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QOCS strikes again: Corstorphine v Liverpool City Council

By Peter Houghton

Introduction

The Court of Appeal (Sir Geoffrey Vos and Hamblen LJ) handed down judgment last week in another appeal concerning the application of qualified one-way costs shifting (‘QOCS’). The decision in Corstorphine v Liverpool City Council [2018] EWCA Civ 270 marks the Court’s third foray into the QOCS realm in the past 12 months.

The Facts

The Claimant (‘C’), a child, was injured on a tyre swing in a playground occupied by the Defendant (‘D’). The tyre swing was designed and manufactured by FHS Holztechnik (‘FHS’). D had bought it from Blakedown Landscape Operations (‘BLO’).

On 23 August 2012 C (by his litigation friend) entered into a pre-LASPO CFA with his solicitors and an ATE policy. The CFA was said to cover C’s claim for personal injury damages against D. It provided for a success fee. The ATE policy stated that the ‘Opponent’s Name’ was D. It provided cover of up to £25,000 against ‘Opponent’s Costs’. On 28 August 2012 C served a notice of funding referring to the pre-LASPO CFA and ATE. On 18 November 2012 he issued proceedings against D.

The QOCS regime came into effect on 1 April 2013.

On 21 October 2013 D issued a Part 20 Claim against FHS and BLO. By an Order of 15 August 2014 FHS and BLO were joined as Second and Third Defendants to C’s own claim. All claims were tried together.

In July 2015 Mr Recorder Edge in the Liverpool County Court heard the trial over 4 days. On 19 October 2015 he handed down judgment dismissing C’s claim against D, FHS and BLO. Accordingly he dismissed D’s Part 20 claim against FHS and BLO too.

The Judgment Below on Costs

The Recorder ordered that:

  1. C was to pay D’s costs of the claim against it, including the costs of FHS and BLO that D had been ordered to pay.
  2. C was to pay FHS’s costs and BLO’s costs of his claim against them.
  3. D was to pay FHS’s costs and BLO’s costs of the Part 20 claim against them.

He held that the QOCS regime did not apply to protect C. Whilst this was uncontroversial in respect of D’s own costs of the claim against it, the costs that D had to pay to the other parties but which C was ordered to reimburse without QOCS protection exceeded £200,000.

C appealed, arguing that:

  1. His pre-LASPO CFA did not encompass the claims he brought against FHS and BLO. Rather, in respect of them, he had QOCS protection.
  2. The Judge had erred in exercising his discretion so as to direct that D could recover within its own claim for costs against C the costs that it had been ordered to pay to FHS and BLO pursuant to the Part 20 Claim.

The Court of Appeal’s Decision

On the first ground of appeal, the Court of Appeal noted that the Recorder had reasoned that:

  • As between C and D there was no QOCS protection because there was a pre-LASPO CFA, described in CPR 44.17 as a “pre-commencement funding arrangement“. CPR 48.2 provided that a “pre-commencement funding arrangement” was:
    • a funding arrangement as defined by rule 43.2(1)(k)(i) where –
    • (aa) the agreement was entered into before 1st 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
  • The pre-LASPO CFA was entered into for the purpose of providing ‘advocacy or litigation services’ to C ‘in relation to the matter that is the subject of the proceedings in which the costs order to be made’, which was C’s claim for personal injury damages.
  • The ‘proceedings’ to which the pre-LASPO CFA applied was the claim to which, on 15 August 2014, FHS and BLO were joined.
  • This reasoning was consistent with Landau v Big Bus (in which Master Haworth had held that a claimant who had entered into a pre-LASPO CFA and lost at first instance did not have QOCS protection in respect of the costs of an unsuccessful appeal notwithstanding that the CFA did not cover the appeal).
  • Hence C did not have QOCS protection in respect of his claims against FHS and BLO.

The Court of Appeal disagreed and reversed the Recorder holding that, in respect of FHS and BLO, C did have QOCS protection. Hamblen LJ gave the judgment. He held that:

  1. The key issue was the meaning to be given to “the matter that is the subject of the proceedings in which the costs order is to be made“. C contended that the matter was only the claim against D – at the time of the pre-LASPO CFA and ATE that was the only claim being made. D argued that the matter was a broader term which meant the underlying dispute, the claim for personal injury damages which had come to be directed against three defendants.
  2. The purpose of the QOCS regime was to protect personal injury claimants from adverse costs orders.
  3. There was no CFA and no ATE policy in respect of the claims against FHS and BLO. Unless QOCS applied, C would have no protection against adverse costs orders in respect of such claims.
  4. Whilst D suggested that C could have entered into a further or amended CFA and ATE policy, (i) that assumed it was even lawful for him to do so after 1 April 2013 and (ii) in any event he might legitimately have taken the view that there was no need to do so once QOCS applied.
  5. The purpose of the transitional provisions (i.e. CPR 44.17 and 48.2) was, per Lord Sumption in Plevin v Paragon Personal Finance Ltd [2017] UKSC 23, to preserve vested rights and expectations. But as of 1 April 2013 C had no such rights or expectations in respect of claims against BLO or FHS. His only rights or expectations were in respect of the claim against D, which was the sole subject matter of his pre-LASPO CFA. And at the time of the pre-LASPO CFA the underlying dispute was only with D.
  6. Hence the word matter in CPR 48.2 should be construed as meaning the claim for personal injury damages against D only. That alone was the matter which was the subject of the proceedings and in relation to which advocacy and litigation services were to be provided.
  7. Thus the QOCS regime did apply to protect C regarding his claims made against FHS and BLO.

