B e f o r e :
SIR GEOFFREY VOS, CHANCELLOR OF THE HIGH COURT
and
LORD JUSTICE HAMBLEN
____________________
Between:
| |
JACOB CORSTORPHINE
(an infant who proceeds by his mother and litigation friend Laura Ellis)
|
Appellant
|
| |
- and -
|
|
| |
LIVERPOOL CITY COUNCIL
|
Respondent
|
____________________
Andrew Hogan (instructed by EAD Solicitors) for the Appellant
Tim Kenward (instructed by Legal Services, Liverpool City Council) for the Respondent
Hearing date : 13 February 2018
____________________
HTML VERSION OF JUDGMENT APPROVED
____________________
Crown Copyright ©
LORD JUSTICE HAMBLEN :
Introduction
- This appeal concerns the application of the qualified one-way costs shifting ("QOCS") regime in CPR 44.13 to 44.17 in respect of an unsuccessful claim by the Appellant for damages for personal injury.
- The Appellant Claimant contends that the judge was wrong to conclude that the QOCS regime does not apply to the claim brought by the Appellant against the Second and Third Defendants, who were joined to the proceedings following a Part 20 claim being brought against them by the Respondent First Defendant. In consequence, it is said that he wrongly ordered the Appellant to pay the costs of the Second and Third Defendant which the Respondent had been ordered to pay.
Factual background
- On 31 August 2010 the Appellant suffered serious personal injury on an allegedly dangerous tyre swing located within a playground, at Calderstones Park in the City of Liverpool ("the Incident"). The Respondent 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 Respondent from Blakedown Landscape Operations, the Third Defendant.
Procedural Background
- On 23 August 2012, the Appellant by his Litigation Friend entered into a Conditional Fee Agreement ("CFA") with his solicitors. The CFA was said to cover the Appellant's claim for damages for personal injury against the Respondent and provided for a success fee.
- On the same date, the Appellant by his Litigation Friend entered into a policy of After the Event Legal Expense Insurance ("ATE"). The "Opponent's Name" in the policy was stated to be the 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 on the Respondent Notice of Funding of Case or Claim stating that:
"all claims herein … [are] now being funded by … a conditional fee agreement dated 23.08.12 which provides for a success fee [and] an insurance policy issued on 23.08.12 Policy no. C101 1525 [provided by] Windward Insurance PCC Ltd …".
- On 18 November 2012 proceedings were issued against the Respondent ("the Primary Claim"), alleging that the Respondent was liable by reason of breach of section 2 of the Occupiers Liability Act 1957 and in negligence.
- On 1 April 2013 the QOCS regime came into effect.
- On 21 October 2013, the Respondent issued a Part 20 claim against the Second and Third Defendants ("the Additional Claim"). By a court order of 15 August 2014 the Second and Third Defendants were also joined to the Primary Claim. The Primary Claim and the Additional Claim were ordered to be tried together.
- In July 2015 the case proceeded to a 4 day trial before Mr Recorder Edge. A written judgment on liability was handed down on 19 October 2015, dismissing the Primary Claim and, in consequence, the Additional Claim.
- On 8 February 2016 Mr Recorder Edge gave a further written judgment on the issues of costs and made the costs order which is the subject of this appeal. 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 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 pay the Second and Third Defendants' costs of the Primary Claim;
(3) The Respondent 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.
The QOCS regime
- The background to and the nature of the QOCS regime is helpfully summarised in the judgment of Longmore LJ in Catalano v Espley-Tyas Development Group Ltd [2017] EWCA Civ 1132 at [2]-[8]:
"2. 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 s.17 of the Legal Aid Act 1988.
3. 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.
4. 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)
5. Parliament accepted the principle of Jackson LJ's recommendation; after the event insurance premiums ceased to be recoverable as costs after 1 April 2013 save where the policy had been purchased before that date: s.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: s.44(2) of LASPO.
6 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).
7 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.
8 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 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 1st 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 1st April 2013 and advocacy or litigation services were provided to that person under the agreement in connection with that matter before 1st April 2013;
ii) a funding arrangement as defined by rule 43.2(1)(k)(ii) where the party seeking to recover the insurance premium took out the insurance policy in relation to the proceedings before 1st April 2013."
- A pre-commencement funding agreement ("PCFA") therefore includes under (1)(a)(i) a CFA which provides for a success fee and under (1)(a)(ii) an ATE policy.
The judgment
- In his costs judgment the judge held as follows:
(1) There was no issue as to the costs position between the Appellant and Respondent, as there was clearly a PCFA within the meaning of CPR 48.2 such that the QOCS regime was disapplied pursuant to CPR 44.17 (at [10]).
