Neutral Citation Number: [2011] EWHC 90214 (Costs)
Case No: HQ08X02033
SCCO Ref: CL/1002891
IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE

Clifford’s Inn, Fetter Lane
London, EC4A 1DQ

Date: 18 February 2011 

Before :

MASTER LEONARD, COSTS JUDGE
- - - - - - - - - - - - - - - - - - - - -
Between :

	HANY YOUNAN 	Claimant	
	- and -		
	FIRST GROUP PLC	Defendant	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Mr Roger Mallalieu (counsel instructed by Irwin Mitchell) for the Claimant
Mr Simon Gibbs (costs lawyer instructed by Kennedys) for the Defendant

Hearing date: 20 December 2010
- - - - - - - - - - - - - - - - - - - - -
Judgment

Master Leonard: 

1.	In this action the Claimant sought damages from the Defendant following a road traffic accident on 11 December 2002, in which the Claimant suffered cervical and lumbar injuries. On 1 April 2009, after a two day trial, HH Judge Richard Seymour QC (sitting as a Judge of the High Court) gave judgment for the Claimant on the issue of liability for damages to be assessed, the Defendant to pay the Claimant’s costs of the action to the date of judgement. A counterclaim by the Defendant was dismissed. 
2.	In October 2010 the action concluded with a consent order settling quantum and providing for the Defendant to pay the Claimant’s costs of the action. This assessment is of two bills, the first representing the Claimant’s costs as claimed up to 1 April 2009 and the second the Claimant’s costs thereafter. They total £225,218.61 and £20,608.90 respectively.
The Issues 
3.	On the assessment of the Claimant’s costs a number of preliminary issues arose. These were: 
i)	Whether the Claimant’s costs should be reduced by a given overall percentage to reflect misconduct on the part of the Claimant. The Defendant relies on two key allegations: first that the Claimant exaggerated his claim and second that he procured fabricated evidence from a witness to support his case on liability. 
ii)	Whether it was reasonable for the Claimant to instruct leading counsel, or whether the decision to do so was made in consequence of the exaggeration of his claim, so that the costs so incurred should be disallowed.
iii)	Whether a conditional fee agreement dated 3 April 2003 between the Claimant and Percy Hughes & Roberts was rendered unenforceable by any breach of Regulation 4(2)(e)(ii) of the Conditional Fee Agreements Regulations 2000.
iv)	Whether it is necessary for the Claimant to make an application for Relief from Sanctions and if so whether it should be granted.
v)	The level of success fees claimed by Solicitors and Counsel for the Claimant. (As the accident occurred in December 2002, the fixed fee regime for Road Traffic Accidents occurring from 6 October 2003 does not apply.)
The History of the Action 
4.	Following the accident the Claimant instructed Percy Hughes & Roberts of Birkenhead, who acted under a standard AAH (Accident Advice Helpline) conditional fee agreement dated 11 April 2003.    A letter of claim was written on 17 April 2003 addressed to “First Bus Co”. The letter of claim was acknowledged by First Capital East Ltd, who on 1 May 2003 confirmed that the matter had been passed to their claims handlers, Transportation Claims Ltd. In a letter of 11 July 2003, Transportation Claims Ltd stated that they were acting “on behalf of First Centre West”. 
5.	In a letter of 9 March 2005 addressed to Percy Hughes & Roberts, Transportation Claims Ltd confirmed that “… negligence is no longer in dispute subject to causation”.  The letter referred to their client as “First Centre West”.   
6.	A claim form was issued in the Birkenhead County Court on 8 December 2005, just before the expiry of the limitation period, naming the Defendant as “First Group”.  In a letter of 13 February 2006, Claims Management Group Limited (CMGL) advised that they had been instructed by Transportation Claims Ltd.  
7.	The Claim form, together with brief Particulars of Claim indicating that a full schedule of damages would be served in due course, was served by post under cover of a letter dated 4 April 2006 addressed to “First Group” at “Station Road, Wilsden Junction London WN10 4XB”.     The claim form limited damages to £5,000. The Particulars of Claim specified a claim for damages exceeding £5,000 but not exceeding £15,000. 
8.	According to the certificate of service on file, the claim form and Particulars of Claim were not accompanied by any medical report, schedule of loss or the response pack required by CPR 7.8(1).  The covering letter was also incorrectly addressed; apart from the misspelling of “Willesden Junction” the post code should have been “NW10”.    The letter and its enclosures do not appear to have been copied to CMGL at the time of sending.
9.	The addressee did not respond to the letter of 4 April 2006, which may well never have been received. However, a request for default judgment made by Percy Hughes & Roberts on 19 May 2006 was refused by the court on the basis that there were “no Particulars of Claim or medical report on file”. 
10.	In July 2006 the Claimant changed his solicitors. He instructed Irwin Mitchell, with whom he signed a conditional fee agreement dated 28 October 2006.    
11.	After obtaining the file of Percy Hughes & Roberts, on about 23 August 2006 Irwin Mitchell notified CMGL that they had taken over the claim. They wrote to CMGL enclosing a copy of the letter of 4 April 2006 with (unspecified) enclosures.  Irwin Mitchell offered 28 days for CMGL to instruct solicitors, failing which they warned that they would renew the application for judgment in default. That letter and several reminders were ignored.   
12.	Accordingly on 5 November 2006 Irwin Mitchell obtained default judgement for the Claimant for damages to be assessed. Kennedys were then instructed by the Defendant. On 22 January 2007 directions were given, counsel for both parties attending. The claim was allocated to the multi-track and, by agreement, transferred to Central London County Court.
13.	By the time an updated schedule of costs was served by the Claimant on 14 August 2007, the quantum of claim included a very substantial loss of earnings claim, capable of exceeding £1,000,000. The Claimant’s case was that shortly before the accident he had entered into a contract with Green Creation, an Egyptian trading company, to act as technical director at a starting net monthly salary of £5,200, and that he had lost that position as a result of the injuries he had sustained in the accident.
