QOCS and the Man

The Jackson Reforms of 2013 brought tremendous savings to the insurance industry and other compensators. The price of the abolition of the Access to Justice Act scheme of recoverable success fees and ATE insurance premiums, and the introduction of fixed costs for the majority of personal injury claims, was the system of QOCS. Despite not recovering their costs in individual cases, systemically it would be far cheaper than the preceding system. 

As is the way with human nature, the benefits of introducing QOCS as a reform to save insurers money, was swiftly forgotten and it has become to be seen as a system which wreaks unfairness or injustice in individual cases. One target of the compensator’s ire is that claimant and her solicitor, who run a case up to the doors of the court, and then, for one reason or another decline to attend trial and instead serve a Notice of Discontinuance.

In such circumstances, if there is no element of fundamental dishonesty to complicate matter is there anything an insurer can do, to set aside the Notice of Discontinuance, strike out the claim for conduct on the part of the claimant that is likely to obstruct the just disposal of the proceedings and thereby seek the disapplication of the QOCS protection pursuant to rule 44.15 CPR?

Rule 38.4 provides

(1) Where the claimant discontinues under rule 38.2(1) the defendant may apply to have the notice of discontinuance set aside(GL).

(2) The defendant may not make an application under this rule more than 28 days after the date when the notice of discontinuance was served on him.

Rule 3.4(2)(b) reads as follows:

(1) In this rule and rule 3.5, reference to a statement of case includes reference to part of a statement of case.

(2) The court may strike out(GL) a statement of case if it appears to the court –

(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;

(b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or

(c) that there has been a failure to comply with a rule, practice direction or court order.

Practice Direction 3A provides:

1.5 A claim may fall within rule 3.4(2)(b) where it is vexatious, scurrilous or obviously ill-founded.

Rule 44.15 reads as follows:

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 –

(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.

The Practice Direction to part 44 does not address rule 44.15 at all.

Discontinuance in order to (i) recognise the shortcomings in a case or (ii) expressly to preserve QOCS protection has been ruled by the High Court to be a proper use of a claimant’s election to utilise a procedure open to him, to bring his personal injury claim to an end.

In the case of Shaw v Medtronic [2017] EWHC 1397 (QB) Lavender J ruled:

52. The fifth defendant seeks an order setting aside the notice of discontinuance, so that I can then hear and allow the fifth defendant’s application issued on 16 October 2016 for an order striking out the proceedings. The effect of this would be to bring the fifth defendant within the scope of the exception in CPR 44.15.1(a) to the general rule concerning qualified one-way costs shifting.

53. I am not persuaded that it would be appropriate to do this. Prima facie, the claimant had a right to discontinue under CPR rule 38.2 . It was a proper use of that power, and to be encouraged, for the claimant to recognise, in the light of the First Judgment, that her claim against the fifth defendant was not sustainable and to discontinue that claim.

54. The court has power under CPR rule 38.4 to set aside a notice of discontinuance. That paragraph does not identify the circumstances in which the power should be exercised. The only guidance on that point in para 38.4.1 of the White Book is to be found in two cases which are cited for the proposition that a court may set aside a notice of discontinuance as an abuse of the process of the court, but there was no abuse of process in the present case.

And:

57. Mr Riley-Smith submits that I can infer from those circumstances that the claimant’s intent in serving notice of discontinuance was to avoid the exception to the qualified one-way costs shifting regime. He submits that it is difficult to draw any other conclusion. However, it is striking that the claimant has decided to discontinue against the fifth defendant, but is still, notwithstanding the First Judgment, seeking to maintain her claims against the first, third and fourth defendants by way of an application to the Court of Appeal for permission to appeal.

58 In those circumstances, the possibility that the claimant has simply recognised, in the light of the First Judgment, that the claim against the fifth defendant will not stand remains a real one. That is perhaps a realisation which should have occurred to the claimant earlier, but it does not, in those circumstances, strike me that this is a case of abuse of process or anything sufficient to justify setting aside the notice of discontinuance.

