We take a look below at exactly what these changes do and what they are likely to mean for those involved in personal injury litigation.
From 6 April 2023 the wide-ranging protection offered by the Qualified One-way Costs Shifting (QOCS) regime to claimants will be curtailed slightly, giving defendants’ offers much more bite if dismissed out of hand.
These changes will ultimately help bring the regime closer to its intended purpose – balancing access to justice and redress for those with meritorious claims and protection for defendants and their indemnifiers/insurers from those who seek to exploit the current rules.
The current regime
The introduction of QOCS in April 2013 shifted the costs landscape of personal injury claims significantly.
From that point on the usual “loser pays” philosophy of our adversarial system was, understandably, reigned in in such cases by limiting enforcement of any costs claimants were ordered to pay defendants up to “the damages and interest ordered to be payable to the claimant” (CPR 44.14(1)).
This meant that from that point on if a QOCS covered claimant had no order in their favour then a defendant has nothing to enforce any costs liability the claimant might have against. As one would expect, this has been subject to various challenges and developed interpretation over the years, the key parts of which are as follows:
- Cartwright v Venduct Engineering Ltd: damages received by way of Tomlin order and Part 36 offers alike cannot have a costs order in a defendant’s favour enforced against them as neither are “orders”.
- University Hospitals of Derby & Burton NHS Foundation Trust v Harrison: a defendant cannot enforce any costs order against a claimant for their late acceptance of Part 36 as there is no relevant “order” to enforce those costs against, effectively leaving claimants with very little penalty for poor conduct.
- Ho v Adelekun: QOCS does not allow the parties’ costs liabilities to be set off against each other.
- Pathan v Commissioner of Police of the Metropolis: where a claim becomes pleaded as one involving personal injury despite not originally being pursued as such, QOCS will apply even to the period before that change.
As such, rather than striking the intended balance, the regime has developed to one that protects claimants from penalties even where the conduct of their claim has been poor.
The new “settled” regime
The upcoming changes come into effect from 6 April 2023 and apply to all personal injury claims issued from this date onwards.
The most significant change is to CPR 44.14(1) and is as follows:
“(1) Subject to rules 44.15 and 44.16, 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 or agreements to pay or settle a claim for, damages, costs and interest made in favour of the claimant.”
This will allow defendants to enforce costs orders in their favour against any agreed settlement up to its total (made up of damages, costs and interest) and put an end to the rather superfluous need for an “order”.
New paragraphs 44.14(2) and (4) are also being inserted:
“(2) For the purposes of this Section, orders for costs includes orders for costs deemed to have been made (either against the claimant or in favour of the claimant) as set out in rule 44.9.
(3) … [current paragraph (2)]
(4) Where enforcement is permitted against any order for costs made in favour of the claimant, rule 44.12 applies.”
The new rule 44.12(4) reverses Ho, allowing successful defendants to set-off their costs against any costs orders made in favour of claimants (if applicable).
The changes bring with them four immediately apparent and rather significant implications for those bringing, defending and funding personal injury claims.
Defendants will have much more negotiating power than they have had in the last decade, with late acceptance of an offer now risking more severe costs penalties. As such, defendants and insurers alike should anticipate an influx of claims being issued before 6 April 2023 as claimants seek to preserve the bargaining power the current regime gives them.
However, before rushing headfirst into proceedings both parties should be mindful of the pre-action protocols which, as a general rule, provide for premature issuing of claims to bring with it its own penalties.
Claimants must satisfy themselves that they are not opening themselves up to unforeseen costs consequences by issuing prematurely and defendants should keep a very close eye on any claim issued in the run up to 6 April 2023 to determine whether there are any such arguments to be made.
Reductions in recovery
Claimants will now need to be more alive to the risk of losing part of their damages should they dismiss a defendant’s settlement offer out of hand. The same is true of the firms representing them, particularly when acting under a CFA as they will now be at greater risk of failing to recover costs they may otherwise been relying on.
More universally, all parties will now have to give that much more consideration to whether any settlement offer made or received is of a reasonable level. This is in particularly stark contrast to the current regime which has incentivised claimants and their representatives to bring claims with very low prospects of success on the tactical basis that defendants’ inability to recover any defence costs will pressure them into settling unmeritorious claims on a commercial basis.
After the event insurance
Even under the current regime it is common, perhaps more so in clinical negligence claims, for claimants to rely on after the event (ATE) insurance to fund part of their claim.
Given the more significant costs risks claimants will now face, it seems likely insurers will want to review their approach to funding such claims. There are many ways this could develop, but it seems likely that this will mean a more hands-on approach to the conduct of claimants’ claims and a closer funder’s eye on prospects of success.
Lastly, but as is always the case with any significant change, there is the possibility of future professional negligence claims if parties’ representatives do not pick up on these changes sufficiently quickly.
Defendant representatives will need to be advising on the additional effects this change has on any offers but the more significant risks falls to claimant’s representatives. They must now be mindful of the implications issuing a claim on or after 6 April 2023 will have on their clients’ potential costs liability. Such representatives will be at significant risks of future claims should they fail to advise their clients of the change and its implications.
Based on our experience, this is likely to mean an awful lot of redrafting in the near future if it hasn’t already!