Qualified One Way Costs Shifting

Kerry Underwood has produced another masterly costs update analysing Qualified One Way Costs Shifting.

This highlights another of the bizarre aspects of the implementation of the Jackson Reforms and one that seems to have attracted very little attention.

At the risk of oversimplification, in personal injury claims successful claimants will be able to recover costs from defendants in the ordinary way. However, successful defendants will only be able to recover costs, except in some limited situations (such as dishonest claims), up the level of any damages awarded to the claimant. Therefore, where the claimant fails on liability there will be no pot of money from which to recover costs. If a defendant wins on a Part 36 offer and the claimant’s damages are assessed at £2,000, that is the maximum that can be recovered in costs by the defendant.

The new rules come into force on 1 April 2013 at which stage:

“orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant. Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.”

Again, the transitional provisions are crucial:

“This Section does not apply to proceedings where the claimant has entered into a pre-commencement funding arrangement (as defined in rule 48.2).”

In simple terms a “pre-commencement funding arrangement”, with some exceptions, is a CFA, CCFA, ATE or ATE equivalent entered into/obtained before 1 April 2013.

As Kerry points out, this means that Qualified One Way Costs Shifting is retrospective in all cases where there is no such funding arrangement in place.

My reading is that this will be retrospective even where there is an existing costs order in the defendant’s favour. Claimants do not need to wait until 1 April 2013 before discontinuing. Unless it is possible to enforce the costs order before 1 April 2013 (ie in itself requiring costs to have been agreed/assessed by then) the order becomes, in a case where the defendant has won on liability, not worth the paper it is written on. For cases where the defendant has won on a Part 36 offer, the order is only as good as the level of damages recovered by the claimant.

Genuine BTE insurers (ie those whose cases are not run with a CFA with a success fee) will be laughing all the way to the bank (assuming they have picked up on this).

Given this decision will impact on a significant number of cases that have been brought/are being brought against the NHSLA, local authorities and other public bodies, one does have to seriously wonder whether this was intentional.

It makes the Court of Appeal’s decision in Simmons v Castle to award the 10% damages uplift to all “conventional claimants” (ie those without CFAs in place before 1 April 2013) all the more strange. A claimant currently bringing a claim with a genuine BTE policy in place will get an extra 10% damages to compensate them for not being able to recover the success fee that does not exist and will also benefit from QOCS to compensate them for not being able to recover the cost of an ATE policy that they also did not have.

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