June Catalano v Espley-Tyas Development Group Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore |
| Judgment Date | 28 July 2017 |
| Neutral Citation | [2017] EWCA Civ 1132 |
| Docket Number | Case No: A2/2016/0351 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 July 2017 |
[2017] EWCA Civ 1132
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MANCHESTER COUNTY COURT
DEPUTY DISTRICT JUDGE HARRIS (Sitting as a regional costs Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
The Right Honourable Lord Justice Longmore
The Right Honourable Lord Justice Beatson
The Right Honourable Lord Justice David Richards
and
Senior Costs Judge Gordon-Saker (sitting as an assessor)
Case No: A2/2016/0351
Mr Andrew McGee (instructed by Woodward Solicitors Industrial Disease Ltd) for the Appellant
Mr Jamie Carpenter (instructed by DAC Beachcroft Claims Ltd) for the Respondent
Hearing date: 19 th July 2017
Judgment Approved
See Order at foot of this judgment.
Introduction
This appeal is about the transitional rules necessitated by the introduction of Qualified One-way Costs Shifting ("QOCS"). This is the judgment of the court.
Before 2000, the personal injury claimant in this case, Ms Catalano, would almost certainly have been entitled to legal aid and, in the event that she lost, would have been entitled to costs protection under section 17 of the Legal Aid Act 1988.
After the Access to Justice Act 1999 she was not entitled to legal aid but could fund proceedings through a conditional fee agreement ("CFA") and obtain costs protection by purchasing after the event insurance ("ATE insurance"). Typically such insurance covered not only liability for the other side's costs but also any liability to pay the premium in the event that the insured lost (payment of the premium was usually deferred until the end of the case). In the event that the insured won, the premium would be recoverable, in principle, from the other side as costs. Either way the claimant usually paid nothing – either for the other side's costs or for the premium. In effect the whole cost of ATE insurance was funded by unsuccessful defendants and their insurers. The same was true of any success fee agreed in the CFA.
In Jackson LJ's 2009 Review of Civil Litigation Costs, he recommended that success fees under conditional fee arrangements and ATE premiums should no longer be recoverable as costs from the defendant but he recognised that some form of costs protection would be required in personal injury cases. His intention was that claimants should have protection similar to that enjoyed under the pre-2000 legal aid provisions:-
"In personal injuries litigation it must be accepted that claimants require protection against adverse costs orders. Otherwise injured persons may be deterred from bringing claims for compensation. I recommend a form of qualified one way costs shifting in personal injury cases, as set out in chapter 19 below". (Final Report chapter 9 para 5.8)
"I therefore propose that all claimants in personal injury cases, whether or not legally aided, be given a broadly similar degree of protection against adverse costs. In order to achieve this result I propose that a provision along the following lines be added to the CPR:
"Costs ordered against the claimant in any claim for personal injuries or clinical negligence shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including:
(a) the financial resources of all the parties to the proceedings, and
(b) their conduct in connection with the dispute to which the proceedings relate." (Final Report chapter 19 para 4.7)
Parliament accepted the principle of Jackson LJ's recommendation; after the event insurance premiums ceased to be recoverable as costs after 1 st April 2013 save where the policy had been purchased before that date: section 46(3) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ("LASPO"). Any agreed success fee was to be recoverable out of the damages recovered by the claimant, subject to a cap: section 44(2) of LASPO.
By the QOCS rules ( CPR 44.13 – 44.17) claimants are, contrary to Jackson LJ's original proposal, given costs protection regardless of their resources. The effect of QOCS is that orders for costs made against a claimant in a personal injury action may be enforced only to the extent that the amount does not exceed any damages and interest awarded to the claimant: CPR 44.14(1). A claimant who loses on liability (or discontinues) will not therefore have to pay the successful defendant's costs. (There are exceptions for claims which are fundamentally dishonest or are struck out).
Overall the 2013 reforms are therefore favourable to defendants and their insurers, since the cost of defending unsuccessful claims should be significantly less than the amount of ATE insurance premiums and success fees formerly recovered by successful claimants.
The transitional provision ( CPR 44.17) provides that QOCS does not apply where the claimant has entered into a pre-commencement funding agreement. A pre-commencement funding agreement is a conditional fee agreement or after the event insurance policy entered into before 1 st April 2013. CPR 48.2 relevantly provides:-
"(1) A pre-commencement funding arrangement is –
a) in relation to proceedings other than insolvency-related proceedings, publication and privacy proceedings or a mesothelioma claim –
i) a funding arrangement as defined by rule 43.2(1)(k)(i) where –
(aa) the agreement was entered into before 1 st April 2013 specifically for the purposes of the provision to the person by whom the success fee is payable of advocacy or litigation services in relation to the matter that is the subject of the proceedings in which the costs order is to be made; or
(bb) the agreement was entered into before 1 st April 2013 and advocacy or litigation services were provided to that person under the agreement in connection with that matter before 1 st April 2013;
ii) a funding arrangement as defined by rule 43.2(1)(k)(where the party seeking to recover the insurance premium took out the insurance policy in relation to the proceedings before 1 st April 2013."
A "funding arrangement as defined by rule 43.2(1)(k)(i)" (as in force before 1 st April 2013) is a CFA which provides for a success fee.
Factual Background
Ms Catalano brought an action by a claim form issued on 26 th July 2013 for loss and damage suffered as a result of noise induced hearing loss sustained during employment. She claimed that while working for the defendant company as a cone winder she was exposed to harmful noise. A cone winder is a person in the textile industry whose job it is to tend the machines which spin yarn.
Proceedings were initially funded by way of a CFA entered into on 13 th June 2012. Evidence of this arrangement was notified to the defendant in a letter of claim dated 6 th September 2012. Also on that day, the claimant's application for ATE insurance was declined. Expert evidence was obtained during the period in which that CFA was in force. There was a written report from Mr D Walker dated 29 th October 2012 and also from Mr V Sharma dated 25 th May 2013. There is no dispute that this CFA was "a funding arrangement as defined by rule 43.2(1)(k)(i)" for the purposes of CPR 48.2 (1)(a)(i).
On 1 st April 2013 the QOCS regime came into force.
On 15 th July 2013 the claimant and her solicitors entered into a new CFA which is said to have replaced the prior arrangement. Proceedings were then issued in the County Court Money Claims Centre. On 16 th December 2013 the claimant's solicitors submitted their costs budget to the court which referred to pre-action costs of £5,375 as having been incurred. The defendant was served with a notice of funding on 20 th January 2014 which explained that the case was now being funded by way of a CFA dated 15 th July 2013. This notice referred to the existence of the earlier CFA of June 2012 "which provides for a success fee" but did not tick the box available for saying it had been terminated.
The trial was due to take place on 14 th January 2015. However, the claimant served a notice of discontinuance on 13 th January 2015. Pursuant to CPR rule 38.6 the claimant was, in principle, liable to pay the defendant's costs and a defendant's costs order was deemed to...
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