Paul Edwards of Hill Dickinson and Jamie Clarke, barrister at Hardwicke (at Crown Office Chambers from 26th August), comment on a ruling that gives useful guidance on QOCS. Original news Wagenaar v Weekend Travel Ltd trading as Ski Weekend  EWCA Civ 1105,  All ER (D) 24 (Aug)
by Jamie Clarke
With my thanks to LexisNexis for permitting use of this article on my blog
This article was first published on Lexis®PSL Dispute Resolution on 13 August 2014.
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What are the benefits of qualified one-way costs shifting? 13/08/2014
Dispute Resolution analysis: How do the courts view the provisions for qualified one-way costs shifting (QOCS)? Paul Edwards of Hill Dickinson and Jamie Clarke, barrister at Hardwicke (at Crown Office Chambers from 26th August), comment on a ruling that gives useful guidance on QOCS. Original news Wagenaar v Weekend Travel Ltd trading as Ski Weekend  EWCA Civ 1105,  All ER (D) 24 (Aug)
Following proceedings for personal injury, in which the defendant had joined a third party pursuant to Civil Procedure Rules 1998, SI 1998/3132, Pt 20 (CPR), judgment on costs was given by reference to CPR 44.13-44.17, which had introduced the QOCS regime. The Court of Appeal, Civil Division, held that the regime was not ultra vires, it did have retrospective effect and the regime did not apply to funding arrangements such as conditional fee agreements. Further, the QOCS regime had not applied to the proceedings between the defendant and third party as it did not apply to the entire action in a claim for damages.
What issues did this case raise?
Paul Edwards (PE): The claimant was injured in a skiing accident while on a package holiday arranged by the defendant. She brought a claim under the Package Travel, Package Holidays and Package Tour Regulations 1992, SI 1992/3288.
The defendant issued a CPR 20 claim for indemnity and contribution against the claimant’s ski instructor as a third party. The defendant alleged that if negligence was proven, it was the third party’s negligence that had caused the claimants injury.
Both CPR 7 and 20 claims were dismissed. The judge ordered the claimant to pay the defendant’s costs. The defendant was ordered to pay the third party costs. However, the judge also applied the provisions of QOCS under CPR 44.13 rendering these costs orders unenforceable.
The defendant and third party appealed.
Appeal issues were:
-whether the QOCS provisions are ultra vires in limiting the courts powers under the Senior Courts Act 1981, s 51 (SCA 1981)
-whether QOCS should apply retrospectively to costs incurred prior to 1 April 2013
-whether a defendant’s pre-commencement funding arrangement should be exempt from QOCS
-whether QOCS should extend to CPR 20 claims
What is the significance of this case?
PE: This is the first reported case to deal with QOCS in the context of CPR 20 claims for indemnity and contribution, and sets out the limits of its application.
Jamie Clarke (JC): It is the first opportunity the Court of Appeal has had to consider QOCS in a straightforward, CPR 7 personal injury claim. The successful defendant, unable to enforce its order for costs against the unsuccessful claimant, advanced a number of ingenious arguments to persuade the Court of Appeal to disapply QOCS and permit enforcement of its order for costs. Vos LJ’s judgment dismissed these attempts carefully but firmly. As might have been expected, he was influenced by the place QOCS holds within the Jackson reforms.
On this he was explicit: ‘[T]he QOCS regime is part of a wholesale reform of the funding of personal injury litigation. It is just one of a raft of interconnected changes. If QOCS were to be struck down, there would need to be a complete rethink of the entire Jackson reform programme as it affects personal injury litigation.’
This overarching consideration cannot be underestimated. QOCS was, in effect, the quid pro quo given to accident victims for losing the right to recover after the event (ATE) premiums in successful claims, and the price the insurers paid for being relieved of that liability (although this commentator never understood how the privately-funded defendant was supposed to benefit). In effect, QOCS was intended to wipe out the ATE market in personal injury claims. Were the Court of Appeal to strike down QOCS or limit its scope, Jackson would be in tatters.
