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QOCS Protection and Fundamental Dishonesty – latest ruling clarifies extent of protection

QOCS Protection and Fundamental Dishonesty – latest ruling clarifies extent of protection

The advent of LASPO in April 2013, which replaced the regime of ATE insurance to cover adverse costs with Qualified One-Way Costs Shifting (QOCS), also provided that there would be exceptions to the protection afforded under the scheme such that it would not be an absolute shield in all circumstances, as it may at first have appeared and the circumstances in which the court may exercise its discretion to deny a party QOCS protection was first set out in the matter of Gosling v Screwfix Direct Ltd & Anor (29 April 2014, Cambridge County Court, HHJ Maloney).

In a more recent case involving an RTA, Rouse v Aviva Insurance Ltd (15 January 2016, Bradford County Court, HHJ Gosnell), a claim was brought alleging that as the claimant was travelling as a passenger behind the defendant on the A59, parts of a birdcage attached to the defendant’s vehicle’s roof, immediately in front, fell from the vehicle, causing the claimant to sustain personal injury (whiplash) caused by the driver allegedly swerving to avoid the birdcage. The claim was valued in the region of £2,000.00. The claim was vigorously opposed by the defendant, contending not only that having arrived at the auction house at which they intended to sell the birdcage, the same was both complete and in good condition, but also that they had, in fact, been followed by a friend and not the claimant’s vehicle, and thus the claimant could not have been following them.

The matter therefore proceeded through the normal process, being robustly disputed by the defendant throughout, and was finally listed for trial.

However, 2 or 3 days prior to the trial, the claimant elected to serve a Notice of Discontinuance which, in principle, gave rise to an entitlement to an indemnity from the claimant to the defendant in respect of his costs of defending the claim, which were substantial, but which as a result of the operation of QOCS, the claimant contended in reality would be limited to the amount of the damages recovered by the claimant, hence nil.

The defendant, having been denied a trial of the facts, having incurred some £11,293.36 in the defence of the claim and yet remaining adamant that they would be wholly vindicated, made an application for a finding of fundamental dishonesty against the claimant, to enable them to recover their costs and disapply the normal operation of the QOCS regime and permission for such a hearing was granted.

Such permission having been granted, at first instance the court ordered the parties to attend for the purposes of cross-examination. However, on the appointment, the claimant failed to attend due to having been taken ill shortly before the hearing and being in hospital on the date of the hearing. Detailed submissions were made by both parties, with the defendant contending that it was imperative that the claimant be cross-examined and with it being contended on behalf of the claimant that the matter could be dealt with on the papers. The District Judge recognised both parties issues, and also referred to the matter of Gosling, in which there had been surveillance evidence which undermined the claimant’s claim, absent in the instant matter

“The problem with this case is that there is no smoking gun, as it were, such as that surveillance video. There is no to use an improper expressions; the American phrase is ‘slam/dunk.’ The problem is that the claimant says he suffered an injury and he suffered it as a part of the cage falling off the defendant’s vehicle.”

and put two questions at the heart of his considerations, namely

  1. Can (and if so should) the court require a claimant to give an explanation for the discontinuance of the claim. If the claimant does not offer an explanation can the court be invited to draw an adverse inference?; and

  2. To what extent should the court explore the evidence beyond that immediately before it when considering applications relating to QOCS?

In considering these aspects and concluding that it was an established principle of law that, as a claimant could discontinue their claim at any time pre-trial and there was no principle or rule which required them to give a reason or reasons for doing so, no adverse inference could be drawn from their failure to attend, the District Judge observed

“I am satisfied that if it was intended that the introduction of QOCS would expand on the procedure for notice of discontinuance to require the claimant or allow the court to require the claimant to offer some reason for the discontinuation, the Rules would have been amended accordingly. Given that I am satisfied the claimant is not required to proffer any reasons for the discontinuance it must follow that, contrary to Mr Morwood’s submission, the court cannot be obliged to draw an adverse conclusion from the absence of any such explanation.”

concluding therefore that the filing of a Notice of Discontinuance was an absolute end to the claim, and thus there was no basis to compel the claimant to explain themselves.

