Court of Appeal backs unsuccessful claimant against council over QOCS application

The Court of Appeal has allowed an appeal brought by an unsuccessful personal injury claimant over whether the qualified one-way costs shifting ("QOCS") regime in the Civil Procedure Rules applied to his claim involving a local authority.

The background to the appeal was that on 31 August 2010 the appellant/claimant suffered serious personal injury on an allegedly dangerous tyre swing located within a playground, at Calderstones Park in Liverpool.

Liverpool City Council was the occupier of the playground and owed a duty of care at law and under section 2 of the Occupiers Liability Act 1957.

The tyre swing had been designed and manufactured by a company named FHS Holztechnik, the second defendant, and purchased by the city council from Blakedown Landscape Operations, the third defendant.

The background to the case was:

• On 23 August 2012 the appellant by his litigation friend entered into a CFA with his solicitors. This was said to cover the claim for damages for personal injury against the respondent and provided for a success fee.
• On the same date the appellant also entered into a policy of After the Event Legal Expense Insurance. The ‘opponent’s name’ in the policy was stated to be the council/respondent. The policy provided cover against ‘opponent’s costs’ that the appellant was ordered to pay, subject to a limit of £25,000.
• On 28 August 2012, the appellant served a notice of funding of case or claim on the council.
• Proceedings were issued on 18 November 2012 against the council saying it was liable by reason of breach of s.2 of the 1957 Act and in negligence (the ‘primary claim’).
• On 1 April 2013 the QOCS regime came into effect.
• On 21 October 2013 the respondent/council issued a Part 20 claim against the second and third defendants (the ‘additional claim’).

In October 2015 Mr Recorder Edge rejected the claim for damages for personal injury after a four-day trial.

On 8 February 2016 he gave a further written judgment on the issues of costs. He held that there was no reason to depart from the general principle that costs follow the event and that the unsuccessful party should pay the costs of the successful one(s). He ordered that:

(1) The appellant/claimant pay the respondent's costs of the primary claim, including any costs of the other parties which the respondent had been ordered to pay;

(2) The appellant/claimant pay the second and third defendants' costs of the primary claim;

(3) The respondent/council pay the second and third defendants' costs of the additional claim.

In reaching these decisions, the judge held that the QOCS regime in CPR 44.13 to 44.17 did not apply to the appellant/claimant.

The appellant was refused permission to appeal on liability but granted permission in relation to costs. The costs order made was challenged on two related grounds:

(1) The judge erred in finding that the appellant's PCFA [pre-commencement funding agreement] encompassed the claims brought against the second and third defendants, with the result that he was not entitled to the benefit of QOCS in respect of their costs of the primary claim (Ground (1));

(2) The judge erred in the exercise of his discretion in directing that the respondent was entitled to recover as part of its own claim for costs against the appellant, those costs it had been ordered to pay the second and third defendants (Ground 2).

In Corstorphine (An Infant) v Liverpool City Council [2018] EWCA Civ 270 the Court of Appeal allowed the appeal and varied the costs order.

In relation to Ground 1 Lord Justice Hamblen – with whom Sir Geoffrey Vos, Chancellor of the High Court, agreed – said the essential issue between the parties related to the meaning to be given to “the matter that is the subject of the proceedings in which the costs order is to be made” (emphasis added by the judge) in CPR48.2(1)(a)(i)(aa).

Lord Justice Hamblen said that in the circumstances in his judgment “the correct construction of CPR 48.2 is that the relevant "matter" in the present case was the claim for damages for personal injury against the Respondent. In terms of CPR 48.2(1)(a)(i), that was the "matter" which was the "subject of the proceedings" and in relation to which "advocacy or litigation services were to be provided". It was "specifically" for the "purposes of the provision" of such services that the PCFA was entered into. In terms of CPR 48.2(2)(a)(ii) it was "proceedings" in relation to that claim that the ATE policy was taken out and which are the sole subject-matter of that policy.

“It follows that in my judgment the judge should have concluded that the QOCS regime applied to the claims made against the Second and Third Defendants. If so, that would have been a highly material factor to be taken into account in determining whether the Appellant should be liable to pay to the Respondent the costs it had to pay the Second and Third Defendants.”

On Ground 2, the Court of Appeal judge said that in an ordinary case of an additional claim which was closely interconnected with a primary claim, where both claims failed, the order made by the judge would be unexceptional. “This is not, however, an ordinary case.”

Lord Justice Hamblen said the consequence of concluding that the QOCS regime applied to the claims against the second and third defendants was that the appellant was entitled to QOCS protection in respect of adverse costs orders in respect of those claims.

“The effect of the judge's order is effectively to deprive them of that protection,” he said. “By ordering the Appellant to pay to the Respondent the costs of the Second and Third Defendants for which it is liable, the Appellant is made liable for virtually all those costs. In essence, it makes the Appellant indirectly liable for costs which could not be enforced against him directly.”

Lord Justice Hamblen added that there was Court of Appeal authority that drew a clear distinction with regard to the QOCS regime between costs relating to the claimant's claim and those relating to third party proceedings.

He said: “In a case in which the QOCS regime applied to the main claim but not to the third party proceedings, a successful defendant would not be able to enforce its costs order against the claimant and so the costs of the third party proceedings would lie where they fell. It would be surprising if a different result was to follow in a case such as the present where, although the QOCS regime does not apply to the claim against the defendant, it does apply to the claim against the additional parties.

“In these circumstances, I consider that the judge has exercised his discretion on an erroneous basis in that he has failed to take into account a highly material factor, namely the applicability of the QOCS regime to the claims against the Second and Third Defendants.”

Lord Justice Hamblen said Mr Recorder Edge’s decision should therefore be set aside, and that the Court of Appeal could itself exercise that discretion. “In my judgment…..the fair, just and proportionate order to make in the circumstances of the present case is to vary the costs order made in favour of the Respondent so as to exclude any costs of the Second and Third Defendants parties which the Respondent had been ordered to pay.”