The Court of Appeal has ruled that qualified one-way costs shifting (QOCS) is not “ultra vires”.
Counsel for a holiday company argued that the rule, which protects claimants from costs orders even when they lose, breached Section 51(3) of the Senior Courts Act 1981. This provides that courts have “full power to determine by whom and to what extent the costs are to be paid”.
Lord Justice Vos said the introduction of the QOCS regime was “part of a wholesale reform of the funding of personal injury litigation”.
He went on: “It is just one of a raft of interconnected changes. If QOCS were to be struck down, there would need to be a complete rethink of the entire Jackson reform programme.”
Vos LJ ruled that the court’s power to determine by whom and to what extent the costs of any proceedings were to be paid under the Senior Courts Act was to be read “subject to the power of the rules committee to make rules of court applicable to particular circumstances”.
The case involved a personal injury claim following a skiing accident at Chamonix during a package holiday in the French Alps. The skiing instructor was joined to the action as a third party.
Delivering judgment in Wagenaar v Weekend Travel and another  EWCA Civ 1105 , Vos LJ accepted the argument put forward by the third party.
She appealed against a finding by the trial judge that QOCS should be extended to cover “claims for an indemnity or contribution” by defendants against third parties.
Rejecting this approach, Lord Justice Vos said: “The defendant was a commercial party in the business of supplying packaged skiing holidays.
“The fact that its insurance was for some reason vitiated in this case is nothing to the point. It chose, in its own commercial interests, to bring the third party into the proceedings as a third party because, no doubt, it thought it commercially to its advantage to do so.
“In doing so, it would have weighed up the pros and cons including the costs consequences, which, on the defendant’s own case, it expected to be the ones normally to be expected in litigation before these courts (before QOCS were introduced).
“The defendant could have chosen to resist the claimant’s claim on its merits and saved itself the trouble and expense of joining the third party and the risk of an adverse costs order.”
Vos LJ concluded: “In my judgment, therefore, the judge was wrong to hold that the QOCS regime applied to the proceedings between the defendant and the third party in this case.
“In these circumstances, the costs order that the judge made as between those parties must be set aside.”
He directed that the defendant should pay the third party’s costs. Lord justices Laws and Floyd agreed.