In disease litigation the usual complexities of QOCS can become a labyrinth of confusing rules and exceptions. Questions such as ‘what costs can be set off against damages, and when’, or ‘when do the QOCS exemptions kick in’, can create serious problems, if a defendant wants to make an application or seek to enforce any costs orders, but doesn’t have the answer.
With those issues in mind I have drafted this guide called Surviving QOCS, to help navigate the often daunting rules. This is a brief overview of the relevant issues of QOCS and the costs rules that surround it.
In disease claims a significant number of cases discontinue some-way into the proceedings, either because the claim never had any prospects of success or because the claimant’s solicitors lost faith in the case after issue.
The rules on QOCs make it difficult for defendants to recover their costs. Even if a defendant is given permission to recover their costs, claimants no longer have any funding backing them and with no money of their own there is little point in pursuing claimants personally.
Therefore the main aim when handling cases pre-issue is to set out the defendant’s stall fully in the hopes of dissuading a large number of claims which will discontinue from ever issuing. As part of that you will need to set out the risks to claimants personally and the risks to claimant’s solicitors, if they do issue a case with no real prospects.
The first thing to be alive to is the funding of the claim and, if a conditional fee agreement has been entered into, when was it entered into.
On 1 April 2013 Legal Aid Sentencing and Punishment of Offenders Act 2013 “LASPO” came into force and has the effect that while claimants are entitled to take out a legal funding arrangement they may not recover success fees from another party further, the premiums for such insurance are not recoverable against another party.
LASPO also allowed solicitors to enter into Damages Based Agreements (DBA) with their clients, which are capped at 25% of the claimant’s damages.
If the claimant has entered into a funding arrangement (including a DBA) there should be a notice of funding clearly indicating whether a funding arrangement was entered into after 1 April 2013. If there is insufficient information on funding, whether in a pre-lit or any litigated claim, you must seek clarification as to funding.
If the funding arrangement post-dates LASPO, costs cannot be recovered, even if we successfully defend to trial, apart from in a narrow set of circumstances.
Since LASPO many claimants are not entering into funding arrangements but nevertheless their solicitors are serving notices of funding.
What is a QOCS case?
Qualified One-way Costs Shifting “QOCS” is the regime in place which prevents defendants from enforcing a costs order against an unsuccessful claimant (with some rather important exceptions).
All lawyers in disease must have a good working knowledge of QOCS, from Pre-lit file handlers to costs draftspersons. QOCS impacts on reserves and strategy from the outset.
QOCS is retrospective unless there is a pre-April 2013 funding arrangement (44.17, confirmed in Wagenaar v Weekend Travel Limited  EWCA Civ 1105.
What does this mean for disease when we have such a high litigation success rate? In short we can ensure that we do the proper preparation/front loading in the pre litigation stages to ensure litigation costs are avoided on both sides. Note that while we can seek to recover and enforce costs the likelihood of recovery is slim, given few claimants have assets. Therefore the idea is to resolve claims as swiftly as possible and one of the tools used to do that is the risk that a claimant will have to pay some of their damages or lose their damages and face costs orders which show up on their credit history.
Qualified one-way costs shifting: scope and interpretation
(1) This Section applies to proceedings which include a claim for damages –
(a) for personal injuries;
(b) under the Fatal Accidents Act 1976; or
(c) which arises out of death or personal injury and survives for the benefit of an estate by virtue of section 1(1) of the Law Reform (Miscellaneous Provisions) Act 1934,
but does not apply to applications pursuant to section 33 of the Senior Courts Act 1981 or section 52 of the County Courts Act 1984 (applications for pre-action disclosure), or where rule 44.17 applies.
(2) In this Section, ‘claimant’ means a person bringing a claim to which this Section applies or an estate on behalf of which such a claim is brought, and includes a person making a counterclaim or an additional claim.
Effect of qualified one-way costs shifting
(1) Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount does not exceed the aggregate amount of any orders for damages and interest made in favour of the claimant.
(2) Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.
(3) An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.