14.	In the meantime, on 31 July 2007, the Claimant served his witness statements.    These included a statement from one Mr Safarpour of 18 May 2007 (mis-dated 18 May 2008 by Mr Safarpour). This conflicted with a previous (albeit unsigned and undated) statement of Mr Safarpour provided on a standard form to Norwich Union in March 2003. In that document he had confirmed that he did not know the Claimant and that he had witnessed the accident, which was the fault of the Defendant. In his statement of 18 May 2007 he confirmed that he had known the Claimant for over 12 years, that they were close friends, and that he did not witness the accident.    
15.	This was significant because Mr Safarpour’s unsigned statement had been sent by Percy Hughes & Roberts to Transportation Claims Ltd with a letter dated 9 May 2003, inviting an admission of liability in the light of what appeared to be independent eye - witness evidence. 
16.	On 24 August 2007 Kennedys wrote to Irwin Mitchell referring to the discrepancies in Mr Safarpour’s evidence. Irwin Mitchell obtained a second witness statement from Mr Safarpour dated 7 October 2007. That statement clarified his position in that he confirmed that he had witnessed the accident and gave more detail of the circumstances, but did little to address previous discrepancies.  
17.	It would appear from the correspondence between the parties that another accident/enquiry form may have been submitted to the Westminster Traffic Unit dated 20 January 2003, in which Mr Safarpour confirmed that he had known the Claimant for some time. That document had not been seen by the Defendant at the time. I have not been able to identify it. It is not referred to in His Honour Judge Seymour QC’s judgement on liability, referred to below, which considered Mr Safarpour’s evidence in some detail. For those reasons, and because it would not evidently have been of much assistance in addressing concerns about discrepancies in key aspects of Mr Safarpour’s evidence, I do not treat it as material.
18.	In September and October 2007, Kennedys obtained surveillance evidence which showed the Claimant moving freely and walking distances of about a mile, in direct contradiction to the evidence he had given (in his witness statement and to medical experts) about his physical state of health.    
19.	Kennedys wrote again to Irwin Mitchell on 6 November 2007 stating that the Defendant’s admission of liability had been made promptly after receipt of Mr Safarpour’s first statement and indicating that that admission had been made n reliance upon Mr Safarpour’s purportedly independent eye witness account of the accident. 
20.	In fact, as will be evident from the sequence of events outlined above, some considerable time elapsed between receipt of Mr Safarpour’s undated statement and the admission of liability. The weight attached to Mr Safarpour’s undated statement in making that admission remains unclear. A witness statement by a Mr Jones incorporating a rather bald assertion to the effect that the Defendant had made its admission on the basis of Mr Safarpour’s first statement was not relied upon at the liability trial. 
21.	Kennedys also enclosed with their letter of 6 November 2007 copies of the surveillance evidence. They stated that they would now be instructing their own psychiatric and orthopaedic evidence and expressed their client’s grave concerns at the suspicion that “a fraudulent claim has been presented to our client”.     
22.	Kennedys advised that the Defendant was considering an application to resile from the admission of liability on the basis that the Defendant had been deliberately misled into making it, amending the defence to allege fraud, and taking the matter to trial in order to cross-examine the Claimant and Mr Safarpour under oath.   They then added:
“In the event that the court establishes that your client or Mrs (sic) Safarpour have committed perjury then the strongest possible action will be taken by our client against them.”
23.	Kennedys confirmed that their client was considering seeking an order for repayment of an interim payment previously made, and: 
“… in the event that our client’s suspicions are proved to be correct, seeking an indemnity costs order against your client and those who have acted for him.   We believe that the discrepancies in the evidence have been clearly within the knowledge of those who have acted for the Claimant in this case but that it only became clear to the Defendant upon exchange of witness statements.   The court will need to consider whether any solicitor acting for the Claimant should have noted the misleading information and acted to remedy it by drawing it to the Defendant’s and the court’s attention.”
24.	In June 2008, the Action was transferred to the High Court. Master Fontaine, on the application of the Defendant, set aside judgement, ordered repayment of an interim payment, gave permission to serve an amended Defence and gave directions for trial of the preliminary issue of liability. Master Fontaine’s order was dated 26 September 2008 but it appears to have been sealed on 20 October 2008.
25.	Paragraph 4 of Master Fontaine’s order read; “…Preliminary issues shall be tried between the Claimant and the Defendant as…to whether or not the Defendant is liable to the Claimant…and…issues as to the Claimant’s credibility…”
26.	Paragraph 9 of Master Fontaine’s order reserved the costs of the Defendant’s application to the Trial Judge.
27.	The amended Defence relied upon the evidence of Mr Shaw, the Defendant’s employee and the driver of the bus with which the Claimant’s car had collided, invited the court to conclude that Mr Safarpour had lied, asserted that (if so) there must have been an element of collusion with the Claimant and invited the court to consider whether there had been contempt of court or an attempt to pervert the course of justice.    
28.	The Defendant also alleged that the evidence produced by the Claimant in support of his claim for loss of earnings was fraudulent.  
The Judgment of HH Judge Richard Seymour QC on liability
29.	On 1 April 2009 His Honour Judge Seymour QC handed down two written judgments: first on liability, taking into account the challenges raised by the Defendant in relation to the credibility of the Claimant, his witnesses and his documentary evidence and second (following written submissions) on the appropriate order for costs in the light of his findings.    
30.	In his judgment on liability, the learned judge made the following findings (I shall refer, in relation to each finding, to the relevant paragraphs of his judgement). 
31.	He accepted the Claimant’s account of the accident and rejected that of the Defendant. In particular he found the evidence of Mr Shaw to be unsatisfactory.  His conclusion was that key aspects of the evidence of Mr Shaw had been exaggerated. Notwithstanding his “considerable” reservations about some parts of the evidence of the Claimant, he preferred his evidence to that of Mr Shaw (paragraphs 85 to 88).
32.	The Claimant had indeed entered into a contract of employment with Green Creation and that the evidence produced by the Claimant in support of that assertion was genuine. Far from the Claimant’s credibility being damaged by any finding of forgery, it was enhanced by the acceptance of his evidence on this point (paragraph 57). In coming to that conclusion the learned judge had occasion to comment upon peculiarities in the evidence relied upon by the Defendant in support of the allegation of fraud, for example that two very similar statements of their witness Mr Mansour Mansour appeared to bear different signatures. 
