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PI and Civil Litigation

Law - practice - procedure

27 AUG 2014

QOCS and Third Party Claims – Wagenaar v Weekend Travel Ltd [2014] EWCA Civ 1105

Daniel  Clarke

Barrister

QOCS and Third Party Claims – Wagenaar v Weekend Travel Ltd [2014] EWCA Civ 1105
Introduction
In Wagenaar v Weekend Travel Ltd [2014] EWCA Civ 1105 the Court of Appeal (Laws, Floyd and Vos LJJ) has handed down an important decision on qualified one-way costs shifting (‘QOCS’), one of the major innovations introduced by the Jackson Reforms.

As is by now well known, QOCS applies to proceedings which include a claim for damages for personal injuries. It does not apply to claims where the claimant has entered into a CFA before 1 April 2013. When it does apply, a claimant may recover costs if so ordered, but a defendant may only enforce a costs order in its favour to the extent that it does not exceed the damages and interest awarded to the claimant. This subject to certain exceptions, eg a defendant may be permitted to enforce a costs order to its full extent where the proceedings are struck out, or where the claim is found to have been ‘fundamentally dishonest’.

Background
In Wagenaar the claimant sued the defendant tour operator under the Package Travel, etc Regulations 1992 for injuries sustained in a skiing accident on 8 March 2007 on a package holiday in France. The defendant later joined the claimant's ski instructor as a third party.

In September 2013 the trial judge dismissed both the claimant's claim against the defendant and the defendant's claim against the third party. In October 2013 he ordered that: the claimant pay the defendant's costs, but that, since QOCS applied, the order was not to be enforced against the claimant; and the defendant pay the third party's costs, but that, since QOCS applied to the third party claim also, such order was not to be enforced against the defendant.
Issues

The defendant appealed, arguing that:
  • QOCS was ultra vires since section 51(3) Senior Courts Act 1981 provides that “[t]he court shall have full power to determine by whom and to what extent the costs are to be paid” and QOCS fettered this power. 
  • QOCS should not have been applied retrospectively. This was particularly unfair in this case as the defendant had taken all its litigation decisions before the QOCS rules had even been published. 
  • The defendant's junior counsel's CFA survived the QOCS reform because it was entered into before 1 April 2013. This meant that the defendant could at least recover the fees incurred under that CFA from the claimant.
The third party also appealed. She argued that QOCS did not apply to the third party claim, entitling to enforce her costs order against the defendant.

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Decision
The Court of Appeal rejected each of the defendant's grounds of appeal.

First, the QOCS rules were not ultra vires. The court’s power to determine by whom and to what extent the costs of any proceedings were to be paid under section 51(3) Senior Courts Act 1981 was to be read subject to the power of the Rules Committee to make rules of court applicable to particular circumstances. The QOCS rules (set out in CPR r44.13 to 44.17) were rules that the Rules Committee was empowered to make.

Secondly, there was nothing in CPR r44.13 to 44.17 to indicate that the QOCS rules were not intended to be retrospective. The presumption against retrospection did not apply to legislation concerned with matters of procedure, which were to be construed as retrospective unless there was a clear indication otherwise.

Thirdly, the defendant's junior counsel's CFA did not survive the QOCS reform. The exception for cases funded by a CFA entered into before 1 April 2013 applied only where a claimant had entered into a pre-commencement funding arrangement.

However, the Court of Appeal allowed the third party's appeal. QOCS did not apply to the third party claim. The defendant was therefore required to pay the third party’s costs. The whole thrust of the QOCS provisions was that they concerned claimants who were themselves making a claim for damages for personal injuries, whether in the claim itself or in a counterclaim or by an additional claim. By contrast, the claim between the defendant and third party related solely to the economic consequences of having to fund damages. QOCS did not apply to this. CPR r 44.13 did not therefore apply QOCS to the entire action in which any claim for damages for personal injuries was made.

The court saw no injustice in this. It was for the defendant to choose, in its own commercial interests, whether to bring the third party into the proceedings. In doing so, it would weigh up the pros and cons (including costs consequences). It was open to the defendant to have resisted 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.

Comment
The decision provides welcome clarification of several points. The most important for practical purposes is the non-application of QOCS to third party claims.

The relationship between the defendant and a potential third party is often governed by contract, including provision as to indemnities, costs and jurisdiction. However, this is not always the case. Not everything can be planned for. Defendants in such cases may now feel obliged to adopt the approach of defending the main action, awaiting the result and then considering bringing a separate action for an indemnity against the (would be) third party.

Often this will be a sensible course. However, it will not always be so straightforward. For example (as in Wagenaar itself) the third party may not be domiciled in the jurisdiction. This is very common in package travel claims. An English court would be likely to have jurisdiction over a third party claim. But it would be unlikely to have jurisdiction over a later ‘stand alone’ claim against a third party.

In such cases the defendant will have a choice. It can add the third party to the main claim. This ensures that the English court has jurisdiction over the claim. But it leaves the defendant open to the risk of an adverse costs order of the type made in Wagenaar. Alternatively, it can (if it loses) attempt to bring later, separate indemnity proceedings against the third party in a foreign jurisdiction. This entails obvious complications and drawbacks. The decision in Wagenaar seems likely to make the decision whether to join a third party in cases such as these much trickier.
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