Qualified One Way Costs Shifting – 2 Years On

It is now almost two years since qualified one way costs shifting (QOCS) was introduced for personal injury claims.

To date, the issue has still given rise to few reported cases but I consider two of note relating to different aspects of the regime.

 

Loss of QOCS protection

Orders for costs made against personal injury claimants cannot automatically be enforced unless their claims are struck out as disclosing no reasonable grounds of success, or as an abuse of the court’s process, or because the claimant’s conduct was likely to obstruct the just disposal of proceedings.

Permission for enforcement can be granted by the court in circumstances where the claim is found on balance to be “fundamentally dishonest”. But what does this mean?

There is only one reported case to consider; Gosling v Hailo & Screwfix Direct [LTL 28/07/14], a decision of HHJ Moloney QC in Cambridge County Court.

The claimant alleged that he suffered a knee injury whilst using a defective ladder, manufactured by the 1st defendant and sold to him by the 2nd defendant. His injury was sufficiently serious to require an arthroplasty operation. His initial schedule of loss was for £39,000 including £17,000 for future care.

The defendants conducted surveillance which was retained until after service of his witness statement. The claimant said he suffered constant knee pain, was limited in his mobility and reliant on morphine. The surveillance showed him using his crutches only when visiting hospital. On viewing the footage the medical experts agreed that it suggested he was not suffering any such problems and that he was not being honest about his symptoms.

Further to disclosure of the surveillance, the claimant served a revised schedule of loss that was drastically reduced, abandoning the claim for future care. He also asserted and invited the defendants to confirm that he was protected against costs liability to them by QOCS. The 2nd defendant replied by asserting it would contend the claim was fundamentally dishonest.

The claimant settled his claim with the 1st defendant before trial for £5,000 net. He discontinued against the 2nd defendant. While this gave rise in the ordinary way for an automatic order in favour of the 2nd defendant for its costs, that order could not be enforced due to QOCS.

The 2nd defendant applied to the court for permission to enforce the order for costs by finding the claimant was fundamentally dishonest.

HHJ Moloney QC found that in relation to the quantum claim, the claim was indeed fundamentally dishonest as the surveillance evidence had caught the claimant “bang to rights”.

The judge held that in considering whether a claim was “fundamentally dishonest”, it had to be determined whether a claimant was “deserving” of QOCS protection. Thus a claimant, who had shown to have been dishonest as to some collateral matter or possibly a minor, self-contained head of damage, should not be exposed to costs but where the dishonesty went to the whole or a substantial part of his claim, that would constitute fundamental dishonesty.

The judge therefore had regard to valuation issues. He found that the claimant had been dishonest to around half the value of his claim in total damages which on any sensible definition rendered the claim to be characterised as fundamentally dishonest. While it was open to the judge to allow the 2nd defendant to only enforce such costs attributable to the fundamental dishonesty, he declined to do so and ordered the claimant to pay their costs in full. As to whether the claimant had the means to pay these costs (over and above the £5,000 damages he recovered from the 1st defendant) is another matter.

While this case provides some clarification as to what the court will have regard to when assessing fundamental dishonesty, it still leaves in question how much dishonesty is required. Will a claimant who is shown to have been dishonest about say 20% of his claim be sufficient? Would it make a difference if 20% the dishonesty equated to £2,000 of damages in a claim for £10,000 as opposed to £20,000 of damages in a £100,000 claim?

 

No QOCS protection in the first place

In Wagenaar v Weekend Travel Ltd & Nawelle Serradj (third party) [2014] EWCA Civ 1005 the Court of Appeal held that QOCS protection did not extend to a defendant who had brought a third party into a claim.

The claimant brought a claim against the defendant package tour company arising from a skiing accident inFrance. The defendant joined the claimant’s ski-instructor, alleging that if the accident had been caused by negligence (which was denied) it must have been the negligence of the instructor.

The trial judge dismissed the claimant’s claim against the defendant and accordingly the defendant’s third party claim was also dismissed. He ordered the claimant to pay the defendant’s costs and the defendant to pay the third party’s costs but that neither costs order was to be enforced pursuant to the provisions of QOCS.

The defendant appealed on grounds including that most of the costs had been incurred prior to 1 April 2013 and that QOCS did not have retrospect effect. The third party appealed on the basis that QOCS did not apply to the third party claim.

The Court of Appeal held that QOCS does have retrospective effect. The claimant had not entered into any pre-commencement funding arrangement and while it was unfortunate for the defendant that if the trial had been heard two months earlier they would have been entitled to recover costs, this was just a consequence of procedural reform.

Even more unfortunate for the defendant was that QOCS did not apply to the third party claim. CPR Rule 44.13 states that QOCS applies to proceedings which include a claim for damages for personal injuries. The Court of Appeal found that this rule is applying QOCS to a single claim against a defendant or defendants but not to claims as between a defendant and third party or defendants themselves.

Regard therefore needs to be given by a defendant as to the potential benefit of joining a third party to the claim and whether issuing a later claim for contribution (should it prove necessary) is the preferred option.

Nick Padfield

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