33.	The inconsistencies in Mr Safarpour’s witness statements justified a sceptical view of the evidence of the Claimant in assessing his account of how the accident occurred, but in the absence of cross-examination it was impossible to do more than speculate as to the reasons for the inconsistencies, which could have been the result of fabrication or simply of language difficulties (paragraphs 65 and 66).   
34.	In relation to the allegation of exaggerating his claim for damages it was possible to conclude, as the Defendant submitted, that the Claimant was prepared to say whatever he considered necessary in order to advance such a claim.   However, it did not inevitably follow that a person who exaggerated his disabilities for the purpose of enhancing an award of damages was congenitally incapable of telling the truth, or that he must be telling lies about the circumstances of his accident. In consequence it was right to approach his evidence with caution and a healthy degree of scepticism (paragraphs 74 and 75). Nonetheless he preferred his evidence, in relation to the circumstances of the accident, to that of Mr Shaw.
The Judgment of HH Judge Richard Seymour QC on costs
35.	In his judgment on costs, the learned judge considered a number of submissions by the Defendant in relation to the court’s jurisdiction under CPR 44.3(4)(a), 44.3(5)(a),(c) and (d) and 44.3(6), which provide for the court, when exercising its jurisdiction as to costs, to take into account the conduct of the parties, the manner in which a party has pursued or defended his case, a particular allegation or issue,  whether a successful Claimant exaggerated his claim.  
36.	The Claimant made submissions in response, but I shall outline only the Defendant’s submissions here because it is necessary to understand what was put by the Defendant to the trial judge in relation to costs, how he dealt with those submissions and the extent to which the Defendant’s Points of Dispute repeat them. 
37.	Generally the Defendant sought an order for costs on the issue of liability only, costs in relation to liability and quantum together to be determined when both issues had been decided. More specific submissions were as follows.
38.	The court should make a positive finding to the effect that Mr Safarpour had colluded with the Claimant to boost the evidence in support of his claim. Accordingly, he should be deprived of any costs on the issue of liability.    
39.	The costs of the application to resile from the admission of liability having been reserved to the trial Judge, the Defendant, having acted reasonably in bringing that application in response to the evidence of Mr Safarpour, should have its costs of and attributable to that application in any event.     
40.	The Defendant ought not to be required to pay any costs in respect of Mr Safarpour’s involvement in the case, because he did not attend court to give evidence and if he had, he would have had to accept that his evidence was false and misleading.   The Claimant should pay such costs to the Defendant.   
41.	The Defendant should not have to pay the costs attributable to the involvement of Mr Hammond, another witness for the Claimant. Mr. Hammond’s evidence was disputed by the Defendant. He attended court, but left it without permission and without giving his evidence.    
42.	All costs relating to Green Creation should be deferred until the trial on quantum because they were directly relevant to quantum, and only indirectly relevant to liability. The Claimant would not be prejudiced by such an order, whereas there could be serious prejudice to the Defendant if it appeared that there was never a contract between the Claimant and Green Creation. 
43.	Costs in relation to medical evidence should be limited to the cost of the expert’s unnecessary attendance at court, which the Defendants’ solicitors blamed upon the Claimant (and vice versa). 
44.	The Claimant had not accepted the effect of the Defendant’s surveillance witness sufficiently promptly and so should bear the costs of his intended attendance at the liability hearing (his evidence being primarily relevant to the issue of quantum).    
45.	There should be no order for costs in relation to preparation of trial bundles, in relation to which both parties made complaint. 
46.	All of these submissions were considered and rejected. These were the learned Judge’s conclusions:
47.	It was not appropriate to draw the conclusions that the Defendant invited him to draw in relation to the evidence of Mr Safarpour nor to deprive the Claimant of costs on that basis (paragraph 3). 
48.	It was appropriate for the Claimant’s advisers to establish what, if anything, of value Mr. Safarpour was able to say (paragraph 5).
49.	 It was necessary to “stand back” and consider whether in all the circumstances the prima facie entitlement of the successful Claimant should be displaced in whole or in part for any of the reasons relied upon by the Defendant, bearing in mind that “the peculiarities in the evidence were not all on the Claimant’s side” (paragraph 16). 
50.	The learned Judge concluded (at paragraphs 18 and 19): 
“… this is a case in which it is appropriate for the court to adopt a robust approach and ask itself essentially whether the successful claimant should be deprived of his prima facie entitlement to costs in whole or in part for any of the reasons urged upon me … I am not persuaded that that is appropriate.    I am persuaded that the appropriate order in relation to the trial on liability is that (the Claimant) should recover all of his costs without any deduction.”
51.	The learned judge’s order of 1 April 2009, giving judgement for the Claimant, provided that 
“…The Defendant do pay the Claimant’s costs of this action to date. Such costs to be assessed forthwith in default of agreement.   For the avoidance of doubt these costs include the preliminary issues listed at paragraph 4 of the Order made by Master Fontaine on 26 September 2008 and the costs of and incidental to the Defendant’s application in paragraph 9 of that Order”. 
52.	On 24 August 2009 the Defendant obtained from the Court of Appeal permission to appeal on costs.  That appeal did not proceed. Instead, on 20 October 2009 a Consent Order was sealed providing for the appeal to be withdrawn and for the Defendant to pay the Claimant the sum of £75,000 (inclusive of interim payments). 
53.	On the first hearing of this assessment I had received what appeared to be a copy of an unsealed consent order purporting to make specific provision for the Defendant to have complete freedom on detailed assessment to raise issues in relation to the Claimant’s conduct. As the final terms their agreement might have some bearing upon my approach to conduct issues I requested a copy of the sealed order, which could not be located either by Irwin Mitchell or on the SCCO file. I finally obtained a copy from Irwin Mitchell, who had obtained it from The Queens Bench Division, on 4 February 2011. On doing so I found that the actual, sealed consent order made no provision for costs other than that “…The Defendant do pay the Claimant’s reasonable cost of these proceedings, to be subject to a detailed assessment on the standard basis if not agreed”.
The Principles Governing the Exercise of the Court’s Powers under CPR 44.3 and CPR 44.5(3)
54.	CPR 44.5 (3) provides for the court, on assessing costs, to have regard to a number of matters including the conduct of the parties.
