The recent case of Fox v Foundation Piling Ltd  has delivered a blow to Defendants by finding that a Claimant who grossly exaggerated his claim for damages should still be entitled to recover all of his legal costs.
CPR Part 44.3 allows the Court to exercise it's discretion as to whether costs are payable by one party to another and invites the Court to consider all the circumstances of the case; including the conduct of the parties and whether any aspect of the claim has been exaggerated.
Historically, Defendants could be advantaged by this flexibility by obtaining favourable costs orders at the conclusion of a case if it had been shown that the Claimant had exaggerated the value of their claim. This is demonstrated in the case of Painting v University of Oxford  where the Defendants were able to prove that the Claimant had exaggerated her injuries through the use of surveillance. The Claimant had initially valued her claim at £500,000 and it was eventually settled at just over £30,000. Whilst the Claimant was awarded her costs at the first instance, this decision was set aside on appeal and the Court held that the Claimant would be required to pay a significant proportion of the Defendant's costs.
In Fox v Foundation Piling Ltd, the Claimant was involved in an accident at work which caused an injury to his back and he submitted that his claim was worth £280,000. The Defendant obtained video surveillance showing that the Claimant's injuries were not as severe as had been pleaded and that he had exaggerated his symptoms during examination by a medical expert. The case eventually settled in the sum of £31,702, which was only slightly higher than the Part 36 offer of £23,550 that the Defendant had made previously. At first instance the Court held that the Defendant was the successful party under the rules of CPR Part 36 and was therefore awarded costs. The Claimant successfully appealed this decision.
The reason given for this reversal was that the Claimant had recovered more than the Defendant had offered and was therefore the successful party under CPR Part 44.3. Lord Justice Jackson stated that the Claimant had not been dishonest and was accordingly entitled to recover his costs. Merely exaggerating his claim did not affect this stance as the onus had been on the Defendant to protect their position by making an appropriate Part 36 offer to settle at the earliest possible stage.
Fox v Foundation Piling Ltd has highlighted how the Courts are now veering away from the discretionary approach favoured in previous cases in order to find that, as a general rule, Claimants should be entitled to recover their legal costs, even when the claim is exaggerated. The only exception to this appears to be if the Claimant has been dishonest; however the burden of proving that this is the case will undoubtedly fall on the Defendant.
Whilst this is certainly an unwelcome decision for Defendant solicitors it has emphasised the importance of a Defendant making a Part 36 offer at the first opportunity in order to secure costs protection.
In his decision, Lord Jackson lamented the fact that there are a vast amount of cases being appealed solely on the issue of costs. He confirmed that the new CPR 36.14 (1A), coming into force in October 2011, intends to clarify the confusion surrounding CPR Part 36 and will provide a clear and unambiguous framework within which cases can be settled.