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Subject to any unforeseen delays, we are now just six months
away from a regime of qualified one way costs shifting for personal
injury claims. To those who might be unfamiliar with the notion of
'QOCS' this is an approach to civil litigation funding that
prevents a defendant from recovering its costs from an unsuccessful
claimant. It is one of a range of new measures that are set to be
introduced from April 2013 onwards as part of the implementation of
the proposals set out by Lord Justice Jackson. The 'trade
off' with QOCS is that although defendants will be unable to
recover their own costs even if successful save for very limited
circumstances, they will benefit from other interlinked costs
measures such as ATE insurance premiums and success fees no longer
being recoverable from the defendant.
So, if a claimant whose claim fails does not have to pay the
defendant's costs does this mean that QOCS is good news for
fraudsters? Thankfully, a number of 'exceptions' are being
built into the QOCS regime and if triggered will result in a
claimant losing the costs protection that is afforded under
QOCS.
Costs may be awarded against a claimant:
1. If the claimant is guilty of fraud in pursuing the claim;
2. If the claim is struck out as a result of the claimant having
no reasonable grounds to pursue the claim / an abuse of
process;
3. Where the claimant fails to beat a Part 36 offer.
Fraud
As the proposed rules stand, in order to 'trigger' the
fraud exception under the QOCS regime there is a requirement that
fraud must be pleaded. So potentially, a claim could be found to be
fraudulent but if allegations of fraud were not pleaded then the
fraudster could escape liability for the defendant's costs.
This seems harsh to say the least although in these circumstances a
defendant could still protect itself on costs by making a Part 36
offer.
The Civil Justice Council has suggested a definition of fraud in
the context of QOCS and this is likely to be the 'test'
that defendants will have to overcome in order to establish
fraud:
It must be proved on the balance of probabilities that:
1. The statements and representations relied on were made;
2. They were false;
3. They were likely to interfere with the course of justice in
some material respects;
4. At the time they were made, the maker had no honest belief in
their truth and knew of the likelihood that they would interfere
with the course of justice.
Interestingly, the above 'test' is the test used for
proving contempt of court although it has been modified to reduce
the burden of proof from the criminal standard of 'beyond all
reasonable doubt' to the civil standard.
Exaggerated Claims
Exaggeration alone will not be enough to trigger the loss of
QOCS and if a defendant believes that a genuine claim has been
dishonestly exaggerated and wants to recover its costs from the
claimant then they will essentially have two options:
1. Plead fraud. If dishonesty is proven then QOCS will be
lost.
2. Make a part 36 offer and QOCS will be lost if the claimant
fails to beat it.
Discontinued Claims
If a claim is discontinued then QOCS will still apply, meaning
that in such cases a defendant will be unable to recover its costs.
It is currently quite common in fraud claims for a claimant to
simply file a Notice of Discontinuance and under the existing
regime this gives the defendant an automatic entitlement to costs.
Unfortunately that will be lost under the new regime. However, this
is perhaps incentive for defendants to instead apply to strike out
a claim believed to be fraudulent. Unlike discontinuances, a
claimant whose case is struck out (on the grounds identified above)
will be liable for the defendant's costs.
It remains to be seen whether any further changes to the
proposed rules will be made between now and the implementation
date. Certainly, the procedural rules that will translate the QOCS
policy into the CPR have yet to be publicised. It does seem clear
though that the introduction of QOCS will have a significant
practical effect on how litigation is dealt with when fraud is
suspected and counter fraud tactics will need to evolve to ensure
that opportunities to recover costs are not lost.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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