Summary

John Dagnall appeared for Christine Laird (“CSL”) was employed as Chief Executive of Cheltenham Borough Council (“CBC”) from 2002 until August 2005 when her employment terminated as a result of ill-health depression. Subsequently she was sued in misrepresentation with the employer alleging that she had fraudulently, and if not then negligently, made misrepresentations in a Medical Questionnaire. At trial it was held that there had been no misrepresentations, no fraud and no negligence. However, the Judge held that certain (purely) defensive allegations raised by CSL (relating to causation, set-off and accounting for benefits obtained by CBC resulting from her conduct) would have failed. In relation to costs, the Judge held that the points taken by CSL were all reasonably and properly arguable but that she had “thrown the kitchen sink” and that even allowing for some leeway in the light of the seriousness of the case against her, her costs recovery against CBC should only be 65% of her costs on the standard basis. CSL appealed the costs order contending that an individual defendant facing such a destructive claim in fraud, and provided that they were acting in good faith and only taking reasonably arguable points, should be entitled to all of their costs.

Facts

This approach will cause real difficulties for defendants and those advising them. While a successful claimant can regard a costs shortfall as part of the price for success; a defendant will have to be told that to run all of their genuine and reasonably arguable points may result in overall success being negated by a substantial costs liability to their own lawyers (quite apart from the usual difference between assessed and actual costs).

Held

While the rule prior to the introduction of the CPR would have been that a defendant facing such a serious fraud claim would have been entitled to all of their costs notwithstanding failing on numerous potential issues provided that they were each taken in good faith and reasonably arguable, that was no longer the law. The Court required proportionality and would adopt an “issues-based” approach even though it might be more relaxed in favour of the successful defendant. Accordingly, the Judge’s order would be upheld.