(emphasis added)

In the case of English v Mabb [2017] EWHC 3616 (QB) May J ruled

33. Mr Mallalieu accepted, as he was bound to do, that there is nothing inherently abusive or contrary to the overriding objective in a party taking steps to avoid a costs liability. The problem here, he said, was the circumstances in which the claimant had sought to do it. I examined with Mr Mallalieu what the implications of his argument might be, to try to identify that point in proceedings when, on his case, a claimant would effectively be precluded from discontinuing. Understandably, he sought to avoid being tied to any general rule, although he did suggest that once a strikeout application had been issued, then a claimant ought to be prevented from discontinuing, particularly in a case like the present. I asked him to consider what the likely outcome would have been of an application to Langstaff J, made at the time of applying for permission, seeking to prevent the claimant from issuing a notice of discontinuance. He agreed that Langstaff J would almost certainly not have made any such order. He suggested that this was because a judge considering permission would be unable to consider then the reasons why a claimant may have wanted to discontinue.

34. However, that would put the onus on a claimant to establish a reason in order to be permitted to discontinue and the rules do not require a claimant to provide any. The problem for Mr Mallalieu’s argument is that there is no rule preventing a claimant with QOCS protection from taking steps to secure the benefit of that protection whilst it still exists. CPR rule 38 does provide for some restrictions on *15 the right of a claimant to discontinue. The court’s permission is required, for instance, where an interim injunction has been issued. Nothing is said in the rule about discontinuance in the context of QOCS, nor is there any provision in Part 44 itself, although there is provision, in rule 44.16 , for permission of the court to be sought for a costs order to be enforced where a claim has been fraudulently (as opposed to merely incompetently) pursued.

35. Accordingly, whilst I can see that the effect of rule 38 and 44.15 taken together can give rise to a situation in which a defendant, as here, loses the opportunity to obtain the benefit of the exception, I cannot conclude that there is any inherent unfairness in a claimant taking advantage of the result that the rules together permit, at least in their current form. I would not rule out the possibility of a case falling short of fraud in which the behaviour of a claimant or their solicitors might on the facts be so egregious or cynical as to justify setting aside a notice of discontinuance in accordance with the overriding objection, but this case is not so extreme as to lead me to that conclusion. The conduct of these proceedings on behalf of the claimant does appear to have been dilatory and lacking in many respects, but not to the extent that requires me to reinstate proceedings by setting aside the notice of discontinuance. Accordingly, I decline to do so.

(emphasis added)

Rule 3.4(2)(b) has been considered in two contexts: (i) a narrow focus on whether the wording of the statement of case is likely to obstruct the just disposal of the proceedings and (ii) a wider focus on whether the conduct of the litigant whose statement of case is sought to be struck out is such as to obstruct the just disposal of the proceedings.

In relation to the drafting point the High Court in Atos Consulting v Avis Europe [2005] EWHC 982 observed as follows:

18. Mr Nicholas Baatz Q.C., who appears for Atos, places reliance upon that concession in argument made by Mr Akka. Mr Baatz submits that in the light of that concession it cannot be said that the second limb of r.3.4(2)(b) of CPR is satisfied. *664 Mr Baatz concedes that the word “obstruct” in that rule does not mean absolutely prevent. On the other hand, Mr. Baatz submits that the word “obstruct” does mean impede to a high extent. He bases that submission upon the fact that r.3.4(2) (b) formulates two alternative grounds for striking out a statement of case. In my view, Mr Baatz is correct in that submission. A court will not strike out a statement of case merely because that statement of case would generate some untidiness in the pleadings. A court will not strike out a statement of case merely because one will end up with a bundle of pleadings, some parts of which are redundant. A court will only strike out a statement of case pursuant to the second limb of r.3.4 (2)(b) , if the statement of case is such as to prevent the just disposal of the proceedings or, alternatively, such as to create a substantial obstruction to the just disposal of the proceedings. It seems to me that if one has a somewhat untidy bundle of pleadings or statements of case, counsel and the judge will rapidly become familiar with which parts of those pleadings are redundant and which parts are relevant. If one has the kind of pleadings bundle which I foresee in the present case, there will be no true obstacle to the just disposal of the proceedings.

