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FREE BOOK CHAPTER: Qualified One-Way Costs Shifting (QOCS) (from 'A Practical Guide to QOCS and Fundamental Dishonesty' by James Bentley)

13/10/17. Before exploring the qualifications to one-way costs shifting, it will be useful to first look at when the QOCS regime does and does not apply.

The substantive scope of the QOCS provisions

CPR 44.13 reads as follows:

(1) This Section applies to proceedings which include a claim for damages—

(a) For personal injuries;

(b) Under the Fatal Accidents Act 1976; or

(c) Which arises out of death or personal injury and survives for the benefit of an estate by virtue of section 1(1) of the Law Reform (Miscellaneous Provisions) Act 1934,

But does not apply to applications pursuant to Section 33 of the Senior Courts Act 1981 or section 52 of the County Courts Act 1984 (applications for pre-action disclosure), or where rule 44.17 applies.

(2) In this Section, “claimant” means a person bringing a claim to which this Section applies or an estate on behalf of which such a claim is brought, and includes a person making a counterclaim or an additional claim.

Claim for ‘damages for personal injuries’

Wagenaar v Weekend Travel Limited t/s Ski Weekend [2014] EWCA Civ 1105, was one of the first and indeed, one of the few times the Court of Appeal have had the opportunity to review the qualified one way costs shifting provisions.

The claimant had booked a package holiday to go skiing in Chamonix. Unfortunately, whilst on holiday, she was involved in an accident, and suffered injuries as a result. As such, she pursued the first defendant for compensation under the Package Travel Regulations. The first defendant in turn pursued the ski instructor by way of a Part 20 claim for an indemnity/contribution, alleging that if the accident was caused by anybody’s negligence, it was hers (i.e. the instructor’s).

The claim against the first defendant was dismissed, as was the first defendant’s Part 20 claim against the instructor. When it came to costs the trial Judge (HHJ Hughes QC) made the following order:

  1. The claimant should pay the defendant’s costs, but that such an order was not to be enforced against the claimant pursuant to the provisions of CPR 44.13 and CPR 44.14; and

  2. The defendant should pay the third party’s costs, but that such an order was not to be enforced against the claimant pursuant to the provisions of CPR 44.13 and CPR 44.14

The instructor appealed, submitting that the Judge had erred in finding that QOCS applied to the Part 20 proceedings.

The key wording to focus on was ‘a claim for damages for personal injuries .’ A Part 20 claim was a claim not for personal injuries, but for a contribution or indemnity. That conclusion not only made sense as a matter of construction, but also in so far as it would be illogical if Part 20 claimants and defendants could recover their costs. As Lord Justice Vos pointed out, that was not the purpose of the QOCS regime:

Suffice it to say that the rationale for QOCS that Sir Rupert Jackson expressed in those sections came through loud and clear. It was that QOCS was a way of protecting those who had suffered injuries from the risk of facing adverse costs orders obtained by insured or self-insured parties or well-funded defendants. It was, Sir Rupert thought, far preferable to the previous regime of recoverable success fees under CFAs and recoverable ATE premiums. There is nothing in the Jackson Report that supports the idea that QOCS might apply to the costs of disputes between those liable to the injured parties as to how those personal injury damages should be funded amongst themselves.”1

The court was fortified in that view by looking at some practical examples. In medical negligence cases for example:

...a claimant may sue a doctor, a health authority and the manufacturer of some piece of medical equipment. It would be strange if there could be no costs orders enforced between the defendants at the end of a long battle in the cross-contribution claims between them where it was ultimately proved that the doctor and the health authority were blameless but the injury was caused by a defective piece of medical equipment. In such a case, the claimant’s damages might be agreed, and the argument might be almost wholly between the defendants – or possibly third parties, if any of them were not originally sued.

In road traffic cases, the typical situation is equally revealing. Injured passengers in a car may sue the driver of the car in which they are injured. That driver may seek to pass on the blame in CPR Part 20 proceedings to any number of other insured parties, such as another driver involved in the collision, or a local authority responsible for maintenance of the road. Again, there might be little argument as to the claimant’s entitlement for damages, but significant dispute between the insured parties as to who was to blame. It would be surprising if there could be no effective costs orders made between defendants in their contribution claims (if there was ultimately more than one) and between defendants and the third parties in the additional claims made.”2

The message from the Court of Appeal was therefore clear – the QOCS regime will apply to claims for personal injury only, and not to claims for a contribution or indemnity.

Other statutory claims

A separate question from the one posed in Wagenaar was whether or not QOCS could apply to statutory claims such as, for example, claims against the MIB.

The question of whether QOCS applied to MIB claims was specifically addressed in Howe v Motor Insurers’ Bureau [2017] EWCA Civ 932 , where the facts were as follows.

