Claimants Cannot Have the Best of Both Worlds: QOCS and Transitional Provisions
The recent case of Catalano v Espley-Tyas Development Group Ltd  EWCA Civ 1132 deals with the entitlement to costs protection under the QOCS (Qualified One-Way Costs Shifting) regime – which was brought in to compensate for the loss of recovery of success fees and ATE premiums.
The effect of QOCS (CPR 44.13 – 44.17) is that claimants in personal injury cases, who lose on liability or discontinue, do not have to pay the defendant’s costs, unless the claim is fundamentally dishonest or struck out. However, if the claimant has entered into a pre-commencement funding agreement, i.e. a conditional fee agreement or after-the-event insurance policy before 1 April 2013, QOCS does not apply (transitional provision CPR 44.17).
Ms Catalano was employed as cone winder in a textile factory in the 1960s. In 2012 she decided to bring a personal injury claim for noise-induced hearing loss against her former employer. As ATE insurers were not convinced she had any prospects of success, her application for ATE insurance was rejected. Despite that she entered into a CFA in June 2012 and obtained expert evidence in October 2012. Notice of this initial CFA was given to the defendant.
On 1 April 2013 recoverable success fees and ATE premiums were abolished and QOCS was introduced. The claimant entered into a new CFA on 15 July 2013 in order to replace the old one. Shortly afterwards proceedings were issued, however, the Notice of Funding given referred to the initial CFA.
Prior to the trial of the matter, which was listed for 14 January 2015, the matter was discontinued. The defendant prepared and served a bill of costs totalling over £21,600.00 excluding interest. Ms Catalano argued that QOCS applied to her case as the funding arrangement had been made post 1 April 2013 and as such she was not liable for the defendant’s costs.
The matter was heard before Deputy District Judge Harris, sitting as a Regional Costs Judge, who considered the cases of Landau v The Big Bus Company Ltd & Anor  EWCA Civ 1102 and Casseldine v The Diocese of LLandaff Board for Social Responsibility (a charity) (unreported) (3 July 2015) (Cardiff County Court). Deputy District Judge Harris found that the new regime was not applicable as the claimant had a pre-commencement funding arrangement. Permission was granted to appeal.
The appeal centered around the provisions of CPR 48.2(1) and CPR 44.17.
The Court of Appeal agreed with the decision of the Judge. They concluded that CPR 48.2 provided that a pre-funding arrangement did not just include an agreement where services have in fact been provided before 1 April 2013, but also an agreement before 1 April 2013 for the provision of such services in the future.
The Court concluded that it was clear on the facts of the case, Ms Catalano’s solicitors had provided legal services to her before 1 April 2013. In those circumstances they concluded that, unless the appellant’s counsel was correct to read the words “a funding arrangement” as “an un-terminated funding arrangement” there was undoubtedly a pre-commencement funding arrangement within CPR 48.2(1).
In reaching this conclusion they confirmed that if the appellant was correct it would give rise to a situation where a claimant could have the best of both worlds in that they could make an agreement providing for a success fee and purchase ATE insurance and wait until shortly before trial to re-assess his or her prospects. If they appeared to be high, such claimant could continue and claim the cost of the ATE premium and the success fee as costs from the defendants; if they appeared to be low, he or she could cancel the original CFA, make a second CFA and then discontinue the claim a day later and escape the costs consequences. This was not something that the rule makes envisaged. Ms Catalano’s appeal was therefore dismissed.
This is a sensible decision, as it makes it clear that a claimant in a personal injury case is either entitled to a recoverable success fee and ATE premium or QOCS protection, depending on the date of their CFA. It's not possible to rely on both, on the basis of the claimant’s risk assessment at different stages of the claim.
The judgment, however, does not answer all questions in respect of pre- and post-1 April 2013 retainers and QOCS. It is still not clear what the position would be in cases where a CFA is made before 1 April 2013 and before any work is done, a second CFA is made after 1 April 2013; or in cases where the retainer is terminated before 1 April 2013 and a second CFA is entered into with new solicitors after 1 April 2013.
While the above issues have not been dealt with, the decision provides clarity on cases where claimants attempt to have the best of both worlds. This is not possible as the CPR provisions are clear and apply to all retainers; some extra words cannot be added to the rules in order to make the claimant’s life easier.
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