Lies, damned lies & QOCS - Jackson: cost exemptions
Disease Aware Issue 5
The Jackson Reforms were implemented in England and Wales on 1 April 2013. Amongst other aspects, they affected the manner in which a successful defendant could recover its costs of an action. The new regime under CPR Part 44.13 introduced Qualified One Way Costs Shifting (QOCS) for personal injury claims including disease claims.
QOCS does not apply to proceedings where the claimant entered into a CFA or took out an ATE policy prior to 1 April 2013 (CPR Part 44.17). In such circumstances a successful defendant may continue to recover its costs in accordance with the prior regime.
The effect of QOCS on:
- a successful claimant: a successful claimant will continue to recover their costs as under the prior regime.
- a successful defendant: a defendant succeeding at trial or receiving a notice of discontinuance will no longer be able to recover its own costs except in specific circumstances.
CPR Part 44.16 provides one of the exceptions to allow a successful defendant to recover its costs which is where the claim is found, on the balance of probabilities, to be fundamentally dishonest. The exception prevents a claimant from benefiting from the costs protection provided by QOCS. However, the CPR does not continue to provide a definition of what would constitute ‘fundamental dishonesty’ - although it is assumed to be akin to fraud.
Under the prior regime the claimant would have to consider the merits of the claim before issuing court proceedings. That was the point at which the claimant was at risk of paying the defendant’s costs. Under QOCS, some claimants may be less hesitant to issue proceedings. A Notice of Discontinuance is their ‘get out of jail free’ card.
Costs Practice Direction 12.4 (b) suggests that before any finding of fundamental dishonesty, the court would normally require a trial on the issue. If a defendant identifies a potential fraud, a claimant wanting to avoid a finding at trial may file a notice of discontinuance. Costs Practice Direction 12.4(c) allows defendants to apply to the court to determine fundamental dishonesty even after discontinuance.
Dishonesty in disease cases
Disease claims can be an easy target for dishonest claims as they often involve historical exposure with dissolved companies. Claimants are generally aware that there will be difficulty for a dissolved defendant to produce evidence to defend the claim or challenge the claimant’s evidence.
Dishonesty in disease claims can take a number of forms including:
- An individual other than the claimant attending for an audiogram
- A claimant making a second claim for damages arising out of the same disease
- A claimant alleging exposure to noise or vibration that did not occur or did so with another employer (often an insolvent defendant where insurance cannot be traced)
- A claimant denying the provision of appropriate PPE or training
- A claimant exaggerating his exposure
- A claimant denying the presence of long-standing symptoms - sometimes a result of limitation concerns
- An exaggerated claim for special damages.
Allegations of fraud may arise at the outset of the claim or they may be unearthed following investigations. Any allegation of fraud firstly has to be:
- properly pleaded, and;
- there must be evidence upon which to make the allegation of fraud
The claimant is also entitled to know the nature of the defence mounted against him or her (Digby v Essex CC  PIQR P53 (CA)).
Secondly, the failure to have the appropriate evidence to base an allegation of fraud may have serious consequences as in Clarke v Maltby  EWHC 1201 (QB) and  EWHC 1856 (QB) in which the defendant was sanctioned with an order to pay indemnity costs to the claimant.
There is no requirement to plead fraud however when alleging dishonesty. The absence of such an allegation would not subsequently prevent a defendant from raising issues of dishonesty, as they arise in the litigation.
In the recent county court matter of Gosling v Screwfix and Anr (unreported 29 March 2014) HHJ Moloney QC gave some guidance on the definition of fundamental dishonesty. The judge was satisfied that the claimant had suffered an injury in the accident. That meant that the claim was not fraudulent. However, surveillance evidence illustrated that the claimant was exaggerating the extent of his ongoing symptoms.
The judge concluded that the claimant’s conduct was dishonest and that, on the balance of probabilities, the claim was fundamentally dishonest. He concluded that the claimant should be denied the protection of QOCS and ordered them to pay the defendant’s costs of the action on an indemnity basis (a Part 36 Offer had been made by the defendant earlier in the proceedings).
Contempt of court proceedings
A further potential avenue for insurers is an action for contempt of court against a claimant for having made false statements in documents verified by a statement of truth. In order to bring a private claim for contempt of court, the applicant must show that it is in the public interest to do so.
The issue of being in the public interest and guidance on the procedure to be followed was considered in the case of Barnes t/a Pool Motors v Seabrook  EWHC 1849 in which the divisional court considered applications for permission to commence proceedings for the committal to prison of unsuccessful claimants in three unrelated cases for contempt of court. One of the applicants raised the issue of the presence of endemic insurance fraud and the concept of it being a victimless crime for which the penalties of being caught were negligible.
Permission was given in relation to two of the three applications where there was a strong case against the defendant that he knowingly made false statements verified by a statement of truth, which were very material to a central issue in the proceedings (such as the amount of damages) and there was no significant delay in bringing the proceedings.
Permission was refused in the third case due to a delay in bringing the proceedings. Such applications may be made in addition to a costs recovery action.
The proceedings may deter the potentially fraudulent or dishonest claimant from bringing claims lacking any real merit and be particularly useful where there is the absence of an ATE insurer and the insurer is faced with an impecunious claimant.