Personal Injury Update – January 2015

Published: 20/01/2015 | Newsletters, Personal Injury


Contents

  • News
  • A review of bad character evidence in Personal Injury claims
  • 2015: The Year of the QOCS?
  • Case Law Update

News

Huw DaviesBy Huw Davies

I hope that all our readers had a good Christmas break and a happy New Year and that the return to the office has not proved too painful. In this month’s Newsletter Hannah Saxena considers the question of bad character evidence in relation to personal injury claims, whilst John Meredith-Hardy provides an in-depth analysis of one of the likely buzz topic of 2015, Qualified One Way Cost Shifting. The Case Law Update was prepared by our pupil Joel McMillan.

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A review of bad character evidence in Personal Injury claims

Hannah SaxenaBy Hannah Saxena

The recent case of Laughton v Shalaby [2014] EWCA Civ 1450 gives a reminder of the test for admissibility of bad character evidence in civil cases but also an opportunity to look at what types of evidence on credibility or bad character would be admissible and indeed useful in personal injury claims.

The possible bad character evidence admissible in civil cases was clarified by the House of Lords in O’Brien v Chief Constable of South Wales Police [2005] 2 AC 534. In this case it was stated that similar fact evidence would be admissible if it was potentially probative of an issue in the action, but also stressing that there is a second stage where a judge can use their discretion to exclude otherwise admissible evidence or limit cross examination. Phipson on Evidence (17th edition) summarises the current position at §22-07, describing a civil rule in which courts are required to balance “probative value to the promoting party against oppression and unfairness to the other side, rather than probative value against prejudicial effect”.

The Civil Procedure Rules specifically provide for attacking the credibility of witnesses who propose to give hearsay evidence in r33.5 but make no further provision for attacks on a witness’s credibility if they are to be a live witness. Under r32.1 the court has the power to control the evidence, to exclude evidence that would be admissible and to limit cross-examination. Standard disclosure under r31.6 specifically provides for disclosure of documents that either adversely affect their own case or another party’s case or indeed support another party’s case, which would include any documents casting doubt on the credibility of a party. The 2014 edition of the White Book specifically notes in §31.6.5 that “disclosure of documents and admissibility of evidence are two distinct concepts” noting that “potentially inadmissible documents should still be disclosed”.

Laughton v Shalaby

Laughton v Shalaby was a clinical negligence case in which the claimant brought a claim against an orthopaedic surgeon who carried out her left hip replacement. A year after her hip replacement surgery the claimant underwent a second procedure on her left hip due to ongoing pain. During this second surgery a muscle, which the defendant should have re-attached to the bone at the end of the initial hip replacement surgery, was found to not be attached to the correct bone but instead attached to the adjoining muscle. It was the claimant’s case that the defendant was negligent in not re-attaching the muscle to the correct bone at the end of the surgery.

The defendant’s position was that he would have re-attached the muscle, although he could not remember this particular operation having carried out around 3,000 similar operations, and that tearing away of the muscle (an avulsion) was a recognised but rare occurrence after hip replacement surgery. He relied on expert evidence to that extent which was preferred by the trial judge.

The claimant appealed and argued that the judge failed to take into account a number of extraneous factors regarding the defendant’s character and balance those against the rarity of an avulsion occurring without negligence. The Court of Appeal broke down the extraneous factors into three categories: those regarding the lack of probity or honesty of the defendant, those showing the stress the defendant and evidence of his incompetence in other cases.

In relation to the first category it was noted by Lord Justice Longmore that if there was “extraneous evidence of lock of probity that would be relevant to the credibility of any witness”. But went on to note that the credibility of the defendant in this case was not really in issue given that he could not remember the particular operation.

When considering the second category of factors it was specifically noted that the “fact that a doctor is under stress does not of itself mean that he is more likely than not to have been negligent on a particular occasion”.

It was the third category of factors that was considered more problematic. It was argued by the claimant that s103(1)(a) of the Criminal Justice Act 2003 should apply to civil proceedings and put forward the proposition that ‘evidence of systematic failure of various types of incompetence is admissible in professional negligence cases as enabling a judge to make inferences of negligence in a particular case’. This was rejected by the Court of Appeal, which stated “evidence of extraneous matters should be confined to cases of similar fact for the traditional reason that, unless the evidence is similar fact evidence, it is not probative of the issue to be determined”. The second discretionary stage as set down in O’Brien was also noted, particularly where the evidence is likely to open up complex collateral issues.

The evidence of complaints against the defendant was noted to be correctly dealt with by the trial judge in determining that it was not probative. A doctor who had investigated the defendant’s treatment of a number of patients, including the claimant, on behalf of the GMC noted that the defendant’s care on occasion fell seriously below the standard expected of a reasonably competent orthopaedic surgeon. The Court of Appeal found that the comment in itself could not prove that he was negligent during the claimant’s operation. The complaints about knee, foot and wrist operations were deemed too far removed to constitute similar fact evidence and the only hip replacement complaint was about insufficient discussion with the patient. A decision of the Fitness to Practice Panel, which suspended the defendant’s registration, was also adduced on appeal but was noted not to disclose similar fact evidence relevant to whether the defendant was negligent in the course of the claimant’s operation.

The appeal was dismissed on the basis that there was no evidence of a second instance of this complication and general evidence of a lack of probity, stress and incompetence in other areas of practice were incapable of making up the deficiency.