Mr. Howe was severely injured as a result of an accident whilst driving in France. A wheel had come off from a lorry and had collided with his lorry. However, it was impossible to identify the lorry from which the wheel came, or its driver, or its insurer. His claim was therefore pursued under Regulation 13 of the Motor Vehicles (Compulsory Insurance) (Information Centre and compensation Board) Regulations 2003.

Unfortunately for Mr. Howe, the claim was dismissed on the grounds of limitation. The defendant pursued their costs, averring that the claimant could not avail himself of the protection provided by the qualified one-way costs shifting provisions in CPR 44.13. The claim, it was submitted, was based upon the Regulations and was not therefore a claim for ‘damages for personal injuries’.

At first instance, the Judge (Mr. Justice Stewart) held that:

The rationale for QOCS can be said to extend to a claimant in Mr. Howe’s position. He comes fairly and squarely within the citations which I have set out above in paragraph 11, subject to whether, in relation to the Jackson report citation this is ‘personal injuries litigation’. He is a person who has suffered personal injuries and, absent QOCS, he faces enforcement of the adverse costs order obtained by the MIB, which is a well-funded defendant. If his claim does not have QOCS protection, then injured persons in situations similar to his may be deterred from bringing claims for compensation.”3

However, and despite that acknowledgment, the Judge continued:

The substance of the claim is based on the MIB’s liability to compensate the claimant under Regulation 13 of the 2003 Regulations. As I found, on the way the case was argued before me and pleaded, this is a claim under statute (judgment paragraph 82)...”4

I was not addressed in any detail about the meaning of damages, nor was I taken to any authority on something which has caused problems in previous cases. I have however reminded myself of certain passages in McGregor on Damages 19th Edition which makes it clear that damages are simply an award in money for a civil wrong and that, to retain the requirement of a wrong is entirely necessary, this being the essential feature of damages; actions claiming money under statute, where the claim is made independently of a wrong, are not actions for damages. (Paragraphs 1-001, 1-004, 1-007).

There being no breach of duty alleged against the MIB or any other wrong alleged against them, it seems to me difficult to conclude that a claim based on regulation 13 is a claim within the meaning of Rule 44.13.” 5

The claimant appealed. The issues on appeal were whether:

  1. The EU principles of equivalence and effectiveness were engaged in relation to the CPR.

  2. Reference in CPR 44.13 to "damages for personal injuries" could be interpreted, comfortably within the Marleasing principles, to include a claim for compensation under reg.13; and

  3. The appellant had claimed a sum that was "due and owing" under the Regulations.

It was held that national rules such as the CPR had to be interpreted so as to be compatible with the objective of the Directive, which meant giving effect to the principles of equivalence and effectiveness. That principle meant putting the claimant into an equivalent position to those who were claiming against an identifiable and insured driver.

Whilst it was true that the strict interpretation of the word ‘damages’ meant that there had to be some type of breach of duty, the word "damages" could be treated as including ‘compensation’ as per the Regulation, which did not go against the grain of the CPR. Indeed, as was noted at first instance, the glossary of terms in Appendix E to the CPR itself described "damages" as a "sum of money awarded by the court as compensation to the claimant" .

The appeal was therefore allowed, and QOCS will therefore apply to MIB claims also.

Mixed claims

Questions have been raised as to the application of QOCS where a claimant seeks several different remedies, only one of which is a claim for damages for personal injuries. Although this was not explicitly in issue in Wagenaar the Court nevertheless did touch upon the subject of ‘mixed claims’:

It is true, however, that the word “proceedings” in CPR Rule 44.13 is a wide word which could, in theory, include the entire umbrella of the litigation in which commercial parties dispute responsibility for the payment of personal injury damages. I do not think that would be an appropriate construction. Instead, I think the word “proceedings” in CPR Part 44.13 was used because the QOCS regime is intended to catch claims 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.

Thus, in my judgment, CPR Rule 44.13 is applying QOCS to a single claim against a defendant or defendants, which includes a claim for damages for personal injuries or the other claims specified in CPR Rule 44.13(1)(b) and (c), but may also have other claims brought by the same claimant within that single claim. Argument has not been addressed to the question of whether QOCS should apply to a subsidiary claim for damages not including damages for personal injuries made by such a claimant against another defendant in the same action as the personal injury claim. I would prefer to leave that question to a case in which it arises. CPR Rule 44.13 is not applying QOCS to the entire action in which any such claim for damages for personal injuries or the other claims specified in CPR Rule 44.13(1)(b) and (c) is made.”6

In Robert Jeffreys v the Commissioner of the Police of the Metropolis (Mr. Justice Morris QC, QBD, 4 th May 2017, unreported) the claimant brought a claim against the police following his arrest for: assault, false imprisonment, misfeasance in public office and malicious prosecution. He claimed exemplary and aggravated damages, and alleged that he had suffered pain, distress, anxiety, loss of liberty and (most importantly for our purposes) soft tissue injuries to his hands.

