Important questions concerning the interpretation and application of the provisions under the qualified one-way costs shifting (QOCS) regime (CPR 44.130-44.17) came before the Court of Appeal in Jacob Corstorphine v Liverpool City Council [2018] EWCA Civ 270 (Sir Geoffrey Vos PQBD and Hamblen LJ).
QOCS provisions
The QOCS rules provide the claimant with costs protection regardless of their resources. The effect of QOCS is that orders for costs made against a claimant in personal injury claims may be enforced only to the extent that the amount does not exceed any damages and interest awarded to the claimant (CPR 44.14(1)). A claimant who loses on liability (or discontinues) will not therefore have to pay the successful defendant’s costs. There are various exceptions for claims which are fundamentally dishonest or are struck out.
The transitional provisions under CPR 44.17 provide that the QOCS regime does not apply where the claimant has entered into a pre-commencement funding agreement (PCFA). A PCFA is a conditional fee agreement (CFA) or after-the-event insurance (ATE) policy entered into before 1 April 2013.
Background
In 2010, the claimant suffered serious personal injury on an allegedly dangerous tyre swing in a playground. D1 was the occupier of the playground and owed a duty of care at law and under section 2 of the Occupiers Liability Act 1957. The tyre swing had been designed and manufactured by D2 and purchased by D1 from D3.
In August 2012, the claimant entered into a CFA with his solicitors for a claim against D1. The claimant also entered into an ATE policy which named D1 as the ‘opponent’ and provided cover against ‘opponent’s costs’ that the claimant may be ordered to pay. On 18 November 2012 proceedings were issued against D1 (the primary claim). On 1 April 2013 the QOCS regime came into effect.
On 21 October 2013, D1 issued a part 20 claim against D2 and D3 (the additional claim). By a court order, D2 and D3 were also joined to the primary claim. The primary claim and the additional claim were ordered to be tried together.
Both the primary claim and the additional claim were dismissed after a four-day trial. On costs, the judge held that there was no reason to depart from the general principle that costs follow the event and that the unsuccessful party should pay the costs of the successful party. Consequently, he ordered that the claimant pay:
- D1’s costs of the primary claim;
- D2 and D3’s costs of the primary claim;
- D2 and D3’s costs of the additional claim.
In reaching these decisions, the judge held that the QOCS regime in CPR 44.13-44.17 did not apply to the claimant.
The claimant appealed on the following grounds: (1) the judge erred in finding that the claimant’s PCFA encompassed the claims brought against D2 and D3 so that the QOCS regime did not apply; and (2) the judge erred in the exercise of his discretion in directing that D1 was entitled to recover from the claimant those costs it had been ordered to pay D2 and D3.
First ground for appeal
The essential question here was the meaning to be given to ‘the matter that is the subject of the proceedings in which the costs order is to be made’ in CPR 48.2(1)(a)(i)(aa) (emphasis added). The claimant argued that the relevant ‘matter’ was the claim for damages for personal injury made against D1. D1 argued that the ‘matter’ means the ‘underlying dispute’, which was the claim for damages for personal injury. That ‘matter’ was the subject of all the proceedings, both the primary claim and the additional claim. The PCFA was entered into in relation to that ‘matter’ and those proceedings and, accordingly, the QOCS regime was disapplied in relation to all those proceedings.
Giving the leading judgment of the Court of Appeal, Hamblen LJ drew guidance from Plevin v Paragon Personal Finance Ltd [2017] UKSC 23, [2017] 1 WLR 1249, in which Lord Sumption considered what was meant by the equivalent terms in section 44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO). Hamblen LJ noted that CPR 48.2(1)(a)(i)(aa) was materially the same terms as section 44(6) of LASPO.
In Plevin the issue was whether the transitional provisions applied to variations made to a pre-1 April 2013 PCFA in order to cover the costs of appeals, which variations were made after that date and the inception of the QOCS regime. The Supreme Court held that they did apply. Lord Sumption explained: ‘The “matter that is the subject of the proceedings” means the underlying dispute. The two deeds of variation provided for litigation services in relation to the same underlying dispute as the original CFA, albeit at the appellate stages’ (paragraph 12).
His lordship went on to explain: ‘The purpose of the transitional provisions of LASPO, in relation to both success fees and ATE premiums, is to preserve vested rights and expectations arising from the previous law. That purpose would be defeated by a rigid distinction between different stages of the same litigation’ (my emphasis) (see also Landau v The Big Bus Company, unreported 31 October 2014).
Hamblen LJ noted that at the time of the inception of the QOCS regime the claimant had no vested rights or expectations in respect of claims against D2 or D3: its sole right and expectations concerned D1. At the time of the PCFA the ‘underlying dispute’ was the claim against D1 which was the only existing claim at the time. Thus, Hamblen LJ held that the correct construction of CPR 48.2 was that the relevant ‘matter’ in the present case was the claim for damages for personal injury against D1.
In respect 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 respect of CPR 48.2(2)(a)(ii), it was ‘proceedings’ in relation to that claim that the ATE policy was taken out and which were the sole subject matter of that policy. Therefore, the judge should have concluded that the QOCS regime applied to the claims against D2 and D3.
Second ground for appeal
Hamblen LJ also found that the judge had erred in exercising his discretion, which had the consequence of depriving the claimant of the protections afforded to him by QOCS. By ordering the claimant to pay D1’s costs of D2 and D3 for which D1 is liable, the claimant was, Hamblen LJ argued, being made liable for virtually all those costs. In essence, this made the claimant indirectly liable for costs which could not be enforced against him directly. Further, there was Court of Appeal authority that draws a clear distinction with regard to the QOCS regime between costs relating to the claimant’s claim and those relating to third-party proceedings (see Wagenaar v Weekend Travel Ltd [2015] 1 WLR 1968).
The judgment provides important judicial guidance on the interpretation and application of the QOCS transitional provisions. When considering whether the QOCS regime will apply to a personal injury claim which had a PCFA and in circumstances where there are additional claims, the court will consider whether and against whom the claimant maintained vested interests and expectations. It also makes clear that the word ‘matter’ relates to the ‘underlying dispute’ between the parties and should not be applied in various aspects of the same litigation. This would clearly run counter to the policy aims of the provisions to preserve the rights and expectations of the claimant.
Masood Ahmed is associate professor at the University of Leicester and a member of the Civil Procedure Rule Committee (@ahmedcivJustice)
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