Confused by QOCS? A brief summary of everything you need to know…

Qualified One way Costs Shifting (QOCS) was introduced in April 2013 for personal injury matters and it is essentially a rule that means a successful defendant cannot recover their costs from an unsuccessful claimant except in specific circumstances (such as the claim being fundamentally dishonest).

2018 saw 3 decisions of interest; one from the Court of Appeal, and 2 County Court decisions that conflicted each other. It is likely that the issues in the County Court decisions will be tested again, hopefully with binding authority.

Court of Appeal – 28/06/18: Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654

This was a NIHL (Noise Induced Hearing Loss) claim where the claimant pursued 2 defendants (as is often the case with industrial disease matters).

The claimant successfully negotiated settlement against defendant 1, and dismissed the claim against defendant 2. Defendant 2 argued that their costs (following the discontinued claim) could be enforced against the claimant up to the level of damages recovered from defendant 1. It was argued that the purpose of QOCS was to ensure that the claimant was no worse off after litigation had been conducted than before it had started. The court of appeal agreed – defendant 2 was entitled to their costs, limited to the amount of damages recovered from defendant 1.

This decision confirmed that a claimant was not entitled to QOCS protection when they issued against a defendant (in a multi defendant case where they succeeded against a different defendant) and their claim was ultimately unsuccessful (prior to this decision, the rule had been if no fundamental dishonesty had been proven by a successful defendant, then the claimant would be protected by QOCS in this scenario – the county court decision of Bowman).

The Cartwright decision means that litigators now need to be extremely vigilant when deciding against which defendants to issue their claim. If they do not adequately consider and evaluate the risks against each and every defendant, there is potential for a professional negligence claim.

The second issue decided in Cartwright was whether a successful QOCS defendant could enforce a tomlin order (remembering that a tomlin order is a record of settlement and not an order of the court). The rules state that QOCS applies to orders for costs made against the Claimant and therefore Cartwright found that defendants would not be able to enforce a tomlin order or Part 36 agreement in order to benefit from QOCS on the basis they are not orders made by the court. The order must either have been made at trial, or be within a consent order or provisional damages order.

Ketchion v McEwan – Jun 2018 (County Court decision)

This was an RTA matter where the claimant brought a claim for financial loss (but not personal injury). The defendant denied liability and issued a part 20 counterclaim for personal injury. The matter proceeded to a fast track trial – the judge found the defendant to be 100% at fault and therefore entered judgment and dismissed the counterclaim.

The claimant sought their costs but the judge ordered that the defendant was protected by QOCS (given the existence of his unsuccessful counterclaim). Therefore, despite the claimant succeeding in full, their costs were not recoverable as the defendant had QOCS protection. The claimant sought permission to appeal but this was dismissed – the judge found that the rules referred to “proceedings” and that this captured the claim AND counterclaim. It should not be limited to just the claim – any successful claim could be precluded from recovering costs by an unsuccessful counter claim.

Waring v McDonnell – Nov 2018 (County Court decision)

This was a claim involving 2 cyclists. One brought a claim for personal injury, the other a counterclaim for personal injury. The counterclaim was unsuccessful and the court found that the defendant/Part 20 claimant was not protected by QOCS. This decision was to deter the bringing of frivolous counter claims in order to avoid a costs order/benefit from QOCS. It was found that the defendant was not an unsuccessful claimant, but an unsuccessful defendant and that he would only have been entitled to QOCS protection if he had brought his own PI claim.

So, what’s next? 

It is recognised that there is currently some tension in the drafting of the QOCS rules, and that they need to be re-worded in order to iron out issues.  Currently, the term “proceedings” in Cartwright encompasses multiple defendants, however, in the county court decisions, “proceedings” do not include counterclaims.

There is also an increasing trend in defendants arguing fundamental dishonesty in order to set aside QOCS. There is currently limited authority on what constitutes fundamental dishonesty, however, the Court of Appeal decision of Howlett v Davies & Another [2017] EWCA Civ 1696 concluded that fraud did not have to be pleaded for the Court to make a finding of dishonesty. The defendant merely had to have given adequate warning to the claimant of their intention to submit evidence that could lead to the Court making such a finding, such as within their defence.

Finally, there is talk about extending the QOCS regime to non-clinical professional negligence claims, and also private nuisance proceedings. It, therefore, appears that QOCS is going to expand beyond the realms of personal injury in the not too distant future.

Joanne Chase is a Senior Associate Costs Lawyer in the Costs and Litigation Funding Department at Clarion Solicitors.

You can contact her at joanne.chase@clarionsolicitors.com and 0113 336 3327, or the Clarion Costs Team on 0113 246 0622.

 

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THE INDEMNITY PRINCIPLE – WHAT IS IT? IS IT IMPORTANT?