Exceptions to qualified one-way costs shifting where permission not required
Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the proceedings have been struck out on the grounds that:
(a) the claimant has disclosed no reasonable grounds for bringing the proceedings;
(b) the proceedings are an abuse of the court’s process; or
(c) the conduct of –
(i) the claimant; or
(ii) a person acting on the claimant’s behalf and with the claimant’s knowledge of such conduct, is likely to obstruct the just disposal of the proceedings.
Exceptions to qualified one-way costs shifting where permission required
There are two further situations in which defence costs are recoverable, without the limitation that the defendant must seek the court’s permission to enforce:
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.
Orders for costs made against the claimant may be enforced up to the full extent of such orders with the permission of the court, and to the extent that it considers just, where –(a) the proceedings include a claim which is made for the financial benefit of a person other than the claimant or a dependant within the meaning of section 1(3) of the Fatal Accidents Act 1976 (other than a claim in respect of the gratuitous provision of care, earnings paid by an employer or medical expenses); or(b) a claim is made for the benefit of the claimant other than a claim to which this Section applies.
Where paragraph (2)(a) applies, the court may, subject to rule 46.2, make an order for costs against a person, other than the claimant, for whose financial benefit the whole or part of the claim was made.
Double check the date of the CFA
In Catalano v Espley-Tyas Development Group Ltd  EWCA Civ 1132 the Court of Appeal held that in any case in which litigation services had been provided under a CFA agreement made before 1 April 2013, success fees could continue to be recovered as costs and QOCS would not apply even if the CFA was terminated and a second CFA was made.
The narrow definition of proceedings and focus on ‘notional recovery’ of additional liabilities led to the danger of “cherry picking” or claimants “having their cake and eating it”. Essentially; at early stages work was being done on a CFA with an uplift but when prospects seriously reduced the old CFA could be ended and a new one entered into affording QOCS protection.
The significant effect of the provisions of LASPO (the end of CFA uplifts) meant that claimants’ solicitors understandably accelerated the volume of cases they took on and the date they entered into the CFA in order to maintain their uplifts. Consequently there are a “glut” of cases that fall in this transitional period, certainly more than was initially expected.
In Catalano the claimant’s solicitors had terminated the pre 1st April 2013 CFA. They then entered into a post 1 April 2013 CFA and claimed QOCS protection for their client. The Court of Appeal recognised the danger of this approach and have sought to guard against it by ruling that qualified one-way costs shifting would not apply even if the CFA was terminated.
Setting Aside QOCS
(a) Permission Not Required:
There are three circumstances where in a QOCS case permission is not required to enforce costs against a claimant. Firstly the proceedings need to be struck out, whether by application or of the court’s own motion. It is the reason for the strike out that engages rule 44.15 and will enable you to seek to recover costs against a claimant.
As part of your practice you should begin to form the habit of reminding the claimant’s solicitors that where they bring proceedings that disclose no reasonable grounds or represent an abuse of process you have the ability to apply to strike out the case and seek to recover and enforce your costs of doing so under 44.15 and that you do not require the court’s permission to do so. This will hopefully have the effect that claimant solicitors will be slow to issue unmeritorious claims.
CPR 3.4 is the rule which enables a part to apply to strike out a statement of case. A strike out application can be made for three reasons:
a. The statement of case discloses no reasonable grounds for bringing… the case;
b. The statement of case is an abuse of the court’s process or likely to obstruct the just disposal of the proceedings; or
c. There has been a failure to comply with a rule, practice direction or order.
Rule 44.15 overlaps with 3.4 in that you may enforce a costs order without permissions if the claim has been struck out under rule (a) No reasonable grounds or (b) Abuse or process/obstructions of just disposal.
No Reasonable Grounds 3.4(2)a
Rule 3.4.2 states that ‘no reasonable grounds’ can consist of:
A claim which sets out no facts as to what the claim is about;
A claim which is incoherent and makes no sense;
A claim which discloses facts which do not constitute any legally recognisable claim;
An unwinnable case.
