Court of Appeal provides much needed clarity on QOCS where there has been pre and post 1 st April 2013 CFAs
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- Lenard Campbell
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1 Court of Appeal provides much needed clarity on QOCS where there has been pre and post 1 st April 2013 CFAs Darren Lewis, Barrister, St John s Chambers and Counsel in Casseldine Published on 31 July 2017 Case note: Catalano v Espley-Tyas Development Group Ltd [2017] EWCA Civ 1132 Introduction 1. The Court of Appeal Judgment in Catalano v Espley-Tyas Development Group Ltd [2017] EWCA Civ 1132 has delivered some much needed clarity to litigants as to when Qualified One Way Costs Shifting protection is afforded in case where there was a pre 1 st April 2013 and Post 1 st April 2013 Conditional Fee Agreement (aka a pre commencement funding arrangement ). 2. Prior to Catalano litigants were faced with two conflicting authorities Landau v The Big Bus Company, 31 October 2014, Senior Courts Cost Office, Master Haworth and Casseldine v The Diocese of Llandaff Board for Social Responsibility LTL 3/8/2015. (the latter being a case where the author represented the Defendant). QOCS where there has been a pre and post 1 st April 2013 CFA 3. By now most readers practicing in the civil litigation field will have read dozens of articles on what QOCS is and the limited occasions it is disapplied. In the present case the Court was only concerned with cases where there had been at least one pre 1 st April 2013 CFA and one post 1 st April 2013 CFA and what that meant for QOCS protection. 4. The relevant CPR provisions are: This Section does not apply to proceedings where the claimant has entered into a pre-commencement funding arrangement (as defined in rule 48.2). Page 1 of 5
2 5. CPR 48.2 defines a pre commencement funding arrangement as 48.2 (1) A pre-commencement funding arrangement is (a) in relation to proceedings other than insolvency-related proceedings, publication and privacy proceedings or a mesothelioma claim (i) a funding arrangement as defined by rule 43.2(1)(k)(i) where (aa) the agreement was entered into before 1 April 2013 specifically for the purposes of the provision to the person by whom the success fee is payable of advocacy or litigation services in relation to the matter that is the subject of the proceedings in which the costs order is to be made; or (bb) the agreement was entered into before 1 April 2013 and advocacy or litigation services were provided to that person under the agreement in connection with that matter before 1 April 2013; (ii) a funding arrangement as defined by rule 43.2(1)(k)(ii) where the party seeking to recover the insurance premium took out the insurance policy in relation to the proceedings before 1 April 2013; (iii) a funding arrangement as defined by rule 43.2(1)(k)(iii) where the agreement with the membership organisation to meet the costs was made before 1 April 2013 specifically in respect of the costs of other parties to proceedings relating to the matter which is the subject of the proceedings in which the costs order is to be made; Previous uncertainty 6. In the case of Landau v The Big Bus Company, 31 October 2014, Senior Courts Cost Office, Master Haworth ruled the QOCS regime did not apply when the Claimant had entered into a CFA prior to 1 st April 2013 which was subsequently terminated saying in relation to Counsel s Submissions: and then 11. He argued that pre-commencement funding arrangements in relation to CFAs are defined not by reference to the proceedings in which costs order is made but by reference to the matter that is the subject of those proceedings pursuant to Rule 48.2(1) (i) (aa). He argued that the distinction between proceedings and matter was deliberate and that the latter expression is wider than the former... It was submitted that it was Parliament s intention that a pre-commencement CFA entered into in this respect of a matter would disapply QOCS in any proceedings arising out of that matter 17. To my mind, Rule 48.2(1)(i)(aa) is clear that it refers to the matter that is the subject of proceedings and not proceedings in which the costs order is made. I accept the submissions of the Second Defendant that this distinction is deliberate one of the draftsman and that the reference to matter that is the subject of proceedings is wider in context than proceedings in which the costs order is to be made. Had that been the intention of the Civil Procedure Rule Committee the Rule could easily have read entered into before 1 April in relation to the proceedings in which the costs order is to be made. 18. In my judgment, the reference to the matter that is the subject of the proceedings implies and acknowledges that the matter might give rise to more than one set of proceedings. I accepts the Second Defendant s submission that it was clearly Parliament s intention that a pre-commencement CFA entered into in the respect of the matter would disapply QOCS in any proceedings arising out of the matter... Page 2 of 5
3 7. By contrast the Regional Costs Judge District Judge Phillips in Casseldine v The Diocese of Llandaff Board for Social Responsibility LTL 3/8/2015 distinguished the matter from Landau (where the CFA covered the substantive hearing and then an appeal) saying: and 33. In the case before me, proceedings were never commenced in relation to the first CFA but only the second. So far as the first CFA was concerned, it was the Solicitors (Thompsons) who terminated the CFA, and therefore had no entitlement to payment of any success fee or costs. 35. In the present case the Claimant issued proceedings pursuant to the conditional fee agreement entered into with her second Solicitors. That CFA was entered into post 1 st April 2013 and therefore the Court was never in a position to order the Defendant to pay the Claimant s additional liabilities. In my judgment that is an important consideration when considering the meaning of CPR and CPR 48.2 itself referring to subparagraph (aa) to the person by whom the success fee is payable The reference later in the rule to the matter that is the subject of proceedings does not in my judgment entitle the Court to order the Claimant to pay the Defendant s costs having regard to the circumstances of the case, and the fact no proceedings were ever issued in relation to that First CFA. 8. In essence litigants were faced with two conflicting approaches. One based on an expansive definition of proceedings and one with a narrow definition of proceedings and a focus on the notional recovery of additional liabilities or not. The danger of cherry picking 9. The narrow definition of proceedings and focus on notional recovery of additional liabilities leads to the danger of cherry picking or the Claimant having their cake and eating it. Essentially; at early stages work was being done on a CFA with an uplift but when prospects seriously reduced the old CFA could be ended and a new one entered into affording QOCS protection. Despite this danger being raised in Casseldine the Court was unmoved. 