Part 2:Qualified One-way Costs Shifting and Counterclaiming Defendants
Qualified One-way Costs Shifting and Counterclaiming Defendants – Part Two: HHJ Venn adopts a narrower interpretation of CPR r. 44.13 to restrict QOCS protection to the costs of the claim (and counterclaim)
Christopher McClure compares the decision of HHJ Venn in Waring v McDonnell  EW Misc B11 (CC) with that of HHJ Freedman in Ketchion v McEwan (C87YJ176, Newcastle-upon-Tyne, 28 June 2018).
The decision in Ketchion was especially difficult for claimants to swallow. As outlined in our immediately foregoing article – ‘Qualified One-way Costs Shifting and Counterclaiming Defendants – Part 1’ – claimants who found themselves the subject of a counterclaim which included an element of personal injury were, subject to a very limited number of unlikely exceptions, effectively precluded from recovering costs per se from their defendant/counterclaimant opponent.
Claimant-centred concerns regarding the exploitation of QOCS by unscrupulous defendant-insurer companies were put to the sword in Ketchion by reference to principle: if the counterclaim for personal injury was without merit then it could be struck out and the counterclaiming defendant dis-availed of QOCS protection accordingly.
But as cost of testing the veracity of a counterclaim would make it something of a false economy to apply in practise what the court in Ketchion had suggested in principle, the reality for claimant solicitors is a real and genuine risk of being put to costs which are, on balance, unlikely to be recovered inter partes, i.e. the costs of the claim itself.
Ketchion places claimants in a position whereby costs (which are unlikely to be recovered) must be incurred to test the potential for costs recovery per se
It will be recalled that Coulson LJ in Cartwright v Venduct Engineering Limited  EWCA Civ 1654 afforded a very wide definition to the term “proceedings” for the purposes of CPR r. 44.13; it was on this basis that HHJ Freedman in Ketchion determined that:
“[T]he proper interpretation of CPR 44.13 is that the reference to proceedings is to both the claim and the counterclaim; and that since it is expressly stated that a Claimant includes a person who brings a counterclaim/additional claim, it follows that the Defendant/Part 20 Claimant has the protection of QOCS.”
The Court in Waring disagreed by favouring a narrower interpretation of “proceedings” under CPR r. 44.13.
The claimant’s argument was summarised by HHJ Venn in the following terms:
“The claimant says that he succeeded in his claim and he should be entitled to recover the costs of doing so; the defendant failed in pursuing his counterclaim and should enjoy QOCS protection against having to pay the claimant’s costs of defending the counterclaim.”
Moreover, it was submitted on behalf of the claimant that an unsuccessful defendant/counterclaimant should not enjoy QOCS protection in respect of those costs incurred by the claimant in bringing the claim (as opposed defending the counterclaim).
HHJ Venn agreed with the claimant. By reference to CPR Part 20 (and specifically CPR r. 20.2(2)) the claimant and counterclaim brought by claimant and defendant respectively were treated as two separate claims and thus “in the context of CPR r. 44.13 and its application to this claim, the word “proceedings” is synonymous with ‘a claim’.”
The Judge continued to find that:
“The defendant is not, in the claim in which he is the defendant, protected by the QOCS regime; in his capacity as defendant, he is not making a claim for damages for personal injury.”
HHJ Venn relied on the following considerations in support of her decision:
• Defendant insurers to claims for personal injury would be incentivised to encourage counterclaims for damages for personal injury in order to qualify for QOCS protection against a claimant’s costs of bringing a successful claim;
• Claimants making a claim for damages for personal injury arising from a road traffic accident would be significantly disadvantaged when compared to those making claims for personal injury in any other context (e.g. employers and public liability, clinical negligence, etc.) given that the opportunity for making a counterclaim is, in any other context, far less likely to arise than it would be in an RTA. Thus claimants in RTAs would be far more likely to face defendants with the benefit of QOCS protection than they would in any other personal injury claim; there is no justification for this;
• Access to justice would be severely curtailed as “it would be surprising if any solicitor continued to act once a counterclaim was intimated as they would be unlikely to ever recover any costs.”
• The Part 36 regime would be rendered impotent save to the extent that the defendant recovered damages under the counterclaim (which would often be zero if the claim succeeded); and
• Defendant insurers would avoid both the payment of additional liabilities and, in many cases, costs to a successful claimant. This would appear to strike at the heart of the reason behind the implementation of QOCS, which was a quid pro quo for the abolition of recoverability inter partes of additional liabilities – not for the recoverability of costs per se.
In summary, according to Waring where a claimant brings a claim against a defendant who makes a counterclaim which includes an element of personal injury, the position on costs is as follows:
Successful Claim / Unsuccessful Counterclaim
• the claimant is entitled to recover its costs of bringing the claim, i.e. the defendant is not entitled to QOCS protection in relation to the costs of bringing the claim; and
• the defendant is entitled to QOCS protection in relation to the costs of bringing the counterclaim, i.e. the claimant cannot recover its costs of defending the counterclaim
Unsuccessful Claim / Successful Counterclaim
• the defendant is entitled to recover its costs in relation to bringing the counterclaim, i.e. the claimant is not entitled to QOCS protection in relation to the costs of defending the counterclaim; and
• the claimant is entitled to QOCS protection in relation to the costs of bringing the claim, i.e. the defendant cannot recover its costs of defending the claim
The rationale behind the foregoing is best summarised by HHJ Venn in the following terms:
“The defendant in this case was not an unsuccessful claimant in the claimant’s claim for damages for personal injury (he was not a claimant at all in the claimant’s claim for damages for personal injury); he was an unsuccessful defendant (and an unsuccessful claimant in his counterclaim for damages for personal injury). He only has the protection of the QOCS regime in respect of his claim for damages for personal injury and does not benefit from it in the claimant’s claim for damages for personal injury.”
This is a very sound and sensibly reasoned decision for which there is longstanding precedent regarding the identification and division within the same action between costs of the claim and costs of the counterclaim: Medway Oil and Storage Company Limited v Continental Contractors Limited & Others  AC 88.
Regrettably, however, litigators are yet again confronted with a situation where ambiguities within the rules introduced under the Jackson reforms have led to entirely opposite results and the Court of Appeal will be required to make the final determination. It could be a while.
Please contact Christopher McClure to discuss any query relating to this article. Christopher is based at our Manchester office and can be contacted on 0161 835 4087. Alternatively, please click the make enquiry button to the right.
LLB (Hons), PG Dip (BVC)
Monday 11th February 2019