A recent case has clarified the law on Qualified One Way costs shifting and found that a Claimant who discontinued at the last minute was still entitled to QOCs protection, as dishonesty was not alleged. This will give some comfort to claimants who sometimes foundthat they cannot discontinue a personal injury claim without being penalised by being ordered to pay thousands of pounds to the Defendant insurers.
This was the Court of Appeal decision in Excalibur & Keswick Groundworks Ltd v McDonald [2023] EWCA Civ 18 (17 January 2023). In this case the claimant was employed by the first defendant ("the defendant") as a groundworker. The second defendant was the main contractor who had engaged the defendant to provide a new drainage system to the wall of the house. It was the claimant's case that he was climbing up a ladder during the course of his employment when it slipped beneath him causing him to fall and suffer injury.
The trial was listed for a remote hearing. On the morning of the trial the District Judge raised issues as to the ownership of the ladder, and the inconsistency in the claimant's account as between his pleaded case, his witness statement and the entries in the medical records. The District Judge asked the claimant's counsel if the claimant wished to consider his position. The matter was adjourned for 30 minutes and the claimant made the decision to discontinue. As a result, Notices of Discontinuance were served on both defendants that morning. Following service, counsel for the defendants applied to set aside the Notices of Discontinuance (CPR 38.4) and to strike out the claim on the grounds that the claimant's conduct had obstructed "the just disposal of the proceedings", and as a result he was not entitled to the protection of qualified one-way costs shifting ("QOCS").
The judge held that QOCs protection should not apply. “She noted that the claimant had dropped his claim at the "eleventh hour and fifty ninth minute … the inevitable outcome of which would be to increase Costs and take up additional Court time and resources by virtue of additional listings and hearing, using time of both Court staff and the judiciary, in addition to the incurring of today's costs and use of court resources." The District Judge stated that: "I do not consider that his conduct in that context can be otherwise than to obstruct the just disposal of the proceedings. The matter has been drawn out and I am satisfied costs have incurred needlessly. I am entirely satisfied that had his case been pleaded in accordance with the facts known only to the Claimant, as clarified this morning by Counsel on his behalf, the inevitable consequences would have included, from a significantly earlier time, the prospects of either being struck out on application for summary judgment or, indeed, of the court's own motion."
The Court of Appeal Decision
The Court of Appeal found that the QOCs regime is essentially a mechanical process:
“The rationale behind the introduction of QOCS is that it provides a broad scheme of protection for claimants preventing enforcement of costs orders made against them in failed personal injury claims. A common outcome of the QOCS scheme is that a defendant who succeeds will not recover its costs from a losing claimant despite a costs order in its favour. The scope of the scheme is broad. All personal injury claimants qualify, their means are irrelevant. As was stated in Adelekun (para 33) the QOCs regime is essentially mechanical rather than discretionary so that the phrase in CPR 44.14(1) "without the permission of the court" did not preserve a general discretionary power to permit a defendant's costs enforcement beyond that expressly provided for by the permission process in CPR 44.16. That process was necessitated only by the need for the court to see whether the qualifying facts existed, such as fundamental dishonesty.”
In relation to notices to discontinue, the Court of Appeal found that the right to discontinue should only be set aside where there was an abuse or egregious conduct by the Claimant:
”Given the breadth of the discretion accorded to the court to set aside a Notice of Discontinuance, coupled with the fact that a claimant can discontinue as of right subject to limited exceptions, in my view the Judge was right to state that there need to be powerful reasons why a Notice of Discontinuance should be set aside. Further, I agree with the reasoning of Lavender J in Shaw and May J in Mabb that evidence of abuse of the court's process or egregious conduct of a similar nature is required on an application which has the effect of depriving a claimant of his right to discontinue.
I do not accept the defendant's contention that a court is required to approach CPR 38.4 differently in a personal injury claim to which QOCS applies. If that were so, it would in my view defeat the purpose of the QOCS regime which is an attempt to correct the financial imbalance as between claimants and defendants in personal injury claims.
It is of note that the defendant has not alleged that the claimant was or might be fundamentally dishonest. The defendant's purpose in seeking to set aside the Notice of Discontinuance was in order to facilitate an application to strike out the claim and thereafter seek an order for costs in favour of the defendant.”
The mere decision to discontinue based upon an analysis and evaluation the legal case was not sufficient to amount to an abuse. The Court of Appeal said:
“What the claimant did, following an intervention by the District Judge (para 7 above), and in all likelihood having received legal advice, was to recognise inconsistencies as between his witness statement and the pleaded case, weigh up his prospect of success and having done so, made the decision to discontinue. It is a course of conduct taken by many litigants and in my judgment does not begin to provide the powerful reasons upon which a Notice of Discontinuance could or should be set aside.”
The Court of Appeal then went on to consider whether the claim should have been struck out so as to remove QOCs protection and found that it should not:
The Court of Appeal said:
“I accept the contention made on behalf of the claimant that the wording of CPR 3.4(2)(b) creates a high bar for a strike-out with its focus on abuse of process or a Statement of Case which is "otherwise likely to obstruct the just disposal of the proceedings". In addressing the issue of whether the claimant was guilty of conduct which is likely to obstruct the just disposal of the proceedings the Judge, relying upon the authority of Arrow Nominees, at [56] posed the relevant questions as follows: "whether the appellant's conduct in this case rendered the just of fair trial impossible or whether his conduct corrupted the trial process so that a just result could not be achieved". At [59] he stated that what the Rules envisage is conduct "which jeopardises the fairness of the trial process".
I accept the contention made on behalf of the defendant that the approach of the court to this issue, as identified by the Court of Appeal in Arrow Nominees, was not whether the litigant's conduct rendered a just or fair trial impossible. Reflecting the approach of the court in Arrow Nominees, in particular as stated at [54], I would formulate the question thus: is the litigant's conduct of such a nature and degree as to corrupt the trial process so as to put the fairness of the trial in jeopardy? In my judgment, the claimant's conduct did not begin to meet the degree of seriousness which is envisaged in this formulation.
What this claimant did was to give a different account in his witness statement from that which was contained in the Statement of Case. It was a material inconsistency and one which had the potential to undermine not only his credibility but also the viability of his claim. What it did not do was to demonstrate a determination by the claimant to pursue proceedings with the object of preventing a fair trial. If this claimant's conduct is to be regarded as obstructing the just disposal of the proceedings, the same could be said of the conduct of many litigants who present claims for personal injuries.
It follows, and I so find, that the claimant's conduct did not meet the test of being likely to obstruct the just disposal of the proceedings. It is regrettable that consideration of his differing accounts had not taken place at an earlier stage but the defendant was in possession both of the claimant's witness statement and the Statement of Case and could have applied for summary judgment. Of course, had summary judgment been obtained pursuant to CPR 24, the claimant would be entitled to QOCS protection.”
The Defendant’s appeal was therefore dismissed. This decision is a major victory for Claimants and access to justice. The Court of Appeal has reinforced a Claimant’s right to bring a claim for personal injury with costs protection. The Court has redressed the balance and emphasised that a Claimant should be able to discontinue a claim without losing costs protection. What remains unclear is whether the Court would adopt the same approach if fundamental dishonesty is actually raised in the Defence.