QOCS rule changes now in force – has the imbalance been restored?

Following a much-anticipated review of the Civil Procedure Rules by defendants and their insurers, some balance has finally been restored to the Qualified One-Way Costs Shifting (QOCS) regime.

As of 6 April 2023, the existing issues with QOCS arising from the well-known decisions in Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654 and Ho v Adelekun [2021] UKSC 43 are a thing of the past, as changes to CPR 44.14 come into effect.

Where we were

Introduced in 2013, QOCS is a form of costs protection in personal injury and clinical negligence cases. The purpose of the scheme was to "ensure that a party is not denied access to justice because of the prospect of incurring liability for adverse costs beyond its means". However, the Civil Procedure Rules Committee (CPRC) has made it very clear that that was the intended extent of the protection. It did not anticipate that some claimants might incur costs arguing unmeritorious points without any risk to themselves, and at a significant cost to defendants. The decisions of Cartwright and Ho, allowed this to happen, extending QOCS's intended limited effect to protect claimants from adverse costs orders and negating the need for costly After the Event ('ATE') insurance premiums.

So, what exactly went awry? In short:

• The Court of Appeal's decision in Cartwright precluded defendants from enforcing cost orders in their favour against damages payable to a claimant pursuant to a Part 36 offer or Tomlin Order. In practice, this called into question the utility of offers for defendants.
  
  
• In Ho, the Supreme Court (citing Cartwright) went a step further and ruled that defendants were not able to recover costs awarded in their favour by off-setting them against costs awarded to the claimant.

Both judgments left it open to the CPRC to revisit the Rules, with the Supreme Court recognising that its ruling in Ho "may lead to results that at first blush look counterintuitive and unfair".

Where are we now?

Well, the CPRC listened, and the amendments to CPR 44.14 have now been implemented, effectively reversing the decisions in Ho and Cartwright, and restoring some balance to the regime. The CPRC confirmed its intention "to ensure that adverse behaviours in litigation are discouraged and the claimant bears adequate financial risk". The effect of the changes will allow a defendant to enforce a costs order in their favour against:

• A cost order in a claimant's favour (in addition to those for damages); and
• Damages and costs payable to a claimant pursuant to a Part 36 offer or Tomlin Order.

These changes will likely give renewed bite to Part 36 offers made by defendants and their insurers, encouraging competitive offers at an early stage and putting claimants at risk on their damages and costs if a reasonable offer is rejected. Where claims are settled by way of a Part 36 offer or Tomlin Order, defendants can now recover costs in certain circumstances, and if necessary, by set off against the deemed order for damages, interest, and any claimant costs.

The rule amendments only apply to claims issued on or after 6 April 2023. Given the increased pressure they present for claimants and their legal representatives (with enhanced exposure to defendant costs orders), we anticipate that there has been a flurry of cases issued protectively, ahead of the deadline. This may result in claimants circumventing their obligations under the Pre-Action Protocol for the Resolution of Clinical Disputes, which (ironically) could incur cost penalties. 

The potential for satellite litigation arising out of the rule changes cannot be ruled out as a result of claimants attempting to avoid their effect. With the intention behind the changes having been made very clear by the CPRC, it is hard to see that any such attempt will result in us finding ourselves back where we were.

Whilst these changes will be very much welcomed by defendants and their insurers, it is important to be mindful that QOCS protection has not been completely eroded. It remains the case that if a defendant wins at trial, or the claim is discontinued, it will be unable to recover any costs (as there will be no order for damages and costs to enforce against). Pending a fixed costs regime affecting all personal injury and medmal cases, defendants still need to have a careful eye on the cost benefit of defending even unmeritorious claims, but at least for now defendants and their insurers can be assured that they are back on a more level playing field.