QOCS and the exceptions to it: Where are we now?

QOCS (CPR 44.13-44.17) protects Claimants from costs orders in new PI claims, and was part of the trade-off for the non-recoverability of additional liabilities following LAPSO.

I deal below with the arguments which are beginning to be seen arising from the exceptions to the rule.

 (1) QOCS

44.13 provides that the section (Section II of part 44) applies to proceedings which include a claim for damages for personal injuries (or fatal accident claims). It includes in the definition of claimant a person bringing a counterclaim.

The main provision is:

4.14—

(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 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.

The effect of this is clear – the Defendant can only have its costs up to the total damages awarded to the Claimant. Thus, if the Claimant has lost at trial, and recovered no damages, then the Defendant cannot recover any costs.

Part 36 still applies, and so a Claimant who recovers damages but fails to beat a Defendant’s offer could see his damages lost to pay the Defendant’s costs from the date of the expiry of the offer.

(2) Exceptions

There are exceptions to QOCS which allow costs orders made against a Claimant to be enforced to the full extent of such orders (so even a losing Claimant would be liable for the full costs order):

Under 44.15:

Without the permission of the court where the claim has 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.

Under 44.16 (1):

With the court’s permission, where the claim is found on the balance of probabilities to be fundamentally dishonest.

Under 44.16(2):

With the court’s permission, and to the extent that it considers just, where:

(a)    The proceedings include a claim for the benefit of another person other than a dependant under the FAA 1976 [the order may be made against the person for whose benefit the claim was made: 46.16(3)];

(b)   A claim is made for the benefit of a claimant other than a claim to which this section applies.

(3) Exceptions: analysis & arguments

The strike out exceptions

The important point to note here is that, where an application to strike out a claim or counterclaim is successful, it is important that the order records the reason for the strike out so that the costs order may be properly enforced.

Note also that a strike out for failure to comply with rules or court orders does not necessarily entitle the Defendant to its costs, unless the strike out also falls within 44.15(c).

Fundamental Dishonesty

Judge Maloney QC, in Cambridge County Court, considered the meaning of the term and its application in Gosling v (1) Hailo (2) Screwfix Direct (available on Lawtel).

The Claimant had been subject to video surveillance which demonstrated that he had greatly exaggerated his symptoms (by showing him walking unaided and shopping, when he later that day claimed to the expert that he walked with a crutch and could not do the shopping). The Claimant settled and discontinued, resulting in a costs order against him.

The issue was whether that costs order could be enforced, and how the court should determine the issue of whether the claimant had been fundamentally dishonest.

The Judge found that the dishonesty must go to the root of the whole or a substantial part of the claim, not some minor or collateral matter.

He also found that there was no need to hold a hearing and take oral evidence from the Claimant on the issue, as that would be disproportionate and, given the overwhelming nature of the video evidence, the issue could be dealt with summarily.

Therefore he considered the extent of the claim for personal injuries and noted that around half the general damages claimed – and all of the future care – related to the knee injury. He therefore found that the Claimant’s dishonesty was fundamental, and allowed the order to be enforced to its full extent.

Claim for a person other than C

This is an exception which is more likely to arise in run-of-the-mill RTA litigation. Practice direction 44 states at paragraph 12.2: Examples of claims made for the financial benefit of a person other than the claimant … are subrogated claims and claims for credit hire.

Clearly very many personal injury RTA claims include a claim for credit hire; the practice direction is clear that that is a claim for the benefit of a person other than C, immediately defeating any argument that the hire was for the claimant’s benefit and/or that the liability the claimant’s.

That suggests that a large number of ordinary PI matters would fall within this ‘exception’ to QOCS, simply because they include a claim for credit hire.

Importantly, however, before the costs order may be enforced there are two stages of discretion to be exercised. 44.16(2) says the order may only be enforced: (i) with the court’s permission and (ii) to the extent it considers just.

(i)                  Exercising the discretion

Rule 44.16 sets out exceptions to QOCS.  The purpose of QOCS is to protect claimants in claims which ‘include’ a claim for personal injury. The rules envisage application to claims will include other matters (including credit hire).

It seems therefore that it would contrary to the principle of QOCS for the exception to apply simply because there is a claim for credit hire. Something more exceptional would, in my view, be required before the exception should be applied.

The rule is more properly applied to claims which include PI only to gain the benefits of QOCS, or those where the only dispute left at trial was the quantum for credit hire.

It seems to me that an ordinary RTA trial with a legitimate PI claim and credit hire should not fall outside of QOCS.

(ii)                Extent of order and paying party

Furthermore even if the court decided to exercise that discretion, it should only do so to the extent that it considers just. That may be £nil, if any more would not be just. ‘Just’ in this rule must again be considered in light of the public policy background to QOCS.