On the second ground – whether the Judge should have included within the costs order made against C in favour of D the costs that D was ordered to pay to BLO and FHS – Hamblen LJ stated that:

  1. The application of QOCS in respect of C’s own claims against FHS and BLO was a “highly material factor” which the Judge had not (because of his wrong conclusion about QOCS) taken into account. Although in the ordinary case of an additional claim closely interconnected with a primary claim the Judge’s order would be unexceptional, this was not an ordinary case because of the interposition of the QOCS regime.
  2. Since C was entitled to QOCS protection in respect of adverse costs orders in his claims against BLO and FHS, the effect of the Judge’s order was to deprive him of that protection. C was made indirectly liable for costs that could not be enforced against him directly.
  3. Wagenaar v Weekend Travel Ltd [2015] 1 WLR 1968 was authority for the proposition that there was a clear distinction to be drawn with regard to the QOCS regime between costs relating to a claimant’s claim and those relating to third party proceedings. If QOCS applied to a main claim but not to third party proceedings, a successful defendant would be unable to enforce its costs order against a claimant but the costs of the third party proceedings would lie where they fell: Wagenaar. It would be anomalous if a different result followed just because QOCS did not apply in respect of D even though it did apply in relation to FHS and BLO.
  4. Therefore the fair, just and proportionate order was to exclude from the (enforceable) costs that C was ordered to pay to D any costs of BLO or FHS that D itself had been ordered to pay.

Comment

The following points of interest emerge from Hamblen LJ’s reasoning:

  1. The Court of Appeal’s approach to whether or not a claim has QOCS protection remains heavily influenced by what, in its view, the whole QOCS regime set out to achieve. The notion that without QOCS protection C would be exposed to enforceable adverse costs orders in favour of FHS and BLO, even though he brought his claim against them well after 1 April 2013 and he had not contemplated claims against them in the pre-LASPO era, clearly weighed heavily on Hamblen LJ. This is of a piece with the reasoning of Longmore LJ in Catalano v Espley-Tyas Development Group Ltd [2017] EWCA Civ 1132 where a claimant who had a pre-LASPO CFA and ATE then entered into a new CFA after 1 April 2013 was not afforded QOCS protection because she should not have ‘the best of both worlds’, i.e. the chance to recover uplift and ATE premium if the case succeeded but QOCS protection if it failed. The Court of Appeal is concerned to ensure a fair outcome from QOCS for claimants but not a windfall, neither restricting nor extending its scope unduly.
  2. The wording of the pre-LASPO CFA was also important. It provided for the provision of advocacy and litigation services only in respect of the claim against D. However, in many cases the wording might be broader – “all claims in respect of X’s accident on 10 March 2013” for instance – and then arguably X would not be entitled to QOCS protection if, after 1 April 2013, claims against parties not contemplated at the time of the pre-LASPO CFA were made.
  3. The key divergence that QOCS effects between costs in ‘main claims’ and ‘additional claims’ is reinforced. Defendants contemplating Part 20 claims should be aware.
  4. There are interesting times ahead in respect of QOCS in multi-defendant claims. The existence of QOCS protection was said by Hamblen LJ to be a critical factor in the Court’s exercise of discretion in respect of what costs order to make. He objected to a costs order that effectively sought to circumvent QOCS. Where does that leave the case where J claims damages against K and L, loses against K but succeeds against L?
    1. Assuming there is no pre-LASPO CFA, K might expect to obtain an order for its costs against J which cannot be enforced had it been the only defendant
    2. But can K nevertheless enforce its costs order if J recovers damages L? The wording of CPR 44.14 would not seem to block this but it does potentially run contrary to Hamblen LJ’s approach.

As an aside, what would the position have been had C won against BLO or FHS? It appears that there was no CFA in place in respect of claims against them since the pre-LASPO CFA referred only to C’s claim against D. The correct answer would seem to be that C could not have recovered any costs against BLO or FHS even if successful against this. See the Court of Appeal’s decision in Engeham v London and Quadrant Housing Trust and anor [2015] EWCA Civ 1530 at [10], consistent with the decision of HHJ Cotter QC in Brookes v DC Leisure Management Ltd [2013] EW Misc 17 (CC).



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