The Court of Appeal dismissed the challenge that QOCS is ultra vires by looking to the development of SCA 1981, s 51, which gives the court power to determine by whom and to what extent costs are to be paid. This power was clearly intended to apply subject to any other Act or rule of court.
The court pointed out that it is well established that the presumption against retrospection does not apply to legislation concerned with matters of procedure so that QOCS should apply to costs incurred before 1 April 2013. The CPR 44.17 exemption for pre-commencement funding arrangements applies only when the claimant has entered into such an arrangement and so did not apply here despite an ingenious argument based on CPR 48.1, where the defendant’s junior counsel had a pre-1 April 2013 conditional fee agreement.
The Court of Appeal overruled the trial judge on whether CPR 20 claim should be excluded from the QOCS provisions. References in the Jackson report make it clear that the intention was to protect people who had suffered injuries from the risk of facing adverse costs orders–it was not intended to extend to those simply arguing about who was liable to an injured party. The QOCS provisions do not include the entire umbrella of the litigation beyond the part of the proceedings that contained personal injury.
This judgment is one of many to come in the various foothills of the Jackson regime. The outcome is not surprising. It demonstrates the anticipated robustness of highest judicial support for the QOCS regime.
What are the implications for lawyers?
PE: Lawyers will have to be aware of the costs implications of pursuing an indemnity and contribution claim against a third party. Where previously it might have been prudent to include such a claim within ongoing proceedings, doing so now could open a client up to a hefty costs order. The defendant in this case ended up paying their own costs of the CPR 7 claim, their own costs of the CPR 20 claim and the third party’s costs of the CPR 20 claim. They would have been better off if the claimant had succeeded against them.
In an ideal world, the claimant in these situations should bring the third party into the CPR 7 claim as a second defendant. So long as they have reasonable grounds to do this, they will be protected by QOCS. Alternatively, a defendant could wait until they get a liability decision and then pursue separate proceedings against the third party if they have grounds to do so.
JC: Some commentators have already tried to unpick the potential anomalies that may arise in CPR 20 proceedings following Wagenaar. For instance, what if a claimant (benefitting from the protection of QOCS) discontinues against a defendant who has initiated CPR 20 proceedings? The trap in such analyses is that they overlook Vos LJ’s pronouncement that, by its public policy objectives, QOCS is not unjust. Moreover, CPR 20 claims in personal injury have always come with a kind of ‘buyer beware’ sign hanging from them and QOCS does not change that. CPR 20 claims brought, or at least expensively pursued before the outcome of a main CPR 7 personal injury claim, are always perilous in terms of costs.
Is the decision in line with recent developments in this area?
PE: This is the first reported case to deal with QOCS in CPR 20 claims for indemnity and contribution so it is difficult to say. Certainly, it is in line with the government’s efforts to protect genuine claimants and streamline the litigation process by ensuring defendants properly assess their own liability before issuing a CPR 20 claim. As to whether it impedes access to justice for a defendant, we’ll have to wait for the outcome in Coventry v Lawrence before we consider that argument.
JC: QOCS is a cornerstone of the Jackson reforms and I think judges like it. There will be anomalies, but I don’t foresee many inroads being made to dilute or eliminate the effects of QOCS. Any gaps in the rules will be plugged by the Court of Appeal and or the rules committee. This decision correctly applies Jackson’s proposals on QOCS.
Interviewed by Nicola Laver.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
I set out below some additional comments on the CA decision that could not be included in the published interview because of limitations of space:
- Of interest on retrospective application, Vos LJ remarked that had the trial of this claim been 2 months earlier the costs consequences would have been different. This overlooks the interesting way in which QOCS is framed, that is to say, it does not prevent a costs order being made against an unsuccessful Claimant, it prevents it being enforced. This means that costs orders made before 1st April 2013 in favour of Defendants following personal injury trials, are captured by QOCS if the receiving party waits until after 1st April 2013 to enforce!
- QOCS has been a windfall for BTE insurers (perhaps even more than they may have expected), but as Vos LJ put it in a slightly different context, but of no less relevance: … this unfortunately is an inevitable consequence of procedural reform. There has to be a cut off point and someone will always be on the cusp of it. To that might be added “and there will be winner and losers”.