In Wall v British Canoe Union in the Birmingham County Court, a widow of a man who died in a canoe accident lost the protection of QOCS after her fatal damages claim was struck out. Judge Lopez, sitting at Birmingham County Court, said Mandy Wall sued the British Canoe Union (BCU) as publisher, in 2003, of a guidebook on “English white water” covering the stretch of the River Teme in Shropshire where the accident happened. Mr Wall, who died after his canoe became trapped at the bottom of a weir, was a member of the Wyre Forest Canoe Club, affiliated to the BCU. However, the judge said there was no “relationship of proximity” between the defendant and Mr Wall to establish a duty of care between publisher and reader.
Judge Lopez found that QOCS applied to claims under the Fatal Accidents Act 1976, or for the benefit of an estate by virtue of section 1(1) of the Law Reform (Miscellaneous Provisions) Act 1934.
The BCU argued that the claim should be struck out because the duty of care which the claimant contended was owed to her late husband “does not exist in law” and there was “no reasonably arguable claim on causation”.
Judge Lopez accepted the defendant’s arguments, ruling that the statement of case gave “no reasonable grounds for bringing the claim” and struck it out under CPR 3.4(2).
Giving judgment for the defendant, Judge Lopez ordered the claimant, in accordance with CPR 44.15(1), to pay the defendant’s costs.
Abuse of Process (3.4(2)b
While discussed at C.P.R. 3.2.3, abuse of process is not defined in any rule or statute, though a working definition was used in Attorney General v Barker  1. F.L.R. 759:
“using [the court] process for a purpose or in a way significantly different from its ordinary and proper use.”
Examples of abuse of process are given as:
Vexatious proceedings, i.e. using the court process to prevent a fair trial e.g. having two sets of proceedings with the same subject matter in order to harass the defendant (multiplying the time, cost and stress a defendant faces, regardless of if the proceeding are concurrent or sequential;
Attempts to re-litigate decided issues;
Collateral attacks on earlier decisions:
Pointless and wasteful litigation: where the benefit of litigation to a claimant is of such limited value and the cost of the litigation will be out of all proportion to the benefit to be achieved;
Improper collateral purpose: ”…if it can be shown that a litigant is pursuing an ulterior purpose unrelated to the subject matter of the litigation and that but for his ulterior purpose he would not have commenced proceedings at all, that is an abuse of process.”
Brahilika v Allianz Insurance Plc (unreported, 30 July 2015) (Romford County Court), the claimant in a fast-track personal injury case failed to attend at trial. The week before the trial, he had told his solicitors that he had booked a holiday which would overlap with the trial. Other than this, the claimant could not be contacted. At trial, counsel for the claimant applied for an adjournment, but DJ Dodsworth refused the application and struck out the claim. A costs order was made in the defendant's favour and was not subject to QOCS. A failure to attend at trial was held to be “conduct likely to obstruct the just disposal of the proceedings”.
The final head for striking out a claim and enforcing costs without the court’s permission is where the conduct of the claimant or a person acting on the claimant’s behalf and with the claimant’s knowledge of such conduct is likely to obstruct the just disposal of proceedings.
In Laird v Secretary of State for the Home Department two McKenzie friends narrowly avoided paying costs under this rule.
(b) Permission Required:
A party can also seek to enforce a costs order under 44.16 however they must first seek permission to do so, which will be granted in two circumstances:
Under 44.16 2(a), in "mixed" claims is where part of the claim is brought for the benefit of a non-party (such as a credit hirer or a subrogated claim for an insurer) or where part falls outside the definition of "personal injury". So in the event there is some part of a claim that is not for personal injury, i.e. property damage for another party such as a landlord, you are entitled to apply to the court to for permission to enforce cost orders.
Fundamental Dishonesty (44.16)
The court continues to expand on the parameters of ‘Fundamental Dishonesty’.
To prove fundamental dishonesty it must be shown, on the balance of probabilities the claimant must have:
Made statements they knew to be false, or had no reasonable belief in the truth of; And these statements either:(a) Resulted in the substantial increase in the claimed value of their, or a related case and/or(b) Went to a central issue in their, or a related case; and/or(c) If undiscovered, would have significantly undermined the administration of justice.
