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Qualified One way Costs Shifting (QOCS) - The first 30 months

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One of the Jackson reforms of most interest to Defendants and their insurers is the area of QOCS.   It was intended to be lawyer proof and to act as a balance to the loss of success fees and insurance premiums suffered by Claimants.  Can QOCS make Defendants a hostage to fortune and force them to settle weak claims on economic grounds while the Claimant was at no risk?

The rule, put simply, is that no costs order against a losing Claimant in a personal injuries (PI) case (including a fatal accident or dependency claims) may be enforced:

  • Over and above the level of any damages recovered (eg under Part 36) or

  • CPR 44.15 – Where the claimant had no reasonable grounds to bring the claim, or it was an abuse of process or the Claimant’s conduct obstructs just disposal of the claim (no court permission required) or

  • CPR 44.16 – where the claim is “fundamentally dishonest” (court permission required)

Attempt to defeat QOCS – take 1

There was one important early CA case, reported just over a year old now called Wagenaar v Weekend Travel Ltd & Serradj [2014] EWCA Civ 1105.

The question arose about whether QOCS applied to Part 20 proceedings (for an indemnity) against a Third party or Co Defendant.  The case was also the unlikely setting for an attempt for the QOCS regulations to be ruled ultra vires.

The Claimant brought proceedings in contract for the negligent action of a third party (the skiing instructor) after her holiday.  At trial, the claim was dismissed.  The trial judge ordered the Claimant to pay the Defendant’s costs of the action not to be enforced under CPR44.13 (QOCS protected) and the Defendant to pay the Third Party’s costs on similar terms.  The Third Party appealed saying QOCS did not apply to Third Party proceedings.  The Defendant contended:

  1. The QOCS rules were ultra vires.S.51(3) of the Senior Courts Act 1981 (providing that “the court shall have full power to determine by whom and to what extent costs are to be paid”) could only be displaced by primary legislation.

  2. The rules should not have retrospective effect since most of the costs had already been incurred by the time the rule came into effect.The result was unfair.

  3. Defendant’s Counsel had a pre commencement CFA against which QOCS could have no effect (see CPR 48.1)

The court was having none of this.

The S51 was about jurisdiction and the identity of those against whom a costs order could be made.  If D was right, all the Jackson reforms plus the long standing small claims track would collapse.  When S51 was enacted, there were already rules curbing the court’s power to award costs and it was not intended that this section displaced them.

For argument #2, the court said “hard luck”.  Had the trial been 2 months earlier, the result would have been different.  The transitional provisions only applied where the Claimant had entered a pre commencement funding agreement.  This was a BTE (DAS) case (interestingly, the court did not consider what date the funding agreement was entered.  Without one, there is a retainer with no obligation to pay for the services provided).  Argument #3 was dispatched in the same manner.

The CA found that QOCS did not affect every litigant and sought to apply the principles of the Jackson report (as opposed to the rules actually enacted).  It interpreted the term “proceedings” as those brought by a Claimant – no one else.  QOCS did not cover anything else within the litigation.  The (innocent) Defendant had to pay the (innocent) Third Party’s costs. 

At this point, here is a question.

Suppose there is an RTA where liability is split – say 50/50.  Both parties (A and B) were injured as a result (in part) of the other’s negligence.  A brings proceedings and B counterclaims.  What is the costs order:

  1. Where B wins?

  2. Where A wins?

  3. Where both win in some part?

  4. Where neither win?

Alternatively, what about where liability is 5/95 in favour of B.  Is it First come, first served?

Attempt to defeat QOCS – take 2

The wheeze of signing a second funding agreement for the appeal when you lost at trial under an old (pre 01/04/13) to get QOCS protection is not a good one.  In Landau v The Big Bus Company (31/10/14), Master Howarth found that QOCS protection will not apply if you lose the appeal as this is essentially the same set of proceedings.

But if you change funding agreement before issuing proceedings (both after 01/04/13), you will be fine and QOCS protection applies, even when the first CFA pre dated 01/04/13 – Casseldine v Diocese of Landaff Board of Social Responsibility.

Attempt to defeat QOCS – take 3

Why not just discontinue a weak claim late on?  Kite v Phoenix Pub Group.  The Claimant served process at pub where the accident occurred.  A default judgment was obtained.  The Defendant at the time of the accident had no legal responsibility for that pub and applied to strike out the claim.  This seemed a good Defence and the Claimant sought an adjournment of the application and discontinued 2 days before the new hearing date.  The judge set aside the notice of discontinuance and invoked the “fairness” component of the overriding objective.  Resistance to the strike out application dissolved and a costs order was made against the Claimant.

The Exceptions to “OCS” - Dishonesty

There are some lower court cases including Gosling v Screwfix which is a case on exaggeration but may be “judge sensitive”.  He was prepared to making a finding of Fundamental Dishonesty which pierced the QOCS shield.  The second case (Vowles v Morgan) is less significant and involved an RTA where the Claimant fled the scene!  Not a good basis for the credibility of any claim!

There was no need to prove fraud and both cases it was sufficient to show that part of the claim was dishonest – no one denied that the accident happened.

AXA also report having recently defeated dishonest claims and obtained enforceable costs orders (Kamal & Keenan).

The Exceptions to “OCS” – No reasonable prospects

In a genuinely unhappy case (Wall v British Canoe Union – 30/07/15), the widow of a canoeist sued the publishers of a waterways guide which she said failed to warn the deceased about a weir (as it had done in previous editions).  The court found that no duty of care was owed to readers of the guide.   Having struck out the claim, a costs order followed under CPR 44.15.  It is unclear whether the Defendant’s insurer would seek to enforce their order against the widow unless it was backed by LEI.  There was no fraud.