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Qualified One Way Costs Shifting - Friend or Foe?

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In a statement yesterday, the Minister for Justice - Mr Jonathan Djanogly - has further clarified the operation of Qualified One Way Costs Shifting (QOCS). This will be introduced into main stream practice through the medium of the Legal Aid, Sentencing and Punishment of Offenders Act, which will come into force in April 2013.

QOCS is a means to apportion costs risks among parties in personal injury claims, and will apply to all Claimants bringing an action as a result of a personal injury. At first glance, it means costs risks are only present for the Defendant, hence the term One Way. The qualification of this regime is the Court’s discretion to determine whether, in exceptional circumstances, the Claimant should be liable for any of the Defendant’s costs.

The aim of QOCS was to reduce or eradicate the need for ATE insurance by protecting the Claimant from paying the Defendant’s costs should they lose. Claimants who conduct their claim in a proper fashion will not be liable to pay the Defendant’s costs should their claim not be successful. On the other hand, if the Claimant acts in a way which is improper or fraudulent or the Court finds that the claim is an abuse of process, the Claimant may be liable to pay all or part of the Defendant’s costs.

The limited protection afforded to the Claimant will also be lost should the Claimant fail to beat a Part 36 Offer to settle made by the Defendant.This, in itself, creates uncertainty as to costs and creates a need to take out ATE insurance anyway, effectively undermining one of the key principles of the QOCS reforms.

On one hand, there is an onus on the Claimant to consider whether they want to bring a claim, and if they do, to ensure they conduct it in an appropriate manner. On the other hand, Defendants will need to carefully consider the commercial merits of defending a claim and may even consider making early offers which are over the odds, in an effort to provide them with some costs protection.

Mr Djanogly has stated that QOCS will apply to all Claimants; there will be no means testing, therefore a Claimant’s financial means will have no impact on the effect of QOCS. Many may argue that this is fair “access to justice”; however a Defendant successful in his defence and yet unable to recover costs, would probably disagree.

This could dramatically increase the number of litigants in person, both as Claimant and Defendant. In the absence of any prospect of recovering their costs, Defendants may have a go at representing themselves. This creates the potential for an uneven footing where a claim is brought by a Claimant who has substantial and expensive legal representation against a Defendant who is a litigant in person. This situation clearly compromises access to justice and reignites the age-old argument that justice is the preserve of the rich.

The number of claims may decrease as a result of Claimants only bringing a claim which has a high chance of success due to the uninsured risk of having to pay the Defendant’s costs. It may also lead to Claimants accepting lower settlements on their claims to avoid the Part 36 risks which are not protected by the QOCS regime.

Hopefully, considering the onus is upon the Claimant to act “properly”, the vague distinction line between “proper” and “improper” management of a claim will
eventually be clearly defined. In the meantime, the utilisation of the word ‘Qualified’ should alleviate the impact of any obvious unfairness placed upon the Defendant.

For advice or more information, contact Elizabeth Elliott.