Some Guidance

In personal injury cases attacks on the credibility or character of a party or witness are common. If liability is in issue then more often than not there are divergent versions of events and the court needs to consider the credibility of the witnesses giving the accounts. When looking at quantum the claimant’s credibility and honesty in describing the extent of their injuries is often challenged.

With so much on the internet it is often very easy to find out information about a party or witness that might potentially impact upon their credibility or character that they have not disclosed. What is more difficult is working out what will be admissible and what will actually help the case.

The evidence that is likely to assist either party in a personal injury claim falls into two broad categories: that going to the truthfulness of a witness and that showing the likelihood of that party being in breach of their duties.

When it comes to evidence of untruthfulness, or a lack of probity as described in Laughton, this is always likely to be relevant where the credibility of a witness is an issue. However, as can be seen from Laughton credibility will not always be an issue and therefore there will need to be an assessment of the particular case.

As recognised in Laughton courts are more ready to admit evidence as being of similar fact than in the past. However, where it could be suggested that the evidence is unsubstantiated and would lead to lengthy argument that would take the case away from the issues of the case it might be possible to persuade the court to use it’s discretion to disallow it.

A recent example of where the court used it’s discretion in this way was in Alleyne v Commissioner of Police for the Metropolis [2012] EWHC 4406 (QB). In a claim for compensation for injuries sustained by a claimant following a police search of his property Judge Seys-Llewellyn QC admitted two unsubstantiated complaints against the officers involved but disallowed a further unsubstantiated complaint on the basis that the particular complaint was highly likely to lead to questions of peripheral matters which would encumber the claim.

On the other hand, during a pre-trial review in the widely publicised Mitchell v News Group Newspapers Ltd [2014] EWHC 3590 (QB) similar fact evidence of Andrew Mitchell repeatedly asserting his status, engaging in confrontation and behaving in a rude and condescending way to police officers was admitted on the basis that it was probative as it went beyond what he was prepared to admit about his behaviour. It was felt that all instances were brief and evidence relating to them confined, therefore would not distort the trial. It was said not to be prejudicial as Mitchell would be able to challenge it and had adduced witness statements stating that he was habitually courteous.

Ultimately it is well known that Mitchell lost the case, however, it is interesting to note that the similar fact evidence was not determinative and Mr Justice Mitting found that none of the incidents caused him to doubt the truth and accuracy of the evidence of Mitchell’s character and conduct (paragraph 90 – Mitchell v News Group Newspapers Ltd [2014] EWHC 4014 (QB)).

When deciding whether to adduce similar fact evidence it is important to consider how far it does go to the issues in dispute and how far off track it is likely to take the trial. In cases of negligence it is unlikely to ever be determinative of liability on it’s own.

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2015: The Year of the QOCS?

John Meredith-HardyBy John Meredith-Hardy

Qualified One ay Costs Shifting (‘QOCS’) is increasingly a part of the repertoire of the personal injury lawyer as the cohort of post 1.4.13 cases increases. The Court of Appeal has considered the lawfulness of the QOCS regime and addressed a number of other issues of its applicability in Wagenaar v Weekend Travel Ltd, T/A Ski Weekend and Serradj [2014] P.I.Q.R. P23. There is also a first instance decision on the procedure to be adopted and the meaning of fundamentally dishonest from HHJ Moloney, QC in Gosling v Hailo Cambridge CC, 29 April 2014.

Matters are becoming clearer; however, there are many areas of uncertainty and QOCS are likely to be a significant area of CA consideration in coming years.

QOCS, when does it apply?

QOCS is currently restricted in its application to claims for personal injury and those statutory claims where there is a fatal accident and/or a claim for personal injury or death that survives for the benefit of the estate.

QOCS applies to cases where there are multiple personal injury claimants as confirmed by the CA in Wagenaar at para 38: “… The whole thrust of CPR rr.44.13 – 44.16 is that they concern claimants who are themselves making a claim for damages for personal injuries, whether in the claim itself or in a counterclaim or by an additional claim …”

However, if a counterclaim relates to property damage only, QOCS protection should not apply.

The CA left open circumstances where a claimant brought multiple claims, one of which was not a personal injury claim, see para 44: “… Argument has not been addressed to the question of whether QOCS should apply to a subsidiary claim for damages not including damages for personal injuries made by such a claimant against another defendant in the same action as the personal injury claim. I would prefer to leave that question to a case in which it arises …”

Contribution claims under Part 20 are not subject to QOCS protection, see Wagenaar (para 42): “… The defendant was a commercial party in the business of supplying packaged skiing holidays. The fact that its insurance was for some reason vitiated in this case is nothing to the point. It chose, in its own commercial interests, to bring the third party into the proceedings as a third party because, no doubt, it thought it commercially to its advantage to do so. In doing so, it would have weighed up the pros and cons including the costs consequences, which, on the defendant’s own case, it expected to be the ones normally to be expected in litigation before these courts (before QOCS were introduced). The defendant could have chosen to resist the claimant’s claim on its merits and saved itself the trouble and expense of joining the third party and the risk of an adverse costs order. It did not do so …”

Subject to none of the exclusions applying, QOCS

  • is retrospective and applies to cases commenced prior to 1.4.13 but concluded afterwards. In Waggener, the defendant was aggrieved as they “had taken all its litigation decisions before the new rules were even published”. However (para 30): “It is well established that the presumption against retrospection does not apply to legislation concerned with matters of procedure, and that provisions of that nature are to be construed as retrospective unless there is a clear indication that that was not the legislature’s intention”.
  • applies regardless of BTE that may have been taken out prior to (or after) QOCS coming into force on 1.4.13. These were the facts of Waggener (the claimant had legal expenses insurance with DAS);
  • applies to interlocutory costs orders as well as final orders. Therefore, whilst orders for costs may be made against a claimant at the interlocutory stage and be summarily assessed, cost orders cannot be enforced unless one of the exceptions applies (see below).

