11/10/2021

The fundamentally dishonest claim and improper conduct - are wasted costs applications on the rise?

In the personal injury arena, a defendant is often left picking up their own costs tab due to the application of QOCS (qualified one-way costs shifting). There are some exceptions to QOCS, of which a finding of fundamental dishonesty is one, but what is the position when the claim is fundamentally dishonest but this has been facilitated by improper, unreasonable and/or negligent conduct of the claimant’s own legal representatives?

An application for wasted costs was recently refused in Lakatamia Shipping Co Ltd v Su & Ors [2021] . Consequently, legal practitioners may well be understandably wary, but on the right cases, wasted costs can and will be recovered. On our most recent application, the claimants’ solicitors have been left to pick up a very hefty costs bill.

Background to claim

The claimants alleged that they fell ill on holiday due to food and/or drink consumed at the hotel, as part of their all-inclusive holiday package. They further alleged the illness was so severe, their entire holiday was ruined and subsequently pursed a claim for damages against the tour operator for the costs of the holiday, loss of enjoyment and compensation for the illness contracted.

The claimants, however, did not report any issues with the hotel, the food, or drink at the time. They also failed to report any illness to the hotel or tour operator.

Shortly after their return home, the claimants made two complaints. The first complaint related to the level of service that they received on the return flight home. The second complaint was about power cuts which occurred whilst they were on holiday. Again, there were no post-holiday complaints about the alleged illness.

A claim for personal injury later followed, to which a defence was filed positively pleading that the claim was fundamentally dishonest, supported by social media posts located by the defendant. The posts included a number of unqualified and favourable comments about the hotel and the claimants’ holiday experience which completely undermined their pleaded claim.

The claimants subsequently discontinued their claims which left the tour operator with the decision of whether to secure an enforceable costs order.

The application

The social media evidence was so compelling that the defendant alleged the claims were fundamentally dishonest on two grounds:

  1. Firstly, in relation to whether the claimants were ill, as alleged or at all; and
  2. Secondly, in the material representations they made about the hotel and the service provided, to bolster the merits of their claim.

The application also sought an order that the claimants’ solicitors were held jointly and severally liable for the tour operator’s costs because had they had clearly not conducted any checks into their clients’ social media, as highlighted in the SRA Warning Notices about the risk of fraud in travel sickness claims. Had they done so, they would have located the posts and advised their clients not to pursue the claims.

The claimants subsequently admitted that their claims were fundamentally dishonest and offered to contribute towards the tour operator’s legal costs. However, they were adamant that their solicitor already knew about the offending social media posts and felt the dishonest presentation of their claims was due to their legal representation. The claimants waived legal privilege over their solicitors’ file of papers in order to give the tour operator access to review the correspondence.

The solicitors’ file of papers confirmed that:

  • The solicitors had repeatedly advised the claimants to hide/delete any holiday pictures or posts on social media.
  • The solicitors had conducted social media searches and located material adverse to the claimants’ case.
  • The solicitors obtained instructions on the same adverse social media evidence and then proceeded to issue court proceedings.
  • The solicitors asked their clients to sign lists of documents, after the social media evidence had been located by them. The lists did not include the social media evidence.

The solicitors’ files were also missing a number of key documents including:

  • The actual social media entries located by the solicitors which were exhibited to a letter they sent to the claimants.
  • The claimants’ replies to the located social media posts; only the solicitor’s email thanking them for their input was included.

The contents of the files also raised additional issues as the solicitors had signed a statement, in response to the application for costs, stating that they had “asked the claimants from the outset about holiday photographs and social media evidence”. The file confirmed however that the only discussions they had with the claimants was to advise them to delete any comments or photographs, not to produce them as the statement had suggested.

All of this was then put in evidence by the defendant and the solicitors agreed to pay the tour operator’s costs on an indemnity basis.

Outcome

This claim should not have been started. It was a dishonest claim and the tour operator was required to incur significant cost defending the claim and then pursuing an application for costs.

Had the claimants or the solicitors settled the tour operator’s costs before an application was made, it would have cost them under £10,000; instead the application was robustly opposed which resulted in numerous hearings. The tour operator has now secured a costs order for £37,000 against the solicitors.

Wasted costs

It is not easy to establish that a legal representative should be personally liable for legal costs. There needs to be a clear and prima facie case that there has been improper, negligent or unreasonable conduct as defined by Lord Bingham in Ridehalgh v Horsefield [1994]. However, the conduct alone is not enough, as the applicant must also demonstrate that this conduct caused them to incur costs. In this case, we could demonstrate that the defendant’s costs of the claim and the application, could be attributed to the solicitors’ conduct.

So what is the position when the claim is fundamentally dishonest but this has been facilitated by improper, unreasonable and/or negligent conduct of the claimant’s own legal representatives?

A solicitor cannot hide behind their client’s dishonesty to excuse their own conduct as we have seen in other cases such as Thompson v Go-North East and Bott & Co. [2016] and Rasoul v Linkevicius & Anor [2012]. In this case, it resulted in the claimants and their solicitors paying the defendant’s costs, but it will very much depend on the facts of the specific case and how causative the solicitor’s conduct was in the costs incurred by the defendant.

Wasted costs orders serve as a useful reminder that parties to litigation have a duty to promote the overriding objective and follow the SRA rules. Failure to do so risks being penalised in costs, reputational damage and potentially a negligence claim. Watch this space - we may see an increase in wasted costs applications.