What is the Indemnity Principle?

A long-established principle which effectively means that a successful party cannot recover more in legal costs then they are liable to pay their solicitor under the terms of the contract with their solicitors.

Why does it exist?

To indemnify the winner for the reasonable legal costs incurred on the matter. In practice, the loser contributes to those costs.

If the indemnity principle did not exist, then a losing party could face a costs liability higher than the winner is liable to pay his solicitor. This would mean that a client would make a profit from the costs of the litigation which is not the intention of costs awards. The intention is to reasonably compensate the winner for the legal costs they have incurred.

Please note that there are some exceptions to the indemnity principle, for example, inter-partes claims for costs where the matter was funded by way of a Legal Aid Certificate, and fixed costs claims i.e. where the costs incurred are lower than the costs that can be claimed inter parties.

Key Case Law

Harold v Smith [1860] 5 H & N 381

Costs orders inter-partes are awarded as an indemnity to the receiving party. They are not awarded to impose a punishment on the party who pays them.

Gundry v Sainsbury [1910]

The Court of Appeal confirmed the underlying principle set out in Harold v Smith. The solicitor had acted for no charge and tried (unsuccessfully) to seek costs from the opponent. The court held that the solicitor was not entitled to recover costs as there was no agreement from the client to pay.

J H Milner & Son v Percy Bilton Limited [1966] 1 WLR 1985

Retainer (contract for services by the solicitor) is fundamental to the right to recover costs. No retainer equals no entitlement to recover costs from clients (and therefore no entitlement to costs inter-partes).

Is the Indemnity Principle important?

Taking into account the above cases (which remain good authorities) the indemnity principle is clearly very important and something which every contentious lawyer should have a sound knowledge and understanding of. Failure to do so can lead to serious professional consequences.

The importance of the indemnity principle is best illustrated by the case of Bailey v IBC Vehicles Limited [1998] 3 All ER 570 where the Court said that the signature of a Bill of Costs is that of an officer of the Court and that mis-certification of the Bill is a serious (disciplinary) offence.

In that case Lord Justice Henry said:

“the signature of the Bill of Costs under the rules is effectively a certificate by an officer of the Court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge under a contentious business agreement. The Court can (and should unless there is evidence to the contrary) assume that his signature to the Bill of Costs shows that the indemnity principle has not been offended”.

When lawyers sign costs budgets, statements of costs for summary assessment and Bills of Costs it is therefore fundamentally important to ensure that there is no breach of the indemnity principle.

I am now going to consider two recent cases regarding the indemnity principle:

Gempride v Jagjit Bamrah & Law Lords of London Limited [2018] EWCA CIV 1367

In this matter, the receiving party’s bill of costs claimed hourly rates higher than those which the client had agreed to pay their solicitor within the retainer. Furthermore, misleading information was provided in Replies to Points of Dispute in respect of the availability of before the event insurance.

The matter proceeded to the Court of Appeal where the Court imposed a penalty for the mis-certification of the Bill of 50% (Part 1 of the Bill of Costs only). Whilst the penalty in the end was not too severe, the real damage for the law firm was to its reputation.

HMRC v Gardiner and Others [2018] EWHC 1716 (QB)

This matter related to an appeal by HMRC in respect of an order for them to pay the Respondents’ costs in tax appeal proceedings. The Respondents were amongst several tax payers challenging penalties imposed by HMRC for incorrect tax returns.

The Respondent’s tax advisors were at the forefront of the work carried out. Counsel was instructed to represent the Respondents and the fees were paid by their tax advisors. HMRC alleged a breach of the indemnity principle (no direct retainer). That argument failed and the key points were as:

  1. There was never an agreement that the Respondents would never pay Counsel’s fees;
  2. Counsel was there to represent the Respondents, not their advisors;
  3. No difference to a trade union funding arrangement; and
  4. The key is a liability to pay (the Respondents were liable to pay the fees that were incurred, but the tax advisors paid them).This is a useful case to rely on where costs have been paid by a third party and a challenge is raised that there has been a breach of the indemnity principle as a result.


    Summary

    As you can see from the authorities, the indemnity principle has been with us for some time. Lord Justice Jackson recommended the abolition of the indemnity principle in his Final Report in 2010. He was of the opinion that the indemnity principle caused more problems than it solved. However, in my view the indemnity principle should always be in place whilst we have a cost shifting environment in England and Wales. Otherwise, it could encourage inflated claims for costs and allow clients to profit on the costs of litigation and therefore increase claims for costs – which would be contrary to the whole purpose of the Jackson Reforms!

    Do you have any views? – please feel free to share them.

