WHEN QOCS APPLY: COURT OF APPEAL DECISION: THE SWINGS AND THE ROUNDABOUTS

February 26, 2018 · by · in Appeals, Civil evidence, Civil Procedure, Costs, QOCS

In Corstorphine (An Infant) v Liverpool City Council [2018] EWCA Civ 270 the Court of Appeal considered an important issue in relation to Qualified One Costs Shifting. What order should be made when the claimant has QOCS protection against some of the defendants in an action, but an action against another defendant pre-dates the QOCS regime.

THE CASE

The minor claimant was injured whilst playing on a tyre swing in a playground on the 31 August 2010. He entered into a conditional fee agreement, by his litigation friend, on the 23rd August 2012.   A Notice of Funding was served.

  • Proceedings were issued on the 28th August 2012.
  • The QOCS regime came into force on the 1st April 3013.
  • On the 21st October 2013 the defendant issued Part 20 claims against  the parties that (were to become) the second and third defendants.
  • By an order dated 15th August 2014 the second and third defendants were formally joined as defendants and the issues ordered to be heard together.
  • The claimant was unsuccessful in July 2015.

THE QOCS POSITION – THE ORDER AT FIRST INSTANCE

At first instance the Recorder held that the QOCS regime did not apply to the claimant’s action against the first defendant.   He ordered that the first defendant could recover its costs liabilities to the Second and Third Defendant in recovering its costs against the claimant.

THE APPEAL

The claimant appealed. It was agreed that QOCS did not apply to the claim against the first defendant.  He ordered that the first defendant could recover  from the claimant the costs it had to pay to the second and third defendant.

THE JUDGMENT ON APPEAL

Lord Justice Hamblen considered the claimant’s appeal.

    1. The Appellant was refused permission to appeal on liability but granted permission in relation to costs. The costs order made is challenged on two related grounds:

(1) The judge erred in finding that the Appellant’s PCFA encompassed the claims brought against the Second and Third Defendants, with the result that he was not entitled to the benefit of QOCS in respect of their costs of the Primary Claim (Ground (1));

(2) The judge erred in the exercise of his discretion in directing that the Respondent was entitled to recover as part of its own claim for costs against the Appellant, those costs it had been ordered to pay the Second and Third Defendants (Ground 2).

    1. For reasons of cost and expediency, the Appellant does not appeal the costs orders made in favour of the Second and Third Defendants in respect of the Primary Claim. We were informed that the amount of these costs was minimal, whereas costs of over £200,000 were claimed by the Respondent in respect of its liability for those Defendants’ costs. It was contended, however, that the judge erred in his discretion in ordering these costs to be paid by the Appellant, primarily because he wrongly failed to take into account that the Appellant was entitled to QOCS protection in respect of costs liabilities to the Second and Third Defendants.

Ground (1)

    1. In relation to Ground (1), the essential issue between the parties relates to the meaning to be given to “the matter that is the subject of the proceedings in which the costs order is to be made” (emphasis added) in CPR48.2(1)(a)(i)(aa).

    2. The Appellant contends that in the present case the relevant “matter” is the claim for damages for personal injury made against the Respondent. At the time of the PCFA that was the only claim being made; that was the only claim covered by the CFA and the ATE policy; that was the only claim in respect of which a success fee or ATE premium could be claimed, and that was the only claim in respect of which an indemnity for costs was being provided. In those circumstances, the PCFA did not disapply the QOCS regime in respect of the claims made against the Second and Third Defendants.

    3. The Respondent contends that the “matter” means the “underlying dispute”, which is 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.

    4. In the case of Plevin v Paragon Personal Finance Ltd [2017] UKSC 23, [2017] 1 WLR 1249 the Supreme Court considered what was meant by the equivalent terms in section 44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”). CPR 48.2(1)(a)(i)(aa) reflects and is in materially the same terms as section 44(6) of LASPO. The context in which the issue arose in Plevin 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 (Lord Hodge dissenting) that they did so apply.

    5. In giving the majority judgment, Lord Sumption stated as follows at [12]:

“12. Paragon’s case is that in relation to the proceedings in the Court of Appeal and the Supreme Court the variations of August 2013 and January 2014 were new agreements entered into after 1 April 2013 for the provision of litigation services after that date. They were not therefore covered by the transitional provisions of section 44(6) of LASPO. This is in my judgment a bad point. 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.”

    1. Lord Sumption explained that this was consistent with the purpose of the transitional provisions which he described as follows at [21]:

“21. 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.”

    1. Lord Sumption also noted at [22] that the reason that section 44(6) referred to the “matter that is the subject of the proceedings” rather than “the proceedings” (as in section 46(3) – the equivalent of CPR 48.2(1)(a)(ii)) was because a solicitor’s retainer will commonly cover services in relation to a “matter” other than advocacy and litigation services.

    2. That the transitional provisions apply to appeals is also borne out by the decision of Master Haworth in Michael Landau v The Big Bus Company(2014) unreported, 31st October 2014, upon which the judge relied. In that case Master Haworth summarised the rival arguments in the following terms:

“7. The Claimant contends that the claim at first instance and on appeal were different “proceedings” for the purposes of CPR 44.17. Accordingly, as he did not have a “pre-commencement funding arrangement” relating to the appeal, CPR 44.17 does not apply and consequently QOCS takes effect.