In terms of timing for enforcement of interlocutory orders for costs, CPR, Part 44.14(2) states: Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed (assessment means summary or detailed assessment (44PD.12.7).

In cases where a personal injury claim is likely to fail, or costs may exceed damages recovered, and none of the exceptions to QOCS is likely to apply, there may be defendant focus at the interlocutory and final stage on costs orders against legal advisers under CPR, Part 46.8 / Senior Courts Act 1981, s.51(6) and Part 44.11.

QOCS do not apply to personal injury cases where there was a pre-1.4.13 CFA or ATE (CPR, Part 44.17; Part 48.1 & 48.2; Part 43.2(l)(k)(i) & (ii)), nor to an appeal where the substantive claim had been funded by a pre-1.4.13 CFA & ATE (see Landau v Big Bus Co Ltd SCCO 31.10.14 (Master Haworth) 31.10.14).

The rules do not distinguish between a pre-1.4.13 CFA or ATE that is enforceable at the conclusion of the claim and a pre-1.4.13 CFA or ATE having been agreed but is no longer enforceable at the time of judgment (e.g. legal representation has ceased to act on this basis and / or ATE insurers have declined further cover).

It is not clear whether pre-1.4.13 CFAs and ATE can be ‘thrown off’ and reliance placed on QOCS: there may be advantages for clients of such a course where ATE may be ‘flakey’, of limited cover or where cases of ‘close to call’ prospects of success.

Certainly the analysis in Landau, by analogy, would suggest that it is not the enforceability of the CFA but the fact of having entered into a pre-1.4.13 CFA which would act as an effective bar on any future reliance on QOCS.

However, an analysis of Simmons v Castle would suggest a contrary view. In Simmons the 10% increase hinged on LASPO 44(6) (see paras 40 & 50): The amendment made by subsection (4) does not prevent a costs order including provision in relation to a success fee payable by a person (“P”) under a conditional fee agreement entered into before the day on which that subsection comes into force (“the commencement day”) if:

  • the agreement was entered into specifically for the purposes of the provision to P of advocacy or litigation services in connection with the matter that is the subject of the proceedings in which the costs order is made, or
  • advocacy or litigation services were provided to P under the agreement in connection with that matter before the commencement day.

The word ‘prevent’ seems to be the crucial word – if the Court of Appeal on QOCS was to take a consistent approach it would talk about pre-1.4.13 CFAs being enforced and not their historical existence – this was raised as an aside in Simmons at para 33 re satellite litigation and the Court of Appeal stated: “33 APIL’s first point is that ABI’s proposal would lead to satellite litigation. However, the only examples Mr Aldous came up with were (i) a case where a claimant had entered into a CFA before 1 April 2013, and, after that date, he had died, and his executors then entered into a fresh CFA, and (ii) where a claimant entered into a CFA before 1 April 2013, and then disinstructed his solicitors and reinstructed other solicitors on a CFA after 1 April 2013. The first situation will very rarely arise, and the answer in the second situation is obvious”.

QOCS does not apply to applications for pre-action disclosure (Senior Courts Act 1981, s.33 & County Courts Act 1984, s.52).

Effect Of QOCS

CPR, Part 44.14 provides:

  • 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.
  • orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.
  • a order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.

If a claimant is successful on liability and the claim gives rise to damages being paid by the defendant to the claimant, costs orders can be enforced up to the aggregate amount in money terms of the damages “without permission”.

Therefore, a defendant can enforce any interlocutory costs orders at the conclusion of the claim against a successful claimant up to the value of the damages ordered to be paid.

Likewise, a defendant can enforce a final costs order made where a defendant’s Part 36 offer was not exceeded at trial or where conduct issues have given rise to adverse costs orders against a claimant, again limited to the value of the damages ordered to be paid. In both instances, the defendant is entitled to enforce without permission i.e. ‘as of right’.

Set off of costs pursuant to CPR, Part 44.12 has a part to play in a defendant’s recovery of costs.

However, if the claimant loses the claim or is successful on liability but receives nominal damages, any interlocutory or final costs orders in favour of the defendant cannot be enforced unless one of the exceptions applies.

It must be stressed that the effect of QOCS is not to prevent costs orders being made against a claimant either at the interlocutory or final stage. It is exclusively the enforcement of costs orders that is fettered by QOCS.

The provisions of Part 36 and its costs consequences are not ousted by the existence of QOCS.

Further, costs budgeting remains a live issue for defendants regardless of QOCS as without a costs budget, a defendant will have no costs to enforce and a defendant Part 36 will be nugatory.

Exceptions To QOCS Where Permission Is Not Required

CPR, Part 44.14 provides:

Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the 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 the proceedings.

A defendant is entitled to costs without permission if the claim is struck out on certain specific grounds. The list of reasons for striking out is not comprehensive and would appear to be a closed list (“… struck out on the grounds that”).