    This blog was prepared by Andrew McAulay who is a Partner at Clarion and the Head of the Costs and Litigation Funding team. Andrew can be contacted at andrew.mcaulay@clarionsolicitors.com or on 0113 336 3334 or 07764 501252.

The Local Authority seeks orders to restrict the Husband’s contact with the Protected Party.

The case of SR v A Local Authority & Anor (2018), involves the Protected Party (SR), who was an 83-year-old woman who suffered from late onset Alzheimer’s, which was of moderate to severe intensity.

The Protected Party resides at a care home and lacks capacity to decide who she has contact with and to decide on any arrangements for such contact. The Local Authority raised awareness that the Protected Party may be at risk of harm in her husband’s sole care, due to his expressed views on euthanasia, which involved reference to throwing himself and his wife into a river and supplying her with tablets. The Protected Party’s husband also had restrictions placed on the care that he could provide to the Protected Party, such as having to be accompanied if he took her out of the care home. The Protected Party’s family wished for her to return home and the Protected Party has allegedly stated her wishes to be with her husband as she becomes distressed when he leaves her.

In determining whether the Protected Party would be at risk, the court reached the conclusion that the restriction sought by the Local Authority was neither justifiable, proportionate or necessary. They therefore declined to make the Order sought. It was believed that the Protected Party’s husband would most likely not harm the Protected Party, as he had been previously been with her many times unaccompanied. The Protected Party’s daughter also stated that her mother and her father were a happy and loving couple with no allegations of domestic violence ever having been made between them.

Unusual Granting of an Order to Prevent the Protected Party from knowing the full details of his Personal Injury Settlement following an application made by his Professional Deputy.

In this personal injury case, the judge had to grapple with an unexpected question – should a Deputy, appointed to manage the personal injury payment made to a brain-injured claimant, be allowed to not tell the claimant the exact amount that was awarded to him?

The case of EXB v FDZ

The case of EXB v FDZ (2018) was very unusual in that it involved an application by the Protected Party’s professional Deputy, and his mother as Litigation Friend, to prevent the Protected Party from knowing the full details of his personal injury settlement, which was deemed to be in his best interests.

This was a complex matter, as the Court recognised that withholding such information inadvertently affected the Protected Party’s rights. Judge Foskett explained in his judgement that he had never come across this issue before and he called upon assistance from Ms. Butler-Cole as a ‘friend of the Court’.

The Protected Party

The Protected Party sustained orthopaedic injuries, alongside a severe brain injury following a road traffic accident. The Protected Party was a backseat passenger in a car driven by the First Defendant. The Protected Party was not wearing a seatbelt and his damages were reduced accordingly, following an admission of contributory negligence.

Why was it in the best interests of the Protected Party to withhold settlement info?

The applicants submitted evidence from both themselves and professionals which detailed the reasons as to why it was in the Protected Party’s best interests to withhold the settlement information.

The Protected Party’s neuropsychologist stated that “Such knowledge would translate and impact upon his behaviour”. It was believed that the Protected Party would become fixated by the sum of money, that it would lead to him being extremely vulnerable and placed into a situation where he was likely to be financially exploited. Interestingly, the Protected Party himself expressed to his Deputy and the Court that he would be better off not knowing the sum; however, he also stated that he was conned into making such a statement. Following the accident, the Protected Party was very impulsive, and he often became very anxious when it came to money, struggling to budget and often living beyond his means.

The Judge gave careful consideration to the evidence submitted, as well as reviewing the relevant legislation, such as the Mental Capacity Act 2005 and the UN Convention on the Rights of Persons with Disabilities (CRPD). Following this, the Judge held that the Protected Party lacked the relevant decision-making capacity, finding that it was in the Protected Party’s best interests not to be told the value of the reward. The Judge also considered whether it was within the scope of a normal Deputy Order not to reveal the sum; however, the Deputy argued that it would make the Deputy’s life more difficult if the Protected Party believed that he was personally withholding the information and it was considered more appropriate for the Deputy to state that the Court prevented him from doing so.

Costs of the application

The next issue that arose was in respect of the costs of the application. The Claimant sought the costs of the application to be paid by the Third and Fourth Defendants of the Personal Injury claim, as their tort had necessitated. The Third and Fourth Defendants objected to paying the costs. Their defence stated that “they should not be responsible for the costs because all of the issues between them and the Claimant were concluded by the Settlement which was approved in April 2018” and that this particular issue was a ‘solicitor/own client’ dispute. Within the remit of the initial Personal Injury claim, there was no claim for costs attributable to this issue within the Schedule of Loss and there was also the fear that there may be an “open-ended commitment to pay the costs associated with any repeat applications”.

