Qualified one-way cost shifting – recent case law and practice



PI & Clinical Negligence analysis: David Thomson, barrister at 1 Chancery Lane, examines how qualified one-way cost shifting (QOCS) operates in practice by considering recent case law and developments.

QOCS was introduced on 1 April 2013 as part of the Jackson costs reforms following the removal of a claimant’s right to recover additional liabilities from the defendant, ie success fees and after the event (ATE) insurance premiums. The QOCS regime limits a losing claimant’s liability to pay costs and provides for circumstances where a defendant’s costs can be fully enforced with or without court permission. Recent QOCS cases are somewhat fact-specific, however, the trend is to permit set-off of costs pursuant to CPR 44.12.

Brown v The Commissioner of Police of the Metropolis (The Equality and Human Rights Commission intervening) [2019] EWCA Civ 1724 decided that there was no automatic QOCS costs protection for ‘mixed’ personal injury claims at CPR 44.16(2)(b). QOCS protection does not automatically apply for a claimant from a costs order in a claim for damages for personal injury and a claim other than a claim for damages for personal injury. The QOCS regime remains in claims for personal injury damages a claimant’s liability for costs does not exceed the sum of the damages and interest they would recover in the proceedings for personal injuries. A claim for damages for personal injury was not just a claim limited to pain and suffering, but included all other claims consequential upon the personal injury such as medical treatment costs, accommodation adaptions and loss of earnings. The Court of Appeal (CA) found that CPR 44.16(2)(b) was QOCS protection only to claims for damages for personal injury and not other types of claims, such as police misconduct claims.

So QOCS can be disapplied and costs (or costs over the damages sum if paid) can be recovered in the event that mixed claims are successfully defended. The CA stated that proceedings that ‘can fairly be described in the round as a personal injury case’ should still be subject to QOCS, however, it would be wrong to approach such claims as the discretion always being exercised as QOCS applies. It will require balanced analysis and consideration as to whether the other claims that are not consequential or dependent upon the incurring of a personal injury should have the QOCS exemption applied to them, such as claims for vehicle damage and vehicle hire.

QOCS protection in respect of claims for non-personal injury damages was never intended. The ‘final’ Report on Low Value Personal Injury Claims published in December 2020 by the Civil Justice Council and the Ministry of Justice details recurring issues and makes some recommendations regarding QOCS and FD, but detailed a lack of agreement on many issues, particularly between claimant and defendant representatives. Therefore, the numerous proposals detailed with not be discussed further in any significant detail or implemented in 2021.

Faulkner v Secretary of State for Business, Energy and Industrial Strategy [2020] EWHC 296 (QB), the defendant fails to circumvent QOCS through set-off of costs against costs. A claim was brought against a defendant former employer (the government), which had exposed the claimant to occupational dust and allegedly caused him to develop lung disease. At the case management conference (CMC), which ordered a trial of preliminary issues (on diagnosis and causation), the defendant was awarded costs of £3,500, which were not enforceable, due to the application of QOCS. The claimant discontinued before the trial of preliminary issues (TPI) against the defendant. The defendant applied to set aside the notice of discontinuance, with a view to disapplying QOCS, but this was unsuccessful, and the defendant was ordered to pay the claimant’s costs of this application hearing of £7,000. Could the claimant’s costs be set-off against the costs that the defendant was awarded at the CMC, so that the defendant’s total liability was reduced to £3,500? The claimant asserted that this was provided for in CPR 44.14(1), as costs are not ‘orders for damages and interest’; the defendant contended that the court had the power to circumvent QOCS by ordering a set-off against costs, under CPR 44.12(1).

In the end, the defendant appealed to Mr Justice Turner who explained: ‘Observing the “obvious danger” of laying down general rules on the exercise of “procedural discretion”, which is intended to provide “flexibility… in circumstances of infinite potential permutation”’ that when exercising discretion to set-off costs against costs, ‘each case must be decided on its own facts’. Thus, sometimes, set-off will be appropriate and other times, it will not. He explained that although the claimant’s evidence was ‘vulnerable’, such that the defendant would have been fairly confident of success at a TPI, the strength of the defendant’s case did not amount to a CPR 44.15 QOCS exception, such as no reasonable grounds, abuse of process, or obstruction of just disposal, so the defendant’s application to set aside the claimant’s discontinuance could only be described as ‘very weak’, while its prospective application for strike out was ‘doomed to failure’. He commented that ‘the notice of discontinuance … albeit served late in the day, had had the effect of saving it [the defendant] money’. He continued: ‘I can well understand the defendant’s frustration that the notice was not served earlier but the resilience of the QOCS regime is such as to limit very strictly the inroads which can be made into the scope of its application’. So the set-off was refused.

Waterfield v Dentality Ltd [2020] Lexis Citation 340 considered not just QOCS not applicable to mixed cases, but QOCS only applicable to IP proceedings. The court construed the meaning of the word ‘proceedings’ in CPR 44.13 and held that the qualified one-way costs shifting regime did not apply to pre-issue group litigation order (GLO) applications.

The case was brought by 26 claimants who had been treated by a dental hygienist employed at a dental practice owned by the defendant. The hygienist had not been sterilising the instruments. 563 patients were involved. The practice had not responded to letters of claim because it asserted the hygienist was an independent contractor. These claimants made a pre-issue application for a GLO pursuant to CPR 19.11. They argued they were protected by CPR 44.13 QOCS. The defendant asserted QOCS did not apply to applications made pre-issue, per Wagenaar v Weekend Travel Ltd [2014] EWCA Civ 1105 and Wickes Building Supplies Ltd v Blair (No 2) (Costs) [2020] EWCA Civ 17. The court found ‘proceedings’ in CPR 44.13 had to be construed in accordance with CPR 7.2, which excluded all pre-issue applications. The costs order was therefore enforceable against the claimants.

Lai Ho v Adelekun (No 2) [2020] EWCA Civ 517 considered proceeding under the Low Value Personal Injury Claims in Road Traffic Accidents Protocol. Proceedings allegedly exited the Protocol and the costs would be limited to fixed costs in the sum of about £16,000. The claimant did not accept fixed costs and appealed. The claimant lost in the CA, which found no exception under CPR 45.29J for exceptional circumstances to avoid fixed costs. The defendant sought her costs of the appeal. Proceedings ended up back in the CA, where the defendant sought to set off her costs of the first appeal against the £16,000 costs due to the claimant pursuant to the set off provisions of CPR 44.12. The claimant asserted that the set off provisions not apply as the proceedings fell within the QOCS regime and CPR 44.14(1) applied, and argued that a defendant may recover costs from the claimant where the proceedings have been struck out on the grounds set out in CPR 44.15, with the permission of the court, where the claim is found to be fundamentally dishonest, or CPR 44.16(2) applies. Those exceptions apart, a defendant can enforce a costs order, whether by set-off or otherwise, only up to ‘the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant’ in accordance with CPR 44.14.

The CA had previously decided in Howe v Motor Insurer’s Bureau [2017] EWCA Civ 932 that costs awarded to the claimant should be set off against costs orders in favour of the defendant, the set off not being limited to the damages and interest received by the claimant. Accordingly, the CA explained that it was bound by Howe, so the defendant could set off the costs due to her against her liability to the claimant for the costs of the claim generally. There was permission to appeal to the Supreme Court.

Accordingly, while sets off are being permitted, the future development is somewhat uncertain. It may be that some revisions of the CPR are indeed appropriate, however, there is no appetite for this quite yet.

This article was first published by Lexis Nexis on 29th March 2021.

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