The basis for striking out the claim are the CPR, Part 3.4(2)(a) and (b) grounds and the inherent jurisdiction (abuse) but does not include (interestingly) striking out for “a failure to comply with a rule, practice direction or court order” (CPR, Part 3.4(2)(c)).

Therefore, for example, if a claim is struck out for non-payment of court fees under CPR, Part 3.7, a defendant would not be entitled to their costs under the CPR, Part 44.15 exception on a reading of the words of the section.

Some interesting hybrid situations may arise. For example, if a claimant is disbarred from relying on lay or expert evidence on account of late service (perhaps less likely following Denton) giving rise to the claim being untenable, the question arises as to whether the strike out is due to a breach of a rule (exception to QOCS not apply) or ‘disclosed no reasonable grounds’ and / or an ‘abuse of the court’s process’ (exceptions to QOCS apply).

The common use of the CPR, Part 44.15 exception maybe where, after service of proceedings, a defendant brings an application to strike out as, for example, limitation has expired or the wrong party has been sued. In either of these examples, if the claim is struck out the claimant is fully exposed to enforceable adverse costs orders.

Claimants may be astute to the tactical play upon an application to strike out- if an application is made by a defendant to strike out the claim, a claimant may discontinue the claim before hearing resulting in an unenforceable order for costs in the defendant’s favour (though subject to the Part 44.16 exceptions, that at 44PD.12(c) refers to discontinuance, see below as this is what happened in Gosling).

Should the claimant discontinue in the face of an application to strike out the defendant is entitled to apply to set aside discontinuance under CPR, Part 38.4. How this provision may be used by defendants to preserve their entitlement to costs on strike out will have to be seen. In Gosling, HHJ Moloney, QC did not consider that reversing discontinuance had much utility and approached the application on the basis of fundamental dishonesty (see para 10).

In any event, a court may consider that setting aside discontinuance is a collateral attack on QOCS that permits discontinuance without costs consequences subject to the permitted 44PD.12(c) adjudication on fundamental dishonesty.

The CPR, Part 44.15 exception may give rise to the utility of defendants seeking to strike out a claim at a late stage in proceedings.

In Summers v Fairclough Homes Ltd [2012] 1 WLR 2004 it was stated (from the headnote):

“… strike out a statement of case … at any stage of proceedings, even after trial in circumstances where the court had been able to make a proper assessment of both liability and quantum; but that that power would be exercised at the end of a trial only in very exceptional circumstances where the court was satisfied that the party’s abuse of process was such that he had thereby forfeited the right to have his claim determined; that, while the existence of such a power was in the public interest, in deciding whether to exercise it the court had to have regard to the claimant’s Convention 2005 rights to have his claim fairly determined by a court and to enjoyment of his possessions and so to examine the circumstances of the case scrupulously in order to ensure that any decision to strike out the claim was a proportionate means of controlling the court’s process and deciding the case justly; and that it would be a very rare case in which, at the end of a trial, it would be appropriate or proportionate to strike out a case rather than to dismiss it in a judgment on the merits or, where both liability and quantum could be assessed fairly, to give judgment in the ordinary way …”.

However, it was stated in Summers that (para 62): “… nothing in this judgment affects the case where the fraud or dishonesty taints the whole claim. In that event, if the court is aware of it before the end of the trial, judgment will be given for the defendant and, if it comes to light afterwards, it will be open to a defendant to raise the issue in an appeal …”

Therefore, whilst the discretion to strike out is only to be exercised in the “very exceptional case” at the conclusion of a claim, where the whole claim is tainted by fraud or dishonesty, it can be struck out thus forestalling the need for an enquiry as to fundamental dishonesty and permission to enforce costs orders.

Nonetheless, at the conclusion of the claim, the fundamental dishonesty Part 44.16 exception is likely to be a more effective route for enforceable costs orders in favour of defendants than at trial strike out.

Exceptions To QOCS Where Permission Is Required

CPR Part 44.16 provides:

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.

Orders for costs made against the claimant may be enforced up to the full extent of such orders with the permission of the court, and to the extent that it considers just, where:

  • the proceedings include a claim which is made for the financial benefit of a person other than the claimant or a dependent within the meaning of section 1(3) of the Fatal Accidents Act 1976 (other than a claim in respect of the gratuitous provision of care, earnings paid by an employer or medical expenses); or
  • a claim is made for the benefit of the claimant other than a claim to which this Section applies.

Where paragraph (2)(a) applies, the court may, subject to rule 46.2, make an order for costs against a person, other than the claimant, for whose financial benefit the whole or part of the claim was made.

The practice Direction at 44.PD.12.6 provides:

In proceedings to which rule 44.16 applies, the court will normally order the claimant or, as the case may be, the person for whose benefit a claim was made to pay costs notwithstanding that the aggregate amount in money terms of such orders exceeds the aggregate amount in money terms of any orders for damages, interest and costs made in favour of the claimant.

Addressing each limb of the exceptions for which permission is required:

(a) Fundamental Dishonesty

‘Fundamental dishonesty’ is a departure from the proposed wording which was to be ‘fraud’ or ‘fraudulent’. It is also to be noted that it is the claim that must be ‘fundamentally dishonest’ rather than the claimant.

The practice direction at 44PD.12 gives guidance on how fundamentally dishonesty will be determined.

