QOCS: a wider motor application but, crucially, a costs setoff

08 Aug 2017

Last month in Howe v MIB [2017] EWCA Civ 932, the Court of Appeal considered the scope of protection against adverse costs afforded by the Qualified One-way Costs Shifting (“QOCS”) regime in the CPR to claims for damages for personal injuries.

The facts
The claimant was rendered paraplegic on 30 March 2007 when driving in France. A wheel came off a lorry ahead of him and collided with his vehicle through no fault of his own. It had been impossible to identify the lorry or its driver or its insurer. The claimant brought proceedings against the MIB under The Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Board) Regulations (SI2003/37) (“the 2003 regulations”).

Stewart J held that the claim failed on limitation. He found that the statutory claim under the 2003 regulations was not one for damages for personal injuries. It followed that the unsuccessful claimant could not benefit from QOCS protection and he was ordered to pay 85% of the MIB’s costs. He appealed both on the merits and on the QOCS point.

His substantive appeal to the Court of Appeal was struck out as being bound to fail following the Supreme Court’s decision of Moreno v MIB [2016] UKSC 52. The costs aspect was considered separately, and in particular whether the claimant should have the benefit of the QOCS regime in CPR r.44.13 - 44.16 so as to restrict his exposure to the MIB’s costs.

The legal background

The scope of QOCS is set out in CPR r. 44.13 (1) which states that:

(1) This Section applies to proceedings which include a claim for damages –

(a) for personal injuries…

The question was whether Mr Howe's claim falls within this rule?

The origins of QOCS lie in Sir Rupert Jackson's review of Civil Litigation Costs. His proposal was that all (unsuccessful) claimants in personal injury cases be given a broadly similar degree of protection against adverse costs orders as that which had been enjoyed by legally-aided claimants.

The High Court decision regarding costs

In dealing with costs, Stewart J decided that the claim was not one for damages for personal injuries within the meaning of CPR r.44.13 which would give the claimant the benefit of QOCS. He found there to be no breach of duty or other wrong alleged against the MIB.  He determined that regulation 13 of the 2003 regulations creates a statutory cause of action against the Bureau and decided that “damages” in the context of the QOCS rule are:

“simply an award in money for a civil wrong and that, to retain the requirement of a wrong is entirely necessary, this being the essential feature of damages; actions claiming money under statute, where the claim is made independently of a wrong, are not actions for damages.”

In coming to this decision, Stewart J had considered both the scheme of the Fourth Motor Insurance Directive, which establishes the MIB compensation arrangements, and the rationale behind the QOCS regime, including the Jackson Report which initially recommended its introduction. He summarised the position as follows:

“The rationale for QOCS can be said to extend to a claimant in Mr Howe's position. He comes fairly and squarely within the citations which I have set out above … subject to whether, in relation to the Jackson Report citation this is “personal injuries litigation”. He is a person who has suffered personal injuries and, absent QOCS, he faces enforcement of the adverse costs order obtained by the MIB which is a well-funded defendant. If his claim does not have QOCS protection, then injured persons in situations similar to his may be deterred from bringing claims for compensation."

Despite this, and despite the costs consequences for Mr Howe in addition to the life-changing injuries he suffered, Stewart J felt compelled to conclude that this statutory claim was not a claim within the meaning of the QOCS rule as narrowly drafted.

The Court of Appeal decision

In a unanimous decision, made with the assistance of Senior Costs Judge Master Gordon-Saker, the Court of Appeal allowed the appeal, applying the QOCS regime, and providing Mr Howe with protection against enforcement of the costs orders against him.

In the leading judgment Lord Justice Lewison reviewed the legal background to the 2003 regulations and the EU Motor Insurance Directives. In doing so he relied on Lord Mance’s discussion of them in Moreno which established that any interpretation of the 2003 regulations should be in a way that is consistent with the Directives: Marleasing SA V La Comercial Internacional de Alimentacion SA (Case C-106/89) [1990 ] ECR I-4135.

Lord Mance determined that the compensation to which a motor accident victim is entitled remains the same whichever provision of a Directive is invoked and against whomever it is made. In reliance on that, LJ Lewison decided that:

“On the face of it, it follows that if the rules relating to the recoverable costs in a claim against the MIB are less favourable to a claimant than the rules relating to the recoverable costs in a claim against an insured driver, the principle of equivalence will have been breached. Plainly, if an injured person sues an insured driver his claim will be covered by QOCS.”

He agreed with Stewart J that this claim was within the rationale which inspired QOCS. However, in interpreting the CPR and the 2003 regulations in accordance with the Marleasing principle, he concluded (see below and with emphasis added) that Mr Howe’s claim satisfied the definition of a claim for personal injuries at CPR 44.13.

“To revert to the Directive, what it requires is the ability to claim "compensation" from the compensation body. Article 1.1 of the Fourth Directive describes it as "compensation in respect of any loss or injury resulting from accidents". Article 1.4 of the Second Directive describes it (so far as relevant) as "compensation ...for ... personal injuries." In view of the requirement in regulation 13 that the MIB must compensate the injured party "in accordance with Article 1 of the second motor insurance directive" I do not consider that there is any difficulty in characterising Mr Howe's claim as a claim for compensation "for personal injuries.""

QOCS and setoff

Going further, the court allowed the MIB to set off costs orders made in its favour during the proceedings. This is a welcome development which BLM has been arguing is a logical step since QOCS implementation.

