COST BITES 206: THE COURT WOULD NOT MAKE A SUBSTANTIAL ORDER FOR COSTS WHEN AN AMENDMENT TO A REPLY ABANDONS AN ALLEGATION OF FRAUD: (ALSO THE DANGERS OF PLEADING FRAUD WITHOUT SUBSTANTIVE EVIDENCE TO SUPPORT THIS)

January 15, 2025 · by · in Amendment, Applications, Costs

In Packer v Packer [2025] EWHC 27 (Ch) HHJ Paul Matthews (sitting as a High Court Judge) considered issues of costs after a claimant had amended a Reply to withdraw an allegation of fraud.  The judge did not accept the defendant’s argument that she should be immediately entitled to a substantial award of costs to reflect the abandonment of that allegation. Rather he found that the claimant should pay the costs of the application, with the wider issues of costs to be left until after the trial.  The judgment also contains an important warning of the risks of pleading fraud before there is any substantive evidence to establish those allegations. Put simply this is not something that should happen.

 

 

“the real problem for the defendant in the present case is that this simply is not a case where the claim has gone to trial, the facts have been found, and one side or the other has won, and seeks the costs of the whole proceedings. In circumstances such as the present, the court is in no position to know whether the amendment will make any difference to the result of the claim or not”

 

THE CASE

The claimant issued proceedings against the defendant seeking the issue of letters administration. The defendant’s case was that there were two wills and that she had been appointed an executor in those wills.

THE CLAIMANT’S REPLY

The claimant’s original Reply to the Defence alleged fraud.

“It is denied the defendant assisted the deceased to make a will in 2017 or in 2022:

(i) There has been a complete absence of information or evidence from the Defendant relating to the creation of the Alleged Wills. It is difficult to pin down the Defendant’s shifting position. As information trickles in (if indeed it does) the Claimant will have to amend her pleadings to respond as and when the Defendant provides such information.

(ii) It is the claimant’s position that the Alleged Wills have been fraudulently created by the Defendant”.

THE CLAIMANT’S AMENDMENT TO THE REPLY

At the pre-trial review the claimant sought permission to amend the Reply to remove the allegation of fraud.  This was consented to by the defendant and the court made the order.

    1. Be that as it may, the present application seeks to amend paragraph 7(c) of the reply so that, instead of the version set out above, it reads as follows:

 

“The Defendant is put to proof as to any assistance provided to the Deceased to make a will. However, the Claimant denies the Deceased executed a valid Will”.

THE COSTS OF THE AMENDMENT

The defendant, however sought an order deferring the costs of the amendment until after the trial. The defendant sought her costs of the amendment. However the defendant’s application for costs went further than that.

THE DEFENDANT’S APPLICATION FOR FURTHER COSTS

  1. However, here the defendant claimed, not only the immediate costs of dealing with the application, but also at least a proportion of the costs already expended by the defendant in meeting the allegation of fraud which had now been withdrawn. For this purpose, he referred to a passage later in the same paragraph, discussing the decision in Begum v Birmingham City Council [2015] EWCA Civ 386. That was a case in which the claim had originally been pleaded in negligence and misrepresentation. However, before trial, it was amended to allege breach of statutory duty as well. The claimant succeeded at trial, but only in relation to the amended claim. The trial judge decided to award the costs prior to amendment to the defendants. The Court of Appeal reversed this part of the decision, because in its view the case which the defendants had to meet was essentially the same before and after the amendment.

THE JUDGE’S DECISION ON THE DEFENDANT’S APPLICATION FOR A PROPORTION OF THE COSTS

    1. I have to say that I do not find Begum v Birmingham City Council a particularly helpful decision for my purposes, turning as it does on the particular facts of the case. Apart from anything else, it was a decision by the trial judge, at the end of the trial, as to who should pay the costs of the whole trial. It was not (as this case is) an interlocutory decision taken in relation to the costs of an amendment which had been made during the pre-trial phase of the proceedings. So the question whether the costs of such an amendment should also carry with them a proportion of the costs previously expended was not in issue, and was not considered.

 

    1. There is another decision which I should perhaps mention at this point. This is Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137, a pre-CPR case. I mention it because it was cited in Begum v Birmingham City Council, but also because it is referred to in Civil Procedure paragraph 17.3.10. It too concerned the decision by the trial judge, at the end of the trial, as to who should pay the costs of the whole trial. In that case, Stuart-Smith LJ, with whom Balcombe and Peter Gibson LJJ agreed, said this (at page 154B):

 

“As a general rule, where a Plaintiff makes a late amendment as here, which substantially alters the case the Defendant has to meet and without which the action will fail, the Defendant is entitled to the costs of the action down to the date of the amendment. There may, of course, be special reasons why this general rule should not be applied.”

    1. It is right to note that, in Begum v Birmingham City Council, Bean LJ said:

 

“36. Beoco is frequently cited, but it is not authority for the proposition that in all cases where an amendment to a claim makes the difference between failure and success, the claimant must pay the defendant’s costs up to the moment of the amendment. It all depends on the case.”

Yet that does not mean that what Stuart-Smith LJ said was wrong. It merely emphasises the importance of looking at the particular facts of the case, to see whether it is appropriate to apply what Stuart-Smith LJ called “the general rule“.

Jurisdiction and discretion

  1. Be that as it may, the real problem for the defendant in the present case is that this simply is not a case where the claim has gone to trial, the facts have been found, and one side or the other has won, and seeks the costs of the whole proceedings. In circumstances such as the present, the court is in no position to know whether the amendment will make any difference to the result of the claim or not. There is also the question whether the court has any jurisdiction at this stage to make an order affecting the costs of anything except the application itself, because that is the only thing which has been decided. The claim itself certainly has not been decided, although the claimant has in effect abandoned an allegation formerly contained in it.One might perhaps have thought that the court’s jurisdiction was restricted to dealing with the costs of and occasioned by the application (to include the costs of making any consequential amendments to statements of case). After all, it would be open to the parties, if they so wished, at the conclusion of the trial, and when the judge was invited to deal with the costs of the proceedings as a whole, to make submissions on the effect of this amendment upon those costs.

