In what is becoming something of a pattern, the Rules committee have come along to clear up the anomaly resulting from the decisions in the Appellate courts, this time in Cartwright v Venduct Engineering Ltd  EWCA Civ 1654;  1 WLR 6137 and Ho v Adelekun  UKSC 43;  1 WLR 5132.
As all PI litigation lawyers know, Cartright precluded enforcement in cases where settlement had been agreed, limiting enforcement to those cases in which there had been a court order concerning the award of damages. Although this had the undoubted effect of encouraging ADR and settlement, it also had the perverse incentive of encouraging defendants to press to trial, while simultaneously robbing Part 36 offers of much of their teeth.
The Adelekun decision precluded the offset of costs against costs.
Therefore, in an effort to address these anomalies, April 2023 will usher in significant changes to CPR 44.14.
The effect of the changes will permit defendants to enforce costs orders made in their favour against costs orders made in favour of claimants.
Defendants will also be able to enforce costs orders in the overwhelming majority of cases in which the claim is concluded by way of acceptance of Part 36 offers or Tomlin Orders.
The Current Rule
Until 5th April 2023, CPR 44.14 reads as follows:
“Effect of qualified one-way costs shifting
(1) Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.
(2) Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.
(3) An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.
From 6th April 2023, The Civil Procedure (Amendment) Rules 2023, will change the Rule as follows (the changes are underlined for ease of reference):
Effect of qualified one-way costs shifting
(1) Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages or agreements to pay or settle a claim for, damages, costs and interest made in favour of the claimant.
(2) For the purposes of this Section, orders for costs include orders for costs deemed to have been made (either against the claimant of in favour of the claimant) as set out in rule 44.9.
(3) Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.
(4) Where enforcement is permitted against any order for costs made in favour of the claimant, rule 44.12 applies.
(5) An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.
As a PI claimant lawyer, what difference does this make?
- The change applies to those claims issued on or after 6th April 2023. The court may expect a rush of not-quite-ready claims to be issued before then with an immediate application for a stay.
- Part 36 offers will now have the added incentive that costs after the 21-day period can now (subject to agreement to the contrary) be enforced against damages, without the need for a court order.
- The need for (or desirability of) ATE cover now becomes an essential conversation at the outset of every new claim.
- The tactical considerations in making or resisting interlocutory applications will change.
- Adverse interlocutory costs orders are now enforceable. Therefore, claimants will need to consider carefully the costs implications of making such applications; and how best to respond to those made by the defendant.
- If the claimant is obliged to make an application where they will not recover the costs (a relief from sanctions application, for example), where will the adverse costs consequences fall – on the client or on the solicitor?
- The defendant will now be able to recover costs up to the damages cap but in addition, up to the costs recoverable by the claimant. Accordingly, the amount of costs that the defendant will theoretically be able to recover, is much greater than before either of these cases reached the Appellate court.
- It seems inevitable that these changes will, of themselves, generate satellite litigation which – if recent history is any guide – will feed into further rule changes.
What do claimant firms of solicitors need to think about in respect of their retainers because of these changes?
The changes to QOCS will also introduce potential areas of conflict between claimants and their solicitors.
Consider the scenario whereby a claimant rejects a Part 36 offer which they later fail to beat at trial. This could happen because the defendant’s offer is well pitched, and the claimant fails to make out the entirety of their factual case at trial. But it could also happen there is a change of prognosis as the case develops. It is entirely possible that such an offer could wipe out the claimant’s damages. Further, depending on the wording of any CFA in use, it is equally possible that the claimant will have ‘won’ for the purposes of the CFA and will therefore be liable for their solicitors’ fees. Some CFAs provide that if the offer is rejected on the solicitors’ advice that no/reduced fees will be payable after that point if the offer is not beaten. However, that is not necessarily the case and it may therefore be that the client is liable for all of their own solicitors’ fees whilst recovering nothing from the defendant.
A similar scenario exists where a defendant has a costs entitlement that will be set off against the claimant’s entitlement to damages and costs (whether by reason of a Part 36 offer being accepted outside the relevant period or because of a successful interim application). In this case, the defendant will pay the total of the claimant’s damages and costs entitlement minus their own entitlement to costs. That will give rise to the question of how the resulting sum is to be apportioned between the client’s damages and their solicitors’ fees.
It is not difficult to envisage a dispute between the client and their solicitor where each considers that they ought to be paid first, with the surplus (if any) left for the other. The position as to who is right in such a dispute will be governed by the contractual agreement between the client and the solicitor. And these contractual terms should be reviewed, in light of the forthcoming change
PI claimant solicitors’ firms would therefore be well advised to consider what approach they will take to such questions now, before they arise. They should then ensure that that approach is reflected by the terms of their retainer documents. When doing so they should be mindful of the importance placed by the Court on full and clear explanations following Herbert v HH Law  EWCA Civ 527;  1 WLR 4253 and Belsner v CAM Legal Services  EWCA Civ 1387;  Costs LR 1569. It would be prudent of any solicitor to make sure that their explanations were clear such that they could not be challenged on the basis that the client did not give informed consent.
Firms would be well advised to avoid the temptation to provide for a better scenario on fee recovery in their retainer than they intend to apply on the basis that they will apply discretionary reductions on a case-by-case basis. The Master of the Rolls was critical of such practice in Belsner, albeit in the context of solicitors’ costs entitlement in low value portal claims. Solicitors should decide how they will approach this and set that out in their contractual documents.
There has been a considerable rise in the number of solicitor-client costs assessments in recent years and it seems likely that points coming out of the QOCS changes will give rise to more arguments in that sphere.
Things for claimant solicitors’ firms to consider:
- Their policy on recovering sums from their client where QOCS reduces/eliminates the client’s recovery despite the claim being successful.
- How this is reflected in the CFA, terms of business etc.
- How this policy is explained to clients in any accompanying documents.
Colm Nugent is a barrister in Gatehouse Chambers’ Personal Injury and Clinical Negligence team.
Martyn Griffiths is a barrister in Gatehouse Chambers’ Costs team.
 At paragraph 85.