Recent developments in qualified one-way cost shifting (QOCS)

Qualified one-way cost shifting (QOCS) has been a hot topic amongst personal injury lawyers since it came into force in Scotland on 30 June 2021. Its introduction saw a fundamental change into how judicial expenses are dealt with in personal injury proceedings with a move away from the long-established ‘winner takes all’ approach. The new QOCS rules mean that a defender is no longer able to seek awards of expenses against an unsuccessful pursuer in some circumstances.

The new rules are set out in Section 8 of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 and were introduced to widen access to justice as part of the 2013 Taylor review.

The Court has the discretion to disapply QOCS protection when proceedings are not conducted in an appropriate manner. Section 8(4) of the 2018 Act sets out three scenarios which the Court may consider in this context.  They are where the Claimant or his legal representative:

• Makes a fraudulent representation or otherwise acts fraudulently in connection with the claim or proceedings
• Behaves in a manner which is manifestly unreasonable in connection with the claim or proceedings, or
• Otherwise, conducting the proceedings in a manner that the Court considers amounts to an abuse of process.

The Act of Sederunt also created three additional exceptions where QOCS protection can be lost. These are:

• If the Claimant fails to obtain an award of damages equal to or greater than the sum offered by way of a tender lodged process
• There is an unreasonable delay by the Claimant in accepting a tender; and
• The Claimant abandons the action.

The Act of Sederunt exceptions follow already established practice in personal injury proceedings but the Section 8(4) exceptions left most practitioners scratching their heads because, whilst the rules set out what the exceptions are, there was no definition or guidance on what constituted ‘fraudulent misrepresentation’, behaviour that is ‘manifestly unreasonable’ or conduct that amounts to an ‘abuse of process’.

It was over a year before any decision was published on the application of QOCS. Lennox v Iceland Foods Ltd was the first reported judgement and since then there has been a steady stream of judgments helping to clarify when QOCS will and will not apply.

Carty v Churchill saw Sheriff Campbell provide a very concise breakdown of the principles established so far. He held that:

‘while the number of cases continues to grow, a number of principles can be discerned from the decisions thus far.

(a) Each case in which the issue of disapplying QOCS arises must be considered on its own facts and circumstances (Lennox, para 61; Gilchrist para 27);

(b) “Manifestly unreasonable” means “obviously unreasonable” (Lennox, para 60);

(c) The legislative history and language indicates that the circumstances where proceedings were not conducted in an appropriate manner are likely to be exceptional (Lennox, para 61);

(d) Where there is a finding that the pursuer is incredible on a core issue in the action, the issue of manifestly unreasonable conduct may arise, but does not invariably arise (Gilchrist, para 27);

(e) The court preferring the defender’s witnesses over the pursuer’s account does not of itself give rise to disapplication; whether it does depends on the court’s reasons (Gilchrist, para 28);

(f) Unusual circumstances may or may not be exceptional; whether they are is context-specific (Love, paras 56 & 65).

The first reported judgments set a high bar for defenders to overcome when seeking to have QOCS disapplied. However, in a recent decision from the All-Scotland Sheriff Personal Injury Court (ASPIC), the Sheriff gave us examples of circumstances where that high threshold is met and instances where QOCS will be disapplied.

In the case of Carty v Churchill the pursuer claimed for damages as a result of an injury suffered in May 2021. The Defender accepted liability for the accident prior to the court action being raised and put forward an offer of £3,700. The offer was rejected and court proceedings were started in May 2022. The pre-litigation offer was formalised in a Minute of Tender in August 2022. After a number of missed timetable dates from the pursuer’s agents, a discharge of proof due to witnesses being unable to attend court on the appointed date and protracted correspondence, the pursuer accepted the Tender on 4 May 2023, only five days before the proof.

The defender moved for modification of expenses under OCR 31A.2(1)(a) and 2(1)(b) and for an award of expenses against the pursuer. The defender submitted to the Court that it was manifestly unreasonable to raise a court action and then subsequently accept an offer that was made before the court action was raised and that the conduct of the action was tantamount to an abuse of process.

The solicitor for the pursuer cited numerous reasons for their failure to comply with the Court timetable such as ill health, the dissolution of their firm and a confusing interlocutor. Reference was made to the test established in Lennox v Iceland Foods, at paragraphs 10-12, and submissions were that none of the criteria to establish manifestly unreasonable conduct was evident. The action had not been raised in bad faith, there was no question of fraud, or of an ulterior motive.

