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There has been a lot of noise regarding Qualified One-Way Costs Shifting (QOCS) lately, with claimant-friendly decisions dominating the personal injury news. Our clients were rightly worried at the continued watering down of powers to manage claims through the use of effective Part 36 offers; but they needn’t worry any longer.

What is QOCS?

QOCS was introduced in April 2013, and essentially provides claimants with protection against liability to pay a defendant’s legal costs if they are unsuccessful with their claim, save for in limited circumstances. A defendant will not recover their legal costs unless one of the following applies:

• The claim is struck out (under certain conditions);
• The claimant is found to be fundamentally dishonest;
• The claimant fails to beat the defendant’s Part 36 offer.

What is a Part 36 Offer?

At the risk of oversimplifying, from a defendant perspective, a Part 36 offer is a powerful tool to mitigate legal costs exposure. A well-placed offer can focus the minds of the parties towards settling a claim, without admission of liability.

More importantly, it gives defendants some costs protection under QOCS. When making a defendant Part 36 offer, a defendant agrees liability for the claimant’s legal costs for 21 days. If that offer is accepted late, the defendant’s liability for the claimant’s costs is capped to the end of the 21 days. Further, in theory, the claimant becomes liable for the defendant’s costs after the 21 days.

This can be particularly powerful, where for example a claimant takes their case to trial and does not better the defendant’s Part 36 offer. The defendant can recover its costs from the end of the 21 days to Trial up to the level of damages and costs recovered by the claimant.

How had Defendant’s powers lessened?

Whilst the Part 36 consequences existed in theory, the powers of defendants to enforce had been watered down by the courts. England and Wales have a common law legal system. This means the law develops as issues are tested in court, and judges make decisions in the higher courts, which become binding on cases with similar facts in lower courts. There are two key cases which impacted recoverability for defendants:

• Cartwright v Venduct Engineering Ltd – the Court of Appeal decision of Cartwright (2018), prevented a defendant from offsetting their costs against a claimant’s damages where the matter had settled by any other means than a court awarding those damages. i.e., a defendant could not touch a claimant’s damages for the offset of the legal costs it was entitled to as a result of late acceptance of its Part 36 offer.
• Ho v Adelekun – Despite being a modest claim, the case proceeded to the Supreme Court on the issue of enforcement of defendant costs against claimant costs. The outcome was that a defendant could only enforce its costs up to the level of costs ordered by a court. This removed the defendant’s ability to offset its costs where settlement had been achieved by any other means outside of trial, including by way of Part 36.

The combination of the above cases has often left defendants with an entitlement to recover their costs under Part 36, without a means to enforce them.

What has changed?

Thursday 2 February 2023, saw the publishing of the amendments to the Civil Procedure Rules. Nestled in them, are some welcome amendments for defendants to CPR 44.14 which governs the ‘effect’ of QOCS ahead of their inception for claims issued on or after 6 April 2023. I reproduce the accompanying explanatory note to the changes, which sets out the rule maker’s intentions plainly:

“… (i) to allow the court in cases falling within the scope of the qualified one-way costs regime to order that the parties’ costs liabilities be set-off against each other, Ho v Adelekun [2021] UKSC 43 having previously found that this rule, properly construed, did not allow the court to do so; and

(ii) to include within this rule, as well as deemed orders, agreements to pay damages or costs, so to allow the off-setting of costs orders made in favour of a defendant and ensure that offers made under Part 36, and, for example, settlements concluded by way of a Tomlin Order, come within the rule; …”

What does this mean?

This is fantastic news for our clients. In short, it cancels out the decisions in Cartwright and Ho, meaning costs and damages awarded to a claimant are back up for grabs for the purpose of recovering/offsetting defence costs.

Further, defendant representatives needn’t try and reinvent the wheel with some of the recent ingenious (and not so) attempts to circumvent the mechanism for offset. The new rules make it plain that, in addition to orders, ‘deemed’ orders, Tomlin Orders, and Part 36 offers are all now in play.

Where appropriate, a well-placed Part 36 offer has regained its bite and is back on the table as a means for insurers to effectively risk manage claims, with the chance to recoup costs from claimants who push their claim too far.