In a case to which rule 44.16(1) applies (fundamentally dishonest claims):

  • the court will normally direct that issues arising out of an allegation that the claim is fundamentally dishonest be determined at the trial;
  • where the proceedings have been settled, the court will not, save in exceptional circumstances, order that issues arising out of an allegation that the claim was fundamentally dishonest be determined in those proceedings;
  • where the claimant has served a notice of discontinuance, the court may direct that issues arising out of an allegation that the claim was fundamentally dishonest be determined notwithstanding that the notice has not been set aside pursuant to rule 38.4;
  • the court may, as it thinks fair and just, determine the costs attributable to the claim having been found to be fundamentally dishonest.

Therefore, where there is a trial the issue of fundamental dishonesty will need to be addressed at the trial.

This presents a pleading point- should the defendant’s statement of case identify fundamental dishonesty? The answer is probably ‘yes’, or at the least the issue should be raised at the PTR and identified as one of the issues to be addressed at the trial.

Where there has been no trial and the claim has settled, possibly at a significant undervalue, “the court will not, save in exceptional circumstances, order that issues arising out of an allegation that the claim was fundamentally dishonest be determined in those proceedings”.

The foregoing assumes that settlement has addressed damages but not costs. It can be inferred that the condition of exceptional circumstances is to discourage satellite litigation on this issue. What, exactly, are exceptional circumstances is yet to be determined.

Post settlement, surveillance evidence may be relied on and be practical in terms of summary determination of the issue of fundamental dishonesty. However, the court may consider that surveillance evidence is not an exceptional circumstance considering the regularity with which such evidence plays a significant role in reducing claimant’s exaggerated claims for damages.

Adjudication of fundamental dishonesty is not subject to exceptional circumstances on discontinuance, see 44PD.12.4(c).

In Gosling, HHJ Moloney, QC adopted a summary procedure on proportionality grounds with no oral evidence being heard and matters being limited to submissions from counsel, see paragraphs 23 and 24.

The issues included fundamental dishonesty as to the occurrence of the accident and with regard to the quantum of the claim. On the former point, HHJ Moloney, QC considered the evidence insufficiently cogent for summary disposal and a hearing of oral evidence disproportionate, see paragraph 33.

On quantum, it was held that the evidence was sufficiently cogent (“bang to rights”) and oral evidence would be disproportionate, see paragraphs 51 to 57.

The allegation of fundamental dishonesty as to quantum was based on a “devastating surveillance video”. Addressing fundamental dishonesty, HHJ Moloney, QC found: “44 It appears to me that this phrase in the rules has to be interpreted purposively and contextually in the light of the context … It appears to me that when one looks at the matter in that way, one sees that what the rules are doing is distinguishing between two levels of dishonesty: dishonesty in relation to the claim which is not fundamental so as to expose such a claimant to costs liability, and dishonesty which is fundamental, so as to give rise to costs liability.

45 The corollary term to “fundamental” would be a word with some such meaning as “incidental” or “collateral”. Thus, a claimant should not be exposed to costs liability merely because he is shown to have been dishonest as to some collateral matter or perhaps as to some minor, self-contained head of damage. If, on the other hand, the dishonesty went to the root of either the whole of his claim or a substantial part of his claim, then it appears to me that it would be a fundamentally dishonest claim: a claim which depended as to a substantial or important part of itself upon dishonesty”.

The Judge found that the dishonesty in question was fundamental to two heads of damage thus:” 49 Overall, I therefore conclude that in relation both to that very substantial element of his claim, future care, and in relation to an even larger part of his claim, general damages for pain, suffering and loss of amenity, the dishonesty in question here, if established, is fundamental to those heads of damage, and thus to around half of the total claim in damage terms. It appears to me to be very clear that on any sensible definition of a “fundamentally dishonest claim”, dishonesty crucial to such a large part of the claim under those two heads is sufficient to enable the claim to be characterised as fundamentally dishonest.

50 It was not suggested on the claimant’s part nor, I think, could it be seriously maintained that as a matter of law it would be required that the dishonesty went to the root either of liability as a whole, or damages in their entirety. It must be the case that dishonesty fundamental to a sufficiently major part of the claim would suffice to deprive the claimant of his costs protection, and open him to the court’s discretion as to how much of the costs he should pay …”

Consistent with HHJ Moloney’s approach 44PD.12.4(d) permits the court “as it thinks fair and just, determine the costs attributable to the claim having been found to be fundamentally dishonest”.

The inference from 44PD.12.4(d) is that despite the use of “claim” (as opposed to “claim and / or claims”) in CPR, Part 44.16, an allegation that part of the claim is fundamentally dishonest, is sufficient as otherwise attribution would not be relevant.

This particular issue, however, will have to wait for the Court of Appeal’s determination. Meanwhile, HHJ Moloney’s analysis is likely to feature in defendant’s submissions.

(b) A Claim For The Benefit Of A Person Other Than The Claimant

The second limb of CPR, Part 44.16 is supplemented by 44PD.12:

12.2 Examples of claims made for the financial benefit of a person other than the claimant or a dependent within the meaning of section 1(3) of the Fatal Accidents Act 1976 within the meaning of rule 44.16(2) are subrogated claims and claims for credit hire.

12.3 ‘Gratuitous provision of care’ within the meaning of rule 44.16(2)(a) includes the provision of personal services rendered gratuitously by persons such as relatives and friends for things such as personal care, domestic assistance, childminding, home maintenance and decorating, gardening and chauffeuring.

