“It’s no win no fee Jim, but not as we know it.” – Meet Qualified One Way Costs Shifting (QOCS)

Come next April solicitors like Brachers will still be taking personal injury claims on a “no win no fee” basis. But those “no win no fee” agreements will be living in a rather different world. Many elements of that new world will seem hostile to personal injury claimants, despite the survival of “no win no fee”. However, there is one aspect designed to help personal injury claimants and their solicitors, Qualified One Way Costs Shifting (QOCS).

Qualified one way costs shifting will fundamentally change a long-standing rule of English justice – the loser pays the winner’s costs.

Up until now winning personal injury claimants got their reasonable solicitors and other costs paid by the losing defendant. In “no win no fee” cases this included any solicitor’s success fees and insurance costs. However, a losing personal injury claimant has also had to pay the winning defendant’s costs. The claimant who does not already have legal expenses insurance (“BTE insurance”), can cover this risk by his solicitor arranging “after the event”(“ATE”) legal expenses insurance. He can then recover the cost of this insurance from the defendant if he wins. This ensures a genuine “no win no fee” system.

Come next April all that will change.

A winning claimant will still recover his reasonable costs from the losing defendant, but the losing defendant will no longer have to pay the claimant’s solicitors success fee. This will come out of the claimant’s own compensation.

The “no win no fee” personal injury claimant will also no longer be able to recover the cost of any after the event legal expense insurance. This would have created an immediate dilemma for the uninsured personal injury claimant – does he dare run the risk of paying the defendant’s costs (as well as his own non-solicitor expenses) if he loses? Alternatively, does he fork out for an insurance premium, which win or lose he can never get back and which could swallow up even more of his compensation?

To make the path to justice slightly less rocky for the personal injury claimant and his solicitor, the government will be introducing “QOCs”; to remove (or at least reduce) the need for the claimant to take out insurance.

Provided the claimant meets certain qualifying conditions, if he loses his personal injury claim he will no longer have to pay anything for the defendant’s costs.

There was much speculation as to what those qualifying conditions would be after the government chose not to put “QOCS” into the Legal Aid bill. Indeed many sceptics wondered whether “QOCS” might be born at all. Thankfully “QOCS” is due next April and the qualifying conditions should ensure he’s fairly fit and healthy: “QOCS” will apply to all types of personal injury claims of any shape or size. “QOCS” will apply regardless of a personal injury claimant’s means.

Whether you’re Richard Branson or a penniless debt-laden student if you bring and lose your personal injury claim you won’t have to pay a penny for the other side’s costs (provided you meet the other conditions). “QOCS” will apply however a personal injury claim is funded. Therefore, even if you have BTE insurance to cover the defendant’s costs, a winning defendant won’t get paid their costs paid.

The one type of personal injury claimant who will be in a substantially stronger position will be an insured claimant. They won’t have to worry about success fees etc being deducted from their compensation if they win. Yet they also will enjoy the tactical advantage that if they lose the defendants won’t get their costs paid. “QOCS” will not be available for fraudulent claimants. Generally an honest but unreasonable claimant will be able to rely on “QOCS” if he loses. However, if he brings a claim that is so hopeless that it’s struck out he will lose the protection. There is one weapon against which he will have little defence – a part 36 offer and this will be his major weakness.

Presently part 36 allows that if a defendant makes a part 36 offer, which the claimant fails to beat, the claimant has to pay the defendant’s costs from 21 days afterwards. The Ministry’s concern was that if there was no sanction against the claimant refusing a reasonable offer he would lack incentive to negotiate and this could prolong litigation. There ayesre a number reasons why that is a flawed premise. However for the time being that argument has won the day and the old part 36 rule will remain largely in tact. Unfortunately the failure to amend part 36 is likely to turn a defendant’s part 36 offer into something of a nuclear weapon.

The new “no-win no fee” system is meant to work without the need for the claimant to pay for expensive insurance that he won’t get this back from the defendant. What will be the response of such an uninsured personal injury claimant to the defendant’s part 36 offer? If it’s a silly offer it would just be ignored as background noise. But what about a low offer, but which there is still a real chance that he won’t beat? In the past if his solicitor advised him to reject it he could confidently fight on, knowing that if the worst happened his “ATE” insurance would cover the defendant’s costs. But now he will have no insurance. He has his new friend “QOCS” instead.

Unfortunately “QOCS” has been created with a design flaw. The only flimsy protection he can offer against part 36 offers is that he won’t let the claimant pay more than his damages, as his contribution to this defendant’s costs. A claimant can bravely fight on to court to get fair compensation safe in the knowledge that if it goes badly for him he won’t be left in debt to the defendant. It’s just he might walk away without a penny in compensation. In our view this is tipping the scales far too much in the defendant’s favour. It fails to recognise the major emotional and financial differences between an uninsured individual going through personal injury litigation for probably the only time in their lives and a large insurer or public authority department, for which the case is just a statistic, one of hundreds.

We fear that many uninsured claimants with good, meritorious claims, when faced with a part 36 offer will feel forced to under-settle, rather than risk losing all their compensation at court. Perversely, where “QOCS” may give claimants an unfair advantage is in more doubtful, borderline cases. Currently defendants can afford to fight any claim they are confident of defeating, knowing that if they are vindicated the claimant’s insurer will have to pay their costs. In the future defendants will have to think rather harder about the cases they choose to fight.

If they fight all the way and win it could turn out to be a pyrrhic victory, because they will still have to pay their own costs. Just as with the claimant facing a part 36 offer, defendants met with a silly fanciful claim will fight them (they may well get they struck out and recover their costs). However, there may be many slightly doubtful but possible claims which would currently be resisted, where economics will dictate a defendant should try to buy them off at an early stage.

From the claimant’s point of view “QOCS” will be a useful ally to have in a hostile post Jackson world. However, I fear we are going to see a system which will encourage defendants to pay off doubtful claimants with economic offers, whilst under compensating claimants with good, meritorious claims. For anyone with a genuine concern for justice this can only be a backward step. I would hope that a future governments will at some point revisit this brave new world and detect some fundamental design flaws that need to be addressed; not least some genetic re-engineering required to this strange creature we will soon be meeting, “QOCS.”

This content is correct at time of publication