- What this decision makes clear is that the court that is generally the final arbiter of procedural disputes recognises this, and by this judgment makes it clear that it is just tough luck on the disappointed party: there is a bigger picture, and whilst there will be perceived injustices, they are no more than perceived because of the wider benefits to compensators (i.e. insurers), and that whilst there will be cases with irksome outcomes on costs, that must simply land where it falls. To quote Vos LJ later in his judgment: The public policy that led to QOCS regime cannot be regarded as creating injustice in any sense … The point is that the Court of Appeal is going to treat the QOCS regime as cardinal. Insurers will have to price that into their premium. Those who advise insurers will have to get to grips with the new landscape and make the necessary adjustments to their advice on tactics.
- It is worthwhile noting an obiter remark by Vos LJ that the use of the “… word “proceedings” in CPR 44.13 was used because the QOCS regime is intended to catch claim for damages for personal injuries where other claims are made in addition by the same claimant. There may for example in the ordinary road traffic claim be claims for damaged property in addition to the claim for personal injury damages, and the draftsman would plainly not have wished to allow such additional matters to take the claim outside the QOCS regime”. Whilst it is plain that it was never intended a property damage element to a claim should not mean QOCS cannot apply, as the Defendant’s arguments before the Court of Appeal demonstrate (if nothing else), the drafting of the QOCS regime in the CPR may not be entirely robust. This obiter remark cuts-off one potential line of argument, but it may not be sufficient: this commentator can perceive of an argument, albeit weak, that costs in relation to recovery for damage to Claimant’s property could be hived out (NB CPR 44.16(2)(a) allows for costs recovery as is “just” for, say, a subrogated claim, such as a hire claim).
- Interestingly, Vos LJ left for future consideration whether QOCS would extend to a part 20 claim between multiple Defendants. That is to say, by analogy, how this case would have been decided had the Third Party already been made a party to the proceedings by the Claimant as an additional Defendant. Or, to put it another way, where 2 or more Defendants bring part 20 proceedings amongst themselves, do they get QOCS protection? This commentator’s suspicion is that the Defendants would not get QOCS protections between themselves, whilst the unsuccessful Claimant would be protected from the additional costs incurred by the Defendants’ part 20 claims, although established costs case law tends to limit such costs, so it may not be very likely we will see a dispute of this nature coming to the CA.
- If anything, the Defendant’s arguments expose weaknesses in the drafting of CPR 44.13-17 implementing QOCS. Given QOCS is a new concept it is probably not a surprise that the drafting is wanting, and (as we have seen down the years with other important, stand-alone rules in the CPR, such as part 36) it would not surprise were the rules committee to undertake some adjustments to clarify the rule. In the meantime, practitioners can anticipate purposive interpretation of QOCS to ensure its operation and application for the benefit of personal injury Claimants in line with Jackson LJ’s vision.
- We can take this judgment as authority that the acronym is not “QOWCS” or even “QWOCS”, as favoured by some commentators, but “QOCS”!
- [Some commentators have already tried to unpick the potential anomalies that following Wagenaar may arise in part 20 proceedings. For instance, what if a Claimant, benefitting from the protection of QOCS, discontinues against a Defendant who has initiated part 20 proceedings? The trap in such analyses is that they overlook Vos LJ’s pronouncement that, by its public policy objectives, QOCS is not unjust. Moreover, part 20 claims in personal injury have always come with a kind of “buyer beware” sign hanging from them and QOCS does not change that. Part 20 claims brought, or at least expensively pursued, before the outcome of a main part 7 PI claim are always perilous in terms of costs.] Taking the example of the claim discontinued, if the main claim was so weak that the Claimant has to walk away from it, then the Defendant burdened with substantial irrecoverable costs has to ask itself how it came to be embarking on secondary litigation rather than focusing on defeating the main claim. Even if that view is unduly harsh, surely the incidence of weak claims generating part 20 claims is going to be rare, or at least insufficient in volume to justify a dilution of the QOCS regime and its public policy objectives. Again any injustice will be treated as merely perceived, and the consequences must land where they fall.