Sulaman v Axa Insurance Plc & Anor

Factual and Procedural Background

This appeal on costs arises from a complex fraud against Company A and other insurers involving the insurance of genuine cars against Third Party Fire and Theft. Fraudsters paid initial premiums and set up direct debits, then falsely claimed accidents for which the insured drivers were allegedly liable. Innocent or fictitious victims were named in claims, which were managed by a claims management firm that received payments from the insurers. Upon discovery, Company A ceased payments and joined six individuals, including the main fraudster and his sister, as Part 20 defendants in related civil proceedings. After a lengthy trial from January to March 2008, the insurers succeeded against most defendants but failed to prove the common fraudulent design against the sister. She then sought costs, but the trial judge awarded only one-third of her costs due to findings that she had lied in her evidence. This appeal challenges that costs order.

Legal Issues Presented

1. Whether the trial judge was justified in reducing the appellant's costs to one-third on the basis of her proven lies during the trial.
2. Whether the judge properly exercised his discretion in relation to the costs order, including consideration of a Part 36 offer made by the appellant.
3. Whether reliance on a prior costs decision (Grupo Torras litigation) was appropriate or misplaced in determining the costs order.
4. Whether the appellant should be entitled to interest on costs from a date earlier than the costs order.

Arguments of the Parties

Appellant's Arguments

• The lies told by the appellant were not significantly consequential to the overall case or her individual case, which she won.
• The reduction of two-thirds of her costs was too harsh given the nature and impact of the lies.
• The judge failed to adequately explain other reasons for the costs reduction beyond a reference to a prior case and a White Book note, which were inaccurate.
• The judge did not properly separate or quantify how the lies increased trial length or warranted penal costs consequences.
• The judge ignored the appellant's Part 36 offer, which the insurers failed to beat.
• The exercise of discretion was flawed and should be revisited to allow the appellant to recover all costs.
• The judge did not make any order for costs to carry interest from an earlier date.

Respondent's Arguments

• The judge's findings on the appellant's lies and conduct were justified and extended beyond the two specific lies identified.
• The costs reduction was appropriate given the appellant's dishonest assistance to the main fraudster and false evidence.
• The judge's discretion in costs was properly exercised and supported by the trial record and precedent.
• No basis existed to alter the costs order or award interest from an earlier date.

Table of Precedents Cited

Court's Reasoning and Analysis

The court acknowledged the complexity and length of the trial, emphasizing the trial judge's intimate involvement and superior vantage point in assessing the parties' conduct. The judge's findings that the appellant lied about two significant matters—the circumstances of two telephone calls and the handling of a cheque—were accepted as established. These lies complicated the trial and made the judge's task more difficult. The court recognized that while the lies did not establish the appellant as a party to the main fraud, they justified some reduction in costs.

The court rejected the appellant's argument that the judge failed to explain the costs reduction adequately, noting that detailed reasoning was contained in the original judgment and the costs judgment. The court also found that speculative attempts to quantify the precise impact of the lies on trial length were unhelpful, as lies in complex litigation are inherently insidious and can influence the course and difficulty of proceedings.

Regarding the Part 36 offer, the court acknowledged it was not ignored but concluded the judge was justified in giving it limited weight given the appellant’s dishonesty and the public interest in exposing fraud. The court also found that reliance on the Grupo Torras case was not determinative and did not undermine the judge’s discretion.

Lord Justice Sedley dissented in part, considering the reduction to one-third of costs disproportionate to the misconduct, advocating for a two-thirds costs award instead. However, the majority upheld the judge’s discretion as within acceptable bounds.

The court declined to order interest on costs from an earlier date, noting that costs carry interest automatically at the statutory judgment rate.

Holding and Implications

The court DISMISSED the appellant's appeal against the costs order, affirming the trial judge's decision to award only one-third of the appellant’s costs due to her dishonest conduct during the trial.

The decision confirms the broad discretion of trial judges in costs matters, particularly where a party has been found to have given false evidence. It underscores that dishonest conduct can justify significant costs penalties even if the party wins the substantive case. The court also clarified that while Part 36 offers are relevant, they may be outweighed by considerations of public interest and the nature of the litigation. No new precedent was established beyond the application of established principles concerning costs and conduct in complex fraud litigation.