horwich farrelly

Horwich Farrelly Sails Past the 60 Mark

May, 5, 2015

As Horwich Farrelly secures its 60th enforceable costs order under the new QOCS regime we challenge the notions that fundamental dishonesty findings are rare and that a case needs to be taken through a trial to secure such an order.

Horwich Farrelly is obtaining an increasing number of fundamental dishonesty decisions

The LASPO Act and associated CPR changes in 2013 introduced the principle of ‘fundamental dishonesty’ as a way of overturning QOCS. Section 57 of the Civil Justice and Courts Act (CJCA), which entered the statute books on the 13th April, took this further by requiring a claim to be struck out in its entirety in the event of fundamental dishonesty, and provided clear guidance to the judiciary (see here).

Obtaining a finding of fundamental dishonesty is significant as it not only results in the striking out of a claim but (under CPR 44.16) also removes Qualified One-Way Costs Shifting (QOCS) protection, allowing a defendant to seek an enforceable costs order against a claimant.

Recent articles in the insurance media have suggested that fundamental dishonesty decisions are rare. We wholeheartedly disagree.

Whilst the judiciary was certainly slow to apply the ‘old’ fundamental dishonesty provision we started to achieve success, particularly in the area of LSI claims, in mid-2014. Several of these cases were widely publicised.

Since then – and notably before the CJCA came into force – we have been deploying a range of tactics that have resulted in an increasing proportion of suspect cases being found fundamentally dishonest. A key part of our success has been ensuring the consistent application of those tactics by everyone involved in the process.

We are currently securing, on average, one fundamental dishonesty finding a week on suspect LSI cases. Some of these decisions have involved convincing the judiciary that claimants who would normally be considered as beyond reproach, such as teachers, have been fundamentally dishonest.

As importantly, we are also achieving great success with obtaining enforceable costs orders where the claimant discontinues or the case is struck out

Where a claimant discontinues proceedings commenced in connection with a suspect claim we will, where we have the evidence, apply to the court to make a finding of fundamental dishonesty in line with CPR 44.16. Alternatively, we will seek to have Notice of Discontinuance set aside and the claim struck out for abuse of the court process under CPR 44.15.

In both scenarios QOCS protection is removed and we can pursue an enforceable costs order against the claimant.

Over the past six months we have secured more than 60 enforceable costs orders in connection with suspect LSI claims alone, under the new QOCS regime

60% of these followed a finding of fundamental dishonesty at trial. The remainder were issued following decisions made in accordance with CPR 44.15.  Fraud was pleaded in just five of the cases.

These enforceable costs orders total in excess of £350,000, with the largest order being for £26,600.

Our tactics will continue to develop in line with the evolving legal environment

As highlighted above, the judiciary is increasingly comfortable with interpreting what constitutes fundamental dishonesty. Section 57 of CJCA is therefore a welcome addition to the defendant’s toolbox.

However, Section 57(2) allows the court to avoid striking out a claim where “…it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.” But how will ‘substantial injustice’ be determined in each case? When will ‘substantial injustice’ trump ‘fundamental dishonesty’?

In the absence of a clear definition in the Act the courts face the challenge of determining precisely what circumstances or conduct could amount to ‘substantial injustice’.   The financial value of any genuine element of a claim may come into play here, so it will be interesting to see how the courts view ‘substantial injustice’ in the (typically) low value area of LSI claims.

We believe that the ‘substantial injustice’ provisions in the CJCA will not represent a major hurdle to pursuing a robust QOCS protection-removal strategy in LSI claims, but will nevertheless monitor the application of Section 57(2) and provide guidance and responses for clients as appropriate.

If you would like any further information on our LSI experience and capabilities please contact Jared Mallinson.


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