8. The Defendants’ primary case is that this issue does not in fact turn on the construction of “proceedings” because the wording of CPR 48.2 makes that determination unnecessary. In the alternative, the Second Defendant’s case is that the entirety of the case from issue to conclusion, including any appeal, are one “proceedings”. Consequently, a pre-commencement funding arrangement in respect of any part of the proceedings deprives the Claimant of QOCS in relation to the whole of the proceedings”.

    1. Master Haworth preferred the submissions of the Defendants and ruled that it “was clearly Parliament’s intention that a pre-commencement CFA entered into in respect of the “matter” would disapply QOCS in any “proceedings” arising out of that matter” (at [17]).

    2. The Respondent relies upon this reasoning and contends that any Part 20 proceedings were similarly proceedings arising out of that “matter”, namely the Appellant’s original claim.

    3. The Appellant’s case is not, however, inconsistent with this reasoning. His case is that the “matter” is the claim for damages for personal injury against the Respondent, and that would cover appeal proceedings relating to that claim. The issue is whether it also covers proceedings in relation to such a claim when it is brought against different parties in respect of which there is no PCFA.

    4. As has been explained, the purpose of the QOCS regime is to protect personal injury claimants from adverse costs orders. Originally that protection was provided by legal aid. Later it was provided by the complicated regime of CFAs and ATE policies. Now it is provided by the QOCS regime.

    5. In the present case, we are concerned with proceedings involving additional parties which were commenced after the QOCS regime came into effect. There is no CFA or ATE policy which applies to the claims against those parties. Unless the QOCS regime applies, the Appellant will have no protection against adverse costs orders in respect of such claims. Although it is suggested that a further or amended CFA and ATE policy could have been entered into, that assumes that it would have been lawful so to do after 1 April 2013. Even if it was, the Appellant might legitimately have taken the view that there was no need to do so once the QOCS regime applied.

    6. Lord Sumption explains that the purpose of the transitional provisions was to preserve vested rights and expectations. At the time of the inception of QOCS the Appellant had no vested rights or expectations in respect of claims against the Second or Third Defendants. Its sole rights and expectations concerned the claim against the Respondent, which alone was the subject matter of the PCFAs. At the time of the PCFAs the “underlying dispute” was the claim against the Respondent, which was the only existing claim at that time. Similarly, it alone was the subject of the retainer.

    7. In the above circumstances, in my judgment the correct construction of CPR 48.2 is that the relevant “matter” in the present case was the claim for damages for personal injury against the Respondent. In terms 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 terms of CPR 48.2(2)(a)(ii) it was “proceedings” in relation to that claim that the ATE policy was taken out and which are the sole subject-matter of that policy.

    8. It follows that in my judgment the judge should have concluded that the QOCS regime applied to the claims made against the Second and Third Defendants. If so, that would have been a highly material factor to be taken into account in determining whether the Appellant should be liable to pay to the Respondent the costs it had to pay the Second and Third Defendants.

Ground (2)

    1. In an ordinary case of an additional claim which was closely interconnected with a primary claim, where both claims failed, the order made by the judge would be unexceptional – see, for example, Johnson v Ribbins [1977] 1 WLR 1458 at 1464 (Goff LJ); Arkin v Borchard Lines Ltd [2005] EWCA Civ 655; [2005] 1 WLR 3055 at [72]-[77] (Lord Phillips MR). This is not, however, an ordinary case.

    2. The consequence of concluding that the QOCS regime applies to the claims against the Second and Third Defendants is that the Appellant is entitled to QOCS protection in respect of adverse costs orders in respect of those claims. The effect of the judge’s order is effectively to deprive them of that protection. By ordering the Appellant to pay to the Respondent the costs of the Second and Third Defendants for which it is liable, the Appellant is made liable for virtually all those costs. In essence, it makes the Appellant indirectly liable for costs which could not be enforced against him directly.

    3. Further, there is 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. In Wagenaar v Weekend Travel Ltd [2015] 1 WLR 1968 it was held that the QOCS regime does not apply to third party proceedings in relation to a claim for damages for personal injury and that the normal costs rules apply. As Vos LJ observed at [36], there is no good reason to suppose that the QOCS regime was meant to 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”.

    4. In a case in which the QOCS regime applied to the main claim but not to the third party proceedings, a successful defendant would not be able to enforce its costs order against the claimant and so the costs of the third party proceedings would lie where they fell. It would be surprising if a different result was to follow in a case such as the present where, although the QOCS regime does not apply to the claim against the defendant, it does apply to the claim against the additional parties.

    5. In these circumstances, I consider that the judge has exercised his discretion on an erroneous basis in that he has failed to take into account a highly material factor, namely the applicability of the QOCS regime to the claims against the Second and Third Defendants. His decision should accordingly be set aside and this Court may itself exercise that discretion. In my judgment, for the reasons outlined above, the fair, just and proportionate order to make in the circumstances of the present case is to vary the costs order made in favour of the Respondent so as to exclude any costs of the Second and Third Defendants parties which the Respondent had been ordered to pay.

Conclusion

  1. For the reasons outlined above, I would allow the appeal and vary the costs order made below in the terms indicated.

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