This blog was written by Andrew Roy, Deputy Costs Judge & Head of 12KBW’s Costs Team. He was junior costs counsel for the Second Defendant in Mathieu.

The costs judgment in Mathieu v Hinds & Anor (No. 2: Costs) [2022] EWHC 1624 (QB) provides a salutary illustration of the exercise of judicial discretion where a Claimant achieves partial success in a substantial quantum claim. It is also the first reported judgment to consider the efficacy of a full and final offer where the Claimant obtains provisional damages.

The case

The Claimant, Mr Manuel Mathieu (then aged 29), suffered a traumatic brain injury in November 2015 when he was hit by a stolen moped, insured by the Second Defendant, who admitted liability.

At the time of the accident, Mr Mathieu was studying for a Masters’ degree in Fine Art at Goldsmiths College, London. Despite suffering a severe brain injury, by the date of trial, 6.5 years post-accident, he had gone on to enjoy a very successful international career as an artist. However, he claimed that ongoing headaches, fatigue and cognitive deficits resulted in a lifelong shortfall in his productivity, and he sued for £33,617,057.

Following a 10-day quantum trial Hill J, in a very detailed judgment ([2022] EWHC 924 (QB)), awarded the Claimant £3,178,741.64 (c. 9.5% of the total amount claimed) and provisional damages in respect of epilepsy. She dismissed a claim for provisional damages in respect of dementia.

The trial commenced on 8 February 2022. Prior to the trial, the parties had engaged in extensive attempts to settle the claim, including at a joint settlement meeting and a mediation. They also made the following offers:

• On 19 October 2018 the Claimant made a Part 36 offer in the sum of £235,000 (which was more than his Schedule totalled at that time). This was withdrawn on 3 October 2019.
• On 13 December 2021 the Claimant made Calderbank offers of (i) £10,950,000 excluding any award for provisional damages claims in relation to epilepsy and dementia; and (ii) £17,050,000 including the provisional damages claims. Both offers were open until 20 December 2021 and were then automatically withdrawn.
• On 11 January 2022 the Second Defendant made (i) a Part 36 offer of £3,125,000; and (ii) a Calderbank offer of £3,550,000. Both were said to be in full and final settlement of all the Claimant’s claims. The latter offer was open until 18 January 2022 and was then automatically withdrawn.
• On 13 and 19 January 2022 the Claimant made further Calderbank offers of £8,050,000 and £7,250,000, including his provisional damages claims. These offers were open until, respectively, 19 and 26 January 2022, and then automatically withdrawn.
• On Saturday 5 February 2022, with the trial due to start on Tuesday 8 February 2022, the Second Defendant made a further Calderbank offer of £4,000,000.

The Costs Judgment

The Claimant contended that he should recover all his costs and a large payment on account.

The Second Defendant’s primary position was (1) up to 31 January 2022, the Claimant should recover 50% of his costs to reflect his partial success, exaggeration and conduct; and (2) from 1 February 2022, the Claimant should pay the Second Defendant’s costs. The Second Defendant accordingly contended for a much more limited payment on account.

The judge held that the Claimant’s costs recovery should be limited to 85% up 31 January 2022 and 40% thereafter (i.e. she ordered reductions of 15% and 60% respectively).

Her reasons, in summary, were as follows:

(1) In respect of costs up to 31 January 2022, the Second Defendant’s success on the dementia issue warranted a 15% reduction, notwithstanding that it had been reasonable for the Claimant to pursue this:
(a) It was a discrete issue, and a highly significant one which generated significant costs.
(b) It was also a real sticking point for settlement.
(c) Moreover, the Claimant had been unreasonable:
i. In his valuation of the dementia claim for the purposes of settlement.
ii. In claiming immediate damages for dementia of £4,921,873, only to summarily abandon this at the start of trial.
(2) In respect of costs from 1 February 2022, a 60% reduction was warranted to reflect the following:
(a) The Claimant had failed to beat the Second Defendant’s Calderbank offer of £3,550,000:
i. Although that offer did not include provisional damages for epilepsy, the £371,258.36 by which it exceeded the full and final damages obtained more than accommodated this.
ii. For the Claimant to have bettered the Second Defendant’s offer in financial terms the damages generated by uncontrolled epilepsy would have to in the region of £371,258.36 x 100/2.2 = c. £16,875,000. That was not realistic.
iii. Coward v Phaestos Ltd [2014] EWCA Civ 1256; [2014] 6 Costs LR 843 was distinguishable: in that case the offeree secured several very significant elements of non-financial relief. The Claimant’s claim here, by contrast, was purely for damages. His argument that the claim should not be considered purely in financial terms was rejected.
(b) The Claimant failed to beat the £4,000,000 Calderbank offer by an even greater margin.
(c) The points in respect of dementia which warranted a 15% reduction on the earlier period continued to apply in this later period.
(d) The Claimant’s pleaded case was unrealistic. He recovered less than 10% of the value of his pleaded claim, despite having succeeded on all the factual points underpinning the earnings claim.
(e) The Claimant’s offers were also unrealistically high.
(f) By contrast, the Second Defendant’s had taken a much more realistic approach.

