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Counterclaim Costs Conundrums – the application of QOCS to Defendants counterclaiming in personal injury

Mon, 19 Nov 2018

Rebecca Livesey

In County Courts around the country over the past year, it has become ‘fashionable’ to argue over the meaning of the word “proceedings” in CPR r.44.13.  The essential question is whether a Defendant, by virtue of bringing a counterclaim including personal injury, is afforded QOCS protection against the Claimant such that any orders for costs made against him cannot be enforced.  There are currently two contradictory cases on this point.

The first case in time is Ketchion v McEwan, which came before Judge Freedman in Newcastle, where the Claimant sought to appeal against a District Judge’s refusal of permission to enforce a costs order against the Defendant.  The District Judge held that the word “proceedings” in CPR r.44.13 referred to the whole of the matter before him, claim and counterclaim. 

Following the hearing of the original application, the Court of Appeal handed down its decision in Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654.  Judge Freedman sought to follow the ruling in Cartwright, reasoning that a wide meaning should be given to the word “proceedings”.  Whilst it was arguable that a divide could be made between claim and counterclaim, this was not the correct approach.  It was acknowledged that a wide view of “proceedings” could seem unjust, but if another result was intended, it would be explicit in the Rules.  The Defendant/Part 20 Claimant was afforded QOCS protection.  

The second case is that of Waring v McDonnell, an appeal which was heard before Judge Venn in Brighton County Court.  Here, the Part 20 Claimant was not afforded QOCS protection.  The judge delineated between the two separate roles which were being played by the same party.  He was a Defendant to the Claimant’s claim, and in this capacity was not afforded QOCS protection, but was a Claimant in his own counterclaim.  The reference to “proceedings” was not intended to encompass the claim and counterclaim. 

The Court in Waring conducted a teleological examination of the QOCS regime.  It noted that the intention was to protect Claimants in personal injury claims from adverse costs orders from insurer Defendants with deep pockets.  There was no intention for QOCS to protect liable Defendants from paying the costs of successful claimants, at least in their capacity as Defendant to the Claimant’s claim.   

Further, Waring examined the various unjust consequences which could flow from the decision in Ketchion.  These included:

  1. Incentivising personal injury counterclaims;
  2. Personal injury Claimants being singularly disadvantaged given that counterclaims would not arise in other areas such as employers or public liability;
  3. Claimant solicitors ceasing to act once a counterclaim was intimated as they would not recover their costs;
  4. Part 36 being rendered ineffective as any costs recovery would be limited to any damages recovered in the counterclaim;
  5. Insurers would likely be able to avoid paying any costs at all to a successful Claimant.

If such consequences were intended, said the Court in Waring, they would have been delineated in the Rules.  An unsuccessful Defendant should not be granted QOCS protection by virtue of bringing an unsuccessful personal injury counterclaim. 

Given these two existing decisions in conflict at County Court level, it is not difficult to see an appeal arising, or a clarification being placed in future editions of the Rules as to the meaning of “proceedings” in CPR r.44.13.  In the meantime, the issue is likely to be fought out on a regular basis as this continues to be a ‘fashionable’ argument.

Rebecca Livesey
Rebecca is the newest member of the Personal Injury Group at No5, having recently completed her pupillage. View her profile here

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