Sarah Ennis

An unsuccessful pursuer is no longer responsible for meeting their opponent’s expenses, unless it can be shown that one of the three exemptions in section 8(4) of the Act apply. These are that the pursuer has acted in a manner which is (a) fraudulent (b) manifestly unreasonable or (c) amounts to an abuse of process.

Such ‘Qualified One -Way Costs Shifting’ (QOCS) provisions were brought into force on 30 June 2021, but it was not until December the following year, with Helen Lennox v Iceland Foods ([2022] SC EDIN 42), that a reported decision was issued. Since Lennox, a number of QOCS decisions have been published, each providing guidance as to the correct application of the provisions. Practitioners welcome the building case law in this area.

In a further significant development, the Sheriff Appeal Court has recently issued its first reported QOCS decision. This case, Natalie Manley v Thomas McLeese is reported at [2024] SAC (Civ) 16.

The decision provides further direction as to the correct approach to the section 8(4) exemptions, particularly in relation to the making of ‘a fraudulent representation’ or acting ‘fraudulently in connection with the claim or proceedings’ (section 8(4)(a)).

The evidential hearing

Manley v McLeese involved a road traffic accident and, not unusually, two different accounts of the circumstances of the incident. The dispute proceeded to proof, where the pursuer and defender both gave evidence. The sheriff found the defender to be credible and reliable. She found the pursuer both incredible and unreliable.

Expert witnesses on liability also provided evidence. The sheriff considered that she did not require to assess the evidence of those witnesses, as, in terms of making a final determination, it was sufficient that she had reached a view as to the quality of the evidence provided by the pursuer and defender. Given this assessment, the sheriff found in favour of the defender.

The defender subsequently moved for a disapplication of QOCS, citing all three grounds in section 8(4). This motion was opposed by the pursuer. A hearing followed.

The QOCS hearing

On behalf of the pursuer, it was submitted that there had been no averments of fraud before the court at proof, nor had the sheriff made a finding in that regard. This was required before section 8(4)(a) could be applied.

This argument was not accepted. The sheriff highlighted that the pursuer, as a witness, had been found to be incredible. Her view was that the pursuer had been untruthful as to the circumstances of the accident. She also considered that the pursuer’s behaviour towards the defender, post- accident, impacted negatively on her credibility. In the sheriff’s analysis, on the balance of probabilities, these features equated to the pursuer having made a fraudulent representation in relation to the proceedings.

The sheriff’s view was that because she had determined the pursuer had made a fraudulent representation, it followed that she had also acted in a manner which was manifestly unreasonable and which amounted to an abuse of process. On the basis that all three grounds in section 8(4) were established, the pursuer’s QOCS protection was disapplied.

The sheriff’s approach to both the evidence and the section 8(4) argument was challenged by the pursuer. Sheriff Principal Murphy, Appeal Sheriff Fife and Appeal Sheriff Hamilton heard the appeal which followed.

The sheriff appeal court hearing

In relation to the first issue, the appeal court considered that the sheriff had been incorrect to disregard the expert witness’ evidence and base her decision on the evidence of the parties. However, it could not be said that her findings in relation to the parties’ evidence were plainly wrong, or that she had made a material error in law. Accordingly, her decision on liability went undisturbed.

The appeal court then looked at the approach to expenses. It concluded the sheriff had erred in deciding there was no requirement to make a finding in fact that the pursuer had made a fraudulent misrepresentation before using this conclusion as a basis for applying section 8(4)(a). Such a finding was required before taking that step.

The appeal court also considered the sheriff ought to have explained why the pursuer’s post-accident behaviour had resulted in a conclusion that she had acted fraudulently.

Further, the appeal court took the view that the sheriff was required to consider all available evidence before concluding that the pursuer had made a fraudulent representation. The expert witness evidence supporting the pursuer’s account of vehicle damage was relevant but had not been taken into account. The sheriff had given no reason for disregarding this evidence.

Accordingly, the appeal court’s opinion was the sheriff had no basis to find the pursuer had made a fraudulent representation. Section 8(4)(a) could not apply.

The sheriff appeal court went on to observe that each ground listed in section 8(4) requires to be considered in its own right. The sheriff had automatically applied section 8(4)(b) and (c) after deciding section 8(4)(a) applied, but she had not provided a reason for doing so. On the basis that she had given no explanation, the appeal court concluded the sheriff had no grounds to determine the grounds in (b) and (c) applied.

The appeal was therefore sustained in part.

Comment

Digby Brown’s Lisa O’Donnell acted for the pursuer/appellant. She says: “We are disappointed for the pursuer that the appeal was not sustained in full. However, we are pleased the appeal court highlighted that the Sheriff had erred in determining liability by considering only the evidence of the pursuer and defender. We are delighted that the appeal was sustained in respect of the expenses of the action. The appeal court has offered much welcomed guidance on the QOCS provisions, and we are pleased that in this instance, the provisions were applied in accordance with their intended purpose.”

Counsel instructed for the pursuer/appellant in this case were Robert Milligan KC and Tom Brownlee, advocate.

Sarah Ennis is an associate at Digby Brown