A judge was wrong to order an unsuccessful claimant to pay the costs of parties added to a pre-LASPO personal injury claim after the qualified one-way cost shifting (QOCS) rules came into force, the Court of Appeal has ruled.
This was because QOCS did apply to the second and third defendants, the court ruled in Corstorphine (an infant) v Liverpool City Council  EWCA Civ 270.
The claimant child was seriously injured on a tyre swing and his mother sued Liverpool City Council in 2012 under a conditional fee agreement (CFA) backed by after-the-event (ATE) insurance.
In October 2013, the council made a part 20 claim against the manufacturer and seller of the swing, and the following year these second and third defendants were joined to the claim (called the additional claim).
After a four-day trial, Mr Recorder Edge dismissed the primary claim and, as a consequence, the additional claim too.
He ruled that QOCS did not apply and ordered the claimant to pay the defendant’s costs of the primary claim, including any costs of the other parties which the council had been ordered to pay, along with the second and third defendants’ costs of the additional claim.
This was because the two claims were based upon interconnected facts and issues and the outcome of the additional claim was contingent on the result in the primary claim.
The defendant council claimed over £200,000 in respect of its liability for the other defendants’ costs.
Under transitional provisions, QOCS does not apply where the claimant has entered into a pre-commencement funding agreement (PCFA).
The focus was on CPR 48.2(1)(a)(i)(aa), which says such an agreement must have been entered into before 1 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” [emphasis added].
The claimant argued that the “matter” the PCFA concerned was the claim against the council, but not the other defendants as they only became involved after QOCS came into effect.
Lord Justice Hamblen, giving the ruling of the court, agreed, noting the comments on Lord Sumption in last year’s Plevin v Paragon Personal Finance Ltd that the purpose of the transitional provisions was to preserve vested rights and expectations.
Hamblen LJ said: “At the time of the inception of QOCS, the [claimant] had no vested rights or expectations in respect of claims against the second or third defendants. Its sole rights and expectations concerned the claim against the respondent, which alone was the subject matter of the PCFAs.
“At the time of the PCFAs, the ‘underlying dispute’ was the claim against the [council], which was the only existing claim at that time. Similarly, it alone was the subject of the retainer…
“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 [claimant] should be liable to pay to the [council] the costs it had to pay the second and third defendants.”
This meant that Recorder Edge’s order had made the claimant “indirectly liable for costs which could not be enforced against him directly”.
Hamblen LJ cited previous authority that where QOCS applied to the main claim but not to 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.
“His decision should accordingly be set aside and this court may itself exercise that discretion. In my judgment, for the reasons outlined above, 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 [council] so as to exclude any costs of the second and third defendant parties which the [council] had been ordered to pay.”