An Appeal was lodged to the ruling of the District Judge, on the basis that the claimant’s reasons for the discontinuance were paramount to the determination of any application for a finding of fundamental dishonesty, the grounds of that Appeal being

  1. that the judgment appeared to be wrong;

  2. that the case was strong enough that securing a finding of fundamental dishonesty would be possible if the matter was to proceed to trial;

  3. that it was not reasonable to deny the defendant access to a “trial” to prove fundamental dishonesty; and

  4. the reason the claim was discontinued so late in the day could be pivotal in deciding whether the claim was fundamentally dishonest or not, and the absence of an explanation should not create a place for the claimant to “hide”. The rules have evolved and that could mean fresh focus should be given to long established principles.

In granting the Appeal and whilst appreciating the difficult decision with which the District Judge had been faced, absent any ‘smoking gun’, after considering all aspects of this and other potential matters, HHJ Gosnell rejected all of the reasons of the District Judge, concluding that (whilst every matter must be determined upon its merits) the court could fairly, proportionately and properly draw an inference where the claimant had discontinued his claim without explanation or good reason

“What would be the costs of having a somewhat limited enquiry as to whether this was a fundamentally dishonest claim? The answer is it would be, probably, roughly the same in this case as the costs in a fast track trial because of the fact that, perhaps in this case, it would be helpful to the claimant for him to give evidence and his driver and it may be helpful for the defendant’s witnesses to give evidence although I am not convinced in this case that would be necessary. I have got to say that if the Rules say that the defendant can seek a direction that the claimant is fundamentally dishonest-and there is going to be some sort of fair procedure for that to happen –it would not necessarily be disproportionate for, perhaps, £2,000 to be spent at a three hour hearing to determine whether there was fundamental dishonesty when the sum of £11,293.36 is at stake. Therefore, my conclusion is that there may be circumstances where it is proportionate to have such an enquiry.

“The second objection is that most of the claimants in these limited cases are on conditional fee agreements which have been concluded by the discontinuance. Then, says the court, we would be forcing a claimant to act as a litigant in person in a claim he no longer wishes to pursue and the issue to be determined is one of a technical/legal complexity. I have to accept that that is correct but that is what is likely to happen. However, that is exactly what happens when a defendant who was placed in this position before QOCS arose, wanted to seek to apply to commit what they thought was a dishonest claimant. They would need to, firstly, apply to set aside the notice of discontinuance, they would then seek to persuade a court to hear the trial to determine whether, indeed, it was a dishonest claim and then there might be a further hearing to decide whether the claimant should be committed. It often happens that claimants are unrepresented throughout because their conditional fee agreement has been terminated. The court still deals with those cases on the basis that it is appropriate to do so where there is an allegation that a dishonest claim has been made. It seems to me the same argument applies here.”

“For the court to deal with that issue, which is a very serious issue from the claimant’s point of view, he is being condemned as being dishonest on paper. In my view this is fundamentally unfair in that the claimant should be allowed to come to court and say, “Well it might look as if this is a staged accident or a contrived accident but I have genuine reason why I made the claim and I have a genuine reason why I discontinued.” It could be any number of those but I think it would be unfair to expect the court to deal with it without that explanation and, more importantly, fundamentally unfair on the claimant not to give him the opportunity to look the Judge in the eye and say, “I am not a dishonest man and these are the reasons why I made the claim and these are the reasons why I discontinued.” No-one can force him to do so but given that, in a case such as the present one and many other similar cases, there may be a prima facie case of dishonesty. It is only fair to allow the claimant the opportunity to convince the court that what may appear the case from the paperwork is actually inaccurate.”

and the matter was therefore re-listed for the Application for a finding of fundamental dishonesty to be considered.

Whilst the finding on the facts is still awaited, the ruling of HHJ Gosnell is an important one in that it clearly establishes that the filing of a Notice of Discontinuance is not a panacea to a claim which was being pursued by an optimistic or opportunistic litigant, counting on the protection that QOCS would otherwise provide, as the court is now clearly entitled to draw a relevant inference from the circumstances of that discontinuance and any further actions subsequently undertaken by that litigant.

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