Claimants cannot “blow hot and cold” with qualified one-way costs shifting (QOCS) by terminating one conditional fee agreement (CFA) and signing a new one just to get the benefit of costs protection, the Court of Appeal has ruled.
Lord Justice Longmore said the “right construction” of the transitional rules was to apply them to any “funding arrangement” made before 1 April 2013, whether terminated or not.
He said that if they were applied only to “un-terminated” agreements, the claimant could “have the best of both worlds”.
He went on: “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 a 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.”
Delivering the judgment of the court in Catalano v Espley-Tyas Development Group  EWCA Civ 1132 , Longmore LJ said Ms Catalano entered into a CFA in June 2012 to bring a personal injury claim for the noise-induced hearing loss she had suffered as a textile worker.
Her application for after-the-event (ATE) insurance was rejected, but she obtained expert evidence in October 2012. The judge said there was no dispute between the parties that her CFA was a “funding arrangement” for the purposes of the transitional rules set out in CPR 44.17 and CPR 48.2.
However, Longmore LJ said Ms Catalano entered into a new CFA in July 2013, which “is said to have replaced” the prior arrangement.
The trial was due to take place in January 2015, but the claimant served a notice of discontinuance. The defendants served a bill of costs on Ms Catalano amounting to over £21,600 excluding interest.
Longmore LJ went on: “A dispute arose as to whether the QOCS regime was applicable to this case.
“Ms Catalano argued that the litigation services provided by her solicitors were provided pursuant to a funding arrangement made after 1st April 2013 and that QOCS (the new regime) applied so that she could not be liable for costs after discontinuance.”
Sitting at Manchester County Court, Deputy District Judge Harris found that the new regime was not applicable, following the approach taken by Master Haworth in Landau v The Big Bus Company.
Ms Catalano argued that DDJ Harris should have followed the approach taken by District Judge Phillips in a case at Cardiff County Court, Casseldine v the Diocese of Llandaff, although in that case the second CFA was made after 1 April 2013 with a new firm of solicitors.
Longmore LJ ruled that the concept of a “pre-commencement funding arrangement” under CPR 48.2 was “remarkably wide”, including not just agreements where services had been provided but also agreements made before 1 April 2013 for services in the future.
“It is clear that on the facts of this case, Ms Catalano’s solicitors did provide services to her before 1st April 2013 since proposals for ATE insurance were made (although in the event those proposals were declined) and experts were retained, one of whom had even submitted a report before 1st April 2013.
“Those services were noted and a charge of £5,375 was included in Ms Catalano’s solicitors’ costs budget.”
The Court of Appeal said it preferred not to express a “concluded view” on what should happen if no work had been done under the first CFA, as this situation would be “comparatively rare”.
However, on the situation in Casseldine where one solicitor terminated the retainer before 1 April 2013 and another firm made a new CFA after it, Longmore LJ said appeal judges “were doubtful” that the approach taken by District Judge Phillips could be supported.
He dismissed Ms Catalano’s claim. Lord Justices Beatson and David Richards contributed to the judgment. Senior Costs Judge Gordon-Saker sat as an assessor.