The provisions on Qualified One- Way Costs Shifting (QOCS) were introduced in 2013 and the concept of this regime is to protect unsuccessful claimants from paying costs incurred by successful defendants without the need to take out expensive ATE insurance policies (which usually end up being paid by the defendants when the claimant is successful!). There are of course some circumstances in which QOCS may be disapplied and therefore, despite it being 5 years since the introduction of these provisions, the Courts continue to be asked to make decisions on the issue of "proper" application in practice.
In a very recent case of Corstorphine (An Infant) v Liverpool City Council  EWCA Civ 270 the Court of Appeal was requested to make a determination on the issue of applicability of QOCS in relation to costs incurred by additional parties joined after the 1 April 2013.
A claim for damages arising from personal injury that occurred in August 2010 was issued against the first defendant on 18 November 2012.
The claim was funded by way of a PCFA (pre-commencement CFA) that was entered into on behalf of the claimant by his Litigation Friend on 23 August 2012; the PCFA was backed by an ATE insurance policy. The first defendant was notified about the funding arrangement by way of service of the Notice of Funding on 28 August 2012.
On 21 October 2013 the first defendant issued a Part 20 claim against the second and third defendants. The additional defendants, by Court order, were joined to the primary claim and were ordered to be tried together.
The matter proceeded to the Trial in July 2015 when the claimant was found to be unsuccessful on the issue of liability within the primary claim. In the circumstances the Court determined that QOCS did not apply made a costs order by which:
- The claimant was ordered to pay costs incurred by all the defendants in relation to the primary claim;
- The first defendant could recover from the claimant, the costs it was ordered to pay to the second and third defendants;
The claimant appealed the costs order; the appeal was based on two grounds:
(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).
The main issue arising from Ground 1 related to the meaning of “the matter that is the subject of the proceedings in which the costs order is to be made”. The claimant contended that in this case the relevant “matter” was the claim for damages for personal injury made against the first defendant. The claimant went on to suggest that the CFA and the ATE only covered the claim against the first defendant; that only the success fee or ATE premium could have been claimed for costs incurred in pursuing the personal injury claim against the first defendant had the claimant been successful; and that indemnity for costs was only provided for the personal injury claim against the first defendant.
The first defendant on the other hand contended that the “matter” meant the “underlying dispute” which was the claim for damages for personal injury and included both the primary and the additional claims. The claimant’s PCFA was entered into in relation to that “matter” and therefore the QOCS was not applicable and the claimant did not have the benefit of this regime in relation to the additional claims.
Lord Justice Hamblen ruled that in this case the QOCS regime was applicable in relation to costs incurred by the second and third defendants. In justifying his decision Hamblen LJ said:
“… 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.”
Accordingly, it follows that the order that the first defendant was entitled to recover costs as part of its own claim for costs incurred by the second and third defendants from the claimant was set aside. To support this decision Hamblen LJ stated that:
“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.”
In my opinion this is a good and well rounded decision which should provide more certainty on application of QOCS in cases where there are third parties. It may also be useful to consider the Judgment in Wagenaar v Weekend Travel Ltd  1 WLR 1968 which deal with the applicability of the QOCS regime to third parties.