Michael Gosling v (1) Halio (2) Screwfix Direct [Claim No UD17868] Cambridge County Court, 29 April 2014 HHJ Moloney QC
Qualified One Way Costs Shifting (QOCS), one of the key changes brought about by the Jackson reforms to bring costs protection to Claimants has generally meant that in any personal injury cases where the Claimant is unsuccessful they do not have to pay the legal costs of the Defendant, unless the Claimant has entered into a Pre-April 2013 Conditional Fee Agreement. There are however some significant exceptions and arguably the most unclear of these is fundamental dishonesty.
CPR 44.16(1) states that:
“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 CPR does not, however, provide any definition or explanation as to what may amount to fundamental dishonesty and accordingly it has been left to the Courts to determine this for themselves.
Despite the level of fraudulent and dishonest claims many insurance and Defendant law firms have and continue to purport there to be, since the implantation of QOCS there has been limited case law dealing with the issue. The most reported case, Michael Gosling v (1) Halio (2) Screwfix Direct [Claim No UD17868] Cambridge County Court, 29 April 2014 does provide some guidance, although there are still numerous questions which yet to have been dealt with.
In Michael Gosling v (1) Halio (2) Screwfix Direct [Claim No UD17868] Cambridge County Court, 29 April 2014 the Claimant was only found to have been dishonest in respect of quantum, although as the dishonesty was crucial to around half of the value of the claim, it was held that the same was fundamental. It is therefore clear that the Claimant does not need to bring a bogus claim to lose protection under QOCS and that exaggeration of the extent of symptoms can be enough.
“It is therefore clear that the Claimant does not need to bring a bogus claim to lose protection under QOCS and that exaggeration of the extent of symptoms can be enough.”
Mr Gosling brought a personal injury claim against two defendants, shortly prior to the expiration of limitation. The claim involved a serious knee injury which the Claimant alleged arose from an accident involving a ladder manufactured by the First Defendant and sold to him by the Second Defendant. The Claimant’s Schedule of Loss initially totalled £39,000.00, of which some £17,000.00 related to future care.
The Defendants conducted surveillance on the Claimant, in order to see whether his level of disability was as great as he was alleging. On the date that the Claimant was scheduled to attend the Defendants’ expert he was filmed shopping without using a crutch. He subsequently attended the appointment where he used the crutch to help him walk, leading the expert to opine that he still had knee pain which limited his walking distance.
The surveillance evidence was disclosed following the Claimant’s service of his witness statement. In this statement the Claimant made assertions as to his ongoing pain and disability. Following the service of the surveillance, however, the Claimant served a revised Schedule of Loss which was drastically reduced from the initial schedule and in particular abandoned the claim that he had previously made for substantial damages for future care.
The matter settled shortly before trial against the First Defendant for £5,000.00 in damages, £27,000.00 in costs and an indemnity against the Claimant’s CRU liability (approximately £18,000.00). The claim against the Second Defendant was discontinued, meaning that the Second Defendant was automatically entitled to an order for costs arising in its favour under CPR 38.6. However, as QOCS applied the order could not be enforced.
The Second Defendant proceeded to make an application for permission to enforce the order for costs against the Claimant. The application was made on two separate basis. Firstly, that the discontinuance should be set aside so that the action could be stuck out. This would provide automatic protection from QOCS under CPR 44.15. In the alternative, the Second Defendant argued that the Court should find that the Claimant was fundamentally dishonest, in which case the Court may find that orders for costs against the Claimant may be enforced, pursuant to CPR 44.16.
HHJ Moloney QC chose to focus on the second basis of the application as to whether the Claimant was fundamentally dishonest and whether the costs order could be enforced. Accordingly, it still remains uncertain whether Defendants will have any success in arguing that a discontinuance should be set aside so that an action can be struck out, which would provide an automatic exception to QOCS under CPR 44.15.
“It still remains uncertain whether Defendants will have any success in arguing that a discontinuance should be set aside so that an action can be struck out, which would provide an automatic exception to QOCS under CPR 44.15.”
In dealing with the second basis of the Defendant’s application in determining whether the Claimant was fundamentally dishonest HHJ Moloney QC considered separately the alleged dishonesty in relation to both liability and quantum. It was decided that there would not be a determination of the issues arising out of the assertions as to dishonesty on liability, as the evidence in relation to such assertions was not so clear that it could justly be determined on the papers alone, without hearing oral evidence involving the Claimant and up to three experts, which would not be proportionate.
In respect of the allegations of dishonesty as to quantum, however, HHJ Moloney QC held that that the surveillance evidence established on the balance of probabilities that the Claimant was “deliberately dishonest, in that knowingly and dishonestly he gravely exaggerated his symptoms to the doctors and to the court” and that “the effect of his dishonesty was fundamental to a substantial part (both in size and importance) of his claim for damages.”
It therefore does seem safe to assume following this case that where dishonesty is crucial to around half or more of the case value, it may be considered fundamental for the purposes of the provision. It does, however, remain unclear and yet to be determined as to whether anything less than this would escape such a finding.
The issues of whether a Defendant alleging fundamental dishonesty can succeed in an application to set aside a discontinuance and have a case struck out, to receive an automatic exception to QOCS under CPR 44.15 also remains unanswered.
HHJ Moloney did also note that there was an open question which he did not intend to answer in this Judgment as to whether a CRU indemnity was considered a part of the damages? CPR 44.14 provides that where the QOCS exceptions in CPR 44.15 and 44.16 apply, costs orders against the Claimant may be enforced (without permission) but only to the extent that it does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant. Whether the amount of the CRU indemnity forms part of the amount that a Defendant can seek to enforce against a Claimant is therefore still unclear.
Although the Courts have provided some clarification as to what may amount to fundamental dishonesty it does seem that in light of the remaining unanswered questions further guidance will be required in order to achieve a test or definition to provide some certainty in other circumstances, particularly where the effect of any alleged dishonesty is less than around half of the overall case value. Whether any dishonesty can be considered fundamental will no doubt be something which will be considered by assessing the impact on a case by case basis, although it does remain to be seen where or if the Courts will draw the line as to the percentage of impact on the case value any alleged dishonesty needs to have in order to be determined fundamental.