QOCS: a shift in the balance of power

The Easter bank holiday must have been a very welcome break for exhausted claimant personal injury lawyers.

In a flurry of activity harking back to the pre-1 April 2013 frenzy that immediately preceded the Jackson reforms, lawyers rushed to issue PI claims before 6 April 2023. That was when the guillotine came crashing down on the original version of the qualified one-way costs shifting rules – and a major change came into force. In today’s predatory environment, solicitors who failed to press ‘go’ before that deadline could end up being sued by clients insisting that they could have benefited from the previous regime. But at the same time, those who jumped the gun before the claim was really ready risk falling foul of penalties built into the pre-action protocol to deter lawyers from issuing prematurely.

On 6 April, the balance of power within the qualified one-way costs shifting framework shifted considerably. Jackson’s 2013 version of QOCS was all about ensuring that honest claimants would not be deterred from bringing claims for fear of legal costs. That inevitably tipped the balance of the rules in the favour of claimants.

But at the time, it was still a good deal for defendants because it was far cheaper than the extremely expensive regime of recoverable success fees and additional liabilities that it was replacing.

As time went on, defendants made numerous attempts via the courts to dent the armour of QOCS. When these failed, the government stepped in to order the rule change that came into force this month. The effect is that QOCS no longer offers total costs protection to claimants. Where defendants have a costs order made in their favour – for example, because the claimant lost an interim application – the defendant can now enforce this against any damages, costs and interest awarded to the claimant. Previously, the defendant’s costs order could not be enforced, because of QOCS. So in effect, the new rule means that even though a claimant may have won their case, they could potentially find that their entire damages are swallowed up in paying the defendant’s costs. Even worse, with no damages left to pay their own solicitors, they could even find themselves in debt to their own lawyers – despite having won. It is easy to see why claimant representatives are worried about claimants’ costs protection being eroded.

On the plus side, the rule change does have the potential to encourage more claims to settle. The weakness in the first iteration of QOCS was that the absolute protection afforded to claimants took all the sting out of Part 36. Why make a timely acceptance of a defendant’s Part 36 offer, when there was no costs consequence for not doing so? Now, a late acceptance will mean that the defendant can enforce its costs against the claimant from the date that the offer expired to when it was accepted. The new rule incentivises defendants to make meaningful Part 36 offers that claimants will need to think very carefully about. But claimants will need to hold firm against any low offers that defendants may be tempted to throw around as they begin flexing their new-found costs muscles.

As claimants’ costs risks increase, we will inevitably see a rise in the need for after-the-event insurance to address those risks. But unlike in the pre-Jackson era, the cost of ATE premiums is now met by claimants, rather than defendants. Early signals from ATE insurers suggest that they are not immediately hiking prices. But premiums will always be linked to risk.

As the effect of the rules starts to filter through, the more ATE insurers have to pay out, the more they will charge.

How the new QOCS rule will affect litigation dynamics and behaviour will become apparent in the coming months. As well as the impact of Part 36, it will also be much more dangerous from a costs perspective for claimants to make – or resist – any interim applications, for example. Will that put them at a significant tactical disadvantage? But all that is still to come. For now, there is a glut of pre-6 April personal injury claims to be getting on with.

Rachel Rothwell is editor of Gazette sister magazine Litigation Funding, the essential guide to finance and costs.

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