Qualified one way costs shifting

QOCS is the catchy shortened version.

Since 1 April 2013 a new concept has been introduced for personal injury cases. If a Claimant’s case fails the unsuccessful Claimant does not have to pay the legal costs of the successful Defendant, but if the Claimant wins the Defendant pays the Claimant’s legal costs.

That sounds pretty extraordinary as for as long as I can remember the loser in personal injury claims paid the legal costs of the successful party.

So where is the catch? It lies in the qualified bit, which means the concept is not as clear as it first looks.

A claimant who succeedsbut does not beat a Defendant’s Part 36 offer, will be ordered to pay all of the Defendant’s costs from the date of expiry of the time for accepting the offer. In general the order for costs will be for no more than the compensation actually awarded by the Court. A Part 36 offer is a formal offer on liability/fault or on compensation. Also if the Claimant’s case is found to be “fundamentally dishonest” the Claimant could pay out more than just the compensation.

So you can march into a case thinking you are not at risk for the other side’s costs if you lose, but as soon as a competitive offer is made you can be at risk up to the value of the compensation eventually awarded. This is better than the rule which used to apply, as your liability was for all of the other side’s costs, and they often were more than the compensation.

This change has come about to control the cost of personal injury cases, as the cost is usually paid by the Government or an insurance company. To overcome the risk of paying the costs of the other side you can arrange insurance, called after the event insurance. Before these changes the premium was recovered from the Defendant along with the legal costs. The Defendant also paid your solicitors success fee if acting under a conditional fee agreement. Under the new rules neither the after the event insurance premium nor the success fee can be recovered from the Defendant.

Going back to QOCS there is still good reason to insure your risk of paying costs, but there will be a careful balancing act as the insurance premium will now have to be paid by you from your compensation. You also must appreciate that such insurance does not give you a free hand to bash on with your case. At all times the insurer must be satisfied the case continues to have reasonable prospects of success. An insurer told of an offer may take the view the offer ought to be accepted, and decline to cover the costs risk going forward.

So if a solicitor can no longer claim a success fee paid by the other side, can that fee be claimed from you. The answer is yes, if that is what you agreed at the outset. The amount you pay is limited to 25 per cent of the compensation for your injury and past losses. Solicitors will operate in different ways, but getting a good solicitor in the first place is the most important priority. So that is the case if a solicitor acts under a conditional fee agreement, but a new agreement is now possible, called a damages based agreement. In such a case the solicitor is entitled to a percentage of your compensation if the case is successful. The percentage is limited to no more than 25 per cent of past losses. I am not convinced these agreements will be used very often, and it is the Claimant who must think hard about whether such an agreement is the only option available. That subject needs a book and not a web page, but do take care and be sure you know what you are signing up to.

The law should make sense and be easily explained to a Claimant. I said “should.”

About Mark Thompson

Personal injury and accident specialist solicitor

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