55.	As to the way in which CPR 44.3 and CPR 44.5(3) work together, in Drew v Whitbread [2010] EWCA Civ 53, at paragraphs 37 and 38, Waller LJ offered this guidance: 
“… 44.3 and 44.5 are intended to work in harmony and it is intended that the parties' conduct (for example) may have to be considered under both. If what is sought is a special order as to costs which a costs judge should follow that obviously should be sought from the trial judge. If it is clear that a costs judge would be assisted in the assessment of costs by some indication from the trial judge about the way in which a trial has been conducted, a request for that indication should be sought…In this case the question of exaggeration was raised before the trial judge. He was expressly enjoined to take the possibility of exaggeration into account under 44.3(5)(d)…That might have led to a special order for costs, e.g. that the claimant should only get 50% of his costs. But the fact that no special order has been made does not preclude the costs judge in assessing costs considering whether the conduct of a party should preclude an award of costs for some particular item. I can see no reason why the costs judge should not consider the effect of such conduct unless some specific finding of the trial judge binds him. Thus a view expressed that exaggeration was not such as to lead to a special order, ought not it seems to me to prevent a costs judge who must have regard to all the circumstances of the case, being entitled to assess what would have happened if a claimant had instructed his lawyers properly.”
The Points of Dispute
56.	The Defendant contends in its Points of Dispute that the Claimant’s costs 
“…should be reduced to reflect the unreasonable behaviour of the Claimant (being the clear exaggeration and probable conclusion (sic) with Mr Safarpour) in accordance with CPR 44.5(3)(a).”   
57.	The Points of Dispute invite the court to reduce the Claimant’s costs by a percentage figure, suggested at “at least 65%”, in addition to specific reductions proposed throughout the Points of Dispute, to reflect that unreasonable behaviour.
58.	On the hearing of this issue, it was conceded that to adopt such an approach at the outset would be incorrect.   The Defendant’s alternative submission was that it is possible, after going through the bill line by line, to apply an appropriate percentage reduction to take account of the Claimant’s conduct (relying on Booth v Britannia Hotels Ltd [2002] EWCA Civ 579). 
59.	Mr Gibbs for the Defendant suggests that it may be inappropriate to attempt an appropriate reduction in relation to conduct solely by reference to individual items because of the difficulty of identifying every item of cost incurred in consequence of such conduct, and refers me to Shirley v Caswell [2001] 1 Costs LR 1 as an illustration to the principle that the court may, on detailed assessment, make issue-based deductions to a successful party’s  costs, as opposed to individual items (in that case, costs of issues abandoned or not pursued at trial.)
Conclusion on Conduct
60.	My conclusion is that there are a number of reasons why I should not make an overall reduction of the sort contended for by the Defendant.
61.	The first is of general application. I accept that the approach contended for was contemplated in Booth v Britannia Hotels Ltd but I cannot identify, in this particular case, any way of applying it without double-penalising the Claimant. I do not accept that it is particularly difficult to identify those items of cost which have been incurred as a result of misconduct. That in my view is precisely what was envisaged in Drew v Whitbread. Having disallowed items unreasonably incurred as a result of misconduct, to make a further percentage deduction would be to disallow costs reasonably incurred. That would subject the Claimant in this case to the “double jeopardy” that the court in Shirley v Caswell sought to avoid.
62.	The second relates to the bill of costs to 1 April 2009. The court’s powers under CPR 44.3 and 44.5 are, as Waller LJ stated, intended to work in harmony and Mr Mallalieu, for the Claimant, does not argue that the Defendant is not entitled to raise the same conduct issues on the assessment. 
63.	It is clear, following Drew v Whitbread, that it is open to a paying party on a detailed assessment to raise issues of conduct, whether or not they have been canvassed before a trial judge. 
64.	It does not necessarily follow that it is appropriate, where the Defendant has failed to persuade the learned trial judge to make any reduction to the Claimant’s costs in the exercise of his powers under CPR 44.3, that I should accept the same arguments to justify an overall reduction (as opposed to the disallowance of specific items) in the exercise of the court’s powers under CPR 44.5(3). It seems to me that it would normally be wrong to do so, if only on grounds of proportionality.
65.	One must also consider what has been alleged, what has been proved, what has not been proved and the effect of those matters on the costs of the action.
The allegation of collusion
66.	The learned trial judge declined on the evidence before him to find that the Claimant had colluded with Mr Safarpour. I am of the view that it would be wrong in principle for me to make any such finding where the learned trial judge, having considered the evidence, declined to do so. If it were not, I would still not make any such finding because I am not in as good a position to determine conduct and credibility issues as was the trial judge and the inconsistencies in Mr Safarpour’s evidence, as the learned judge pointed out, are capable of more than one explanation. This allegation has not been proved.
The Allegation of Exaggerating of the Claim
67.	 The Claimant was accused of exaggerating his claim in two ways; first in fabricating a claim for lost earnings by producing forged documentation, and second in exaggerating his symptoms.  The first allegation was found, at trial, to be without foundation. That is significant, because loss of earnings constituted by far the largest part of the claim. The second bears further examination.
68.	The essence of the medical evidence, as put to the court on the liability hearing by both parties, was this. Physically, the Defendant had been suffering from a degenerative spinal condition which (there was difference of opinion on the specific point) which might have been accelerated by the accident on 11 December 2002.    However, the extent of the physical symptoms complained of by him, in particular severe pain and an inability to walk distances or move freely, were not explicable by reference to his injuries.
69.	The Defendant had also suffered from a long term depressive illness.  There was some uncertainty about the effect of the accident upon that illness, but the discrepancies between his physical behaviour, as revealed by surveillance evidence, and his account of his symptoms could not be explained by reference to his illness.   
70.	The learned trial judge did not have to make any finding to the effect that the Claimant had exaggerated his symptoms, because by the date of trial that was effectively admitted – the medical evidence could lead to no other reasonable conclusion. Counsel’s skeleton opening for the Claimant described it as common ground that he was more able and independent than he was prepared to admit.  
71.	Accordingly the only misconduct which has been established against the Claimant is that he exaggerated his symptoms. It is open to me, in line with the guidance given in Drew v Whitbread, to disallow costs incurred as a result, and I intend to do so.  However the direct impact of such misbehaviour on the costs of the action was limited, for these reasons.
