Appeal court leaves costs decision alone

Sughra Sulaman v Axa Insurance and another

(Court of Appeal – 11 December 2009)

This case involved an elaborate fraud in respect of claims made by various fraudsters, including the defendant, Sughra Sulaman, who clearly made representations to the court that were untrue.

 

The fraudsters had insured a genuine car against third party fire and theft but, soon after setting up the insurance, had claimed that the car had been involved in an accident at the fault of the car owner. There was therefore an innocent (but usually fictitious) victim, who had a claim against the driver (who was either fictitious or unaware the claim was being made against them). As a result of the accident, claims for repairs and hire charges were made by the fraudsters, which were paid by the defendant — until the fraudulent activity was identified by Axa Insurance.

 

Axa et al. decided that rather than continuing to pay out on the claims, the originators and participants in the fraud should be joined as Part 20 defendants, which meant an additional claim of fraudulent activity could be made against them. They succeeded against most of the Part 20 defendants, however the court failed to prove that, through her claim, Ms Sulaman defrauded insurers in the same way as those involved, although the judge was satisfied she had lied in court at various points of the trial. In considering such conduct, the court awarded only one third of her costs.

 

The decision illustrates the Court of Appeal's reticence to interfere with a trial judge's decision in the exercise of their discretion as to costs. While reference was drawn to various authorities on conduct, Lord Justice Longmore marked his disapproval given the fact cases on conduct are assessed on their own merits and limited points in principle can be derived from previous authorities. This is important as it shows the inherent problems faced by insurers where evidence is flawed and lies made. Such conduct must be balanced against the Part 36 offer regime when a party is successful and litigation is settled before a hearing and decision by a judge.

Comment

Although the order was upheld, the dissenting judgment of Lord Justice Sedley, who would have made a different order as he believed the decision to deprive Ms Sulaman of two thirds of her costs was unjustified, serves to illustrate the lack of certainty insurers face in respect of orders for costs — however reprehensible a successful party's conduct may be. The wide ambit of judicial discretion does not provide for certainty when considering issues of conduct

- Michael Thompson, BLM Birmingham

This law report first appeared in Post Magazine on 25 February 2010

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