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.
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.