Gratuitous care, re-payable earnings paid by an employer and medical expenses escape the definition. Claims for the benefit of third parties, such as subrogated claims and claims for credit hire, are prima facie subject to third party costs orders and, therefore, are exceptions to QOCS.

As provided by CPR, Part 44.16(3), the costs order is made against the third party and not against the claimant (who would otherwise have to recover from the third party) though “exceptionally” this is permissible (44PD.12.5(a)).

The second limb of CPR, Part 44.16 is further supplemented by 44PD.12.5:

The court has power to make an order for costs against a person other than the claimant under section 51(3) of the Senior Courts Act 1981 and rule 46.2. In a case to which rule 44.16(2)(a) applies (claims for the benefit of others).

  • 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.
  • 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.

Therefore, costs ordered against the third party should be limited to those attributable to, for example, the subrogated claim.

If the claim is for the benefit of another, the requirements of the Senior Court’s Act 1981 s.51(3) and CPR, Part 46.2 need to be satisfied before an order is made.

The threshold for third party costs orders has historically been high and “would always be exceptional”, see Dymocks Franchise Systems (NSW) Pty Ltd v Todd (Costs) [2004] UKPC 39 and in summary:

  • The order for payment of costs by a non-party would always be exceptional and any application should be treated with considerable caution.
  • The application should normally be determined by the trial judge who could give effect to any views he had expressed as to the conduct of the non-party without constituting bias or the appearance of bias.
  • The mere fact that someone has funded proceedings would generally be insufficient to support an application that they pay the costs of the successful party. Pure funders, as described at the case of Hamilton v Al-Fayed No. 2 [2002] EWCA Civ 665 reported [2003] QB 117 at [40], will not normally have the discretion exercised against them. That definition of “pure funders” means those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business and in no way seek to control its course.
  • It is relevant but not decisive that the defendant has warned the non-party of the intention to seek costs or that the non-party’s funding has caused the defendant to incur the costs it would not otherwise have had to incur.
  • The conduct of the non-party in the course of the litigation and other than as a pure witness of material fact is of relevance and potential weight.
  • Most of the decided cases on the exercise of the court’s discretion under section 51 concerned commercial funders or corporate bodies closely associated with the party who incurred the costs liability which they were unable to satisfy. In the family context, the courts have been reluctant to impose third party costs orders against those family or friends who in the interests of access to justice assist a party to come to court for philanthropic and disinterested reasons.
  • In determining these applications the court must exercise its case management powers to ensure that the application does not turn into satellite litigation that results in prolonged, complex and over-extended arguments about costs about costs. For that reason the inherent strength of the application is always a relevant factor.

How these issues may be addressed when QOCS anticipates that third parties should pay will have to be seen.

An interesting point arises on the recoverability against BTE and other third party funders of claimant cases. The existing law on the Senior Court’s Act 1981 s.51 and before the event insurance is to be found in Murphy and Another v Young & Co’s Brewery and Another [1997] 1 W.L.R. 1591. In the headnote it states, inter alia:

“… dismissing the appeal, that an order under section 51 that a non-party pay costs was only justified when exceptional circumstances made such an order reasonable and just; that legal expenses insurance was a respectable and well recognised form of insurance which was in the public interest; that the existence of legal expense insurance with a limit of cover that had been exhausted did not, in itself, make it reasonable or just to order the insurers to pay the costs of the adverse successful party; that, while the insurers had funded the litigation under a commercial agreement, they had had no interest in the result, had not initiated the litigation, had exercised no control over the conduct of the action and had been contractually obliged to provide funds up to the limit of cover; and that, accordingly, there were no exceptional circumstances to make it reasonable or just to order the insurers to pay the first defendant’s costs …”

Therefore, whilst QOCS means costs may not be enforced against a claimant, an application could be made (and be successful) against a third party funder unless the third party funder “had no interest in the result, had not initiated the litigation, had exercised no control over the conduct of the action and had been contractually obliged to provide funds up to the limit of cover”.

In the personal injury claim of Thomson v Berkhamsted Collegiate School QBD [2010] C.P. Rep. 5 Blake J. ordered disclosure of the extent to which the claimant’s parents had controlled a claim by their now adult son for bullying against their son’s school.

In the context of defendant cases, orders against defendant insurers have been made on account of the degree and extent of the control exercised by the insurer over the conduct of the litigation, see for example Palmer v Palmer (Deceased) , MIB and others [2008] EWCA Civ 46 (W/B 2014 vol 1 p.1495 & Cook on Costs 2014 p.609).

It is likely that there will be CA cases in the context of QOCS on “financial benefit for another” and the s.51 jurisdiction.

Third party funders will want to be astute to the points made in Murphy and the importance of not permitting themselves to be, or appear to be, the controller of the litigation as occurred in Palmer. Defendants will be interested in disclosure to identify control as in Thomson.

Therefore, whilst no orders should be enforceable or made against the BTE insurers and other litigation funders if they are just funding the litigation in the Murphy sense, this is likely to be a developing area of jurisprudence considering the financial cost of QOCS to defendants.