(2) The Appellant had entered a CFA backed by an ATE insurance policy prior to the introduction of QOCS. This is a funding arrangement as defined by CPR 43.2(1)(k), and the "advocacy or litigation services" were provided "in relation to the matter that is the subject of the proceedings in which the costs order is to be made". The "matter that is the subject matter of the proceedings" was the Appellant's claim for damages for personal injuries. The "proceedings" to which the CFA applied were those issued under Claim No. 2YN19822, initially only brought against the Respondent but to which the Second and Third Defendants were joined on 15 August 2014 (at [12]).
(3) QOCS was therefore disapplied pursuant to CPR 44.17.
(4) This conclusion was consistent with the construction of Master Haworth of CPR 48.2 in Landau v the Big Bus Company & Zeital [2014] EWCA Civ 1102 (at [13]).
- He also held that the Second and Third Defendants' costs of the Additional Claim should be added to the Respondent's costs of the Claim, reasoning that (at [15]):
(1) The Primary Claim and the Additional Claim were based upon interconnected facts and issues, particularly those relating to the condition of the swing, its design and construction, and its alleged dangerousness. Much of the written and oral evidence in the Primary Claim and the Additional Claim addressed these matters.
(2) The outcome of the Additional Claim was contingent on the result in the Primary Claim. On the facts of this case, particularly the recent installation and very limited use of the swing prior to the Incident, it was likely that the Respondent would seek to claim indemnity and/or contribution from the manufacturer and installer and/or the supplier. In all the circumstances, it was reasonable for the Respondent to bring the Additional Claim.
(3) As the Respondent succeeded in its defence of the Primary Claim, it was not necessary separately to determine the issues in the Additional Claim: its failure inevitably followed the outcome of the Primary Claim.
The Grounds of Appeal
- The Appellant was refused permission to appeal on liability but granted permission in relation to costs. The costs order made is challenged on two related grounds:
(1) The judge erred in finding that the Appellant's PCFA 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).
- For reasons of cost and expediency, the Appellant does not appeal the costs orders made in favour of the Second and Third Defendants in respect of the Primary Claim. We were informed that the amount of these costs was minimal, whereas costs of over £200,000 were claimed by the Respondent in respect of its liability for those Defendants' costs. It was contended, however, that the judge erred in his discretion in ordering these costs to be paid by the Appellant, primarily because he wrongly failed to take into account that the Appellant was entitled to QOCS protection in respect of costs liabilities to the Second and Third Defendants.
Ground (1)
- In relation to Ground (1), the essential issue between the parties relates 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) in CPR48.2(1)(a)(i)(aa).
- The Appellant contends that in the present case the relevant "matter" is the claim for damages for personal injury made against the Respondent. At the time of the PCFA that was the only claim being made; that was the only claim covered by the CFA and the ATE policy; that was the only claim in respect of which a success fee or ATE premium could be claimed, and that was the only claim in respect of which an indemnity for costs was being provided. In those circumstances, the PCFA did not disapply the QOCS regime in respect of the claims made against the Second and Third Defendants.
- The Respondent contends that the "matter" means the "underlying dispute", which is the claim for damages for personal injury. That "matter" was the subject of all the proceedings, both the Primary Claim and the Additional Claim. The PCFA was entered into in relation to that "matter" and those proceedings and accordingly the QOCS regime was disapplied in relation to all those proceedings.
- In the case of Plevin v Paragon Personal Finance Ltd [2017] UKSC 23, [2017] 1 WLR 1249 the Supreme Court considered what was meant by the equivalent terms in section 44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ("LASPO"). CPR 48.2(1)(a)(i)(aa) reflects and is in materially the same terms as section 44(6) of LASPO. The context in which the issue arose in Plevin was whether the transitional provisions applied to variations made to a pre-1 April 2013 PCFA in order to cover the costs of appeals, which variations were made after that date and the inception of the QOCS regime. The Supreme Court held (Lord Hodge dissenting) that they did so apply.
- In giving the majority judgment, Lord Sumption stated as follows at [12]:
"12. Paragon's case is that in relation to the proceedings in the Court of Appeal and the Supreme Court the variations of August 2013 and January 2014 were new agreements entered into after 1 April 2013 for the provision of litigation services after that date. They were not therefore covered by the transitional provisions of section 44(6) of LASPO. This is in my judgment a bad point. The "matter that is the subject of the proceedings" means the underlying dispute. The two deeds of variation provided for litigation services in relation to the same underlying dispute as the original CFA, albeit at the appellate stages."
