Sometimes you just gotta roll the hard six.
-Unknown
On 2nd February 2023 The Civil Procedure Amendment Rules 2023 were laid before Parliament with the stated intention that they should come into force on 6th April 2023, amending the Civil Procedure Rules 1998 from that date. There appears to be a drafting error in rule 1, as the first two provisions are identical:
1.—(1) These Rules may be cited as the Civil Procedure (Amendment) Rules 2023 and comeinto force on 6th April 2023, except as provided by paragraphs (2) and (3).
(2) These Rules may be cited as the Civil Procedure (Amendment) Rules 2023 and come into force on 6th April 2023, except as provided by paragraphs (2) and (3).
(3) The amendments made by rule 24 of these Rules apply only to claims where proceedings are issued on or after 6th April 2023.
Nonetheless, the effect of rule 1(3) is tolerably clear. The amendments proposed by rule 24, are subject to transitional provisions, which mean that they only apply to claims where proceedings are issued on or after the 6th April 2023. As the amendments contained in rule 24, constitute a wholesale rewriting of the Qualified One Way Costs Shifting (QOCS) rules, which lie at the heart of personal injury litigation in this country, and reverse one Supreme Court decision and a number of Court of Appeal decision, this is very important.
Rule 24 provides:
24.In rule 44.14—
(a) in paragraph (1), for “damages” substitute “, or agreements to pay or settle a claim for,damages, costs”;
(b) after paragraph (1), insert—
“(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.”;
(c) renumber what was paragraph (2) as paragraph (3);
(d) after what will now be paragraph (3), insert—
“(4) Where enforcement is permitted against any order for costs made in favour of theclaimant, rule 44.12 applies.”; and
(e) renumber what was paragraph (3) as paragraph (5).
The rule change will sweep away the current orthodoxy grounded in Cartwright, Adelekun, Chappell and Harrison that where a personal injury case concludes by way of settlement, rather than at trial, there is nothing that a defendant can practically do to enforce a claim for costs in her favour. Whether the costs orders are made on an interlocutory basis, or at the conclusion of a case, by for example, a claimant accepting a part 36 offer out of time, there was nothing the defendant could practically do. Now a defendant will be able to go after any entitlement that a claimant has to damages and costs, to enforce and set off their own entitlements to costs accordingly, capped only at at the total of damages and costs notionally due to the claimant.
There is of course, an ample basis to argue that the Cartwright/Adelekun position was unfair, and also deleterious to the public weal, in that claimants could assume again some of the rags of super-claimanthood, that they had had to shed in April 2013. The counter argument, would be to point out that compensating parties decisively won the costs wars in April 2013, and the current costs battles are essentially fighting over scraps. But human memory being what it is, even without accusations of cupidity, compensating parties and those who represent them, have long forgotten the triumphant year of 2013, which no longer represents a year zero for them.
But I predict, that the pendulum has likely swung too far again, and there are going to be a number of unwanted, if readily foreseeable consequences, which flow from this rebalancing of the rules.
The first and most obvious one, is that by permitting enforcement against costs as well as damages, until the claimants entitlements are exhausted, it is inevitable, that a claimant will end up in debt to his own lawyers. Thus it is quite conceivable that by bringing a personal injury claim, a claimant may well end up losing his house, in order to pay his own lawyers. So what I hear you ask?
Well the rationale behind QOCS, was that a reasonable claimant who simply got the merits of his case wrong, would not have to lose his house to pay for the costs of the failed litigation. There will be scenarios, where a claimant’s solicitor, reasonably advises his client to reject a low offer. A long way down the line, an expert will change his opinion, and that offer will have to be accepted out of time, and a claimant will then face not only the loss of his own damages and costs, but have to pay his own lawyers from his own resources.
Secondly, and parasitic upon the first issue noted above, a wise claimant faced with a marginal chance of success, will be positively incentivised to press on to trial, either to vindicate his own case, or for the ancillary purpose of avoiding paying his own lawyers, by losing the case. This is logically nuts, but there will be cases, where the merits are not clear cut, and a claimants lawyers will find themselves locked in to trial, or bailing out and facing a solicitor-own client costs dispute.
Thirdly, these rule changes will give a second wind to the ATE insurance industry. For the last decade an optional extra, or reinsurance for a firm’s disbursement carry, ATE immediately steps back up to the line as an essential element of any case, in order to defray a defendant’s costs entitlements, or to look at it another way, to reinsure the claimant’s lawyers own fees, to ensure that these are not depleted by setoff. But the pricing for these policies, as they are likely to be called on more often, may change markedly, and the increased premiums will have to be borne from the claimant’s damages.
Fourthly, and immediately, all claimants in all personal injury cases, where proceedings might need to be issued, but have not yet been, need to be advised about the imminent rule change, and given advice that it is greatly in their interest to issue proceedings now, in order to retain the benefit of the enhanced QOCS protection that will enure to claimants who issue before 6th April 2023. This in turn will lead to any number of interesting premature issue arguments, in the next two years, where the essential argument will be that it was reasonable to take advantage of the transitional provisions.
Fifthly, and in consequence, the courts should be overwhelmed in March, by the number of cases issued, in order to take advantage of the transitional provisions. What will happen to all those cases? And what effect will it have on the existing backlog? And have any extra resources been made available by MOJ/HMCTS to deal with it? I think you know the answer to that one.
And finally, the transitional provisions put an end to an apocryphal belief among defendants that the QOCS amendments, would in some shape or form, be retrospective, permitting them to enforce against settlements made in the last 6 years. Leaving aside the problems with categorising QOCS rules as wholly procedural in nature or the clear conflict such a belief had with the principle of finality, that spectre at least has been laid to rest and claimants lawyers who have settled cases, without due regard to the imminent changes in the QOCS rules, can probably breathe a sigh of relief.