QOCS and set off had been considered in Darini & Olsoy v Markerstudy Group this April, in an appeal to a Circuit Judge in the county court. In that case the judge decided that set off was, in effect a form of enforcement and thus in the context of QOCS it would be allowed only where specifically provided for in the rules, i.e. against any award for damages and interest; or where the claimant’s claim has been struck out on the grounds that it is an abuse, or where there is a finding that a claimant is fundamentally dishonest.

The Court of Appeal in Howe has confirmed that set off is allowed so its restriction in Darini should be regarded as wrongly decided. Deciding to allow set off in QOCS cases could have far-reaching consequences.

QOCS and appeals

Although previously an issue within the case, it was common ground between the parties in the Court of Appeal that QOCS applies to appeals. Consequently, the point was not considered in detail in the judgment. The question had been considered by the High court in 2016 in the case of Parker v Butler [2016] EWHC 1251 (QB) following the approach of the Court of Appeal in Wagenaar v Weekend Travel Ltd (t/a Ski Weekend) [2014] EWCA Civ 1105 (“Wagenaar”) which determined that any appeal which concerned the outcome of a claim for damages for personal injuries or the procedure by which it was to be determined was part of the "proceedings" as defined in CPR r.44.13 and cost orders made in connection with such appeals were therefore subject to QOCS. [It would have been a perverse decision to have held that first instance proceedings were protected by the regime but that appeals were not.]


What does this mean for you?

Direct Action/Statutory Claims
The Court of Appeal was not asked to consider the wider consequences of other similar statutory claims. It determined, however, that “damages for personal injuries” includes compensation under EU law, specifically here regulation 13 of the 2003 regulations. This sits squarely with the requirement in Moreno that the compensation to which the injured party is entitled is "the same compensation as that to which the victim is entitled as against the driver responsible."

An earlier case Nemeti v Sabre Insurance Co Limited [2013] EWCA Civ. 1555 was concerned with a RTA claim for damages made directly against the insurer under regulation 3 of the European Communities (Rights Against Insurers) Regulations 2002 (“ECRAIR”). In this case, the Court of Appeal - in considering whether the Limitation Act applied - determined that ECRAIR claims were not claims for damages for personal injury and not claims in negligence, but claims for indemnity under statute. 

Nemeti does not appear to have been brought to the attention of the Court in Howe and it was on a slightly different point in any event. Whether ECRAIR claims might fall within the QOCS regime did not arise in Howe and had not arisen in Nemeti because it was subject to the previous costs regime. We suggest that there is now some inconsistency between:

  • the finding in Howe that a particular statutory claim under regulations giving effect to the EU Motor Insurance Directives should be regarded as a personal injury claim for the purposes of QOCS, and
  • the decision in Nemeti that a statutory claim under different regulations also giving effect to the EU Motor Insurance Directives should not be regarded as a personal injury claim for the purposes of limitation.

It is our view that the later decision in Howe, because it follows the clear reasoning of the Supreme Court last year in Moreno (above) is likely to be preferred. If this is correct then, following Howe, courts would be unlikely to decide that QOCS does not apply to direct claims made under ECRAIR.

In Wagenaar the Court of Appeal considered costs and QOCS in the context of the Package Travel, Package Holidays and Package Tour Regulations 1992 (“the Package Travel regulations”), under which direct actions (including claims for damages for personal injury) are allowed against the holiday provider arising out of obligations under the holiday contract performed by others. The Court of Appeal implicitly accepted that QOCS should apply to a claimant’s personal injury claim against the holiday provider - made under the Package Travel regulations rather than at common law - but the main finding in Wagenaar was that QOCS did not apply to the subsequent claim for contribution as between the holiday provider and a third party. The recent and clear decision in Howe that QOCS should apply to a personal injury claim made under regulations is therefore entirely consistent with the implicit acceptance of the point in Wagenaar.

What about situations where the insurer involved has the status of RTA insurer or Article 75 insurer?

An RTA insurer’s liability is that of statutory insurer. The effect of the compulsory indemnity provisions at s. 151 and s. 152 of the Road Traffic Act 1988 is, in certain cases, to place obligations on the insurer to compensate a third party notwithstanding that the insurer, may be able to refuse to indemnify his insured under the policy. As a RTA insurer it would normally be joined into proceedings.

An Article 75 insurer stands in the place of and as agent of the MIB where the motor insurer will deal with the claim in certain cases where they would not be liable under the RTA 1988 and the liability is limited to the terms of the MIB Uninsured Drivers' Agreement even where a declaration has been obtained that the insurance is void.

In both these circumstances a claim for personal injuries is capable of being made against an identified tortfeasor (i.e. the negligent driver), albeit that the obligation to meet the claim is set out in statute. Based on the reasoning in Howe (and in particular its adoption of Moreno), it would seem likely that QOCS would apply here.

What about cases against the MIB more generally? Could it be argued that QOCS does not apply to MIB cases at all?

It seems to us that Howe suggests that QOCS should apply, largely for the reasons set out in the heading immediately above. Furthermore, it could be argued that the uninsured drivers’ agreement gives effect to the Directive and in particular to article 10.1:

“Each Member State shall set up or authorise a body with the task of providing compensation, at least up to the limits of the insurance obligation for damage to property or personal injuries caused by an unidentified vehicle or a vehicle for which the insurance obligation provided for in Article 3 has not been satisfied.”


 

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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Alistair Kinley

Alistair Kinley

Director of Policy & Government Affairs,
London


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