In his decision, Sheriff Campbell noted that the overall impression gained was that there had been,“…unsatisfactory management of the action by the pursuer’s agents. There was an apparent failure to respond to correspondence from the defender’s agents, either in a timely fashion or at all, and a persistent failure to adhere to dates in the court timetable once the action was raised.”

When considering the application of QOCS in line with his observations set out above, Sheriff Campbell said, at paragraph 23, that he was “not satisfied that the explanation offered entitles the court to overlook the persistent failures to comply with the timetable or to engage in a timely fashion with the defender’s agents. The operation of all court process depends on the due observance of the procedural framework and that is especially so in a case-flow managed court such as ASSPIC, which relies in part on appropriate engagement with the process by agents.”

He concluded that: “The integrity of the process and the effective management of the cases before it depends on that. I am accordingly satisfied that the conduct of the pursuer’s agents in the management of the action was manifestly unreasonable. I will therefore grant the part of the defender’s motion which invites the court to disapply QOCS and seeks an award of expenses.”

The defender in Carty v Churchill was therefore found entitled to the expenses of the action.

Another case in which QOCS was disapplied was Musialowska v Zurich Insurance Plc. The pursuer was a passenger in a stationary vehicle when the vehicle in front started to carry out a U-turn. The turning vehicle required to reverse to complete their manoeuvre and subsequently collided with the vehicle the pursuer was travelling in. At proof, the pursuer and the driver of the pursuer’s vehicle were ultimately found to be unreliable and incredible witnesses. Their evidence was inconsistent with the vehicle damage evidence put forward by the defender and the pursuer’s description of the accident circumstances changed whilst they were giving evidence. Photographic evidence of the damage to the pursuer’s vehicle was available to the court. The photographs showed that the damage was not consistent with the pursuer’s description of accident circumstances and when faced with the photographs, the pursuer made a serious allegation that the photographs must have been tampered with. The action was ultimately unsuccessful, with Sheriff Keir finding both the pursuer and her witness incredible and unreliable witnesses against what he described as a ‘very unsatisfactory background’.

Unsurprisingly, the defender made an application to disapply QOCS on the grounds of fraudulent misrepresentation and manifestly unreasonable conduct. Sheriff Keir commented that the issues with the pursuer’s evidence were “far beyond the more common scenario where there are competing versions of events and the court has preferred one version over the other.” Sheriff Keir was clear that in this instance the test for fraudulent misrepresentation was met. The defender was awarded the expenses for the action.

However, motions for the disapplication of QOCS have not all been successful and some useful points can be taken from those cases too. In Murray v Mykytyn, ultimately, the pursuer was unsuccessful in her claim against the defender. The pursuer was injured when the vehicle she was travelling in was involved in a collision with the defender’s vehicle. The pursuer and her husband, who was driving the car, both gave evidence at proof. The evidence from the pursuer’s husband conflicted with the pursuer’s evidence. When the inconsistencies were put to the pursuer’s husband in cross-examination, he suggested that their accounts of the accident were inconsistent because the pursuer’s disability (narcolepsy) affected her memory. The pursuer accepted that she could be forgetful at times but she was sure that her memory of the accident circumstances was clear.

Sheriff Campbell indicated that whilst he had no concerns with the pursuer’s credibility, he could not be certain about her reliability.  The pursuer’s narcolepsy was a complicating factor that caused the Sheriff some concern as he did not hear any evidence about the effect of narcolepsy on the pursuer’s ability to recall the circumstances of the accident clearly.  The pursuer lost her case because the evidence of the defender, who was found to be wholly credible and reliable, was preferred.

The Sheriff made it clear that his concerns about the pursuer’s reliability were based on matters external to her evidence and that was not sufficient to meet the threshold of manifestly unreasonable conduct. On this occasion, the defender’s motion for QOCS to be disapplied was refused.

What is clear is that every case continues to be determined on its own specific facts and the bar for disapplying QOCS remains high. The credibility and reliability of witnesses will be under close scrutiny and in the absence of a finding of the pursuer being unreliable and incredible, a motion for QOCS to be disapplied is unlikely to succeed.