The judge also rejected the Claimant’s submission that the payment on account should reflect the likelihood of a successful application to depart from the budget because (i) the budget only provided for a 5-day trial whereas the trial in fact took 9 days of evidence with further oral and written submissions thereafter; and (ii) the budget did not provide for a Pre-Trial Review (which the court eventually ordered) or a mediation which the parties had engaged in. She accepted the Second Defendant’s position that there were strong arguments to the effect that the additional costs incurred reflect a failure by the Claimant’s side to anticipate what were predictable litigation contingencies such that a departure from the budget should not be permitted.

The judge refused the Claimant’s application for permission to appeal.

Comment

Whilst much of this judgment concerns a fact and case specific exercise of discretion (albeit still an interesting and instructive one) several points of general interest emerge.

Perhaps the clearest message which emerges from the judgment is the need for realism both when formally advancing a claim and in negotiations. The judge was clearly unimpressed by the fact that the Claimant’s approach smacked of something of a try on. Conversely, the Second Defendant’s was credited for making realistic offers.

It is important to note a distinction here between advancing a valuation which may or may not be sustainable depending which way the evidence falls and advancing one which is unsustainable on any realistic view of the evidence. The criticism of the Claimant in Mathieu was not so much that he recovered much less than his pleaded case per se. That can happen without any criticism if, for example, a key expert does not come up to proof. That is the nature of litigation, and indeed the very point of having a trial. What clearly struck the judge was the fact that the damages awarded were only a fraction of those claimed despite the court taking a highly favourable view of the Claimant and his evidence. That was a very clear marker that that the claim was unrealistically inflated.

Mathieu also confirms that losing on a significant discrete issue is liable to carry adverse costs consequences, even absent any unreasonable conduct. This is, of course, not any type of novel point. However, it underlines that parties and their advisers should not proceed on an assumption that it will be “winner takes all” at the end of a case.

The novel point established by this judgment is that than an offer for full and final settlement can still bite even if a Claimant recovers provisional damages. Claimants should be alive to this.

However, defendants would be unwise to take this as a green light not to offer provisional damages in appropriate cases. If a claimant is likely to obtain provisional damages, a defendant should generally offer them. There are two reasons for this.

• Firstly, not doing so is likely to stymie settlement. Parties and litigators should never lose sight of the fact that the primary purpose of an offer is to achieve settlement rather than tee up later costs arguments.
• Secondly, the costs protection a defendant will derive from a full and final offer in provisional damages cases is very uncertain. Whilst in Mathieu it was readily demonstrable that the Claimant had failed to better the offer even once the value of provisional damages was taken into account, in other cases it might not be. Moreover, the offer in Mathieu only achieved partial costs protection. By far the best form of protection is such a case remains a Part 36 offer which includes provisional damages.

Finally, Mathieu confirms the cautious approach applied in respect of costs on account. The court is very unlikely to credit costs beyond those budgeted for the purposes of such a payment.

Takeaway Practice Points

• Parties should be realistic as to how they advance their cases both formally and in negotiations.
• Losing on a significant discrete issue is liable to carry adverse costs consequences even if it was reasonable to pursue the issue in question.
• Claimants should not assume that obtaining provisional damages will automatically inure them from the costs consequences of an offer for full and final damages.
• However, defendants would still be well advised to offer provisional damages in cases where the claimant is likely to obtain these.
• The court is very unlikely to credit costs beyond those budgeted for the purposes of a payment on account.