Conflicting judgments on scope of QOCS: does it extend to a counterclaiming defendant?
Ketchion v McEwan [28.06.18] and Waring v McDonnell [06.11.18]
Two recent County Court decisions highlight the ongoing uncertainty as to the application of the qualified one way costs shifting (QOCS) regime - which provides that a legitimate, unsuccessful claimant does not bear the defendant’s costs except in limited circumstances – as to whether it extends to an unsuccessful counterclaiming defendant.
These two recent cases considered the application of QOCS in relation to a counterclaiming defendant, both reaching very different conclusions on the interpretation of “proceedings” under the relevant section of the Civil Procedure Rules (CPR) that sets out the scope and interpretation of QOCS. Part 44.13 of the CPR provides that QOCS applies to proceedings which include a claim for damages for personal injuries and a “claimant” is simply defined as a “person bringing a claim to which this Section applies….and includes a person making a counterclaim or an additional claim.”
The Judge in the latter case of Waring disagreed with the extension of QOCS protection to a counterclaiming defendant that had been applied in Ketchion, on the basis that this was not the aim of the QOCS regime.
The different outcomes are perhaps not surprising in light of the appellate courts continuing to grapple with the scope and definition of ‘proceedings’ under Part 44.13 of the CPR. Notably, in Wagenaar v Weekend Travel Ltd and Serradj , the Court of Appeal indicated that proceedings could in theory include “the entire umbrella of the litigation in which commercial parties dispute responsibility for the payment of personal injury damages”, before finally deciding that it should have a narrower construction and exclude Part 20 claims. More recently, in Cartwright v Venduct Engineering Limited [17.07.2018], the same court found that proceedings should be interpreted widely to encompass claims brought by a claimant against multiple defendants.
The defendant (with an unsuccessful personal injury counterclaim) was held to be entitled to benefit from QOCS protection in respect of the claimant’s costs of pursuing their successful claim, as well as the claimant’s costs of defending the counterclaim. HHJ Freedman ultimately concluded that the proper interpretation of ‘proceedings’ within Part 44.13 of the CPR is to both a claim and counterclaim, and as the rules confirm that QOCS applies equally to a party bringing a counterclaim, it must follow that the defendant can benefit from QOCS protection against enforcement of an order for costs in favour of the claimant.
An entirely contradictory approach was taken in Waring, which saw a defendant being denied the protection of QOCS in respect of the claimant’s costs of their successful claim.
The claimant and defendant cyclists were involved in a head on collision. The claimant brought a claim for personal injuries, the defendant subsequently filed a defence denying liability and brought his own counterclaim for personal injury. The matter was pursued to trial, where the claimant was successful and the defendant’s counterclaim was dismissed.
The Judge found that:
The defendant is not, in the claim in which he is the defendant, protected by the QOCS regime; in his capacity as defendant, he is not making a claim for damages for personal injury. In the context of CPR 44.13 and its application to this claim, the word “proceedings” is synonymous with “a claim’’.
HHJ Venn emphasised that a contrary decision would have undermined the intentions of the QOCS regime, incentivised defendants to bring unmeritorious counterclaims to avoid paying costs, and removed the teeth of Part 36 of the CPR if costs recovery was limited to the amount of any damages recovered in a counterclaim.
The approach taken in Ketchion affords significant costs protection to the defendant who has brought a counterclaim for personal injury and if preferred, it is likely that it will lead to considerable satellite litigation as to the merits of counterclaims. However, ultimately a binding decision from the higher courts is required to provide certainty and it seems most likely that the conclusions of the Supreme Court in Plevin v Paragon Personal Finance Ltd [29.3.2017] that “proceedings is not a defined term in the legislation…its meaning must depend on its statutory context and on the underlying purpose of the provision in which it appears” will influence the higher courts, with the approach taken in Waring being followed. Defendants must therefore be mindful that the inclusion of a counterclaim in proceedings may not necessarily provide them with the QOCS protection that Ketchion provided.