What is QOCS?

A new acronym is set to join CFA1, CMC2, ATE3 and BTE4 in the personal injury litigation costs lexicon from 1 April 2013. Coined by Lord Justice Jackson in his review of costs and funding, it stands for “Qualified one-way costs shifting”.

Under the so-called “English rule” of two-way cost shifting, the loser usually pays the winner’s costs. So, at the moment, all the successful claimant’s costs, including the success fees under conditional fee agreements, are payable by the losing defendant. And if the claimant loses, the defendant’s costs are paid by an after-the-event insurance policy which is taken out by the claimant, but with the premium in effect being paid by other unsuccessful defendants. Rather than simply “no win no fee”, the current system might be described as “no cost to the claimant, win or lose”.

Under Lord Justice Jackson’s reforms, success fees (and after-the-event insurance premiums) will no longer be recoverable from defendants. Instead, the claimant will have to pay any success fee out of the damages recovered, but he will still recover the rest of the costs if he wins. Under “qualified one-way costs shifting”, if the claimant loses a personal injury case he will not normally have to pay the defendant’s costs. Lord Justice Jackson says that as most defendants in personal injury cases are insured, and most personal injury cases are won, this justifies moving away from the “English rule”5.

This one-way cost shifting is to be “qualified”. But to what extent? If this qualification were too wide, it might act as a disincentive to genuine claimants and require them to take out insurance against adverse costs risks at their own expense. However, if too narrow, the protection against paying costs might encourage frivolous claims.

At the end of May the Ministry of Justice commissioned the Civil Justice Council to report on technical aspects of qualified one-way cost shifting. The working group comprised representatives from all sides and was to report no later than 30 June 2012. I represented the Law Society on the working group. The written ministerial statement arising from the working group’s report to government is at https://www.parliament.uk/documents/commons-vote-office/July_2012/10-07-12/11-MOJ-Civil-Litigation-Funding.pdf.

The government has decided that there should be no means testing of claimants and no minimum payments. The costs protection will only be lost if the claimant is guilty of fraud or has brought a case that is so hopeless that it should be struck out as an abuse of the court process. The costs protection will continue in the case of an appeal by either side.

Cases which contain a personal injury element alongside other claims (e.g. some housing disrepair cases) are also likely to have the benefit of the cost protection, although there remain concerns that this is not appropriate in the case of some subrogated claims such as credit hire.

One tricky issue was the extent to which the claimant should lose the costs protection if he rejects an offer of settlement and then fails to beat that offer at a trial. The government has said that the claimant should be ordered to pay the defendant’s costs after the date of the offer, but only to the extent of the amount of damages awarded. In other words, the claimant will not have to pay anything extra out of their own pocket towards the defendant’s costs. It is arguable that this will still act as an economic incentive for claimants to under-settle because the effect of a mis-judgment is potentially the loss of a significant amount of damages. But at least a capped liability is better than an uncapped one.

Whilst the impact of the overall Jackson reforms on litigation remains uncertain, QOCS now looks as though it is at least a feasible mechanism to operate to protect personal injury claimants against adverse costs.

1. Conditional Fee Agreement
2. Claims Management Company
3. After the event legal costs insurance
4. Before the event legal costs insurance
5. The government has, however, decided to limit QOCS to personal injury cases “in the first instance”.

*Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*