I have no doubt we will hear more from QOCS in 2023; particularly with the implementation of the fixed costs regime looming in the latter half of this year, and for the claims issued prior to the 6 April 2023 date. But, for now, defendants can rejoice over the change of momentum, and it’s back to the drawing board for claimant representatives.

Will we see a spike in litigation?

This remains to be seen. Claimant representatives may seek to avoid these changes by issuing their client’s claim in court before the changes come into force on 6 April 2023. Then again, claimant representatives will be mindful of the relevant Pre-action Protocols (PAP). Whilst technically the PAP is for claims allocated to the fast track, the general protocol for Personal Injury Claims states “… the “cards on the table” approach advocated by this Protocol is equally appropriate to higher value claims. The spirit, if not the letter of the Protocol, should still be followed for claims which could potentially be allocated multi-track …”.

The PAP allows the Defendant 3 months to investigate a claim. For many of our clients, this is extended to 6 months where the accident occurred outside England and Wales.

The overview of the PAP states: “… Failure to comply with a Pre-action Protocol will be taken into account in any court proceedings which follow. The defaulting party may be ordered to pay additional costs resulting from his failure. If he is awarded costs by the court, the amount may be reduced on account of his failure. Other sanctions may be applied. …”

So long as defendants are complying with their obligations under the relevant protocol, I find it difficult to see how a court would accept the looming QOCS change is a good reason to breach the PAP without penalty.

We will continue to work with our clients on appropriate strategies as the aftermath unfolds.

George Orton, Solicitor

MFL – Set-off Returns for Defendants under QOCS – 6 Feb 2023

Should any of our clients wish to discuss further, they should not hesitate to contact:

George Orton, Solicitor
George.orton@milesfanning.co.uk

Mark Fanning, Managing Director
mark.fanning@milesfanning.co.uk

Sources:

The Civil Procedure (Amendment) Rules 2023 – https://www.legislation.gov.uk/uksi/2023/105/made

Pre-action Protocols –  https://www.justice.gov.uk/courts/procedure-rules/civil/standard-directions/general/pre-action-protocols

We are pleased to report on the outcome of a recent trial where Mark Fanning of Miles Fanning Legal and David Boyle of Deans Court, successfully defended a Group Action involving Viral Illness. This claim is very important in terms of liability issues for viral illness claims, particularly considering the COVID-19 pandemic and the risk of any future claims that may arise from outbreaks.

Circumstances of the Claim

On or around 10 August 2014 a guest vomited in reception on arrival at the 5-star Lindos Imperial Hotel, on the island of Rhodes. The incident was an isolated incident and was dealt with accordingly. In the early hours of 12 August 2014, several guests started to call reception at the hotel to report illness. Within a few hours, it became clear to the hotel management that a full-blown outbreak was taking hold.

The hotel management team activated its outbreak control plan; called in specialist hygiene consultants; the local authority public health team; doctors to help treat guests and extra staff from sister hotels to assist in containing the outbreak. Cleaning and sanitation protocols were implemented. There were hundreds initially taken ill, but within a few days that dropped significantly as the control measures started to take effect.

The local public health team identified Norovirus as the most likely culprit and applauded the hotel for its efforts to control the outbreak.

A number of the customers involved in the outbreak brought claims against the tour operator(s) involved. Miles Fanning Legal, acting on behalf of one of those, defended a group action involving 26 claimants. The claim proceeded to trial in March 2021 and was heard by His Honour Judge Gosnell sitting in the County Court at Leeds.

The 26 claimants included in the action were represented by Sarah Prager (instructed by Farnworth Rose) and presented their case in three ways:

• The illness was caused by an unidentified food-borne bacterial pathogen, not Norovirus and as such, the food served was not fit for purpose.
• If it was caused by Norovirus, then the virus was most likely ingested on food served from the hotel buffet, and as such the food was not fit for purpose; and
• If neither of the above, then the illness was caused by Norovirus and the hotel had not done enough to prevent or deal with the outbreak i.e., they had been negligent, and that materially increased the risk of exposure.