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Case Law Update

Joel McMillanBy Joel McMillan

National Grid Electricity Transmission Plc v McDonald (Deceased) HRH Prince Abdulaziz Bin Mishal Bin Abdulaziz Al Saud v Apex Global Management Ltd & Anor

[2014] 1 WLR 4495

(Lord Neuberger PSC, Lord Clarke JSC, Lord Sumption JSC, Lord Hughes JSC, Lord Hodge JSC)

Significance: The merits of the case are generally not relevant when a court is (i) making case management directions; (ii) considering the imposition of a sanction for the breach of such directions; or (iii) considering whether to provide relief from any sanction.

Facts: The first respondent and a company owned by the appellant prince (P) decided to set up a third company. Litigation followed a dispute and Vos J ordered that P should personally sign a number of statements relating to disclosure. P subsequently claimed that, as a member of the Saudi royal family, a protocol prevented his signing court documents.

Norris J then ordered that judgment would be entered against P unless he complied with Vos J’s earlier order. P continued to refuse to comply and judgment was entered in the sum of $6 million. P’s subsequent application to vary Vos J’s order and obtain relief from sanctions was dismissed by Mann J. P appealed the orders of Vos, Norris and Mann JJ to the Court of Appeal, and subsequently to the Supreme Court.

Held: (1) The decisions of Vos, Norris and Mann JJ were unassailable.

(2) The strength of a party’s case would generally be irrelevant in decisions on case management and sanctions. It was difficult to see why a court should take the merits of the case into account when making such decisions or how it could be done in a principled way. Further, it would be thoroughly undesirable for the courts to spend time assessing the strength of each side’s case every time it made such decisions. However, there was force in the argument that there should be an exception to the general rule where a party’s case was strong enough to obtain summary judgment.

(3) The contention that the final sanction was disproportionate even though each step was unassailable did not stand up. The imposition of a sanction following breach of a court order was almost inevitable in order to maintain respect for the courts and ensure litigants’ compliance. If non-compliance would lead to an unfair trial it was difficult to disagree with a sanction that prevented the party in breach from presenting or resisting the claim.

(4) It did not matter that there would be a trial in any event in which the payment or non-payment of the $6 million might be raised in relation to credibility. It was inherent in an order for default judgment that the claimant would obtain a remedy to which it might subsequently be shown he was not entitled.

(5) (Obiter) The Supreme Court would be slow to interfere with Court of Appeal guidance and decisions in relation to the application of the CPR, in the same way that that Court was reluctant to interfere with first instance decisions.

Janet Laughton v Salah Eldin Ahmed El Sayed Shalaby

[2014] EWCA Civ 1450

(Longmore LJ, McCombe LJ, and Vos LJ)

Significance: Evidence of incompetence in other cases cannot be adduced to infer clinical negligence in the material case unless it amounts to similar fact evidence.

Facts: The appellant patient (L) alleged that the defendant surgeon (S) had negligently failed to attach her muscle properly to her replacement hip. S had been investigated for incompetence by the General Medical Council (GMC) and the resulting report had found that his care had fallen seriously below the expected standard in relation to 7 patients. Conditions had been placed on S’s registration and he had also been suspended after committing an assault. The trial judge held that the surgery had not been performed negligently, preferring the expert evidence that the tearing away of the muscle was a recognised, albeit rare, occurrence after a hip replacement.

L appealed arguing, inter alia, that the judge (1) should have admitted the findings of the GMC report as evidence to infer incompetence in the instant case, under a principle similar to the admissibility of bad character evidence in criminal law; and (2) had failed to address matters of S’s probity, including his failure to disclose his suspension or the conditions on his registration.

Held: (1) A principle akin to bad character evidence in the criminal law should not be adopted in civil law. The relevant provisions in the criminal law were a statutory change to the common law and did not apply to civil proceedings. Evidence of incompetence in other cases was only admissible if it constituted similar fact evidence for the traditional reason that it was otherwise not probative of the issue to be determined.

(2) Any evidence of lack of probity would be of little value. Whilst it was a serious dereliction of S’s duty to the court that he had not disclosed his suspension and the conditions on his registration, the question was whether he was competent, not credible. The most such evidence could indicate was that he was unlikely to admit to incompetence or was less likely to have followed standard procedure than he claimed; it could not show that he was more likely to have acted negligently.

Carl Heneghan (Son & Administrator of the Estate of James Leo Heneghan, Deceased) v Manchester Dry Docks Ltd & 5 Ors

[2014] EWHC 4190 (QB)

(Jay J)

Significance: The Fairchild v. Glenhaven Funeral Services Ltd [2003] 1 AC 32 exception to the traditional test for causation applies to lung cancer as well as mesotheliooma. A claimant therefore need only show that negligent exposure to a toxic substance by his employer has materially increased the risk of his contracting the disease.

Facts: The deceased (C) was exposed to asbestos during sequential employment with the 6 defendants, as well as during employment with previous employers who had not been sued. He contracted lung cancer and died. Although C had been a smoker both parties’ experts agreed that, on the balance of probabilities, he would not have contracted the disease without the exposure to asbestos. It was further agreed that his employment with the defendants accounted for a combined total of 35.2% of his asbestos exposure.

The only question for the court was whether each defendant was liable for damages in full or 35.2% thereof. The defendants argued that the case fell within the Fairchild exception and recovery was limited to 35.2%; C’s son (H) argued that the common law allowed for a third way between the traditional approach to causation and the Fairchild exception which entitled him to 100% recovery.

