Jake Richards writes on – QOCS: beware of replacement CFAs



A Claimant enters into a Conditional Fee Agreement (CFA) with solicitors before 1st April 2013, but then replaces the original CFA with a new agreement after 1st April 2013. Shortly before trial, the Claimant discontinues the case. Can the Claimant rely on the Qualified One-Way Costs Shifting (QOCS) provisions to oppose liability for the Defendant’s costs?

These transitional provisions relating to QOCS and pre/post April 2013 CFAs was considered by the Court of Appeal in Catalano v Espley Tyas Development Group Limited [2017] EWCA Civ 1132. The claim was for workplace, noise-induced hearing loss. The Claimant entered into the original CFA on 13th June 2012, and the Defendant was notified of the funding arrangement. The QOCS regime – that Defendants will generally be ordered to pay the costs of successful claimants but, subject to certain exceptions, will not recover their own costs if they successfully defend the claim – came into effect on 1st April 2013.

On the 15th July 2013, the Claimant entered into a new CFA which expressly replaced the previous agreement. They had, by this stage, undertaken work on the claim, including the instruction of experts, and these services had been noted and charged to the amount of £5,375. On 20th January 2014, the Defendant was served with a notice of funding that explained that the case was now being funded by the later CFA. The notice reminded the Defendant of the earlier CFA (of June 2012), which provided for a success fee and did not tick the box available for saying it had been terminated. One day prior to trial, the Claimant served a notice of discontinuance.

The Court of Appeal had to decide whether the District Judge had been correct to find that the QOCS regime was not applicable so that, after the discontinuance, the Claimant was liable for the Defendant’s costs of £21,675.52 excluding interest.

The starting point is CPR 44.17 which states that QOCS ‘does not apply to proceedings where the Claimant has entered into a pre-commencement funding arrangement (as defined in rule 48.2)’. Therefore, the QOCS regime can be retrospective in that it applies to proceedings issued before 1st April 2013, except where the Claimant has entered into a ‘pre-commencement funding arrangement’.

CPR 48.2(1) defines a ‘pre-commencement funding arrangement’:

  • the agreement was entered into before 1 April 2013 specifically for the purposes of the provision to the person by whom the success fee is payable of advocacy or litigation services in relation to the matter that is the subject of the proceedings in which the costs order is to be made; or
  • the agreement was entered into before 1 April 2013 and advocacy or litigation services were provided to that person under the agreement in connection with that matter before 1 April 2013;
  • a funding arrangement…where the party seeking to recover the insurance premium took out the insurance policy in relation to the proceedings before 1 April 2013;
  • a funding arrangement…where the agreement with the membership organisation to meet the costs was made before 1 April 2013 specifically in respect of the costs of other parties to proceedings relating to the matter which is the subject of the proceedings in which the costs order is to be made.

The Claimant relied on Casseldine v Diocese of Llandaff Board for Social Responsibility (A Charity) unreported. In Casseldine, although the Claimant had entered into a pre-April 2013 CFA, they were not held to be liable for the Defendant’s costs having signed a second CFA post-April 2013. However, in Casseldine, the second CFA was entered into with a new firm of solicitors, after the first firm had terminated the CFA. The Claimant said this was irrelevant, because the second CFA in her case had replaced the first one to the same extent as if a new firm of solicitors had been instructed. Further, the Claimant argued that she was not operating under a pre-commencement funding arrangement because as she conducted her litigation beyong April 2013, she did not have the benefit of ATE cover and therefore should benefit from the QOCS provisions.

The Defendant argued that for the Claimant’s interpretation of the rules to be correct, the court would have to read the word ‘un-terminated’ into CPR r.48.2(1). Further, the rules could not have meant to allow a Claimant to ‘cherry-pick’ the advantages of both regimes. In this case, the Claimant had continued proceedings despite the refusal of ATE insurance, therefore knowing she may be liable for the costs if she lost.

The Court of Appeal dismissed the appeal. The concept of a ‘pre-commencement funding arrangement’ was ‘remarkably wide’. Critically, the wording of the rules allowed for an agreement for services to be provided before 1st April 2013, but also an agreement for services to occur in the future, beyond the introduction of the QOCS provisions. The correct construction of CPR 48.2(1) was to give the words ‘funding arrangement’ their natural meaning. Essentially, therefore, it would seem that if a litigant enters into a CFA before April 1st 2013, they cannot rely on QOCS, regardless of later arrangements.

There remain some factual permutations that would challenge this ‘natural meaning’ of ‘funding arrangement’ when considering the transition to QOCS. For example, what if a CFA is made pre-1st April 2013, but no work is done on the case, and then a second CFA is entered into after 1st April 2013? Further, how does this judgment align with Casseldine, and a second post-1st April 2013 CFA is entered into with a new set of solicitors? There is also the issue as to the definition of the ‘matter’ of the litigation in CPR 48.2(1) and any development in the litigation that leads to a new CFA that may then be after April 2013. How different would the ‘matter’ being litigated have to be to sufficiently necessitate a new CFA?

The Court of Appeal preferred to express no concluded view on these issues. They merely suggested that the first scenario would be comparatively rare, since some chargeable work would usually be done about the time the first CFA is made. This would suggest that any chargeable work, however minimal, would deem any later CFA redundant for the purposes of relying on QOCS provisions.

In regards to Casseldine, the Court of Appeal, whilst not coming to a conclusive decision, was ‘doubtful’ that the Judgment could be supported on a true interpretation of the rules. Further, they cited Lord Sumption’s judgment in Plevin v Paragon Personal Finance [2017] 1 WLR 1249 where a second and third CFA were held, on the facts, to be merely variations of the first agreement.

The Judgment offers some useful clarity on the transition to QOCS and the protection, or lack thereof, for many claimants entering into later CFAs.

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Jake Richards

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