Qualified One-way Costs Shifting – latest ruling in Court of Appeal decides when it should apply

March 4, 2018

 

Qualified One-way Costs Shifting (QOCS) has been a feature of the landscape of personal injury litigation since April 2013, since when there have been a number of instances where the application of the rules has needed to be clarified, due to circumstances which those rules had neither foreseen nor catered for.

 

Just such an instance arose where a claim had been commenced prior to April 2013, but parties were added after and the Claimant, having been ultimately unsuccessful, sought QOCS protection against their costs liability to those parties.

 

In the matter of Jacob Corstorphine (an infant) v Liverpool City Council [2018] EWCA Civ 270, the substantive claim arose out of serious personal injuries which were inflicted on the infant claimant due to an allegedly defective tyre swing in a playground for which the defendants were responsible.

 

The claimant, by his litigation friend, entered into a CFA on 23 August 2012 which provided for a success fee and covered the claim against the defendant, and further entered into an ATE insurance policy which also named the defendant, which indemnity was limited to £25,000.00. As was also required, on 28 August 2012, the claimant served a Notice of Funding on the defendant setting out the details of the funding obtained and, thereafter, following the protocol and the matter not being capable of settlement, proceedings were issued on 18 November 2012, against the defendant.

 

By October 2013, proceedings were well underway, the reforms (including of course the QOCS provisions) having come into effect on 1 April 2013, and on 21 October 2013 the defendant issued a Part 20 claim against other parties who became 2nd & 3rd defendants, being formally joined into the claim by an order dated 15 August 2014, with both the claim and the Part 20 claim being ordered to be tried together.

 

The matters came to a 4 day trial in July 2015 before Mr Recorder Edge, with his written judgment on liability being handed down on 19 October 2014, which dismissed the claimant’s claim against the defendants, which gave rise to issues being taken as to the unsuccessful claimant’s liability to the various defendants in respect of their costs, and this a further written judgment was handed down on the issue of costs liabilities, on 8 February 2016, finding that there was no reason to depart from the ‘normal order’ that the unsuccessful party provides the successful party with an indemnity for their costs, and therefore ordered that

 

  1. The Appellant pay the Respondent's costs of the Primary Claim, including any costs of the other parties which the Respondent had been ordered to pay;

  2. The Appellant pay the Second and Third Defendants' costs of the Primary Claim;

  3. The Respondent pay the Second and Third Defendants' costs of the Additional Claim.

 

and it was this order which gave rise to the appeal in this instance due to the finding within his judgment that the QOCS regime did not apply to the claimant as their claim pre-dated it and its effect, notwithstanding that 2 of the defendants had been joined into the proceedings after the regime had come into effect.

 

Given that the claimant was, effectively, therefore left without any way of meeting their liabilities to the 2nd & 3rd defendants (the ATE policy was only taken out to cover any liability to the only defendant at that time and, post-1 April 2013, no such equivalent policy was available to the claimant to provide cover against the further defendants, brought in through no actions of the claimant), the claimant sought to appeal the decision on two related grounds, namely that

 

“(1) The judge erred in finding that the Appellant's PCFA encompassed the claims brought against the Second and Third Defendants, with the result that he was not entitled to the benefit of QOCS in respect of their costs of the Primary Claim (Ground (1));

 

(2) The judge erred in the exercise of his discretion in directing that the Respondent was entitled to recover as part of its own claim for costs against the Appellant, those costs it had been ordered to pay the Second and Third Defendants (Ground 2).”

 

Handing down the Court of Appeal’s judgement, and having analysed the QOCS regime thoroughly, Hamblen LJ (sitting with the Chancellor of the High Court, Sir Geoffrey Vos) ruled that Mr Recorder Edge had

 

“…exercised his discretion on an erroneous basis in that he has failed to take into account a highly material factor…”

 

in concluding as he had.

 

In reaching this conclusion and allowing both grounds of appeal, Hamblen LJ reasoned that, in respect of the first ground

 

“…that the purpose of the transitional provisions was to preserve vested rights and expectations. At the time of the inception of QOCS the Appellant had no vested rights or expectations in respect of claims against the Second or Third Defendants. Its sole rights and expectations concerned the claim against the Respondent, which alone was the subject matter of the PCFAs. At the time of the PCFAs the "underlying dispute" was the claim against the Respondent, which was the only existing claim at that time. Similarly, it alone was the subject of the retainer.

 

In the above circumstances, in my judgment the correct construction of CPR 48.2 is that the relevant "matter" in the present case was the claim for damages for personal injury against the Respondent. In terms of CPR 48.2(1)(a)(i), that was the "matter" which was the "subject of the proceedings" and in relation to which "advocacy or litigation services were to be provided". It was "specifically" for the "purposes of the provision" of such services that the PCFA was entered into. In terms of CPR 48.2(2)(a)(ii) it was "proceedings" in relation to that claim that the ATE policy was taken out and which are the sole subject-matter of that policy.

 

It follows that in my judgment the judge should have concluded that the QOCS regime applied to the claims made against the Second and Third Defendants…”

 

and further, in respect of the second ground

 

“The consequence of concluding that the QOCS regime applies to the claims against the Second and Third Defendants is that the Appellant is entitled to QOCS protection in respect of adverse costs orders in respect of those claims. The effect of the judge's order is effectively to deprive them of that protection. By ordering the Appellant to pay to the Respondent the costs of the Second and Third Defendants for which it is liable, the Appellant is made liable for virtually all those costs. In essence, it makes the Appellant indirectly liable for costs which could not be enforced against him directly.

 

Further, there is Court of Appeal authority that draws a clear distinction with regard to the QOCS regime between costs relating to the claimant's claim and those relating to third party proceedings. In Wagenaar v Weekend Travel Ltd [2015] 1 WLR 1968 it was held that the QOCS regime does not apply to third party proceedings in relation to a claim for damages for personal injury and that the normal costs rules apply. As Vos LJ observed at [36], there is no good reason to suppose that the QOCS regime was meant to apply "to the costs of disputes between those liable to the injured parties as to how those personal injury damages should be funded amongst themselves".

 

In a case in which the QOCS regime applied to the main claim but not to the third party proceedings, a successful defendant would not be able to enforce its costs order against the claimant and so the costs of the third party proceedings would lie where they fell. It would be surprising if a different result was to follow in a case such as the present where, although the QOCS regime does not apply to the claim against the defendant, it does apply to the claim against the additional parties.”

 

Consequently, Hamlen LJ set aside the decision of Mr Recorder Edge, and varied the order made in favour of the defendant to exclude any liability to the 2nd & 3rd defendants. In varying the costs order, the Court of Appeal exercised its discretion to allow the operation of QOCS in circumstances where defendants are added after 1 April 2013.

 

We regularly advise on QOCS matters.  Please contact us should you require assistance.

Tags:

Share on Facebook
Share on Twitter
Please reload

Featured Posts

Mandatory Electronic Filing for Court of Protection Bills of Costs

November 11, 2019

1/1
Please reload

Recent Posts
Please reload

Archive