72.	As regards costs to 1 April 2009, any exaggeration of the Claimant’s symptoms in itself had much less impact upon the costs of the action than the Defendant’s response to it when considered together with other suspected misconduct for which, as it transpired, the Defendant had less sound evidence.    
73.	The Defendant’s response to the surveillance evidence obtained, together with the inconsistencies in Mr Safarpour’s evidence and investigations suggesting that the Claimant had submitted fraudulent evidence in relation to loss of earnings was to conclude that his entire case was fraudulent and to defend the claim accordingly.   This proved to be incorrect.
74.	Defendant insurers may very properly take the view that they must mount a vigorous defence to a perceived fraudulent claim. However, that does carry an attendant risk of being proved wrong and of bearing the costs attendant on being proved wrong, which is what happened in this case. 
75.	In contesting liability the Defendant sought to show that the Claimant so lacked credibility that his evidence as to the circumstances of the accident should be disbelieved. In doing so, however, the Defendant itself relied upon evidence which, as the learned trial Judge concluded, was not just inaccurate but, on the part of the Defendant’s key witness, misleading in material respects. As a result, both parties incurred substantial additional costs up to and including the trial on liability. 
76.	That the Claimant reasonably incurred substantial costs in defeating the allegation that his entire case was fabricated is reflected on the order for costs that was made by the learned trial judge. The fact that the Claimant was vindicated in all respects except as to the exaggeration of his symptoms would not be reflected in the overall reduction now contended for by the Defendant. Nor would that fact that it was open to the Defendant to obtain protection against an exaggerated claim by making a suitable Part 36 offer.
77.	By 1 April 2009, the Claimant had effectively admitted that he had exaggerated his symptoms. I do not see any basis for an overall reduction in his costs after April 2009 on that basis.
78.	For all those reasons, my conclusion is that I should disallow appropriate items (or, as the Claimant accepts, groups of items or periods of time) in the Claimant’s bill of costs that can be shown to have been incurred by him as a result of his exaggeration of his physical symptoms, but that it is inappropriate for me to make any overall reduction thereafter. 
Leading Counsel’s Fees
79.	The Claimant first instructed James Bell of counsel. Mr Bell acted under a conditional fee agreement dated 7 March 2007. Mr Bell withdrew on or about 18 February 2009, shortly before the trial was due to begin on 4 March, evaluating the prospects of success at trial at about 20%.
80.	In his place the Claimant instructed Grahame Aldous QC, who in a short period prepared for trial including the drafting of a skeleton opening, an (unsuccessful, given the late hour) attempt to set up a round table meeting  to narrow issues and the provision of key tactical input. He went on to secure a victory for the Claimant in difficult circumstances.
81.	The Defendant objects to the instruction of leading counsel, primarily on the basis that the involvement of leading counsel came about as a direct result of the Claimant’s exaggeration of his claim; a claim for the final settlement sum of £75,000 could never, the Defendant submits, have justified his involvement.
82.	The Claimant responds as follows. First, the allegation of forgery in relation to the loss of earnings claim has been disproved, and that was the most important ground upon which the allegation of exaggeration was based. I regard that as substantially correct; in relation to the stated basis for the greater part of his claim, the Claimant was vindicated. 
83.	Second, the amount for which the claim was finally settled had everything to do with the Claimant’s state of mind and health and nothing to do with exaggeration.  The Claimant lacked the will to continue and the expert evidence on his mental health, in particular a long history of depressive illness, shed doubt upon his ability to sustain the position he had secured with Green Creation. 
84.	Third, leading Counsel was instructed because the Claimant was facing allegations of fraud which threatened his claim, his ATE cover (with consequent potential personal costs exposure) and criminal sanctions. 
85.	Fourth, both sides instructed leading counsel. If it was reasonable for one party, it was reasonable for both.
86.	In the course of the hearing the parties considered and made submissions on the criteria for the instruction of leading and junior counsel outlined by Evans J in Juby v LFCDA and Saunders v Essex CC (unreported) 24 April 2004. Although in this case leading counsel appeared alone, those criteria are relevant and it seems to me that they are substantially met in this case; not least those of the importance for the client, the particular requirements of the case and the need for an experienced and senior advocate.
87.	The Defendant had made it clear that every effort would be made to defeat the claim on the basis that it was entirely fraudulent and that “the strongest possible action” would be taken to visit the consequences of that alleged fraud upon the Claimant and possibly his legal advisers. He had been left without counsel shortly before trial on the basis that his claim did not stand a reasonable chance of success. It might be thought that he did well to find suitable counsel willing to act. It was in my view reasonable for him to instruct leading counsel in those circumstances.
The Conditional Fee Agreement of 11 April 2003 
88.	The CFA between Percy Hughes & Roberts and the Claimant is a standard Accident Advice Helpline client agreement.   As a member of AAH’s Panel Percy Hughes & Roberts, at the relevant time, will have received referrals from AAH. Prior to the assessment the Defendant, in correspondence, requested information on how the Claimant proposed to distinguish between this case and the case of Bevan v Power Panels Electrical Systems Ltd [2007] EWHC 90073 (Costs), in which Master Wright found that an AAH CFA was unenforceable, due to a solicitor’s failure to comply with Regulation 4(2)(e)(ii) of the Conditional Fee Agreement Regulations 2000 in advising the client of a declarable interest in AAH’s ATE insurance policy.  It is common ground that no such advice was given.  Accordingly the Defendant alleges a breach of Regulation 4.
89.	The Claimant’s response is this. First, in Bevan the claimant’s solicitors admitted that they had an interest in recommending the AAH policy to their client.    In this case, no such admission is made.   Second, the decision predates the judgment of Sir Anthony Clarke MR in Tankard v John Fredricks Plastics Ltd [2008] EWCA Civ 1375 in which, giving the judgement of the court, he approved (at paragraph 13) this test to be applied in identifying whether there is an interest in recommending a given policy: 
“For the purposes of Regulation 4, a solicitor has an interest if a reasonable person with knowledge of the relevant facts would think that the existence of the interest might affect the advice given by the solicitor to his client.”