In Summers v Fairclough Homes Ltd  UKSC 26 heard in the supreme court, fundamental dishonesty was described as being:
“… something that goes to the heart [of a claim]”.
The following matters have been found to fall foul of the rule under fundamental dishonesty:
Exaggerating symptoms: in Gosling v Screwfix Direct Ltd and anor (2014) here a claimant had exaggerated his injuries and surveillance undermined his evidence. The fact that the claimant in a NIHL case was inconsistent in the witness box was not sufficient to fulfil the criteria for fundamental dishonesty. The claimant was found to have significantly exaggerated his symptoms. The court held that dishonesty in relation to any significant aspect of a claim – in this case, quantum – could amount to fundamental dishonesty in the context of QOCS.
Denying the provision, in whole or in part, of hearing protection: James v Diamanttek (2016): Mr. James worked for the defendant from 2003 to 2013; there was no issue that he worked in noise. The dispute throughout was whether he was provided with and wore hearing protection, which he denied in his letter of claim, medical report, Part 18 Replies and witness evidence. At the end of cross examination, he conceded that he “had hearing protection 100% of the time, which he wore 100% of the time” when working in the Special Projects Unit, which he did for the last 7 years of his employment and part-time during the first three years. The judge dismissed his claim and rejected the claimant’s evidence in relation to the earlier period (of which there was no other evidence). However at first instance the judge was not willing to find the claimant to have been fundamentally dishonest. On appeal His Honour Judge Gregory found that the judge at first instance applied the wrong test, that her findings were that the claimant had been dishonest and that the issue of the provision and use of hearing protection was fundamental to the claimant’s allegations, so the relevant test had been met.
Insurers and defendants should be reassured that the courts are willing to penalise individuals who make dishonest claims.
In Rouse v Aviva insurance Limited (2016) the claimant issued proceedings for personal injury alleging that a birdcage which had been strapped to the top of a car in front (the defendant’s vehicle), came loose and struck the vehicle he was passenger in, thereby causing him injury. The defendant denied the claim and asserted the birdcage never left his car. Following exchange of statements the claimant discontinued. The defendant applied under CPR to have the proceedings reinstated and sought a finding of fundamental dishonesty against the claimant. At first instance the judge refused. On appeal to the high court it was found that the defendant was entitled to apply for the re-instatement. The question of whether a claimant who discontinued could be compelled to attend a trial after he had discontinued, the appeal judge found that the claimant could be so compelled but ultimately it was a matter for the judge as to whether he wished to consider the issue of fundamental dishonesty either on paper, on submissions or at a full trial.
For short tail disease, exaggeration, provision of PPE, training and surveillance are relevant, therefore fundamental dishonesty will likely play a part when assessing those claims.
There is a question of who needs to be found to be have been dishonest for the purpose of a finding of ‘fundamental dishonesty’: the rule states “an order for costs made against the claimant may be enforced…where the claim is found on the balance of probabilities to be fundamentally dishonest”. The implication being that if part of the claim, for example the schedule of special damages is dishonest as a result of improper conduct on the part of the claimant’s solicitors a costs order against the claimant could be enforced against him. This could lead to manifest injustice. One alternative is to seek a wasted costs order against the solicitors for the claimant. S. 51(6) of the Senior Courts Act 1981 and rule 46.8 of the Civil Procedure Rules provide for a court to order a legal representative to pay for ‘wasted costs’. However, first the representative will be given the opportunity to make written submissions or attend a hearing. When applying for wasted costs an applicant must show:
Improper, unreasonable or negligent conduct on the part of a solicitor’s firm, which constitutes a breach of that firm’s duty to the court: no duty is owed to the applicant in this context.
That the conduct caused the incurrence of costs, which would not otherwise have been incurred.
That all the circumstances of the case render it just to impose a costs liability on the solicitor, by making a wasted costs Order in respect of all or part of the costs sought.
