs will be awarded against them.” (my emphasis)

Lady Chief Justice

In addition to the leading Judgment, the Lady Chief Justice added a further, short, warning.

It was observed that both parties were ‘far too ready to throw unnecessary and serious allegations against each other’.  The case ought to have been approached on the basis of a relatively straightforward RTA case involving conflicting witness evidence.  It was repeated that an ‘unnecessarily aggressive approach to litigation is unacceptable’.

Conclusion

 

The ultimate decision as to whether indemnity costs should be awarded in such a scenario is for the trial judge, based on all the circumstances of the case.

However, the warning that failed FD allegations would ‘very often lead to the making of an indemnity costs order’ is one to be taken seriously.

Accordingly, care should be made with regards to raising such allegations.