90.	The Claimant also refers to paragraph 21 of that judgment: 
  “… in the absence of particular facts, such as, say, very significant dependence on the scheme for a firm’s revenue (which would have to be examined on the facts of the particular case), there is no conflict of interest between the client and his or her solicitor if the test set out above is applied.”
91.	The decision of the Court of Appeal in Garrett v Halton Borough Council [2006] EWCA Civ 1017 (to which the Defendant also referred in this case) was distinguished in Tankard by reference to the fact that the solicitors in that case were substantially dependent on Ainsworth, referred to as “claims farmers”.  
92.	I have also been referred by the Claimant to Overton v Horder [2008] EWHC 9019 (Costs) in which, on the facts in that particular case, membership of the AAH solicitors’ panel was not, on the test generally applied before Tankard, found to give rise to an interest so as to engage Regulation 4(2)(e)(ii).
93.	It seems to me that it is not, in the circumstances, incumbent upon the Claimant’s solicitors to distinguish their position from that of the Claimant’s solicitors in Bevan. It is incumbent upon the Defendant, on the facts of this particular case, to raise at least a prima facie case for a breach of the rule by reference to the test in Tankard. The Defendant has not done so and in those circumstances there is no evident basis upon which I should consider the possibility of a breach of the Regulation.
Paragraph 32.5 (1) (b) of the Costs Practice direction
94.	On serving Notice of Commencement on 24 September 2009, the Claimant’s solicitors did not, as required by paragraph 32.(5)1(b) of the Costs Practice Direction,  serve a statement setting out the basis upon which the success fees which the Claimant seeks to recover were calculated. In the absence of an application for relief from sanctions made in accordance with the provisions of Part 23 of the Civil Procedure Rules, the Defendant submits that all such additional liabilities must be disallowed.  
95.	The relevant provision is CPR 44.3B, which reads, insofar as pertinent:
“(1) Unless the court orders otherwise, a party may not recover as an additional liability –
…(d) any percentage increase where that party has failed to comply with –
(i) a requirement in the Costs Practice Direction; or
(ii) a court order,
to disclose in any assessment proceedings the reasons for setting the percentage increase at the level stated in the conditional fee agreement…”
96.	The Claimant’s response is that a written application is unnecessary. As the Defendant brought the Claimant’s attention to the failure to comply with the Practice Direction in the Points of Dispute, it was remedied by incorporating such a statement (at least as far as Irwin Mitchell and counsel were concerned) in the Replies to the Points of Dispute on about 11 March 2010. Notice was given in the Replies that application would be made (as it was, without issuing a discrete application) at the assessment hearing if necessary. Subsequently, between March and August 2010, copies of the various CFAs and risk assessments were served and the requisite information supplied. The Defendant has not been prejudiced in any way; any difficulty in formulating appropriate offers of settlement consequent on the default can be compensated in costs.   
97.	Given the amendment to CPR 44.3B in October 2009, which specifically added the words “unless the court orders otherwise” to the otherwise absolute prohibition on recovery without relief from sanction, the Claimant also argues that the court has a discretion to depart from the effect prescribed by CPR 44.3B whether or not an application for relief from sanction is made. In the alternative, no formal written application is required for relief to be granted.    The Claimant refers to the decision of Master Rogers in Choudhury v Kingston Hospital NHS Trust (SCCO, 2 May 2006) in support of that argument. 
98.	In response Mr Gibbs for the Defendant points out that Rule 44.3B and the Costs Practice Direction (at section 10) both continue to refer expressly to application for relief from sanction and argues that the failure to make such an application before the date of hearing has in itself been prejudicial. Because the application has not been made promptly the result is that the prospective recovery of success fees by the Claimant has remained uncertain, making it more difficult for the Defendant to make an appropriate settlement offer.
99.	Mr Gibbs refers me to the decision of Master Gordon-Saker in Manning v King’s College Hospital Trust (SCCO, 1 December 2010), in which the Master considered four separate failures to provide prescribed information. In respect of one of them, failure to serve a notice of funding in accordance with CPR 44.15 (2), he found (at paragraphs 77 and 78) that the Defendant had been prejudiced because that failure, together with the uncertainty as to whether the court would grant relief from sanction made the Defendant’s decisions as to what offers to make for costs more difficult – a difficulty which would have been reduced or shortened had a more timely application been made. He did not think that any prejudice so caused could be accurately compensated in costs.
100.	However one must also refer to the fact that the failures to comply considered by the Master in Manning included a failure to serve statements of reasons for percentage increases in accordance with paragraph 32.5.1(b) of the Costs Practice Direction. The delay in serving was 3 months and although the point had been taken in Points of Dispute dated 16 September 2009 no application for relief had been made until 1 November 2010. Nonetheless (paragraphs 60 and 61) the Master did not consider those particular delays to amount to a serious failure to comply with the Costs Practice Direction and was satisfied that the Defendant had suffered no prejudice from them. He found that the sanction that would be imposed if relief were refused in relation to the failure to give statements of reasons – the complete loss of success fees - would be obviously disproportionate. He also observed (paragraph 43):
 “In my experience points of dispute often raise the argument that an additional liability either has been or should be disallowed as the result of a sanction, but the point is not then pursued by the paying party and the receiving party makes no application for relief. For example, in the present case I suspect that if the only failure had been in not serving statements of reasons with the bill, once the statements had been served the Defendant would not have pursued the argument that CPR 44.3B applied, the Claimants would not have applied for relief from sanctions, and the point would have withered away”.

101.	In Manning Master Gordon-Saker also observed (paragraph 42) that the opening words of CPR 44.3B starts with words which expressly provide that the court may disapply an otherwise automatic sanction. That would appear to be the effect of their addition in October 2009, which otherwise would have had no real purpose. The fact that (as Mr Gibbs points out) the failure to comply in this case occurred before they were added would not in my view be an obstacle to exercising that power once it had been given.
102.	It does not follow that the criteria for relief from sanctions become to any degree less relevant. Though the court would seem to have the option to adopt a more flexible approach to the application of otherwise automatic sanctions than prior to October 2009, the policy reasons behind those criteria and the decisions applying them, must remain of key importance. It has been observed in many cases (including Manning) that relief from sanctions is not to be granted lightly. It follows that any power to disapply them should not be exercised lightly.