This is a high threshold to overcome and is not often met by those seeking it, however in the context of fundamental dishonesty on the part of a legal representative it’s likely that a court will be more willing to award wasted costs.
Section 57 Criminal Justice and Courts Act 2015
The rules on QOCS are not the only method by which a finding of fundamental dishonesty can be made.
The Criminal Justice and Courts Act 2015 changes the position for personal injury claims. Section 57 provides that where the court finds that a claimant is entitled to damages, but finds (following an application by the defendant) on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary or a related claim, it must dismiss the entire claim unless it is satisfied that the claimant would suffer substantial injustice.
The Ministry of Justice provided guidance prior to the commencement of the Act suggesting the "related" claims to which section 57 would apply include phantom passenger claims when it stated that "where the claimant colludes in a fraudulent claim brought by another person in connection with the same incident or series of incidents in connection with which the primary claim is made – for example, a claim by a “phantom passenger” in a road traffic accident".
Section 57 states:
Personal injury claims: cases of fundamental dishonesty
This section applies where, in proceedings on a claim for damages in respect of personal injury (“the primary claim”)—(a) the court finds that the claimant is entitled to damages in respect of the claim, but(b) on an application by the defendant for the dismissal of the claim under this section, the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.
The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.
The duty under subsection (2) includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.
The court’s order dismissing the claim must record the amount of damages that the court would have awarded to the claimant in respect of the primary claim but for the dismissal of the claim.
When assessing costs in the proceedings, a court which dismisses a claim under this section must deduct the amount recorded in accordance with subsection (4) from the amount which it would otherwise order the claimant to pay in respect of costs incurred by the defendant.
If a claim is dismissed under this section, subsection (7) applies to—(a) any subsequent criminal proceedings against the claimant in respect of the fundamental dishonesty mentioned in subsection (1)(b), and(b) any subsequent proceedings for contempt of court against the claimant in respect of that dishonesty.
If the court in those proceedings finds the claimant guilty of an offence or of contempt of court, it must have regard to the dismissal of the primary claim under this section when sentencing the claimant or otherwise disposing of the proceedings.
In this section—
“claim” includes a counter-claim and, accordingly, “claimant” includes a counter-claimant and “defendant” includes a defendant to a counter-claim;
“personal injury” includes any disease and any other impairment of a person’s physical or mental condition;
“related claim” means a claim for damages in respect of personal injury which is made—
(a) in connection with the same incident or series of incidents in connection with which the primary claim is made, and
(b) by a person other than the person who made the primary claim.
9. This section does not apply to proceedings started by the issue of a claim form before the day on which this section comes into force.”
Which is best? 44.16 or Section 57?
Given there are two routes to defeat a claim that involves fundamental dishonesty, you will have to give some consideration as to whether to a section 57 application or an application under CPR 44.16.
The question of which is the better option is not as clear cut as it may seem.
Section 57’s main two advantages are firstly where there is fundamental dishonesty the judge must strike out the claim unless it results in a substantial injustice, even if part of the claim is valid and secondly, if there has been dishonesty in the related claim the court must again strike it out.
The downside to a section 57 application is the way in which the defendant's costs are calculated; subsection (5) provides that where a claim is dismissed, the court when assessing costs must reduce the assessed amount by the amount it would have awarded for the genuine element of the claim.
Whereas, if a court finds a claim to involve fundamental dishonesty following an application under 44.16 the defendant is not automatically entitled to enforce any costs order without an application to the court for permission, an added step where the court will consider whether to set aside QOCS.
Tort of Deceit
Where there is sufficient evidence to plead fraud some practitioners are bringing counter claims for the tort of deceit. The thinking behind bringing a counter claim is primarily to seek to recover any losses which flow from a claimant’s dishonesty; the secondary benefit to pleading a counter claim for deceit is that it creates a difficulty for the claimant’s funder. Most funding arrangement do not extend to counterclaims.
