QOCS – what you need to know!

John Appleyard, Browne Jacobson

Historically costs were never recoverable between the parties. In fact, it was not until the 16th century that any form of costs shifting was introduced with the claimant being able to recover costs from the defendant. This was followed shortly after by two-way costs shifting, with costs being able to be recovered by both the claimant and the defendant and this has remained in various forms ever since.

For all the good the 2013 Jackson Reforms purport to achieve, one cannot help but think we have gone backwards rather than forwards.

What is qualified one way costs shifting?

In a personal injury claim, a successful defendant cannot recover their costs from the losing claimant – expect in five very precise circumstances.

Really?

On the face of it, this seems extremely unfair. However, it was not all bad news for the organisation facing a claim. Lord Justice Jackson discovered, during the composition of his report (2008–2013), that defendants very rarely recovered costs when they were successful and, when they did, these were only a fraction of what they had to pay to successful claimants.

The principle of QOCS therefore allowed Jackson to abolish the recoverability of additional liabilities, success fees and after the event (ATE) premiums, by eliminating the risk of adverse costs orders against them.

In other words, if the claimant will not have to pay the defendant anything in costs if they lose, what is there left to insure?

Revolutionary?

While this is a new concept in the 21st century, the position is now back on a par with the way litigation was run in the 16th century when the same principles applied.

However, it has to be hoped that in the 16th century the rule was phrased better than it is now.

The rule

CPR 44.14 (1) states:

“… orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.”

It therefore follows that if the claimant recovers £0.00, the maximum the defendant can recover from them at the end of the case is £0.00.

Strangely, it does not prevent the defendant from proceeding to detailed assessment and having the court assess the costs – it simply prevents the defendant from recovering anything above the damages amount, therefore £0.00.

When and how does it apply?

QOCS applies to all personal injury claims from 1 April 2013 and is governed by s44.13 to 44.17 of the Civil Procedure Rules 1998.

It does not apply to cases that have or had a pre-April 2013 conditional fee agreement (CFA) or after the event (ATE) premium in place but, disappointingly, there is no other transitional provision.

Therefore, if a case has been running since prior to April 2013 without a CFA or ATE premium, then the defendant is stuck with QOCS.

Unfair?

Yes, extremely.

The case of Arabella Wagenar v Weekend Travel Limited & Anor [2014] WLR(D) 389 provided clarification on this issue and stated that, aside from the transitional provisions set out in Civil Procedure Rules 1998 44.17, QOCS applied retrospectively.

Therefore if a personal injury claim has been pursued from before April 2013 without a CFA or ATE premium – such as one funded by a party’s household or car insurance policy – then qualified QOCS will apply regardless of the issues or for how long the case has been active.

Wagenar continued…

The Wagenar case also provided clarification as to the type of proceedings QOCS applied to. The meaning of proceedings under Civil Procedure Rules 1998 was a single claim against a defendant or defendants that included a claim for damages for personal injuries, or other claim specified in Civil Procedure Rules 1998 Rule 44.13(1)(b) that included a claim for personal injury.

It did not apply to Part 20 claims, nor did it apply to claims in which no element of personal injury attached, for example credit hire or damage to property.

Exceptions to the rule

There are three exceptions to the rule, where:

  • the case can be struck out on the grounds that:
    • there was no good reason to bring it;
    • it is an abuse of process; or
    • the conduct of the claimant, or their legal representatives, is likely to obstruct the just disposal of the proceedings;
  • the case was fundamentally dishonest; or
  • the claimant fails to beat a defendants Part 36 offer.

Struck out

The first two points are relatively straightforward and, with the right submissions, the court should not have difficulty in making the right order. However, to date there is no case law or guidance on what is meant by ‘conduct’.

Does conduct relate the claimant’s conduct during the life of the case or does it simply relate to one specific conduct point? Would it cover the claimant’s conduct in failing to comply with a court direction or order? Or, could this be something as potentially trivial as failing to pay the allocation costs with the directions questionnaire?

All these points are open to argument in our view and should be pursued accordingly.

Fundamentally dishonest

The Civil Procedure Rules 1998 is yet to provide a definition of ‘fundamentally dishonest’ but it is generally considered to be fraud. 12.4(b) of the Costs Practice Direction on Costs suggests that before any finding of fundamental dishonesty the court would usually require there to be a trial on the issue.

The point was tested in the case of Michael Gosling v (1) Hallo (2) Screwfix Direct 29 March 2014 (Cambridge County Court). The claim was for personal injury and loss as a result of an accident where the claimant had allegedly fallen from a ladder of deficient construction, resulting in injury to his knee.

Surveillance evidence showed the claimant shopping without a crutch, yet he had attended the pre-arranged medical appointment using a crutch and confirmed to the expert that he still had knee pain that affected his ability to walk distances.

The matter settled a few weeks later with the first defendant, with the claimant discontinuing against the second defendant. The second defendant applied under Civil Procedure Rules 1998 44.16 to permit enforcement of the costs order. The court found that the claimant had advanced a claim that was ‘fundamentally dishonest’ and therefore the order for costs could be enforced to its full extent.

Further guidance can also be taken from the newly introduced s57 of the Criminal Justice Act 2015 that came into force on 13 April 2015. This section provides that where the court concludes that there is a valid claim but the claimant has been fundamentally dishonest, the court must dismiss the claim regardless of whether damages would be awarded for the ‘non dishonest’ elements, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.

Catch

However, there is a catch. The court’s order dismissing the claim must record the amount of damages that the court would have awarded to the claimant but for the dismissal of the claim and then, when assessing costs, must deduct this from the amount awarded in costs. In a modest claim therefore, this could wipe out the defendant’s costs in their entirety.

The case of Creech v Severn Valley Railway (unreported, 25 March 2015) is a rare decision on the issue of fundamental dishonesty. The judge ultimately concluded that the accident simply could not have happened as alleged, or at all, and ordered the claimant to pay costs to the defendant to the tune of £11,000.

Part 36

Part 36 trumps QOCS. This means that a claimant who refuses a defendant’s Part 36 offer but fails to do better than this at trial, is at risk at paying the defendant’s costs from 21 days after the offer is made – capped at the level of damages the claimant recovers.

This highlights the need for a well placed part 36 offer being made by the defendant at an early stage in the proceedings.

Final thoughts

The initial conclusion that all was lost, in relation to recoverable costs from the claimant under QOCS, has turned out not to be so clear cut.

The qualified one way costs provision should encourage sensible litigation on the part of the claimant but provides appropriate sanctions for the foolhardy claimant in the form of ordered payment of at least some, if not all, of the defendant’s qualified one way costs.

Our advice is:

  • if a case is struck out for being an abuse of process or has no good reason for being brought, make sure that counsel is briefed to insist that this is recorded in the court order;
  • if a case is struck out due to a failure of the claimant to comply with either the rules or a court order, there is an argument to run that QOCS does not apply;
  • do not be afraid to take a ‘fundamental dishonesty’ point – not all of the claim has to be dishonest for this to be dismissed or QOCS defeated;
  • if it is a case to settle, make a good part 36 offer as early as possible to get the benefit of the costs protection; and
  • remember that QOCS will apply to the pre-April 2013 cases where there is no CFA or ATE premium.

There are clearly still points to be taken and costs to be recovered. Do not be afraid to take them.

John Appleyard
Costs lawyer
0115 976 6028
john.appleyard@brownejacobson.com