Imminent changes to Qualified One-Way Cost Shifting: levelling the playing field

The UK Government has published its response to its consultation on changes to the Qualified One-Way Cost Shifting (QOCS) regime in personal injury cases, which was launched on 9 May 2022.

Context to the QOCS consultation

By way of background, last year the UK Government published its response to the consultation on extending fixed recoverable costs (FRC) to all civil cases in the fast track and to ‘intermediate’ cases (up to the value of £100,000). Since then, the government and Civil Procedure Rule Committee have been working on the draft rules to ensure the smooth delivery of these reforms, which are expected to come into force in October 2023.

Over the course of this work, concerns were raised as to whether a reconsideration of the rules around QOCS is now called for, following the judgment in Ho v Adelekun [2021]. As such, the government proposed changes to the QOCS regime to ensure the extension of FRC does not exacerbate existing issues with QOCS flowing from recent case law.

To tackle the current dilemma, the UK Government recommended amending Section II of Part 44 of the CPR as follows:

• “Allow that a claimant’s entitlement to costs is considered to be part of the overall fund against which set-off can be applied; and
• Extend costs orders to deemed orders, so a defendant can enforce a deemed order for costs (especially following acceptance of a Part 36 offer) without the permission of the court”.

In Kennedys’ response to the consultation, we highlighted that despite the rules surrounding QOCS, case law, in our view, has shifted the balance significantly in the claimant’s favour. As such, the ultimate aim of the QOCS regime has not been realised and rather, has unintentionally led some claimants to litigate without fear of risk. In turn, defendants are having to incur high costs in defending unmeritorious claims.

Government’s response

Around 60% of the respondents to the consultation were broadly supportive of the Government’s proposals. Generally, defendant respondents advocated for the ‘adverse consequences’ of the decisions in Ho and Cartwright v Venduct Engineering Limited [2018] to be reversed. Further, in terms of set-off and Part 36 offers, these respondents suggested additional wording, expanding on the government’s recommendation, in order to address ‘agreements to pay’.

Claimants on the other hand, generally argued that Cartwright has provided certainty to how QOCS operates and that the proposed rule changes would have adverse consequences. Key concerns included:

• Access to justice issues if claimant solicitors refuse to accept instructions on the basis that they, rather than the claimant, face an increased financial risk for non-compliance with CPR Part 44.
• If the terms of set-off include costs, this could result in claimants being unable to insure against adverse costs.
• Defendants have the benefit of CPR Part 44.15 and Part 44.16 offering protection against genuinely unmeritorious claims.

What next?

On 2 February 2023, the Civil Procedure (Amendment) Rules 2023 were laid before Parliament. The amended CPR Part 44.14, as set out below, will come into force on 6 April 2023.

CPR Part 44.14

1. Subject to rules 44.15 and 44.16, 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, or agreements to pay or settle a claim for, damages, costs and interest made in favour of the claimant.
2. For the purposes of this Section, orders for costs includes orders for costs deemed to have been made (either against the claimant or in favour of the claimant) as set out in rule 44.9.
3. 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.
4. Where enforcement is permitted against any order for costs made in favour of the claimant, rule 44.12 applies.
5. An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.

Comment

The CPR rule change essentially reverses the decisions in Cartwright and Ho. For claims issued on or after 6 April 2023, defendants will be able to enforce up to the extent of orders or agreements for both damages, costs and interest.

For indemnifiers, this rule change is a welcome development. Nonetheless, as the changes are not retrospective, there is a risk that there will be a flood of claims being litigated prior to the amendments coming into force. Claimants may also seek to waive the application of the new rules, with the quid pro quo being that proceedings will not be issued. Such requests raise issues which are likely to require consideration on a case by case basis.

Defendants should therefore carefully monitor pre-action protocol compliance and raise any concerns around the premature issuing of proceedings. Further down the line, it will be interesting to see what sanctions will, or will not, be applied where claimants have issued proceedings only due to this CPR amendment.

Related item: Reforming QOCS: Kennedys welcomes proposals to even the playing field