103.	CPR 3.9 states:
“(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including –
(a) the interests of the administration of justice;
(b) whether the application for relief has been made promptly;
(c) whether the failure to comply was intentional;
(d) whether there is a good explanation for the failure;
(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol;
(f) whether the failure to comply was caused by the party or his legal representative;
(g) whether the trial date or the likely trial date can still be met if relief is granted;
(h) the effect which the failure to comply had on each party; and
(i) the effect which the granting of relief would have on each party.”

104.	The administration of justice is not adversely affected by the granting of relief for a failure which is not serious, and I do not regard this failure as very serious. The failure was not intentional. It was the legal representatives’ mistake, which may not in itself furnish a “good explanation”, but most such omissions are the result of error. If that were a complete barrier to relief it would rarely be granted. There is no other significant failure to comply.
105.	The real issue is delay. I appreciate that notice of intention to apply was given in March 2010, the Defendant knew that an application would be made and the Claimant had some grounds both for hoping that the point would not be pursued. I do not however regard that as a sound basis for the Claimant’s disregarding the provisions of paragraph 10.1 of the Costs Practice Direction which requires a party in default to apply for relief “as quickly as possible after he becomes aware of the default”. 
106.	Assuming that the words added in October 2009 give the court the power to disapply the sanction, that provision cannot be not intended to provide parties with an opportunity to ignore the very clear criteria and procedures for relief set out in the Civil Procedure Rules and Practice Directions.
107.	As for the timing and manner of the application, Mr Gibbs has referred me to paragraphs 70 to 73 of Master Campbell’s judgement in Metcalfe v Clipston [2004] EWHC 9005 (Costs), in which he pointed out that an application for relief from sanctions must be supported by evidence. 
108.	In Choudhury, Master Rogers took the view CPR 3.9 (2) was no obstacle to the court’s power to dispense with the requirement for an application notice in accordance with CPR 23.3 (2) (b), because he could find the evidence he needed in the material placed before him. Much the same applies here. The application was supported by evidence and whilst presented somewhat informally, it was perfectly sufficient to allow the issues to be identified and a decision made. 
109.	Nonetheless, looked at as a whole the timing and the manner of the application were unsatisfactory. Where, as here, the provisions of the Costs Practice Direction have simply not been observed I do not think it sufficient for the Claimant to argue that any prejudice can be compensated in costs. 
110.	It does not follow that a disproportionate sanction should apply and I would regard the complete loss of success fees as disproportionate. The prejudice complained of by the Defendant can only have had any effect since the date of default. My conclusion is that the sanction should continue to apply between the date of default and the date the application was made.
111.	Accordingly the relief sought is granted except for the period between 24 September 2009 and 20 December 2010 (inclusive). No success fees will be recoverable on costs incurred by the Claimant during that period. 
The Amount of Success Fees
112.	Any objection to leading counsel’s success fee has been withdrawn. There remain objections to both firms of solicitors’ success fees and to Mr Bell’s success fee. In accordance with paragraph 11.7 of the Costs Practice Direction, I will consider those objections in the light of the facts and circumstances as they reasonably appeared to solicitors and counsel at the time the relevant CFAs were signed. In accordance with paragraph 11.8 (1), a key factor will be the risk that the circumstances in which the costs, fees or expenses would be payable might or might not occur.
Percy Hughes and Roberts
113.	The Percy Hughes and Roberts CFA of 11 April 2003 provided for a success fee of 80% of which 5% represented the irrecoverable “postponement element” and 75% the “risk element”. At the time the CFA was signed, it appears that Percy Hughes and Roberts knew, broadly, about the circumstances of the accident and what the Claimant had to say. The CFA was entered into under their standing arrangements with AAH. 
114.	I accept Mr Gibb’s submission that this is a case of the sort considered in Callery v Grey (No 1) [2001] EWCA Civ1117. At the time the CFA signed this was evidently perceived by Percy Hughes and Roberts as a straightforward road traffic accident in which, on the Claimant’s account at least, there was a strong prospect of success.  Under those circumstances a recoverable success fee of 20%, is appropriate. I do not accept that a 5% success fee, as in Halloran v Delaney [2002] EWCA Civ 1258, would reflect the risk in this case of the Claimant’s account of the accident being inaccurate.
Irwin Mitchell
115.	Irwin Mitchell’s CFA of 28 October 2006 is in a standard from modelled on Law Society Conditions. It incorporates a statement of “Reasons for Level of Success Fee” specifying a success fee, payable if the Claimant wins, of “12.5% if the case settles at any time prior to 3 months before the date fixed for trial or the first date of the trial window (whichever is the earlier)…or…100% if the case settles at any time thereafter”.  As the claim went to trial, 100% is sought.
116.	“Win” is defined as follows: “Your claim for damages… is finally decided in your favour, whether by a court decision or an agreement to pay your damages…‘Finally’ means that your opponent…is not allowed to appeal against the court decision…has not appealed in time: or…has lost any appeal”.
117.	 The agreement provides that if a Part 36 offer or payment is rejected on Irwin Mitchell’s advice and not beaten, no basic or success fees will be payable after 21 days from the relevant date.
118.	The Defendant points out that Irwin Mitchell’s assessment of risk refers to risk factors both for the Personal Injury claim and to a potential claim in negligence against Percy Hughes and Roberts, based on their failure to effect valid service of the claim shortly before the limitation period expired. The objections are that the relevant risks involved in relation to those two separate issues have been conflated and that the Defendant should not have to bear the consequences of the negligence (if any) of Percy Hughes and Roberts. 
119.	The CFA expressly covers only the Claimant’s “claim for damages for personal injury” and I agree that any risk factors attributable to a potential negligence claim must be stripped out. If one does so it seems to me evident that the success fee is reasonable. 
120.	At the time the Claimant and Irwin Mitchell signed the CFA there was an admission of negligence subject to causation, apparently by “First Centre West”. That was neither a complete admission of liability nor an admission by the Defendant to this action, though it was incorrectly referred to in the Particulars of Claim as both. Such an admission was of limited value and if anything served to suggest that the wrong Defendant had been served. Further, the claim as served stood to be struck out because it had not been validly served by post to the correct address with the requisite documentation. 