The defence was, in summary:

• That the outbreak was caused by Norovirus; and
• That the hotel had a good outbreak control plan in place, implemented it quickly, and worked tirelessly to bring the outbreak under control as quickly as possible, whilst at the same time supporting those that were affected.

After hearing evidence from the Claimants, the hotel management team, and experts in the fields of environmental health, microbiology, and gastroenterology, the judge found that the outbreak was not caused by contaminated food and that the hotel staff had not been negligent in the context of exceptionally difficult circumstances.

The claims were dismissed.

Analysis

This case demonstrates how clearly documented and implemented outbreak response plans can, in cases comparable to this, protect hoteliers (and in turn package organisers) from legal liability. This is fundamental in group actions where financial exposure on a finding of liability could be significant.

As an organiser, you should ensure that your accommodation suppliers do the following:

• Have a clearly documented and effective outbreak control plan in place.
• Ensure that staff are well trained and practiced in its implementation.
• Obtain good advice and support from Health & Hygiene Consultants; and
• Carefully document the implementation of the plan during any outbreak and retain those records e.g., the plan, how it was implemented, advice sought from consultants and a record of the new illness numbers reported.

It is important, where you are using suppliers to provide accommodation, that you have oversight of your suppliers’ processes and actions during an outbreak and that you have written contracts in place to support that. What made a real difference to the outcome, in this case, was the co-operation from the Hotel, enabling us to work as a cohesive team with the hotel, their lawyers, the tour operator, and insurers. We were able to investigate the claim at a very early stage and secure extensive documentation and witness evidence, with which to defend the claims.

As a tour operator, you also need to have contractual indemnity and insurance provisions in place with your suppliers, to support any recovery action should anything go wrong. With limited pandemic cover available currently for Professional Indemnity and Public Liability, it is even more vital for tour operators and their accommodation suppliers to get this right and to revisit their contracts to make sure they are fit for purpose or there could be significant financial exposure.

Whilst this case relates to Norovirus, at some point, there is a risk that the industry may start to see Covid related claims as we move towards unlocking overseas travel again. There are many similarities in terms of the prevention and control measures for both viruses. Adhering to the areas mentioned above could also prevent you from being exposed to financial risk if you are faced with a claim following a COVID-19 outbreak, as a claimant will need to prove negligence to succeed in any claim.

If you would like to discuss this case further or would like support with your supplier contracts, please do not hesitate to contact:

Mark Fanning
Managing Director (Solicitor)

Tel: 0203 036 0741
Mobile: 07454 201540
Email: mark.fanning@milesfanning.co.uk

Judge Dismisses Viral Illness Group Action – 13 May 2021

Tour operators and cruise ship operators have a potential financial exposure if a customer contracts COVID-19 whilst on holiday. It is almost certain that we will see claims being brought against tour operators or cruise ship operators, by customers who allege that they contracted COVID-19 whilst staying in a hotel or on a cruise ship, where there are allegations of failings on behalf of tour operators, cruise ship operators or their suppliers.

WHAT IS THE LEGAL BASIS FOR POTENTIAL LIABILITY?

Any potential Claimant will need to demonstrate that the exposure to virus has occurred at the accommodation provided as part of the holiday. Where sophisticated track and trace systems are in place that might prove straightforward. We have seen several recent examples of defined outbreaks where cruise ships, workplaces and universities have been identified as the centres for outbreaks. Whilst customers travel to and from accommodation and often leave the accommodation during the holiday and this provides for other possible sources of exposure, the courts look at such matters on the balance of probabilities. As such, a well-publicised outbreak at a hotel/ship is likely to attract the attention of claimant law firms.

If a claimant proves a failure to take reasonable care by the accommodation supplier that has caused his/her illness, Regulation 15 of the Package Travel Regulations 2018 extends the tour operator’s liability to cover the failings of its suppliers, and liability will attach from breach of contractual duty. Ultimately, as a tour operator or cruise ship operator, you are heavily reliant on your supplier’s actions during any illness outbreak or to avoid an outbreak occurring in the first place.

With regards potential claims relating to COVID-19, much can be drawn from an analysis of previous legal cases relating to Norovirus to assess the likely basis on which future claims may be brought.

