Legal Update: Qualified one-way costs shifting and pre-April 2013 questions answered

Qualified one-way costs shifting was brought in as part of Lord Justice Jackson’s interlocking civil justice reforms on 1 April 2013.

QOCS means an unsuccessful claimant would not have to pay the defendant’s costs of the action, but also means a defendant would still have to pay a successful claimant’s costs, other than in a limited set of circumstances – these being failure to beat a defendant’s Part 36 offer; where the claim has been struck out; or where the claimant has been found to be fundamentally dishonest.

The trade-off for defendants was an end to the recoverability of after‑the‑event insurance premiums and success fees, as these would apply to a far larger proportion of cases than QOCS would. The logic behind this was if a claimant has no adverse costs risk, then insurance protecting them from this would be unnecessary.

Where does QOCS apply?
QOCS, at present, only applies to personal injury cases – but this may change in the future. The only exclusion in personal injury cases is set out in Civil Procedure Rule 44.13, which states that QOCS does not apply to applications where CPR 44.17 applies (among other excluded applications).

CPR 44.17 is the transitional provision that states “this section does not apply to proceedings where the claimant has entered into a pre-commencement funding arrangement (as defined in rule 48.2)”.

CPR 48.2 is a lengthy rule, but in a nutshell it provides that a pre-commencement funding arrangement is defined as being a conditional fee agreement or collective conditional fee agreement that provides for a success fee, ATE premium or membership organisation indemnity (such as union funding) that was taken out or entered into before 31 March 2013.
 
What about pre-Jackson?
So what does that mean for cases conducted prior to 1 April 2013 that were funded by before‑the‑event or private retainers (both of which are not defined in CPR 48.2 as “pre-commencement funding arrangements”)? It means QOCS protection would apply, and QOCS is fully retrospective in these cases.

This could create the situation where a claimant with, for example, a 2010 claim funded by way of BTE insurance will get QOCS protection. They would no longer be responsible for a costs order made against them in 2011 (unless that order was in relation to Part 36, where recovery would be capped to the level of damages or the other exceptions listed). And they would also get an extra 10% on damages.

This was confirmed in the Court of Appeal decision in Simmons v Castle (2012), where it was decided the 10% uplift to damages would apply to pre-April 2013 cases where no pre-commencement funding was in place.

The question then becomes, in pre-April 2013 cases where you have a pre-commencement funding arrangement as defined by CPR 48.2, can you disregard that arrangement and enter into a new one that would give a claimant QOCS protection? Certainly in the scenario above it could be tempting for a claimant.

However, the answer must be no, due to the wording of CPR 44.17 as stated above: “This section does not apply where the claimant has entered into a pre-commencement funding arrangement.” There is no ambiguity in this sentence. If the claimant ever had a pre-commencement funding agreement, they cannot get QOCS protection.

The rule does not state the agreement must be current – or even that it has to be enforceable – so, as it currently stands, if a pre‑commencement agreement ever existed QOCS protection is lost.

Kelly Matthews, costs associate, Berrymans Lace Mawer