The court also has the power to make the order against the person (credit hire company?) for whose benefit the claim was brought. The Practice Direction suggests that this should normally be the case (para 12.5):

·               the court will usually order any person other than the claimant for whose financial benefit such a claim was made to pay all the costs of the proceedings or the costs attributable to the issues to which rule 44.16(2)(a) applies, or may exceptionally make such an order permitting the enforcement of such an order for costs against the claimant;

·  (b) the court may, as it thinks fair and just, determine the costs attributable to claims for the financial benefit of persons other than the claimant.

It is not clear whether the reference to ‘usually’ means that the discretion should usually be exercised, or that, where it is, the order should be made against the ‘other person’.

However this may be a useful starting point for the argument on behalf of the Defendant: QOCS is intended to protect Claimants, not credit hire companies, and so where a matter is lost at trial or on an issue of quantum for credit hire, the hire company should not be afforded the same protection as the Claimant.

In my experience, however, such applications by Defendants have not (yet) been successful. That my change in a case where the only issue at trial was credit hire.

Claim other than one to which the section applies

The first part of the section applies QOCS to claims which include a claim for personal injury. The vast majority of such claims will include a claim for something else (even if only miscellaneous expenses).

Given that, to fall within the section, a claim must only include PI, it is difficult to see why there is an exception for claims that include something else. There should be nothing unusual about the inclusion of the ’something else’.

There is no assistance in the Practice Direction. The only logical application of the rule is where, again, there is a claim for ‘something else’ which includes a PI claim only to gain the protection of QOCS. Given the wide drafting of the scope/application rule, it would have to be quite obvious that that was the intention before such an order should be considered.

SARAH – The ‘hero’ bill to save the zombie parliament?

Background

One of the measures announced in the queen’s speech was the Social Action, Responsibility and Heroism bill, from Chris Grayling’s Ministry of Justice (though conceived before his appointment as Lord Chancellor).

In a piece on Conservative Home (http://www.conservativehome.com/platform/2014/06/chris-grayling-mp-our-bill-to-curb-the-elf-and-safety-culture.html) , Grayling described it as ‘our bill to end Elf and Safety culture’. Any bill which is trumpeted with a limp joke stolen straight from Richard Littlejohn is a worrying sight, and one which needs to be considered carefully.

The Intention of the Bill

As Grayling sees it, the ‘elf and safety’ culture ‘holds back much of our society’. Clearly he has not read the section on the HSE website dedicated to consistently and regularly debunking the majority of the ‘elf and safety culture’ myths which appear in the press.

Clearly he has also not read much tort case law either, as he also gives the following examples (with comment):

“take the responsible employer  who puts in place proper training for staff, who has sensible safety procedures, and tries to do the right thing”

That sounds almost like a layman’s explanation of the standard of care in employer’s liability, no? Apparently not…

“And then someone injures themselves doing something stupid or something that no reasonable person would ever have expected to be a risk. Common sense says that the law should not simply penalise the employer for what has gone wrong”.

It is not just common sense that says this; so would the law. ‘Reasonable care’ would not require protection against a risk that ‘no reasonable person’ would expect.

“or the member of our emergency services who feels that they can’t come to the rescue of someone in difficulty because of the fear they will end up in trouble for breaching health and safety rules.

This seems to be about health and safety regulation, not negligence; the health and safety culture is often not a result of the regulations but of their perception.

“or the person who holds back from sweeping the snow off the pavement outside their house because they are afraid someone will then slip on the ice and then sue them”

This idea has been around for a considerable time and is as far as I know is a myth, completely unsupported by authority.

If a duty were to be imposed in those circumstances, assuming there is no occupiers’ duty as this is the pavement outside the home, it would be under the Caparo principles and it would have to be ‘fair just and reasonable’ to impose a duty. Courts are unlikely to think that it is fair to do so. Further, clearance would not give rise to a duty to continue to clear the snow/ice in future. At most the duty which would arise would be a duty to take reasonable care in the first place.

Therefore the act of clearance would have to be done in a negligent way, which is rather more difficult to prove than the usual failure to clear by a local authority.

It was also reported by Private Eye that the government’s own DirectGov website advised, until recently, that there was no reason not to clear snow outside your home. That advice no longer appears, but is archived here: http://webarchive.nationalarchives.gov.uk/20121015000000/www.direct.gov.uk/en/Nl1/Newsroom/DG_191868?cid=rss

“of course courts do apply common sense, and very often throw out the most absurd cases. But that’s not before the individuals involved have been through incredible stresses and strains when they think they have just done the right thing”

So the law often gets it right, but it should get it right at an earlier stage. Right at the beginning of a case. It is always easy with hindsight to say that a case was bound to fail but how is any legislative framework supposed to fix that?

The answer according to Grayling is by providing a ‘signpost from parliament to the courts’. Before we consider the actual clauses in the Bill, we can already see that it cannot transplant the decision making process from the end to the beginning of litigation. In any event there are already procedures to deal with such ‘absurd’ cases: strike out and summary judgment.