121.	If such an application were to be made it would, on the information available to Irwin Mitchell in October 2006, have had a strong prospect of success, leaving the Claimant with a statute-barred personal injury claim and only the possibility of relying on the exercise of the court’s discretion under section 33 of the Limitation Act 1980 – complicated by the fact that a prior claim had been struck out.
122.	I do not find the Defendant’s references to C v W [2008] EWCA Civ1459 and Fortune v Roe [2010] EWHC 90180 (Costs) to be helpful with regard to Irwin Mitchell’s CFA because both those decisions concerned circumstances where, as a result of an admission of liability, at the time of signing the relevant CFA the possibility that the Claimant would not “win” within the meaning of the relevant CFA was small. That was far from the case here.
123.	The argument that the Defendant should not have to bear the burden of any professional negligence on the part of Percy Hughes and Roberts is not a good one. The issue is the level of risk attendant on the personal injury claim on 28 October 2006, which was substantial, whatever the circumstances that led to it. The only real relevance of any professional negligence is that the possibility of an alternative remedy for the Claimant against his former solicitors might well have made it more difficult to satisfy the court to exercise its discretion under section 33.
Mr Bell’s Success Fee
124.	Mr Bell’s CFA with Irwin Mitchell dated 7 March 2007 is in a format intended for use in Road Traffic Accident claims occurring on or after 6 October 2003. It identifies the “normal fees” to which any success fee is to be added and incorporates the staged success fees provided for in Part III of CPR 45, so that in this case a 100% success fee is sought. It also incorporates standard terms and conditions based on the APIL/PIBA 6 model.
125.	Under paragraph 6 of the CFA counsel is entitled to terminate the agreement in a number of circumstances. They include (sub-paragraph 5) the discovery of information that has been falsified or (sub-paragraph 3) the rejection by the solicitor or client of particular advice, including advice to the effect that the case is likely to be lost or that damages and costs recoverable on success make it unreasonable or uneconomic for the action to proceed.
126.	Part 6 of the CFA deals with counsel’s entitlement to fees. Paragraph 14 provides that if the agreement is not terminated then the solicitor will, in the event of success, pay counsel his normal and success fees. “Success” is defined by reference to the instructing solicitors’ CFA, so that a “win” by that definition is “success” on the terms of counsel’s CFA.
127.	 Paragraph 15 provides that if the amount of damages and interest awarded is less than a Part 36 payment or effective offer and counsel advised rejection, counsel will be entitled to normal and success fees up to the last day for acceptance but only normal fees for subsequent work. If counsel advised acceptance he will be entitled to normal and success fees for all work done.
128.	Paragraph 18 deals with counsel’s entitlement to fees in the event that counsel terminates the CFA. If the agreement is terminated under paragraph 6 then counsel may elect either to receive payment of normal fees within three month, or to await the outcome of the case and receive payment of normal and success fees. 
129.	By 7 March 2007, judgement had been entered for the Claimant for damages to be assessed. Although a default judgement could still be open to an application to set aside it was, or should have, become clear that the Defendant was now unlikely to apply. If the Defendant was going to take any point regarding service or to argue that the wrong party had been served it would have done so by the time Kennedys were instructed rather than (as was the case) discussing appropriate directions for the assessment of damages.
130.	In those circumstances my conclusion is that the risk to counsel of going unpaid was small. The only identifiable risks were that the Defendant would, at a later stage, identify and take points about service or the correct identity of the Defendant, or that for some unforeseen reason the case would collapse. At the relevant time both possibilities can reasonably be described as unlikely.
131.	Mr Gibbs for the Defendant suggested that Mr Bell’s CFA merits a success fee of between about 5%, as in Halloran v Delaney [2002] EWCA Civ 1258, or 20%, as in C v W. It seems to me that C v W offers the better comparison.
132.	C v W concerned a case where at the time of signing the CFA, judgement had been entered for damages to be assessed based on an admission by the Defendant. Moore-Bick LJ (at paragraph 14) described the risk of a withdrawal of that admission, in the absence of some evidence to put it in doubt, as “hypothetical”. It might be unfair to describe the risk of the Defendant’s resurrecting the issue of defective service or defendant identity in this case, by March 2007, as “hypothetical” but it was evidently, by now, small. On the other side of the equation counsel was not (unlike the Claimant’s solicitors in C v W) at risk of going unpaid in the event that the Claimant failed to better a Part 36 offer which counsel had advised him to reject.
133.	In C v W Moore-Bick LJ found the chances of failure overall, as at the date of the CFA, to be 15% (which, to take into account additional risk factors which do not apply here, he increased to 17%).  For the reasons I have given, that seems to me to be a fair assessment of the risk of going unpaid that counsel faced in this case. On the usual “ready reckoner” basis that would justify a success fee of 18%, but no more.
134.	I do not regard as relevant the fact that the success fee in counsel’s CFA was a staged fee. Evidently that formula was not based on any real assessment of risk but on the appropriation of a form designed for the fixed fee regime, and outside that regime the success fee (as Master Campbell pointed out in Fortune v Roe) must be objectively justifiable. 
135.	Nor is the fact that counsel subsequently did, as he was entitled to do, terminate the agreement. That has no bearing on the position at the time the CFA was signed.
Summary of conclusions
136.	In summary:
i)	There is no proper basis for a percentage reduction of the Claimant’s costs, as claimed, on detailed assessment. I shall disallow appropriate items (or groups of items or periods of time) in the Claimant’s bill of costs that can be shown to have been incurred by him as a result of his exaggeration of his physical symptoms. There is no other basis for reduction on the grounds of conduct.
ii)	It was reasonable for the Claimant to instruct leading counsel when he did.
iii)	There is no evidence before me to suggest that the conditional fee agreement dated 3 April 2003 between the Claimant and Percy Hughes & Roberts was rendered unenforceable by any breach of Regulation 4(2)(e)(ii) of the Conditional Fee Agreements Regulations 2000.
iv)	Relief from Sanctions is granted except for the period between 24 September 2009 and 20 December 2010. No success fees will be recoverable on costs incurred by the Claimant during that period.
v)	The success fees claimed by Percy Hughes & Roberts and Mr Bell of counsel should be reduced to 20% and 18% respectively. All other success fees are recoverable as claimed.