The test for proving the tort of deceit is:
A false representation made by a party:(a) Who knows it to be untrue, or(b) Who has no belief in its truth, or(c) Who is reckless as to its truth.
if that party intended another person should act in reliance on such representation and
that other person in fact does so, the party will be liable in deceit for
the damage caused.
Have you been served with a Notice of Discontinuance?
As a result of the decision in Kite v Phoenix Pub Group you should carefully review any Notice of Discontinuance to consider whether it’s appropriate to apply to set it aside on the basis that the claimant would have faced an application to strike out the claim under CPR 44.15 on the basis there are no reasonable grounds for bringing the claim.
In Kite v Phoenix Pub Group The claimant brought a claim for injuries sustained on November 2014 when he fell into an uncovered man hole in the car park of a pub, The Suffolk Punch. The defendant is a company that operates a number of pubs in the South West of England. The Defendant’s case was that, although The Suffolk Punch had once been operated by it, by the time of the accident it was owned and operated by a different company, Enlighters Ltd. Unfortunately for the claimant Enlighters Ltd had since dissolved.
The case first came before the court on the defendant’s applications both to set aside default judgment and to strike out the claim. Default judgment had been entered because; following the service of proceedings at The Suffolk Punch, there had been no response to the claim form. Default judgment was set aside with the Judge finding that service had been invalid. It then fell to the Judge to consider the defendant’s application to strike out.
In support of the strike out application the defendant had provided Companies House records which illustrated that it had no connection with Enlighters Ltd, the official copy entry for The Suffolk Punch showing that the defendant was not the freeholder, and the lease for The Suffolk Punch which indicated Enlighters Ltd as the leaseholder. On the defendant’s application to strike out counsel for the claimant submitted that an adjournment of the strike out hearing was necessary to allow the claimant to carry out further investigations and produce evidence (the application having been made only one week prior to the hearing itself). The defendant resisted the application to adjourn but this was granted by the Judge, on the basis that there was no prejudice to the defendant in allowing the claimant more time. The Judge ordered that the claimant pay the defendant’s costs of that hearing.
No evidence was produced by the claimant following the hearing. In the run up to the adjourned hearing the claimant’s solicitors contacted the defendant’s solicitors to inform them that this case was a QOCS case and that accordingly they would not be able to recover their costs. In response the defendant’s solicitors reminded the claimant of the exception which applied where a case was struck out.
This is a familiar tale for disease and in particular NIHL cases where proceedings are frequently issued and served against the incorrect defendant.
A Notice of Discontinuance could be served to avoid the enforcement of a costs order as if the claim is struck out the effects of QOCS are dis-applied.
Kite is a County Court judgment and is not binding but it is a good indicator of how the courts will resolve these issues and in this particular case the claimant’s conduct was considered to be opportunistic.
Enforcing a costs order?
If judgment is entered after 1 April it is likely there will be no ATE funding available to satisfy any costs order.
Consideration will be made as whether to pursue the claimant directly (it may involve a consideration of a wasted costs against solicitors). However, notwithstanding claims are still frequently litigated post LASPO with CFA funding post 1 April 2013 supported by a Notice of Funding confirming that there is ATE funding with details of cover.
Although it is unclear why claimant solicitors would serve a Notice of Funding post 1 April 2013 on the basis they are unable to recover a success fee, it is quite clear that a number are doing so and if they hold themselves out as providing cover and there is a costs order which dis-applies QOCS, then there is an argument which remains untested that the ATE funder should satisfy that order.
If there is no ATE cover we do need to factor in the costs of applying to strike out and obtaining a costs order and our ability to enforce it assuming we wish to do so. Each case will have to considered on its own facts. Has the claimant an income? Is this more of an issue concerning the claimant or their solicitors? Are the solicitors the ones we wish to send a “message” to?
Enforcing a costs order as a result of claims being pursued without merit could send a message to claimants’ solicitors that irrespective of QOCS there will be cases where QOCS will be dis-applied and costs orders will be enforced.