The Bill

The bill applies to all claims for negligence or breach of statutory duty, when determining the standard of care (section 1).

The bill requires the courts to have regard to whether the alleged negligence or breach of statutory duty occurred:

-          When the person (defendant) was acting for the benefit of society (s.2);

-          Whilst the person was demonstrating a generally responsible approach towards protecting the safety or other interests of others (s.3);

-          When the person was acting heroically by intervening in an emergency situation to assist an individual in danger and without regard to the person’s own safety (s.3).

Effect of the bill

Firstly, a reminder that civil liability for breach of health and safety regulations was (largely) abolished by the Enterprise & Regulatory Reform Act 2013, bringing most workplace health and safety claims back under a broader ‘negligence’ test.

So in almost all circumstances (‘general’ common law negligence, occupiers’ liability, employers’ liability), the standard of care is ‘reasonable care’, or words to that effect. What is reasonable care is always dependant on the circumstances and so there is nothing to stop the court taking the matters above into account now.

Of course the bill requires them to be taken into account, but gives no further guidance on the effect they should have. That will be entirely up to the courts, and will lead to extensive litigation in the short term.

It remains to be seen what (if anything) the bill would in fact add to the law on negligence. It is unlikely to change the law significantly enough to prevent Grayling’s ‘heroes’ having to go through the process of litigation before succeeding.

The Compensation Act 2006

In any event the same result appears to have been achieved by the Compensation Act which states:

S 1 Deterrent effect of potential liability

A court considering a claim in negligence or breach of statutory duty may, in determining whether the defendant should have taken particular steps to meet a standard of care (whether by taking precautions against a risk or otherwise), have regard to whether a requirement to take those steps might—

(a)prevent a desirable activity from being undertaken at all, to a particular extent or in a particular way, or

(b)discourage persons from undertaking functions in connection with a desirable activity.

Conclusion

This appears to be another example of parliament’s time being spent legislating against a problem which doesn't exist (see also the Saatchi Bill). Time and resources could be better spent on educating people about the myths of ‘elf and safety’ law, or perhaps preventing the collapse of the criminal bar. 

Denton, Decadent and Utilise: Restating Mitchell?

This post also appeared on the Kings Chambers Healthcare blog. 

Introduction

The background to the 4/7/2014 court of appeal decision (available here) needs no introduction to those engaged in civil litigation in recent months. Suffice it to say that the Mitchell decision has caused considerable confusion and contradiction as to the correct approach to applications under CPR 3.9.

What follows is a brief analysis of the judgment and where it leaves the issue of relief from sanctions.

Mitchell & the cases which follow

Interestingly and helpfully the Court of Appeal lists ([13] – [20]) those cases which are, in its view, the ‘most important’ cases decided since Mitchell:

Adlington http://www.bailii.org/ew/cases/EWHC/QB/2013/B29.html,

Durrant http://www.bailii.org/ew/cases/EWCA/Civ/2013/1624.html,

Newland Shipping http://www.bailii.org/ew/cases/EWHC/Comm/2014/210.html,

Lakatamia http://www.bailii.org/ew/cases/EWHC/Comm/2014/275.html,

Summit Navigation http://www.bailii.org/ew/cases/EWHC/Comm/2014/398.html,

Chartwell Estate Agents http://www.bailii.org/ew/cases/EWCA/Civ/2014/506.html.

Given that the court of appeal (in its view at least) is merely ‘restating’ the decision in Mitchell, those cases are still in theory relevant to applications for relief.

Having considered those the court said that “The guidance given at paragraphs 40 and 41 of Mitchell remains substantially sound. However in view of the way it has been interpreted, we propose to restate the approach that should be applied in a little more detail.” Whether what follows is really a restatement is a matter for debate.

The Three-Stage Guidance  

The court sets out (at [24]) a three stage process for the assessment of applications under CPR r3.9:

The first stage is to identify and assess the seriousness and significance of the “failure to comply with any rule, practice direction or court order” which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate “all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b)]”.

Further detail is given on the application of each stage of the test.

Stage 1

The judgment goes some way to assisting with the meaning of ‘triviality’ which caused considerable inconsistency in decision-making.

The court says (at [26]) that “it would be preferable if in future the focus of the enquiry at the first stage should not be on whether the breach has been trivial. Rather, it should be on whether the breach has been serious or significant”.

