Qualified One Way Costs Shifting (QOCS), one of the key changes brought about by the Jackson reforms generally means that in personal injury matters an unsuccessful Claimant does not have to pay the costs of the Defendant, unless the Claimant has entered into a Pre-April 2013 retainer.

Despite the QOCS regime coming into force over four years ago, the position where the funding of a claim changes from a Pre-April 2013 CFA to a post April 2013 agreement remained unclear, until recently considered by the Court of Appeal in Catalano -v- Espley Tyas Development Group Limited [2017] EWCA Civ 1132.

The matter was initially funded by way of a CFA which was entered into on 13 June 2012 and which was notified to the Defendant. On the 15 July 2013 the Claimant entered into a new CFA which was said to have replaced the prior agreement. Proceedings were then issued.

The Defendant was served with a Notice of Funding on 20 January 2014 which explained that the case was now being funded by the second CFA. The Notice of Funding referred to the existence of the earlier CFA which provided for a success fee but did not tick the box available for saying it had been terminated. The Claimant then discontinued the case shortly before trial. As a result she was liable to pay the Defendant’s costs.

The Claimant argued that the matter was pursuant to a funding arrangement made after 1 April 2013 and that as such the QOCS regime applied meaning that the Claimant could not be liable for the Defendant’s costs.

In the first instance decision Deputy District Judge Harris held that there was a pre-commencement funding arrangement and that as such QOCS did not apply. Accordingly the Claimant was liable to pay the Defendants’ costs.

The Claimant obtained permission for a leapfrog appeal to the Court of Appeal where the first instance decision was upheld ruling that, as additional liabilities provided under a terminated pre 1 April 2013 CFA are notionally recoverable, QOCS protection would be disapplied to the whole proceedings, notwithstanding that the pre 1 April 2013 CFA is terminated.

In reaching the decision the Court stated that:

“a construction would lead to a situation where a claimant could have the best of both worlds. A claimant 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. The framers of the rules could not have intended that a claimant should be able to blow hot and cold in that way. The right construction of the rule, therefore, is to give the words “funding arrangement” their natural meaning and apply them to any pre-1st April 2013 agreement (whether terminated or not).”

This decision further clarifies the grey areas arising by virtue of the transitional provisions where Claimants find themselves on both sides of the 1st April fence. The Court of Appeal rightly points out the unfairness of a construction that shows a potential misuse of the regimes, thus re-establishing the “why” of QOCS. However, there are still those unfortunate cases that fall through the cracks of the parity that was envisaged in the QOCS trade-off, for example pre-commencement deceased claims that can see the majority of costs incurred under a second post LASPO CFA, absent the additional liabilities uplift.