Carys Bishop, paralegal in our Serious Injury department, discusses the radical changes to qualified one-way costs shifting, due to come into force on 6 April 2023.
Qualified one-way costs shifting (QOCS) was introduced in April 2013 to help mitigate the removal of the provisions which allowed successful claimants to recover their solicitor’s success fee and After the Event (ATE) premium from the defendant. The current mechanism of QOCS is noted in Part 44.14(1) of the Civil Procedure Rules (CPR), and reads as follows:
“… 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 damages and interest made in favour of the claimant.”
The Court of Appeal in Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654 ruled that QOCS did not apply in settlements reached by Tomlin Order or by the claimant’s late acceptance of a Part 36 offer. Further, the Supreme Court in Ho v Adelekun [2021] UKSC 43 ruled that the defendant could set off their costs against the claimant’s costs, but only to the extent of the claimant’s order for damages and interest.
From 6 April 2023, CPR part 44.14(1) will be amended to say:
“… orders for costs can 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 or agreements to pay or settle a claim for, damages, costs and interest made in favour of the claimant.”
The changes are said to help rebalance the field between claimants and defendants with regards to costs recoverability. Defendants will now be able to set off any cost order in their favour against a successful claimant’s damages, costs, and interest. The new CPR part 44.14 also extends the QOCS regime to include all agreements to settle, including Tomlin orders and Part 36 offers. All claims issued before 6 April 2023 will come under the current QOCS regime, whereas all claims issued after 6 April 2023 will follow the new rules.
Claimant solicitors should now be considering whether it is in the best interests of their client to issue proceedings before 6 April.
What claimants need to know
If your claim has been formalised by the issue of court proceedings your claim remains under the current QOCS rules. If your claim is issued after 6 April 2023, your claim will fall under the new QOCS rules. If, during the course of the claim, you have lost an interim application, you would be responsible for the defendant’s costs of defending the application. The defendant’s costs could be taken from your damages, any order for costs in your favour, and the interest.
Additionally, any Part 36 offer made by a defendant could have serious cost consequences. A Part 36 offer is a formal offer to settle your claim and can be made by either party. If you fail to beat a defendant’s Part 36 offer at trial, you will be responsible for the defendant’s costs from the expiry date of the offer, which is 21 days after the offer is made. The defendant’s costs can again be taken from your damages, any order for costs and the interest. Consequently, serious consideration must be given to any Part 36 offer a defendant makes.
Discussion should be had with your solicitor prior to 6 April 2023 as to whether your claim should be issued so as to come under the current QOCS rules.
What solicitors need to know
Whilst the current QOCS rules are without doubt more favourable to claimants than the new QOCS rules, each case must be considered individually in order to determine whether it is suitable to issue proceedings. One must consider the risk of issuing early in cases without sufficient medical or liability evidence. Additionally, issuing early may prompt a defendant to propose an early Part 36 offer. Where medical evidence has not yet been finalised, it may be difficult to advise the claimant on whether the offer is reasonable, leaving them at risk of not beating the offer at trial. Careful consideration must also be given to claims with multiple defendants, as any successful defendant can now enforce an order for costs from the claimant’s damages, costs, and interest.
APIL’s Brett Dixon recommends some key measures that claimant solicitors should put in place before 6 April 2023. These include reviewing standard documents advising the client on QOCS and consider an updated letter of advice to clients where proceedings are not issued. Where claims have not been issued, clients should be advised as to whether their claim should be issued before 6 April, and why. Clients should be reminded of the risks of issuing proceedings early and the implications of the QOCS changes.
If a client is advised to reject a Part 36 offer, discussion should take place as to who will bear the defendants’ costs should the offer not be beaten at trial, i.e., whether the costs will come out of the client’s damages or the solicitor’s costs first. Consideration must be given if the claimant solicitor predicts that a costs order may be made in favour of the defendant during costs proceedings, particularly if the client has incurred unreasonable costs. The claimant solicitor may wish to consider retaining some of the damages awarded to cover the costs.
Claimants should be reminded of the consequences of QOCS whenever a cost event occurs, such as an interim order, a Part 36 offer is made, bringing in another defendant and during costs proceedings. Claimant solicitors must also consider whether an appropriate ATE policy could be put in place to protect the claimant against adverse costs orders.
Moving forward, Claimant solicitors should now be considering whether it is in their clients’ best interests to issue their claim before 6 April 2023. For all existing and new claims, clients should be well informed of the new QOCS costs consequences and their detrimental effect.
More information on the Ministry of Justice consultation on QOCS can be found here.