- Lord Sumption explained that this was consistent with the purpose of the transitional provisions which he described as follows at [21]:
"21. The purpose of the transitional provisions of LASPO, in relation to both success fees and ATE premiums, is to preserve vested rights and expectations arising from the previous law. That purpose would be defeated by a rigid distinction between different stages of the same litigation."
- Lord Sumption also noted at [22] that the reason that section 44(6) referred to the "matter that is the subject of the proceedings" rather than "the proceedings" (as in section 46(3) – the equivalent of CPR 48.2(1)(a)(ii)) was because a solicitor's retainer will commonly cover services in relation to a "matter" other than advocacy and litigation services.
- That the transitional provisions apply to appeals is also borne out by the decision of Master Haworth in Michael Landau v The Big Bus Company (2014) unreported, 31st October 2014, upon which the judge relied. In that case Master Haworth summarised the rival arguments in the following terms:
"7. The Claimant contends that the claim at first instance and on appeal were different "proceedings" for the purposes of CPR 44.17. Accordingly, as he did not have a "pre-commencement funding arrangement" relating to the appeal, CPR 44.17 does not apply and consequently QOCS takes effect.
8. The Defendants' primary case is that this issue does not in fact turn on the construction of "proceedings" because the wording of CPR 48.2 makes that determination unnecessary. In the alternative, the Second Defendant's case is that the entirety of the case from issue to conclusion, including any appeal, are one "proceedings". Consequently, a pre-commencement funding arrangement in respect of any part of the proceedings deprives the Claimant of QOCS in relation to the whole of the proceedings".
- Master Haworth preferred the submissions of the Defendants and ruled that it "was clearly Parliament's intention that a pre-commencement CFA entered into in respect of the "matter" would disapply QOCS in any "proceedings" arising out of that matter" (at [17]).
- The Respondent relies upon this reasoning and contends that any Part 20 proceedings were similarly proceedings arising out of that "matter", namely the Appellant's original claim.
- The Appellant's case is not, however, inconsistent with this reasoning. His case is that the "matter" is the claim for damages for personal injury against the Respondent, and that would cover appeal proceedings relating to that claim. The issue is whether it also covers proceedings in relation to such a claim when it is brought against different parties in respect of which there is no PCFA.
- As has been explained, the purpose of the QOCS regime is to protect personal injury claimants from adverse costs orders. Originally that protection was provided by legal aid. Later it was provided by the complicated regime of CFAs and ATE policies. Now it is provided by the QOCS regime.
- In the present case, we are concerned with proceedings involving additional parties which were commenced after the QOCS regime came into effect. There is no CFA or ATE policy which applies to the claims against those parties. Unless the QOCS regime applies, the Appellant will have no protection against adverse costs orders in respect of such claims. Although it is suggested that a further or amended CFA and ATE policy could have been entered into, that assumes that it would have been lawful so to do after 1 April 2013. Even if it was, the Appellant might legitimately have taken the view that there was no need to do so once the QOCS regime applied.
- Lord Sumption explains that the purpose of the transitional provisions was to preserve vested rights and expectations. At the time of the inception of QOCS the Appellant 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 Respondent, which was the only existing claim at that time. Similarly, it alone was the subject of the retainer.
- In the above circumstances, in my 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.
Ground (2)
- 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 – see, for example, Johnson v Ribbins [1977] 1 WLR 1458 at 1464 (Goff LJ); Arkin v Borchard Lines Ltd [2005] EWCA Civ 655; [2005] 1 WLR 3055 at [72]-[77] (Lord Phillips MR). This is not, however, an ordinary case.
- The consequence of concluding that the QOCS regime applies to the claims against the Second and Third Defendants is that the Appellant is 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. 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.
- Further, there is Court of Appeal authority that draws a clear distinction with regard to the QOCS regime between costs relating to the claimant's claim and those relating to third party proceedings. In Wagenaar v Weekend Travel Ltd [2015] 1 WLR 1968 it was held that the QOCS regime does not apply to third party proceedings in relation to a claim for damages for personal injury and that the normal costs rules apply. As Vos LJ observed at [36], there is no good reason to suppose that the QOCS regime was meant to apply "to the costs of disputes between those liable to the injured parties as to how those personal injury damages should be funded amongst themselves".
- 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. 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 Respondent so as to exclude any costs of the Second and Third Defendants parties which the Respondent had been ordered to pay.
Conclusion
- For the reasons outlined above, I would allow the appeal and vary the costs order made below in the terms indicated.
SIR GEOFFREY VOS, CHANCELLOR OF THE HIGH COURT:
- I agree.