10. Readers may have a differing experience of how often this cherry picking manifested. Anecdotally the author has been informed by Defendant Solicitors, Insurers and Claimant Solicitors seeking to protect their client, that it has happened in a significant number of transitional cases, one also suspects the number of transitional cases are greater than those brought in a comparable period before and after LASPO coming into force. 11. The very significant effect of the other provisions of LASPO (the end of CFA uplifts) meant that Claimant s Solicitors understandably accelerated the volume of cases they took on and the date they entered into of CFA in order to maintain their uplifts. Counsel too were faced with an uncertainty as to whether their Solicitors pre commencement CFAs were sufficient for a later Counsel s CFA to be subject to an uplift and so a great many Counsel attended Solicitors on sign up days to risk assess and enter into CFAs so as to avoid the uncertainty. Consequently there are a glut of cases that fall in this transitional period. Far more than one might expect. The reader might also form the view these cases were afforded less rigorous early scrutiny than CFA cases entered into long before or long after the 1 st April 2013 deadline. Page 3 of 5
4 Catallano 12. In Catalano the Claimant s Solicitors had terminated the pre 1 st April 2013 CFA (just as Thompsons had in Casseldine.) They then entered into a post 1 st April 2013 CFA and claimed QOCS protection for their client. 13. The Court of Appeal recognised that the danger of cherry picking was a real one and should be guarded against. It also found that for the Claimant to be correct it would be necessary to read words into the Rule that were not there. 23 In these circumstances, unless Mr McGee is right to read the words a funding arrangement as an un-terminated funding arrangement, there was undoubtedly a pre-commencement funding arrangement within CPR 48.2(1). 24. We cannot accept that Mr McGee is right. Not only does he seek to read a word into the rules which is not there, but such a construction would lead to a situation where a claimant could have the best of both worlds. A claimant could make an agreement providing for a success fee and purchase ATE insurance and wait until shortly before trial to re-assess his or her prospects. If they appeared to be high, such claimant could continue and claim the cost of the ATE premium and the success fee as costs from the defendants; if they appeared to be low, he or she could cancel the original CFA, make a second CFA and then discontinue the claim a day later and escape the costs consequences. The framers of the rules could not have intended that a claimant should be able to blow hot and cold in that way. The right construction of the rule, therefore, is to give the words funding arrangement their natural meaning and apply them to any pre-1st April 2013 agreement (whether terminated or not). 25. It is also important to note that, while CPR provides that QOCS does not apply where a claimant has entered into a pre-commencement funding arrangement before 1st April 2013, the rule defining a pre-commencement funding arrangement is (unsurprisingly) the mirror image of the statutory provision which first prohibits the recovery of a success fee as costs but then preserves the position for CFAs entered into before the statutory provision comes into force which was 1st April The Court went on to explain that success fees were recoverable for litigation services that were provided under pre 1 st April 2013 CFAs even if they were terminated and to suggest otherwise would require words to be inserted into rule 44.6 that were not there. It confirmed 27. In any case, therefore, in which litigation services have in fact been provided under a CFA made before 1st April 2013, success fees can continue to be recovered as costs and QOCS will not apply even if the CFA is terminated and a second CFA is made. It follows that Ms Catalano s appeal will have to be dismissed Whilst in Casseldine, the Solicitors on the First CFA did not seek to recover their costs, notionally they could have. The Court of Appeal cautiously doubted District Judge Phillips finding that the Solicitors would not be able to recover its costs and additional liabilities and therefore doubted whether Casseldine was good law. 16. Any litigation services provided under a terminated pre 1 st April 2013 CFA and additional liabilities are notionally recoverable and therefore QOCS protection will be Page 4 of 5
5 disapplied to the whole proceedings not withstanding that a pre 1 st April 2013 CFA is terminated. Remaining problems 17. There remains uncertainty as to those cases where a pre 1 st April 2013 CFA is entered into and no litigation services are provided before terminating it and subsequently entering a post 1 st April 2013 CFA. The Court of Appeal doubted whether there would be many cases like this. Given the discussion above about the bulge of work and mass sign up of Claimants to CFAs the author respectfully suggests this might be a bigger problem going forward than the Court of Appeal anticipated. Certainly it can be contemplated that after signing up a glut of cases no recoverable litigation services are provided for a period of time and then on file review by another fee earner a view is taken on poor prospects and the old CFA terminated and a new one entered into or the Claimant is left to find a new Solicitor on a new CFA. 18. It will be very important to explore the previous litigation services provided when Claimant Solicitors take on new clients and are informed they were previously represented on a claim arising out of the same facts. 19. This may not be the last we hear on these transitional provisions. This article is provided free of charge for information purposes only, it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole. DARREN LEWIS ST. JOHN S CHAMBERS Tel: th July 2017 Page 5 of 5
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