QOCS and Part 36
A Part 36 Offer, if effective, will wipe out a claimant’s damages by permitting enforcement of a costs order in favour of the defendant capped by the total damages/interest figure awarded to the claimant. ATE insurance continues to exist in a more modest form to cover the costs risk of not beating a defendant’s Part 36 Offer.
A claimant who fails to beat a part 36 offer can see their entire damages award and costs entitlement wiped out if it is set off against the defendant’s costs award.
In low value disease claims such as NIHL a costs order can easily exceed damages.
The key is examining the claim at the earliest opportunity and considering if there are any litigation risks .It would be worthwhile making a part 36 not only early but attempting one even if it not possible to properly value a case. There is no benefit in waiting to make a Part 36 offer if it needs to be made.
Interlocutory Costs Order and Wasted Costs
There is another consideration for defendants, when considering enforcing costs against a claimant: interlocutory costs.
In the recent BLM case of Paul Daglish v Forest Gardens (property) Ltd and Parson's Chain Company Ltd and FKI Mining Ltd, a claimant sought damages for NIHL:
The claimant relied on the report of Mr Zeitoun dated 14 January 2014, who concluded the claimant suffered from bilateral hearing loss of 22.4dB, age associated hearing loss of 17.2dB, leaving 5.2dB of hearing loss at 1, 2 and 4 kHz attributable to noise exposure.
Part 35 questions were sent to Mr Zeitoun, pre-litigation, regarding the frequencies used to calculate the claimant’s hearing and whether he indeed had NIHL. Mr Zeitoun in his replies agreed that:
“the frequencies 1, 2 and 3khz [are] more commonly used to determine the degree of NIHL and used in the literature you have provided”.
The claimant then litigated and in the first defendant’s Directions Questionnaire, permission was sought to obtain their own expert medical evidence. Despite this, the district judge adopted the claimant’s proposed directions wholesale, by allocating the matter to the fast track and denying the first defendant permission to present its own medical evidence.
The first defendant complied with the court’s order and raised further Part 35 questions to Mr Zeitoun. The court had further ordered that “no permission is given for expert medical evidence pending any application for the same after questions have been answered”. Mr Zeitoun maintained his position and the first defendant applied to the court for permission to obtain their own report on a joint single basis with the third defendant. A provisional appointment was organised for the claimant to be examined by Mr Phil Jones, a consultant ear, nose and throat surgeon, in order to expedite matters should the application succeed.
Worcester County Court listed the first defendant’s application for permission for their own ENT expert evidence. At this hearing the district judge made the following order:
1. The first defendant’s application is refused
2. The first defendant shall pay the claimant’s costs of the application to be assessed if not agreed
3. Permission to appeal refused
The district judge refused the first defendants permission to obtain a desktop report from Mr Jones.
The first defendant sought permission to appeal the order of the district judge. His Honour Judge Pearce-Higgins QC allowed the appeal and subsequently allowed the first defendant their costs, which totalled in excess of £8,500, more than the total value of the claim.
The claim was valued in the remit of £5,000-£7,500. Consequently, as this is a QOCS claim, the first defendant’s costs could be set-off against any damages the claimant might have been awarded.
As the costs awarded exceeded the claimant’s likely damages, he would not receive any monies from the first defendant should the matter proceed to trial.
Despite this the claimant’s solicitors sought to proceed with the matter. It was at this point it became apparent that they were driving the litigation. The defendant subsequently applied to the court for a wasted costs/non-party costs order against Roberts Jackson Solicitors.
In short, it was argued that Roberts Jackson’s conduct in continuing with the claim (after the interlocutory costs order had been made) enabled it to shelter behind QOCS, placed the risk in respect of an adverse costs order which flowed from potential strike out/exception to QOCS on the claimant’s shoulders, and deployed an ATE policy which had not been disclosed to justify continuing to pursue a claim which was worthless to the claimant. Ultimately this breached the overriding objective, namely that a case should be dealt with “justly and at a proportionate cost”.