Held: It was agreed that it was likely that exposure to asbestos had caused C to contract lung cancer. However, it was not possible to demonstrate on the balance of probability that the defendants, either individually or collectively, had caused or materially contributed to the same. Causation in the traditional sense had not been proved.

The only possible way for H to succeed was if the Fairchild exception applied; there was no third way. Mesothelioma and lung cancer were legally indistinguishable. Both could be caused by exposure to a small quantity of asbestos and neither were aggravated by prolonged exposure. This distinguished them from other industrial lung diseases such as silicosis and pneumoconiosis where any significant exposure caused deterioration and materially contributed to the disease. It was consistent with principle that Fairchild should be deemed to cover lung cancer as well as mesothelioma.

In light of the above ruling H conceded that only 35.2% of the damages were recoverable in line with Barker v Corus UK Ltd [2006] 2 AC 572.

Lougheed v. On The Beach Ltd

[2014] EWCA Civ 1538

(Tomlinson LJ, Floyd LJ, Ouseley J)

Significance: The standard of maintenance and cleanliness to be reasonably expected in a foreign hotel booked through an English tour operator is that which can be reasonably expected in a comparable local establishment.

Facts: A holiday company (O) appealed against an award of damages to the respondent who had slipped on a patch of water on a Spanish hotel staircase whilst on a holiday arranged by O. The judge at first instance had found O liable pursuant to reg. 15(1) of the Package Travel, Package Holidays and Package Tours Regulations 1992, relying on the evidence of the hotel manager as to local standards in the absence of any specific Spanish regulations.

Held: The standard by which the hotel should be judged was that which could reasonably be expected in a similar Spanish establishment. It was not realistic to expect a uniform approach to maintenance and cleanliness in different countries, and it would not be sensible to apply the standard that could reasonably be expected in a comparable English hotel: Wilson v. Best Travel Ltd [1993] 1 All ER 353 applied. Instead proper enquiries should be made into local practices. Compliance with local regulations did not necessarily mean compliance with local standards as it might be the general practice to adopt higher standards where regulations were accepted to be inadequate.

In the instant case the judge had insufficient evidence as to Spanish practices and had unduly relied on the evidence of the hotel manager. The appeal was allowed.

Walsham Chalet Park Ltd (T/A The Dream Lodge Group) v Tallington Lakes Ltd

[2014] EWCA Civ 1607

(Richards LJ, McCombe LJ, Sharpe LJ)

Significance: The principles set out in Mitchell v News Group Newspapers [2014] 1 WLR 795 and restated in Denton v TH White Ltd [2014] 1 WLR 3926 were ‘relevant and important’ when considering an application to strike out a statement of case under CPR r.3.4.

Facts: During litigation arising out of a contractual dispute, the appellant (T) unsuccessfully applied to strike out the respondent’s claim for failing to meet various deadlines set out in a court order. T appealed.

Held: The judge was correct to hold that the principles set out in Mitchell and restated in Denton were ‘relevant and important’, even though the application was to strike out under r.3.4 rather than for relief from sanctions under r.3.9. The factors mentioned in r.3.9, including the need to enforce compliance with court orders, were reflected in the overriding objective in r.1.1, to which the court had to give effect when considering an application to strike out. The Mitchell principles were therefore directly relevant. The judge had been correct to adopt the 3 stage test in Denton and had been entitled to dismiss the application.

Chief Constable of Hampshire v. Southampton City Council

[2014] EWCA Civ 1541

(Jackson LJ, Patten LJ, Lewison LJ)

Significance: Where a claim is settled pursuant to the provisions in CPR Pt 36 and the defendant seeks a contribution under the Civil Liability (Contribution) Act 1978, for the purposes of the Limitation Act 1980 time will start to run at the date the Pt 36 offer is accepted, not the date of any later consent order or assessment of costs.

Facts: On 4th November 2010 a police officer accepted a Pt 36 offer from the appellant police force (P) in respect of his mesothelioma claim. The agreement was formalised in a consent order on 15th December 2010 and costs were subsequently subject to detailed assessment. On 3rd December 2012 P attempted to bring proceedings against the respondent local authority for a contribution under the 1978 Act. The judge held that, for the purposes of the 1980 Act, time ran from the date of acceptance of the Pt 36 offer and the claim was therefore brought after the permitted 2 years.

P appealed arguing (1) that the consent order constituted a ‘judgment’ by which it was ‘held liable’ for the purposes of s. 10(3) of the 1980 Act and that time should start to run from the date of the consent order; and (2) in the alternative, if time ran from when it had agreed to make a payment pursuant to s.10(4), the correct start date was the date on which it had agreed to pay costs as ‘the amount to be paid’ in the subsection covered costs as well as damages.

Held: (1) Neither the consent order nor the later costs order constituted a ‘judgment’ by which P had been ‘held liable’. S. 10(3) of the 1980 Act therefore had no application to the instant case.

(2) Properly construed within the context of the rest of s. 10, ‘the amount to be paid’ referred to damages only and not costs. It followed that time ran from the date of acceptance of the Pt 36 offer and the claim had been brought out of time.

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Author: John Meredith-Hardy Farrars (chambers@farrarsbuilding.co.uk)


Author: Joel McMillan Farrars (chambers@farrarsbuilding.co.uk)


Author: Huw Davies Farrars (chambers@farrarsbuilding.co.uk)


Author: Hannah Saxena Farrars (chambers@farrarsbuilding.co.uk)