QOCS and fundamental dishonesty – a question of purpose?

The effects of QOCS, as set out in the revised CPR 44.13 which came into effect in April 2013, are now well known to those working in the personal…

The effects of qualified one way costs shifting (QOCs), as set out in the revised CPR 44.13 which came into effect on 1 April 2013, are now well known to those working in the personal injury field.  Generally speaking, a costs order made in favour of a defendant is only enforceable against a claimant up to the aggregate amount of damages that that claimant is awarded.  Consequently, if the claimant’s claim is unsuccessful, i.e. he gets nothing; he is likewise not liable to contribute anything towards a successful party’s costs.

There are limited exceptions to this general proposition, which are set out in CPR 44.15 which deals with actions that have been struck out on certain grounds and 44.16 which deals with claims determined by the court to involve fundamental dishonesty and claims pursued on behalf of someone other than the claimant.

CPR 44.16(1) deals specifically with ‘fundamental dishonesty’:

(1) Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim is found on the balance of probabilities to be fundamentally dishonest.

The rationale of the Rules Committee has not been set out; however there appears to be an intended deterrent to the potentially fraudulent claimant.  However the term “fundamentally dishonest” is not defined and so it is has been difficult to predict how the Courts would interpret this rule, and the extent of dishonestly that is required, for the claim to fall into this bracket. 

Although the judgment of Summers v Fairclough Homes [2012] UKSC 26 predates the CPR reforms, there was concern amongst insurers and defendants alike that the approach taken by the Supreme Court had set the bar so high that a determination of fundamental dishonesty would be all but impossible to achieve, save for the most extreme cases of fraud and exaggeration (as in Fari v Homes in Haringey [2012] where the claimant only recovered 0.5% of damages claimed).  In Summers, the Supreme Court refused to strike out the claimant’s claim despite a finding that the claim had been significantly exaggerated, to such extent that the claimant’s final award amounted to just 11% of the sum contended for.  

Nevertheless, hope has been rekindled by the recent, unreported case of Gosling v Screwfix Direct Ltd & Anor (2014).  In summary, the claimant fell through the rung of a ladder.  The ladder had been manufactured by the first defendant, and supplied by Screwfix, the second defendant.  A suspicion of exaggeration arose, leading to surveillance showing that the claimant was not as incapacitated as he alleged.  

Following exchange of witness evidence, it was decided that surveillance was required to determine if the Claimant was as incapacitated as he claimed. 

The surveillance evidence was disclosed to the medical experts who stated: 

“Therefore there is no evidence that Mr Gosling has constant knee pain, except that he reports it.  We are sure the court will take the inference that the disparity between the examination findings and the complaints that we found when doing the medical reports, and the surveillance video which suggests that there is no problem, is that Mr Gosling is not being honest about his symptoms and problems.”

Subsequently, the first defendant settled the claimant’s claim, and the claimant served a Notice of Discontinuance against Screwfix, invoking the protection afforded by QOCS to avoid paying Screwfix’s costs. 

Screwfix applied to the Court for permission to recover its costs in full against the claimant, on the basis of fundamental dishonesty by reason of the exaggeration of the value of his claim by approximately 50%.  The application was heard by HHJ Maloney at Cambridge County Court. 

In giving judgment for Screwfix, HHJ Maloney found that exaggeration to the extent of 50% of the value of the claim, would in anyone’s view, and on the balance of probabilities, amount to fundamental dishonesty.  HHJ Maloney however went on to give guidance as to the meaning of fundamental dishonesty stating that dishonesty which is “incidental” or “collateral” to the claim would not amount to fundamental dishonesty, but that which goes to the “whole or a substantial part of the claim” would.  

What can be considered ‘whole’ or ‘substantial’ will of course depend upon the facts of each case, but it would seem that any dishonesty in relation to breach of duty, should be construed as going to the whole of the case, as without establishing breach, the whole of the claimant’s case must fail.  

This judgment steps away from an arithmetical calculation as to the extent of the dishonesty, and towards a contextual approach focusing on the intended outcome of the dishonesty, and more fairly allows the Court to determine whether public policy should afford a claimant the protection provided by QOCs. 

Claimants and defendants alike need be alive to the fact that the courts will, for the good of public policy, strip away the protection afforded by QOCs where it can be determined that a claimant’s dishonesty is more than merely peripheral, but goes to the heart of the claim with the purpose of influencing the outcome of it.  

Further, a finding of fundamental dishonesty against a claimant will assist a defendant seeking recoveries and/or the imposition of sanctions, such as a finding of contempt of court.

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