Qualified One-Way Costs Shifting: An Overview
Qualified One-Way Costs Shifting (QOCS) is a legal doctrine in personal injury litigation that modifies the traditional cost rules between parties. Under the conventional "costs follow the event" principle, the losing party typically pays the winning party's legal costs. QOCS changes this arrangement to protect claimants from adverse cost orders, increasing access to justice. Established by the Civil Procedure Rules (CPR) 44.13 to 44.17, QOCS applies specifically to personal injury claims, claims under the Fatal Accidents Act 1976, and claims for psychological injuries.
The Legal Framework and Application of QOCS
QOCS was introduced as part of the Jackson Reforms in 2013 to address the imbalance faced by personal injury claimants in litigation costs. Under CPR 44.13 to 44.17, QOCS limits the circumstances in which a successful defendant can recover legal costs from an unsuccessful claimant. Specifically, it provides that claimants are not liable for defendants' costs except in limited situations, such as when the claim is struck out or the claimant is found to be fundamentally dishonest.
Scope of QOCS
QOCS applies to:
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Personal Injury Claims: Actions where the claimant seeks damages for personal injuries.
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Fatal Accidents Act Claims: Claims arising under the Fatal Accidents Act 1976.
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Claims for Damage to Property or Consequential Loss: When such claims arise from personal injuries.
The protection afforded by QOCS is automatic and does not require the claimant to apply for it.
Exceptions to QOCS Protection
While QOCS offers significant protection to claimants, there are notable exceptions where a defendant can recover costs:
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Fundamental Dishonesty: If the court finds that the claimant has been fundamentally dishonest in relation to the claim or a related claim, QOCS protection can be removed, and the claimant may be ordered to pay the defendant's costs.
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Strike Out: If the claim is struck out because it discloses no reasonable grounds, is an abuse of process, or is otherwise likely to obstruct the just disposal of proceedings, QOCS does not apply.
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Part 36 Offers: The interaction between QOCS and Part 36 offers can affect cost liabilities. If a claimant does not accept a defendant's Part 36 offer and fails to obtain a more advantageous judgment, the court may order the claimant to pay the defendant's costs from the date the offer expired. However, enforcement is limited to the amount of damages and interest awarded to the claimant.
Case Law Illustrations
Recent case law has further defined the application of QOCS.
Howlett v Davies [2017] EWCA Civ 1696
In Howlett v Davies, the Court of Appeal clarified the meaning of "fundamental dishonesty" under CPR 44.16. The court held that it is not necessary for the defendant to plead fraud explicitly; it is sufficient if the dishonesty is raised during the trial and the claimant has an opportunity to respond. If fundamental dishonesty is established, the claimant loses QOCS protection.
Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654
In Cartwright v Venduct Engineering Ltd, the court considered the application of QOCS in multi-defendant cases. The claimant settled with one defendant and continued against another. The claimant was ordered to pay costs to the successful defendant, but the QOCS rules limited enforcement to the aggregate amount of any orders for damages and interest made in favor of the claimant. Since the settlement was by way of a Tomlin order (which is not an order for damages and interest), the defendant could not enforce the costs order against the settlement sum.
Policy Rationale Behind QOCS
The implementation of QOCS reflects a policy decision to increase access to justice for individuals who have suffered personal injuries. Under the traditional cost rules, the risk of incurring substantial costs if the claim failed could deter claimants from pursuing legitimate claims. QOCS mitigates this risk by limiting the claimant's exposure to the defendant's costs, thereby encouraging the enforcement of rights.
This policy consideration recognizes the existing imbalance between individual claimants and often well-resourced defendants, such as insurance companies. By providing a form of cost protection, akin to a safety net, QOCS aims to level the playing field and ensure that justice is not denied due to financial constraints.
Practical Implications of QOCS
Impact on Litigation Strategy
QOCS has significant implications for both claimants and defendants in personal injury litigation.
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For Claimants: QOCS reduces the financial risk of bringing a claim, encouraging access to justice. However, claimants must maintain honesty throughout the proceedings to retain QOCS protection.
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For Defendants: Defendants may face difficulty recovering costs from unsuccessful claimants. This increases the importance of early assessment of claims and consideration of strategies such as making a well-pitched Part 36 offer to protect their position on costs.
Interaction with Part 36 Offers
Part 36 offers are formal settlement proposals with specific cost consequences if not accepted. Under QOCS, even if a claimant fails to beat a defendant's Part 36 offer, the defendant's ability to enforce a costs order is limited to the amount of damages and interest awarded to the claimant.
Example Scenario
Suppose a claimant rejects a defendant's Part 36 offer of £20,000 and proceeds to trial, where the claimant is awarded £15,000 in damages. The court may order the claimant to pay the defendant's costs from the expiry of the Part 36 offer. However, under QOCS, the defendant can only enforce the costs order up to the amount of £15,000 awarded to the claimant, effectively nullifying the claimant's damages.
This highlights the need for claimants to carefully consider Part 36 offers, as failing to accept a reasonable offer can result in losing the benefit of any damages awarded.
Strategic Considerations for Legal Practitioners
Understanding QOCS is important for legal practitioners advising clients in personal injury litigation.
For Claimants' Solicitors
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Assessing the Merits: While QOCS reduces cost risks, pursuing unmeritorious claims can still expose claimants to costs in cases of dishonesty or if the claim is struck out.
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Advising on Settlement Offers: Careful consideration of Part 36 offers is important, as rejecting a reasonable offer may result in costs consequences that diminish or eliminate the claimant's recovery.
For Defendants' Solicitors
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Investigating Dishonesty: If there is evidence of fundamental dishonesty, defendants may be able to remove QOCS protection and recover costs.
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Making Strategic Part 36 Offers: Crafting effective Part 36 offers can put pressure on claimants to settle and protect the defendant's position on costs.
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Early Evaluation of Claims: Assessing the strengths and weaknesses of a claim early on can inform litigation strategy and settlement negotiations.
Conclusion
Qualified One-Way Costs Shifting represents a significant modification to the cost rules in personal injury litigation. Under CPR 44.13 to 44.17, QOCS provides claimants with protection against adverse cost orders, except in specific circumstances such as fundamental dishonesty or strike out of the claim. The interaction between QOCS and Part 36 offers adds complexity to litigation strategy, requiring both parties to carefully assess their positions.
Recent case law, including Howlett v Davies and Cartwright v Venduct Engineering Ltd, has clarified aspects of QOCS, particularly concerning fundamental dishonesty and multi-defendant cases. These developments emphasize the importance of understanding the specifics of QOCS for effective litigation planning.
In personal injury claims, QOCS aims to ensure access to justice by reducing the financial risks for claimants. However, it also imposes a duty on claimants to conduct their cases honestly and responsibly. Both claimants and defendants must thoughtfully manage the rules of QOCS to achieve favorable outcomes.