Roberts Jackson advised they were keen to dispose of the issues without a hearing. They subsequently offered the sum of £23,000 to the defendant to settle the issues at this stage. Negotiations continued between the parties and our wasted costs/non-party costs application against Roberts Jackson was eventually settled for £30,000, which equated to 81.5% of the defendant’s costs incurred as a result of Roberts Jackson’s conduct.
Be aware that the point here is that, for you to be able to enforce any costs order, the claimant has to be awarded some measure of damages. In Daglish the point became that even if the claimant’s case succeeded in full he would receive nothing, making the whole purpose of the claim moot. But if you are awarded costs you may only enforce them up to the sum of damages the claimant is awarded. If no damages are awarded unless you have set aside the impact of QOCS you cannot enforce.
Just a reminder of the relationship between QOCS and Part 20:
On 31st July 2014 the Court of Appeal handed down judgment in Wagenaar v Weekend Travel Ltd and Serradj  on a number of issues arising from the application of the new one-way costs shifting rules in CPR 44.13 to 44.17.
The Court of Appeal considered the operation of the QOCS provisions for the first time. The decision has important repercussions for the costs consequences in contribution and third party claims arising out of personal injury claims that fail.
The claimant suffered a severe skiing accident while on holiday in Chamonix and sued the defendant tour operator under the Package Travel, Package Holidays and Package Tour Regulations 1992, alleging negligence on the part of the defendant’s supplier, the Third Party ski instructor. The defendant then brought a Part 20 claim for indemnity or contribution against the Third Party.
After a trial in May 2013, shortly after the QOCS rules came into effect, the claimant’s claim against the defendant was dismissed, as was the defendant’s claim against the Third Party. The claimant’s claim had not been funded by a relevant pre-commencement funding arrangement. The judge at first instance ordered that costs should follow the event in both the claim and the Part 20 claim, so that the defendant was awarded its costs against the claimant and the Third Party was awarded her costs against the defendant, but he went on to order that that the QOCS rules applied to both claims, so that neither costs order could be enforced. The net effect was that each party was to bear her or its own costs. Both the defendant and the Third Party appealed against the costs orders.
The defendant’s principal argument was that the judge should not have applied the QOCS rules to the case at all because they were ultra vires. It was submitted that the power of the court in relation to costs which was set out in section 51(3) of the Senior Courts Act 1981 could not be trammelled by rules of court such as the QOCS rules.
The Court of Appeal held that this argument was wrong and that the court’s power under section 51(3) to determine by whom and to what extent costs are to be paid is to be read subject to the power of the rules committee to make rules of court concerning the availability of an award of costs, the amount of such costs and the exercise of the court’s discretion in relation to costs. The rules committee was therefore fully entitled to make the QOCS rules and the defendant’s appeal was dismissed.
The Third Party appealed against the judge’s application of the QOCS protection to the costs order she obtained against the defendant. The Court of Appeal agreed with the Third Party’s submission that the QOCS provisions only applied to protect claimants who were bringing a claim which included a claim for damages for personal injuries (or the other claims specified in CPR 44.13(1)(b) and (c)) but did not apply to the whole of an action in which such a claim featured. Accordingly the judge had erred in his interpretation of the provisions as extending such protection to defendants who were claimants in third party or contribution proceedings arising out of personal injury claims.
The effect of the appeals was therefore that the claimant was entitled to the QOCS protection but the defendant was not. The practical effect was that, although successful in defending the claim, the defendant could not recover its costs from the claimant and, because of the failure of the Part 20 claim, had to pay the Third Party’s costs. As the defendant submitted, it would have been better off if both claims had succeeded.
The impact of the QOCS provisions plainly requires careful economic consideration where indemnity or contribution claims are contemplated by defendants to personal injury claims, whether arising from accidents abroad or otherwise.
If you are involved in a budgeting exercise for a QOCS consider if you should rely upon CGHRs or actual rates? Not appropriate if it is a fixed fee case but relying on actual hourly rates reduces our budgets. When the costs judge compares our budget with that of the claimants it should give them pause for thought. Remember though once used actual rates for budgets difficult to rely on CGHR for say an interlocutory or Part 36 risks.