 In respect of wider conduct that was likely to obstruct the just disposal of the proceedings the decision of the Court of Appeal in Arrow Nominees v Blackledge and Others [2001] BC 591 is on point where forged documents produced by one party would corrupt the trial process, and made it necessary to strike out the proceedings. The essence of the Court of Appeal’s reasoning was that the conduct of the party rendered a just or fair trial impossible:

54. It would be open to this court to allow the appeal against the judge’s refusal to strike out the petition on that ground alone. But, for my part, I would allow that appeal on a second, and additional, ground. I adopt, as a general principle, the observations of Millett J in Logicrose Ltd v Southend United Football Club Ltd (The Times, 5 March 1988) that the object of the rules as to discovery is to secure the fair trial of the action in accordance with the due process of the court; and that, accordingly, a party is not to be deprived of his right to a proper trial as a penalty for disobedience of those rules – even if such disobedience amounts to contempt for or defiance of the court – if that object is ultimately secured, by (for example) the late production of a document which has been withheld. But where a litigant’s conduct puts the fairness of the trial in jeopardy, where it is such that any judgment in favour of the litigant would have to be regarded as unsafe, or where it amounts to such an abuse of the process of the court as to render further proceedings unsatisfactory and to prevent the court from doing justice, the court is entitled – indeed, I would hold bound – to refuse to allow that litigant to take further part in the proceedings and (where appropriate) to determine the proceedings against him. The reason, as it seems to me, is that it is no part of the court’s function to proceed to trial if to do so would give rise to a substantial risk of injustice. The function of the court is to do justice between the parties; not to allow its process to be used as a means of achieving injustice. A litigant who has demonstrated that he is determined to pursue proceedings with the object of preventing a fair trial has forfeited his right to take part in a trial. His object is inimical to the process which he purports to invoke.

(emphasis added)

There is no support in the authorities for any principle, that simply bringing a case or maintaining a case that is more likely than not to be lost, either at trial or an application for summary judgment is conduct that is “likely to obstruct the just disposal of the proceedings”.

Indeed, such a principle would be antithetical to the wording and formulation of the rule: mere loss of a case at trial on the merits would necessarily be the just disposal of the proceedings. The court has necessarily reached the “just” decision.

Moreover as part of the context, the policy grounding the introduction of QOCS into the civil justice system, in place of the scheme introduced by the Access to Justice Act 1999 of recoverable success fees, and ATE insurance premiums, is premised on the basis that defendants who win at trial, save for a very narrow category of exceptions, including the fundamental dishonesty exception will have to practically bear their own costs.

In short, the correct construction of the rule concerning “conduct” which is likely to obstruct the just disposal of the proceedings is informed by the following considerations:

(a)       The placing of the rule in conjunction with the concept of abuse of process.

(b)      The wording of the rule with its focus on some conduct obstructing the “just” disposal of the proceedings,

(c)       The wording of the Practice Direction 3A with its direction that appropriate cases for a strike out would be vexatious, scurrilous, or ill-founded proceedings.

(d)      The guidance of the Court of Appeal in Arrow Nominees, with its emphasis on how the rule could be invoked where there had been an attempt to corrupt the trial process.

All these considerations direct the court to consider  whether there has been an attempt to corrupt the process and prevent it being just. The rule has no application to cases which simply fail or are going to fail on their merits.

Does this mean that egregious behaviour by claimants and their solicitors in individual cases, has a free pass? Far from it. There remains in any case the potential for the facts to disclose conduct which is an abuse of process or otherwise so lacking in propriety that a strike out under the rules becomes a realistic argument. Such cases must be carefully evaluated, the facts sifted and an application made on an evidentially well founded basis.