It goes on to consider the test of ‘materiality’ proposed by the Bar Council and Law Society (who intervened in the appeal):

It was submitted on behalf of the Law Society and Bar Council that the test of triviality should be replaced by the test of immateriality and that an immaterial breach should be defined as one which “neither imperils future hearing dates nor otherwise disrupts the conduct of the litigation”. Provided that this is understood as including the effect on litigation generally (and not only on the litigation in which the application is made), there are many circumstances in which materiality in this sense will be the most useful measure of whether a breach has been serious or significant. But it leaves out of account those breaches which are incapable of affecting the efficient progress of the litigation, although they are serious…

We therefore prefer simply to say that, in evaluating a breach, judges should assess its seriousness and significance.

Therefore the new question is whether a breach is serious or significant. Whether a breach disrupts the conduct of litigation will in many cases (but not always) answer that question but there are breaches which do not so disrupt, but which could still be serious.

Finally, the court reiterated that where a breach is not ‘serious or significant’ (or trivial as was), then relief will usually be granted ([28]).

The Second Stage

The second stage is, simply, to consider what (if any) the reason for the breach is. Considering why the default occurred will be important at the third stage.

The Third Stage

The court quite accurately recognised that the main difficulty which has arisen has been the ‘paramount importance’ given to factors (a) and (b) in rule 3.9.

Importantly the court appeared to row back from this a little and said (at [32]) that those two factors

“may not be of paramount importance, [but] we reassert that they are of particular importance and should be given particular weight at the third stage when all the circumstances of the case are considered”.

In considering applications, the correct approach is that the court should ([35]):

…give particular weight to these two important factors. In doing so, it will take account of the seriousness and significance of the breach (which has been assessed at the first stage) and any explanation (which has been considered at the second stage). The more serious or significant the breach the less likely it is that relief will be granted unless there is a good reason for it. Where there is a good reason for a serious or significant breach, relief is likely to be granted. Where the breach is not serious or significant, relief is also likely to be granted.

The court noted the following which in the authors view is one of the most important passages in the judgment ([38], emphasis added):

…some judges are approaching applications for relief on the basis that, unless a default can be characterised as trivial or there is a good reason for it, they are bound to refuse relief. This is leading to decisions which are manifestly unjust and disproportionate. It is not the correct approach and is not mandated by what the court said in Mitchell: see in particular para 37. A more nuanced approach is required as we have explained. But the two factors stated in the rule must always be given particular weight. Anything less will inevitably lead to the court slipping back to the old culture of non-compliance which the Jackson reforms were designed to eliminate.

Non-Co-operation

Equally important as the three-stage test, the court went out of its way to criticise the ‘non-cooperation’ between lawyers since Mitchell. The most important passages are these:

[41] …it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied and that they will obtain a windfall strike out or other litigation advantage. In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation. The parties should in any event be ready to agree limited but reasonable extensions of time up to 28 days as envisaged by the new rule 3.8(4).

[42] It should be very much the exceptional case where a contested application for relief from sanctions is necessary.

[43] The court will be more ready in the future to penalise opportunism. The duty of care owed by a legal representative to his client takes account of the fact that litigants are required to help the court to further the overriding objective […] It is as unacceptable for a party to try to take advantage of a minor inadvertent error, as it is for rules, orders and practice directions to be breached in the first place. Heavy costs sanctions should, therefore, be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions. An order to pay the costs of the application under rule 3.9 may not always be sufficient. The court can, in an appropriate case, also record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR rule 44.11 when costs are dealt with at the end of the case

That is as strong an indication as could be given by the Court of Appeal as to the behaviour which is expected of parties and the consequences of unreasonableness

Conclusions

The three stage guidance set out gives further assistance in the making of r3.9 applications. It should diminish the weight currently being given to factors (a) and (b), and give greater weight to the rest of r1.1.

There is, however, no return to pre-Mitchell days and there is no room for laxity.

Equally importantly, respondents (to applications under r3.9) will now have to think very carefully before opposing any application for relief or for an extension of time (including under the newly amended rule 3.8).

Problems

A number of issues remain following this decision.

The effect of rule 32.10

The Court of Appeal in Chartwell indicated that, any application to rely upon a late witness statement was in effect an application under rule 3.9: the sanction had ‘bitten’.

However no argument was in fact heard on that point and the indication (however strong, and even though from the Court of Appeal) is obiter.

In another case decided on the same day as Chartwell, Paul Dean Davies ), the High Court decided the exact opposite.  

This post is not the place for a full analysis of the issue, but it is one which remains unhappily unresolved, and on which there are now directly contradictory decisions from the courts.

Serious breaches not affecting hearing dates

Though the issue of ‘triviality’ is somewhat clearer following Denton, there will remain cases which do not imperil hearing dates or affect the conduct of litigation, but which, in the court’s view, are serious.

Assessing which of those breaches (like paying court fees on time) are serious may present some difficulty. The important points are (i) that the starting point should be the effect on the conduct of litigation generally, and (ii) that ‘seriousness’ is not the end of the matter, and though a failure may be sufficiently serious to pass through stage 1, it has to then be considered in ‘all of the circumstances’ at stage three.