As the issue had been dealt with under the Court of Protection, it was necessary to apply the Court of Protection costs rules. The general rule being that where the issue concerns financial matters, the costs of all parties are to be borne from the Protected Party’s estate (Rule 19.2). The Court does have a broad discretion to depart from the general rule, if circumstances made a different order more appropriate (Rule 19.5). In this case, the Third and Fourth Defendants had not been made formal parties to the application, but they had been provided with an opportunity to make representations regarding the Costs Order being sought.

Judge Foskett held that the costs were to be borne by the relevant Defendants, as the need to make the application arose directly from their actions following the injury caused to the Protected Party, therefore departing from the general rule.

It will be interesting to see whether there will be any similar applications and what the outcomes will be. The Judge has invited the appropriate bodies to consider these matters and decide whether a consultation on this issue will be required.

This blog was prepared by Danielle Walker who is a Costs Lawyer within the Court of Protection Team. Danielle can be contacted at Danielle.walker@clarionsolicitors.com

 

 

Court holds that an application under CPR 44.11 to reduce a party’s costs on the basis of misconduct is not a vehicle to give paying parties a “second bite of the cherry”

In Paul Andrews & Anor -v- Retro Computers Ltd & Ors [2019] EWHC B2 (Costs), Master Friston held that an application that the receiving party’s costs should be reduced or disallowed under CPR 44.11 on the basis of that party’s conduct was not to be used as a vehicle to contest the order for costs made by the trial judge.

This update is a summary of a complex and lengthy judgment. A full analysis will follow in due course.

CPR 44.11

CPR 44.11 states (so far as relevant) that:-

(1) The court may make an order under this rule where –

(a) a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or

(b) it appears to the court that the conduct of a party or that party’s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper.

(2) Where paragraph (1) applies, the court may –

(a) disallow all or part of the costs which are being assessed; or

(b) order the party at fault or that party’s legal representative to pay costs which that party or legal representative has caused any other party to incur.

The Case

The Defendants applied under CPR 44.11(2)(b) on the basis that the Claimants’ conduct had been “unreasonable or improper”. There was no suggestion that the Claimants’ legal representatives had acted improperly or that there had been a failure to comply with a rule or practice direction.

Summary of Judgment

The court held that:-

  1. An application under CPR 44.11 is not a vehicle to allow the paying party to have a “second bite of the cherry”, and that issues which were before the trial judge (or which the parties were reasonably capable of bringing to the trial judge’s attention) could not be considered on such an application;

2. The conduct complained of must have been relevant to the proceedings;

3. There is a high bar for establishing that the conduct was unreasonable; and

4. The sanctions the court can impose are limited.

Conclusion

It is important that solicitors and advocates ensure that issues of conduct are raised at trial and are incorporated into the order for costs.

The issues which the court can consider are wide-ranging but should generally have some relevance to the proceedings.

There is a high bar to establishing that conduce was unreasonable, that “unreasonableness” is to be interpreted narrowly, and is conduct which is so bad as to “permit no reasonable explanation” or which “the consensus of professional opinion would regard as improper”.

The sanction which the court can impose will generally be restricted to disallowing the costs which have been incurred as a result of the unreasonable conduct.

Impersonating a Protected Party grounds for imprisonment – Dudley v Hill

Court of Protection orders imprisonment of a Respondent for falsely impersonating the Protected Party and breaching an injunction.

In the case of Dudley Metropolitan Borough Council v Hill (2018), the Court of Protection made an Order for committal to prison after the Respondent was found guilty of impersonating the Protected Party and incurring costs on the Protected Party’s behalf without the authority to do so.

The Court of Protection were concerned for the Protected Party, both in relation to his health and welfare and also his property and financial affairs. There had been a provisional declaration made within the proceedings that the Protected Party lacked capacity. The Protected Party resided in his own home with his support workers, and the Local Authority were heavily involved in the matter.

The Protected Party was an 82-year-old man who suffered from dementia and the Respondent had been impersonating the Protected Party for a significant amount of time. The Respondent was served an injunction which forbid him to directly or indirectly contact the Protected Party or come within 100 meters of his property. The Respondent breached the injunction by attending the Protected Party’s property on 25th November 2017 and in January 2018, the Respondent fraudulently arranged for the installation of BT equipment without the required authority. Furthermore, the Respondent made a large number of telephone calls from the Protected Party’s property, which incurred unnecessary charges and proved that he had entered the Protected Party’s property.

The Respondent was required to attend a hearing, which was to determine whether he had breached the Order for injunction. The Respondent failed to attend the hearing and the Court then found him guilty as a result of the breach of the Order of injunction. The Respondent was sentenced to 4 months imprisonment, to be served concurrently.

If you have any queries, please do not hesitate to contact Casey McGregor or the team at COPCosts@clarionsolicitors.com