QOCS and Fundamental Dishonesty

Qualified one-way costs shifting (“QOCS”) applies to proceedings which include a claim for damages for personal injuries, under the Fatal Accidents Act 1976 or 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 (Civil Procedure Rules (“CPR”), rule 44.13). However, it does not apply to applications pursuant to Section 33 of the Seniors Courts Act 1981 or Section 52 of the County Courts Act 1984 (applications for pre-action disclosure) or where rule 44.17 applies (where the Claimant has entered into a pre-commencement funding arrangement).

QOCS is often termed as ‘costs protection’; the effect is (subject to rules 44.15 and 44.16) that “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 in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the Claimant.” (CPR, rule 44.14(1))

The exceptions to QOCS where permission is not required are set out in rule 44.15 and where permission is required in rule 44.16. Permission is not required where proceedings have been struck out on the grounds that the Claimant has disclosed no reasonable grounds for bringing the proceedings, the proceedings are an abuse of the Court’s process or 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.

Exceptions where permission is required (rule 44.16) include where the claim is found on the balance of probabilities to be fundamentally dishonest. Fundamental dishonesty will be the focus of the remainder of this article.

There is overlap between rule 44.16 and Section 57 of the Criminal Justice and Courts Act 2015; however, rule 44.16 relates to a claim which is fundamentally dishonest and Section 57 relates to a Claimant who is fundamentally dishonest. There is no definition of the term ‘fundamentally dishonest’ within either the CPR or the Criminal Justice and Courts Act. The Court will consider the overall tenor of the claim in deciding if it is fundamentally dishonest and it would encompass a situation where, for example, the Claimant has a small and honest claim for vehicle damage but a much larger dishonest claim for personal injury.

HHJ Maloney QC in the matter of Michael Joseph Gosling v Hailo and Screwfix Direct [2014] WL 3002771, which was endorsed by the Court of Appeal in Lorna Howlett v Penelope Davies [2017] EWCA Civ 1696, held that “a Claimant should not be exposed to costs liability merely because he had been dishonest regarding some collateral matter or some minor, self-containing head of damage. If, however, the dishonesty went to the root of the whole or a substantial part of the claim, that would be a fundamentally dishonest claim”. Around half of that claim was found to be exaggerated and therefore held to be fundamentally dishonest. Dishonesty can encompass quantum, as well as liability, for example in cases where a Claimant has exaggerated their symptoms.

There is no requirement for fundamental dishonesty to be pleaded in the defence [see Howlett]. However, the Claimant should be given adequate opportunity to respond to and rebut the allegation. The issue is whether the Claimant has been given adequate warning of and a proper opportunity to deal with the suggestion, rather than whether it was pleaded in the defence.

‘Fundamental’ has been considered to be satisfied if the Defendant proves the Claimant acted dishonestly in relation to the primary claim and/or a related claim (as defined in Section 57(8)) and as ‘going to the root of’ or ‘going to the heart of the claim’ [Pinkus v Direct Line [2018] EWHC 1671 (QB)]. However, the approach in Howlett is one that specifically relates to CPR 44.16, rather than Section 57. The burden of proof lies on the Defendant and is on the balance of probabilities.

Under Section 57, where the Court finds the Claimant is entitled to damages in respect of the claim but the Court is satisfied 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 satisfied that the Claimant would suffer substantial injustice if the claim were dismissed.

The Court’s order must then record the amount of damages that the Court would have awarded to the Claimant but for the dismissal of the claim and when assessing costs, must deduct the amount recorded in damages from the amount which it would otherwise order the Claimant to pay in respect of the costs incurred by the Defendant. That difference would then be enforceable, should the Court grant permission under rule 44.16.

This article has been a brief look at some of the rules, case law and legislation that applies to fundamental dishonesty. Claimants should be made aware of the possibility of such a finding being sought at the earliest possible opportunity and be warned of the cost consequences that may apply should such a finding be made. Such an issue will not arise in every claim but may become highly relevant if there are inconsistencies that arise in the circumstances of the claim throughout the papers or evidence and practitioners will need to be alive to the potential.

Members of Becket Chambers are able to provide advice and representation in personal injury matters; please contact the clerks on clerks@becket-chambers.co.uk or 01227 786331 for further details.