QOCS: STRIKE OUT
Lujzka Halsall-Fischel discusses 'strike-out' with regards to Qualified One-Way Cost Shifting (QOCS)
The exception to QOCS most commonly faced by parties is probably fundamental dishonesty. However, it is important that representatives on both sides are alive to the intricacies arising in relation to the other potential causes for the disapplication of QOCS. One such cause is strike out, the only exception to QOCS where permission to enforce the full extent of costs orders is not required (pursuant to CPR 44.15(1)). Consequently, and notably, unlike the claims-for-the-financial-benefit-of-third-parties and mixed claims exceptions (CPR 44.16(2)(a) and (b)), there is no additional requirement for it to be “just” to enforce such order.
The difference between CPR 44.15(1) and CPR 3.4(2)
There are subtle differences in the wording between CPR 3.4(2), the substantive rule used to strike out a statement of case, and CPR 44.15, which sets out when strike out will be an exception to QOCS.
Firstly, from a literal comparison and interpretation, whilst per CPR 3.4(2)(c), a statement of case can be struck out for failure to comply with a rule, practice direction or court order, CPR 44.15(1) does not mirror this part of the provision. It would therefore appear that where a statement of case has been struck out purely on this basis, QOCS would not automatically be disapplied (unless the court were to also find that the statement of case were also struck out on the basis that it was likely to obstruct the just disposal of proceedings). It is therefore important for representatives of both sides to be alive to the basis upon which a strike out is sought and/or found.
Secondly, in circumstances where the Claimant’s statement of case has been struck out for being likely to obstruct the just disposal of proceedings (CPR 3.4(2)(b)), CPR 44.15(1) adds an additional “gloss”. In order for the court to go a step further and disapply QOCS, such conduct must have been by the Claimant, or a person acting on the Claimant’s behalf, and the Claimant must have knowledge of such conduct.
Setting aside the notice of discontinuance
If a claimant discontinues their claim, such that there is a deemed costs order in favour of the defendant by virtue of CPR 38.6, the defendant cannot simply attend an enforcement hearing and seek to disapply QOCS on the basis that the claim disclosed no reasonable grounds. The claim must be struck out first. It is therefore necessary for a defendant to set aside a notice of discontinuance in order to engage the QOCS exception of CPR 44.15(1) (something that is not required for the purposes of determining issues arising out of fundamental dishonesty – this is a point often overlooked, but see CPR PD paragraph 12.4).
The recent decision of Excalibur & Keswick Groundworks Ltd v McDonald  EWCA Civ 18 confirms the difficulty a defendant will face in seeking to set aside notices of discontinuance in order to strike out a claim. The Claimant brought a personal injury claim following an accident at work. The Claimant discontinued at trial, following the trial judge highlighting inconsistencies in their case. The judge then allowed the Defendant’s application to set aside the notice of discontinuance and strike out the claim (for obstructing the just disposal), removing QOCS protection. The Claimant successfully appealed, before the Defendant’s subsequent appeal to the Court of Appeal was dismissed. There are some important parts to note from the judgment:
- CPR 38.2(1) gives a claimant a right to discontinue all or part of a claim at any time (subject to limited exceptions).
- There need to be “powerful reasons why a notice of discontinuance should be set aside”; “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 the Claimant of his right to discontinue”.
- Discontinuance should not be approached differently in the context of a PI claim to which QOCS applied.
- The Claimant adopted a course of conduct taken by many litigations, which did not “begin to provide the powerful reasons upon which a notice of discontinuance could or should be set aside”; he likely received legal advice, recognised the inconsistencies, weighed up his prospects and made the decision to discontinue.
Whilst the Court of Appeal considered that it was “regrettable” that this decision had not taken place earlier, it highlighted that the Defendant had in its possession the relevant accounts and could have applied for summary judgment. Applying for summary judgment is not an approach often taken by Defendants. Whilst QOCS would still be retained in such a scenario, the ball would not be left in the Claimant’s court as to when he/she chooses to discontinue, such that it may represent an opportunity for costs to be saved.
The wrong application
The Court of Appeal, in Kasongo v CRBE Ltd & Anor  EWCA Civ 557, has recently emphasised the danger in the Defendant dressing up a summary judgment application as a strike out application, in order to try to get QOCS disapplied. Again, this was a claim for personal injury following an accident at work. The Claimant successfully appealed to the Court of Appeal after the Second Defendant had successfully applied to strike out the Claimant’s claim (for no reasonable grounds) and QOCS was disapplied.
Highlighting the significance in terms of the QOCS outcome, the Court of Appeal held that “courts should be especially astute in personal injury claims in ensuring that an application that is made under CPR 3.4(2), but which ought properly to have been brought under CPR 24, is dealt with as if brought under the latter” so as not to “erode the protection to claimants afforded by QOCS.”
The full judgment is useful reading as to how a strike out application should be approached, and to what extent a judge should look beyond the pleadings, to the evidence. In summary, it confirmed that a court is not confined solely to looking at the statement of case, but the extent to which it may do so is limited. For example, CCTV demonstrating conclusively that there was no accident at all could be taken into account when assessing whether the statement of case was ill-founded. In this case, the Court of Appeal considered that the judge had erred because the CCTV did show that there was evidence as to a dispute of fact and causation; it did not establish that the statement of case disclosed no reasonable grounds for bringing the claim in the first place (conversely, the judge’s findings might have sufficed to show that the claim had no real prospect of success). As such, the Court of Appeal found that the judge had taken the wrong approach, in that he had wrongly applied an approach appropriate for a summary judgment application to a strike out application. It was held that the pleaded statement of case disclosed all the necessary elements of a cause of action, and being unable to make good his pleaded case on the evidence does not detract from that.
It was held that it was “incumbent on the judge, especially in the context of a personal injury claim where QOCS protection can fall away in the event of a strike out, to consider whether the application ought in fact to be treated as one made under CPR 24.2”. Where a defendant in a personal injury claim considers that a claim is weak and has no real prospect of success, the appropriate course will generally be to make an application under CPR 24.
One final point worth highlighting from the judgment, that may be of wider application, is that points which appeared to go to the honesty of the Claimant did not advance the Defendant’s submission that the particulars of claim disclosed no reasonable grounds for bringing the claim.