15 March, 2023
"April is the cruellest month, breeding Lilacs out of dead land, mixing memory and desire, stirring dull roots with spring rain." From The Wasteland by T.S. Eliot
On 6th April 2023 changes to the rules of court concerning Qualified One Way Costs Shifting (QOCS) will usher in a major shift in litigation to the extent that some commentators have described it as a "Costs Earthquake".
This article is not meant to be a full critique of the QOCs rules, neither past nor to come. There are a plethora of learned articles on line for anyone who wishes to examine the history.
I am instead going to set out briefly what the effects of the present rules are, so we can understand how and why the situation is changing. Also, we must not forget that the QOCS position as it stands today, will continue to apply to many ongoing claims, since the new regime will only apply to claims that remain unissued after 6th April 2023.
The position that will still apply for any cases issued on or before the 6th April
As a result of a combination of CPR rules 44.14, 44.15 and 44.16, and some caselaw interpreting the QOCS rules (let's just call them the Cartwright and Ho cases) the overall outcome meant that (short of a finding that the claimant had been fundamentally dishonest), it was virtually impossible for a defendant to recover costs from a claimant, where a claim settles. These might be defendant costs awarded against the claimant on an interlocutory application, where a claimant accepts a part 36 offer out of time, or where a claimant loses a post-settlement costs dispute.
For a time, a defendant could recover at least some of its costs by way of set off against a claimant's costs in a case that went to trial, even if QOCs precluded direct recovery, but the Supreme Court in the Ho case precluded even this limited route.
Given that the vast majority of personal injury claims settle without a final hearing, in practical terms, the scope for defendants to obtain any effective costs recovery was virtually non-existent.
The Position post 6/4/23 for all cases that have not yet been issued by that date
Ho whilst no doubt celebrated by claimants' solicitors at the time, may come to be seen as a pyrrhic victory for claimants. The outcome was recognized as leading to results that appeared counter-intuitive and unfair to defendants. The Supreme Court therefore recommended changes to CPR 44.14. I am not here going to set out the wording of the new section (it is easy to find online). I will concentrate on what the effects of the changes are likely to be.
The Cartwright and Ho cases are reversed by the new rules, but the changes go even further. They raise the "general enforcement cap" that was in place which means that defendants will have an absolute right to enforce up to the level of any damages or costs recovered by claimants. This now applies to any damages or costs recovered by a defendant by order or by settlement.
The only bit of good news for claimants is that there is a transitional provision that the amendments "apply only to claims where proceedings are issued on or after 6th April". This has led to many commentators advising claimants' solicitors, where possible, to issue cases before the 6th April deadline.
The Likely Practical Consequences of the New QOCs Rules
Most changes to costs rules have in the past generated considerable satellite litigation and this major upheaval may be no different. We shall see.
The time between now and the beginning of the new tax year on 6th April may prove to be very taxing indeed for many claimants and their legal representatives. All presently unissued cases will need to be assessed, and a risk analysis carried out to ascertain if proceedings should be issued before the deadline. Some difficult conversations with clients may be necessary, and previously rejected defendant part 36 offers will perhaps look more attractive as a result of the increased risk.
Some may consider the changes have gone too far and that access to justice is being unfairly restricted. The counter-argument, however, is that defendants have regularly paid to settle claims that they might have contested, simply on the basis that it would cost more to run such a claim to trial, even if the claim was ultimately rejected by the court. In that scenario, under the QOCS rules as they presently stand, the defendant would not be able to recover its own costs, despite achieving a "victory". It is that situation which the Supreme Court has acted to correct, and many will feel it has resulted in a more even playing field in which to conduct litigation.
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