Norovirus has long been a recognised risk associated with cruise ships, which is why the cruise industry was many years ahead of other leisure sectors in terms of outbreak management. As far back as 2007, official guidance was published for cruise ship operators on controlling Norovirus outbreaks, which was drawn from industry best practices at the time. Some core measures such as quarantine, hand hygiene and monitoring illness numbers are now the topics of daily conversation. This week we have seen the publication of new Covid 19 guidance for cruise ship operators from the UK Chamber of Shipping arising from a collaborative approach from operators looking at best practice.

Hotels have, of course, seen their fair share of Norovirus outbreaks over the years. Whilst most hotels have sophisticated outbreak management plans in place, tour operators have often still been involved in defending expensive group action litigation. Whilst the legal liability regimes for cruise ship operators and tour operators are very different, some of the fundamental principles are the same or similar.

There are two important Norovirus cases which demonstrate the way in which COVID-19 cases may be approached by the courts in future: Nolan & Others v TUI UK Ltd [2016] 1 Lloyds Rep 211 and Swift & others v Fred Olsen Cruise Lines (2015) HHJ Robert Owen QC unreported.

In Nolan, which was a win for the cruise line, the court concluded that there was no liability largely due to two key factors. (1) there was an adequate outbreak management plan in place, and (2) that the outbreak management plan was implemented with due care and skill.

On the other hand, in Swift, which was a loss for the cruise line, the court also found that the outbreak management plan itself was adequate (although there was some debate about its complexity). However, despite the huge amount of supporting documentary evidence produced by the cruise ship operator, the court found there had been a failure to adequately implement the plan, which had in turn materially increased the risk of infection of those on board. There were conflicting documents from the ship about implementation of their outbreak plan. The Court of Appeal declined to overturn that decision. Liability attached.

These two cases highlight the importance of documentation, clarity of outbreak management plans and the implementation of the plan by the management team. Having a hugely detailed and complicated outbreak management plan is of no benefit if the staff implementing it do not understand it, and/or if the compliance with the plan is not appropriately documented.

As a tour operator or cruise ship operator, if you are to successfully defend a claim, you will need to show that your suppliers had a good outbreak management plan in place, and they implemented the plan properly. You then need to be able to prove that it was implemented properly. If your business (or its suppliers) falls at any one of these hurdles, it is likely to be more difficult to successfully defend a claim.

However, even with the best measures in place, there can be no guarantee that customers will not be infected as this is simply the nature of a highly infectious viral illness, whether it is Norovirus or Coronavirus. That was expressly recognised by the judge in Nolan. The duty owed is not an absolute one but, rather, whether reasonable steps have been taken to reduce the risk of exposure to the illness as far as is reasonably practicable. The Claimant in any given case still needs to prove the breach of contract, failure to take reasonable care &/or negligence.

We have seen attempts by those representing Claimants to circumvent that approach by trying to demonstrate, with expert evidence, that Norovirus originated from food served in the hotel. The purpose of that tactic is to seek to take advantage of the regime of strict liability laid down in Wood v TUI Travel plc t/a First Choice [2017] EWCA Civ 11. (Note that case does not apply to liability on cruise ships). Studies have shown that the risk that food presents as a transmission route for Norovirus is quite low. Cold food theoretically presents as a contact surface area, but the most common transmission routes are still person to person whether directly or indirectly via contaminated environments or surfaces. The burden of proving all that rests with the claimant. Of course, at this stage, there are no studies relating to COVID-19 on this subject and it is a different type of virus. It may be an argument that is deployed by claimants at some stage in the future if there are studies which support that possible transmission route.

WHAT IS THE LIKELY VALUE OF THESE CLAIMS?

This to me is the most concerning feature that distinguishes a potential financial exposure to a claim for COVID-19 as opposed to that of a viral gastric illness claim. Whilst the vast majority of those infected with COVID-19 appear to have mild symptoms or no symptoms, the risk of an individual claim of significant value is higher. We have seen a small percentage of high value respiratory illness claims resulting from exposure to legionella bacteria where long recovery periods, long periods in hospital on ventilation and in some cases sadly death have meant that claim value is significant. COVID-19 patients in the high-risk categories exposed whilst staying in accommodation may generate high value claims and you take your victim as you find them.