DID THE COURT HAVE JURISDICTION TO MAKE SUCH AN ORDER AT THIS STAGE?

The judge considered the relevant case law in detail and noted some tension in the cases.

 

    1. There is therefore a tension between the approach taken by Morgan J on the one hand, and that taken by Pepperall J on the other, with Foxton J taking something of a middle course. I prefer the approach of Morgan J. In my judgment the court normally should not, on an application to amend a claim, make an order attempting to deal with the costs already incurred generally in that claim, unless it is reasonably clear that those costs would in any event be awarded in the same way at the conclusion of the litigation: cf McDonald v Horn [1995] 1 All ER 961, 969, 971-72, CA. And, in the present case, I am far from clear that it is so. Further, in my judgment, even if the approach of Pepperall J were applied to this case, it would not lead to an order for payment of costs as if on a discontinuance of a part of the claim. This is because the substance of the claim made still remains the same, that is, that the deceased did not make a will executed in accordance with the Wills Act 1837, and that he died intestate.

 

  1. But, in any event, even were it otherwise, in the present case I do not consider that I have enough information to be able to form a view as to what proportion of the costs so far expended could properly be allocated to responding to the allegation now removed from the reply. There is no evidence from the defendant as to how much of the time that she has spent on the litigation was due to this. She has simply speculated, without any supporting material, that it was between 50% and 70% of the total so far. In the circumstances of this case, that seems very high to me. I could not safely rely upon such a speculation. For all these reasons, I decline to order the claimant at this stage to pay any proportion of the earlier costs to the defendant. But the point will remain available to her at the conclusion of this case.

 

THE COSTS ORDER MADE ON THE APPLICATION TO AMEND

The judge held that the “normal” principle should apply with the claimant paying the defendant’s costs of the application to amend on the standard basis.

    1. In the meantime, I deal with the costs of and occasioned by the application as follows. First, I can see no reason not to make an order as to costs. Second, the defendant is the successful party, in that the claimant has sensibly abandoned an allegation which she could not properly make. The application of the general rule would lead to an order being made for the claimant to pay the defendant’s costs of and occasioned by the application. Is there good reason to make a different order? The claimant says that there is. She refers to the reasonableness of her decision to allege fraud in the absence of the metadata relating to the two documents concerned. She refers also to the fact that the defendant did not immediately consent to the application after it was sent to her in draft on 14 December 2024, but waited until earlier this week.

 

    1. As to the first of these, in my judgment, the claimant’s conduct in alleging fraud against the defendant in the creation of the two documents was not reasonable in all the circumstances now before the court. Fraud is a serious matter. It must be specifically set out in the particulars of claim: CPR Part 16 PD para 8.2(1). And the Chancery Guide relevantly provides:

 

“4.8 Paragraph 8.2 of PD 16 requires the claimant specifically to set out any allegation of fraud relied on. Parties must ensure that they state:

•    full particulars of any allegation of fraud, dishonesty, malice or illegality; and

•    where any inference of fraud or dishonesty is alleged, the facts on the basis of which the inference is alleged.

4.9 A party should not make allegations of fraud or dishonesty unless there is credible material to support the contentions made … “

    1. By the time that the claim was issued, the claimant had copies of the two documents concerned. Since the claimant considered that the difference between advancing a claim based on fraud and one based on some other, lesser degree of culpability was obtaining possession of the metadata, then the claimant should have refrained from making the allegation of fraud in the reply until the metadata had been examined. So far as I can see, there was no other reason for making such an allegation at that stage, such as a need to avoid limitation periods, and thus no prejudice to the claimant in not making it immediately.

 

    1. But, even if it had been reasonable for the claimant to advance the fraud allegation, that would not mean that there was a good reason to depart from the general costs rule. The fact is that, during litigation, the parties’ positions change as more information is acquired. A party who alleges fraud and then realises that it is no longer a tenable allegation should of course apply to amend the relevant statement of case. But it is not a reward for “reasonable” pleading to excuse the amending party from the general rule of paying the costs of and occasioned by the application to amend.

 

    1. As to the second point, there are circumstances in which a defendant can be criticised for not immediately consenting to an application to amend the statement of case which effectively withdraws an important allegation. In my judgment, this is not one of those circumstances. The application was sent to her in draft on 14 December, and issued on 23 December 2024, just before Christmas. The application was for permission to amend a number of paragraphs of the reply, although some were consequential amendments. The amendment to paragraph 7(c) did not simply remove the words. It also added some to make a different allegation.

 

    1. The defendant is a litigant in person. She can hardly be criticised for wishing to take legal advice before deciding what to do about the application. That legal advice could not easily be obtained on just before Christmas, nor probably very easily between Christmas and New Year. I am frankly not surprised that it has taken until the beginning of this week for direct access counsel to be instructed, to look at the application and to give advice to the defendant which could be acted upon. The claimant very properly admits that the application could have been issued sooner. In my judgment, the claimant has only herself or her advisers to blame for leaving it so late.

 

Conclusion

  1. In my judgment, there is no good reason for not applying the general rule for the costs of and occasioned by the application. They must be paid by the claimant to the defendant on the standard basis. Those costs will not, however, include any proportion of the costs already incurred in the litigation by the defendant in responding to the allegation of fraud which has now been abandoned. That is a question which will have to be dealt with, if at all, at the end of the trial when the judge is considering costs of the whole proceedings.
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