QOCS Protection & fundamental dishonesty ruling paves way for increased insurer challenges & more satellite litigation

Qualified One -Way Costs Shifting (QOCS) has been in force since 1st April 2013 and was implemented to go hand in hand with the Jackson reforms in respect of funding and the costs of civil litigation.

QOCS have been and continue to be controversial: The essence of QOCS was to remove the need for the Claimant to take out after the event insurance and shield their personal liability to pay costs in the event they lost their case against a Defendant.

However, what resulted was the principle of QOCS itself being qualified by a number of exceptions, which leaves the Claimant potentially liable for the full extent of any cost order made against them and thus leaving a continuing insurable risk. The exceptions are 3 fold:

  1. Where the Claimant failed to beat a Defendant’s Part 36 offer
  2.  Where a case is struck
  3. Where the claim is found to be ‘fundamentally dishonest’

It is the introduction of the ‘fundamental dishonesty test’ that has attracted the most discussion, in particular, concerns as to how the Courts would interpret and determine what constitutes fundamental dishonesty?

In the recent case of Gosling -v- Screwfix and Anr (unreported 29 March 2014), HHJ Moloney in the Cambridge County Court provided the first finding of fundamental dishonesty for the purposes of the new QOCS regime.

Mr Gosling sustained an injury to his knee, after falling through the rung of a ladder. The case was defended on liability, causation and quantum. Evidence of inconsistencies in the reporting of the claimant’s symptoms precipitated the defendant’s claims team to carry out surveillance. This revealed significant exaggeration which was corroborated by the medical experts.

The Defendant successfully persuaded HHJ Moloney to hold that the claim was fundamentally dishonest for the purposes of QOCs.  As a result, the Claimant was ordered to pay the Defendant’s costs of the action on an indemnity basis.

Although it was accepted that the Claimant had sustained some injury, the Claimant had what the judge considered, the Claimant had significantly exaggerated the extent of his on-going symptoms. The effect of which was to reduce the value of his claim by half.

The judge held that the term ‘fundamentally dishonest’ had to be given contextual meaning and this case highlights how the Court distinguished between dishonesty that was fundamental to the claim and that which was not. The judge concluded that dishonesty that was ‘incidental’ or ‘collateral’ to the claim would not be fundamental. However, dishonesty that went to the ‘whole or a substantial part of the claim’ was.

Mr Gosling in significantly exaggerating his symptoms had set out to be dishonest and deliberately give a false impression to the Court and as a result, the Court was satisfied, on the balance of probabilities that the claim was fundamentally dishonest.

It is the first decision in respect of the ‘fundamentally dishonest’ test and given the outcome it is highly probable that insurers will jump on the band wagon and applications for findings of fundamental dishonesty may become a regular occurrence in the future.

From a practical perspective, many questions about the operation of the new QOCs regime remain and I anticipate there will be lots of decisions in the wake of the Gosling decision.

It is very difficult to tell the difference between a genuine Claimant and a Claimant who is exaggerating and this decision only serves to discredit the ‘injured Claimant’s’ character and add more fuel to the fire in the compensation culture debate. What is clear is that real guidance is required in order to lay down principles and parameters for the Courts to follow in how the test of fundamental dishonesty should be determined.  Practitioners should be providing proper advice to Claimants at the outset in respect of their responsibilities and expectations in bringing their claim.

In the meantime, this case acts as a stark warning to practitioners and Claimants that the Courts are willing to make findings of dishonesty even where the same is limited to one issue or where there is an element of honesty to it.

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