The risks of financial exposure to group actions will, really, only apply to those companies with large numbers of customers in one location at any one time but the one-off large losses are difficult to predict and could expose any business to significant losses.

HOW CAN YOUR BUSINESS PROTECT ITSELF FROM CLAIMS?

There are several ways your business and its suppliers can mitigate the risks of claims being made by customers arising from a coronavirus (or any other) outbreak. As with all risk, the extent to which you will implement any of these will depend on the nature of your business, customer demographic, your relationships with customers, and suppliers and the economics of any mitigating factors. We would recommend that you consider each supplier’s approach to the following:

• Does the supplier have an outbreak management plan in place? How are you able to establish whether it is adequate or not? Have the supplier’s staff have been well trained in implementing it and has it been communicated properly to their staff? Do the staff understand their role in the event of an outbreak?
• Is your supplier maintaining adequate records of that implementation and training?
• Do you have a process in place so that, in the event of an outbreak, you are able to work with the supplier to ensure that they are implementing the outbreak management plan properly? Are you able to monitor that they are keeping appropriate records of the actions undertaken, including when they were taken and by whom?
• Are you confident that the supplier will notify you of any outbreak promptly?
• If you have a limited relationship with a supplier (either because you do not use them often or because you have only recently started using them), how will you be satisfied that their outbreak management procedures are in place and that all of the above could be adhere to?
• What level of risk are you prepared to accept if the supplier does not have these policies and is not willing or able to create and implement them? This will be particularly relevant in parts of the world where their approach to risk management may be different.

We fully appreciate that there are few easy and straightforward answers to any of these questions and operational challenges abound. Your approach with your suppliers will very much be impacted by your ability and willingness, as a business, to accept an increased amount of risk (financial or reputational) should an outbreak occur involving your customers.

From a practical perspective, there are several potential avenues for your business to help with managing this risk:

• Traditionally, one of the ways you would mitigate this risk would be through insurance. At the time of writing, however, the current appetite in the insurance market to cover this type of risk is limited. Some insurers are excluding cover for COVID-19 related injury or illness as well as issues relating to cancellations arising from COVID-related events. As such, insurance may not provide a complete solution for this type of risk in the short term. That position may change, should a safe and effective vaccine be developed, but for the moment businesses need to urgently look to reduce risk in other ways. Regardless of whether you have insurance or not, you still need to take steps to reduce the risk of a claim being made, it being successful and you being in a position to secure a recovery from your supplier where appropriate.
• If you do not have in-house resource available to review supplier documents and processes, you could look to outsource this work to hygiene consultants. Several hygiene consultancies have been advising hotels (and tour operators) and have developed COVID-19 outbreak management plans to allow for the safe opening of hotels in 2020. No doubt a lot will have be learned from this summer to further refine those plans for next year. There are various certifications and kitemarks for those hotels who have these outbreak control measures in place and that may give you a greater degree of comfort around those suppliers.
• Your contractual arrangements with your suppliers are also a key part of how you can manage the financial impact of a claim being made against your business. Lucy Schofield, our Commercial Lawyer, will shortly be releasing an article which will consider that further. Should you wish to discuss this with us in the meantime please do not hesitate to contact us.

It is important to note that, if your business does not have insurance to cover claims arising from COVID-19, you may still have claims made against you. We have extensive experience in defending these types of claims on behalf of tour operators, cruise operators and their insurers.

If you would like to discuss topic further please contact Mark Fanning mark.fanning@milesfanning.co.uk

Mark is the owner and Managing Director of Miles Fanning Legal. He has almost 30 years of experience as a solicitor. He specialises in handling complex international large loss claims and marine casualty claims, most of which are significant high-profile claims involving complex issues of law and jurisdiction. Mark holds a Highfield International – Supervising Food Safety Level 3 qualification and has considerable experience in defending group action claims involving food safety and hygiene issues and is no stranger to a ship’s galley/kitchen. He has also been involved in defending claims involving fraud, fundamental dishonesty and gastric illness.

MFL – COVID-19 Liability – Will Your Business Be Exposed – 14 October 2020