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Editorial: Dishonesty, Allocation and Fixed Costs - Aidan Ellis, Temple Garden Chambers

27/07/15. The interplay between fixed costs and qualified one way costs shifting creates an interesting imbalance with regard to low value cases in which dishonesty is alleged. If a new personal injury is allocated to the fast track, the fixed costs regime will apply and, absent exceptional circumstances, the Claimant’s profit costs on a road traffic accident claim which is resolved at trial will ordinarily be limited to £2,655 plus 20% of damages. Should the Defendant succeed, its costs ordinarily cannot exceed the amount which would have payable to the Claimant in costs and are unenforceable anyway due to one way costs shifting. However, if the Claimant is found to be fundamentally dishonest, not only do the costs become enforceable but they can also be assessed on the standard basis without reference to fixed costs (see CPR 45.29F(10)). The result is that where fundamental dishonesty is the only defence (leaving out of account those cases in which the Defendant succeeds because the Claimant has failed to prove his case), if the Claimant succeeds he is restricted to fixed costs but if the Defendant succeeds it is entitled to costs in full.

This does appear to create an imbalance in the resources which the parties can deploy (or at least hope to recover) in relation to fundamental dishonesty. One response might be that the Claimant is only actually penalised if he/she is found to be dishonest. But in cases where the Claimant is not found to be dishonest, he/she may have expended considerable resources in rebutting the Defendant’s allegations which the fixed costs regime does not allow him/her to recover. Cases in which dishonesty is alleged do require more work; for instance, the disclosure typically sought where dishonesty is alleged is significantly more onerous than in a straightforward liability dispute. Under the current regime, only the Defendant can automatically recover those costs.



Is there any solution to this problem? The imbalanced costs position lends some weight to the old argument that cases in which dishonesty is alleged should be allocated to the multi-track. But the rules provide that cases that are fast track in value should be allocated to the fast track unless “it cannot be dealt with justly on that track”. Whilst it is arguable that the rules create a inequality of arms such that a fair hearing cannot occur on the fact track, the rules impose a high threshold before the Court will allocate to the multi-track. Moreover, courts have grown accustomed to hearing such allegations on the fast track and there is likely to be an institutional reluctance to allocate all cases in which dishonesty is alleged to the multi-track.

An alternative is to argue that allegations of dishonesty constitute exceptional circumstances such as to allow the Court to award the Claimant more than fixed costs pursuant to CPR 45.29J. This possibility cannot be ruled out; if the Defendant had alleged dishonesty in such a way that numerous factual allegations, new witnesses and tangential points had to be investigated, that might on the facts be regarded as exceptional. Claimants considering such an application might do well to place the Defendant on notice at an early stage. But not every case in which dishonesty is alleged can be described as exceptional and hence additional costs are not likely to be awarded routinely.

Finally, the Rules might be amended to provide that fixed costs do not apply where dishonesty is alleged. This would remove any imbalance between the parties. However, it would not always be straightforward to determine whether dishonesty was alleged; many defences put the Claimant to proof but expressly or implicitly reserve the possibility of arguing dishonesty in relation to costs. In any event, such a change would require amendment to the fixed costs regime, which is unlikely to be welcome in a climate in which the political desire is to bring more cases rather than less cases within a fixed costs regime.

Aidan Ellis
Temple Garden Chambers

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