The Judge at first instance held that at the heart of the claim were the allegations of misfeasance, and that the personal injury claim was simply ancillary to that. As such, any costs order made could be enforced to the extent of 70% of the sum.

CPR 44.16 (2) (b) allowed for costs orders to be enforced where the claim, ‘was made for the benefit of the claimant other than a claim to which this section applies.’ It was held on appeal that the claimant had sought substantial damages other than those for personal injury (namely for loss of liberty, fear and upset) and that therefore there could be an enforceable costs order that represented the proportion of the claim that was not for personal injuries.

If Jeffries is to be followed, one must look at the damages claimed, and what proportion of them arise out of personal injury and what proportion do not. After that apportionment, a percentage based costs order may be made.

Temporal scope

As far as any temporal scope applies, it is well known that if there is a pre-commencement funding arrangement in place (i.e. a CFA signed before the 1st April 2013) then the QOCS provisions will not apply.7

In most cases it will be self-evident as to whether such a funding arrangement is in place (either it is or it isn’t). That said, there are instances where the picture is more complicated. For example, what is the situation where there is both a pre-commencement funding arrangement and a post-commencement funding arrangement? That was the case in Catalano v Espley-Tyas Development Group Ltd [2017] EWCA Civ 1132 .

In Catalano the claimant had made a claim for NIHL (Noise Induced Hearing Loss) and began proceedings under a CFA dated the 13th June 2012. However, ATE insurance was declined. After obtaining expert evidence, the claimant then entered into a second CFA with the same solicitors, this time dated the 15th July 2013. The claim was discontinued one day before trial. The Judge held that she could not benefit from QOCS. The claimant appealed.

The Court of Appeal dismissed the appeal. Firstly, the words ‘a funding arrangement’ did not mean ‘an un-terminated’ funding arrangement. That would be reading words into the rules that were not there. Secondly, such an approach would be absurd. As the Court pointed out, if it the claimant were right then:

A claimant could make an agreement providing for a success fee and purchase ATE insurance and wait until shortly before trial to re-assess his or her prospects. If they appeared to be high, such claimant could continue and claim the cost of the ATE premium and the success fee as costs from the defendants; if they appeared to be low, he or she could cancel the original CFA, make a second CFA and then discontinue the claim a day later and escape the costs consequences. The framers of the rules could not have intended that a claimant should be able to blow hot and cold in that way.”8

Appeals

The issue of whether QOCS continues to apply to appeals was decided in Parker v Butler [2016] EWHC 1251 (QB) .

The claimant failed in his claim for personal injuries. He appealed, and although he was granted permission, the appeal was dismissed. Although the provisions clearly restrict QOCS to claims for damages for personal injuries, the question in Parker was whether that claim included the subsequent appeal.

Mr. Justice Edis held that:

An appeal by a claimant against the dismissal of his claim for personal injuries is a means of pursuing that claim against the defendant or defendants who succeeded in defeating that claim at trial. There is no difference between the parties or the relief sought as there is between the original claim and the Part 20 claim. Most importantly, to my mind there is no difference between the nature of the claimant at trial and the appellant on appeal. He is the same person, and the QOCS regime exists for his benefit as the best way to protect his access to justice to pursue a personal injury claim. To construe the word "proceedings" as excluding an appeal which was necessary if he were to succeed in establishing the claim which had earlier attracted costs protection would do nothing to serve the purpose of the QOCS regime.9

QOCS protection therefore continues throughout the appeals process.

Summary

In short, and by way of re-cap:

  • For QOCS to apply the claim must be for compensation for personal injuries, rather than for any other remedy (e.g. contribution).

  • In MIB claims, ‘damages’ can be taken to mean ‘compensation’ as per the Regulations, thereby affording QOCS protection to claimants.

  • In mixed claims, the court may look at what proportion of the damages arise out of personal injuries and what proportion do not.

  • If the proceedings are funded by a CFA signed before the 1st April 2013, then the provisions do not apply.

  • The word ‘proceedings’ includes any appeals in the substantive matter, but probably does not include any proceedings or appeals relating to costs.

 

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1See paragraph 36 of Wagenaar

2See paragraphs 41 and 42

3See paragraph 13

4See paragraph 15

5See paragraph 16

6See paragraphs 39 and 40

7See CPR 44.17

8Paragraph 24

9See paragraph 17

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