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QOCS and football pools orders: does Catalano answer all the questions?

Readers of a certain age, such as the author, will remember football pool orders. A losing plaintiff (as a claimant then was), whose personal injury claim had been run on legal aid, was protected against having to pay out any costs by the magic words: “order not to be enforced without the leave of the court”.

The genesis of such an order is to be found in the 1955 judgment of Pearson J in Rogan v Kinnear Moodie & Co Ltd, when he made a nominal order against the plaintiff. In doing so, he said:

“What one wants, is that in case Mr Rogan suddenly becomes rich, wins a Football Pool or whatever it may be, the defendants can apply“.

So was born the “football pools” order, which has been in use ever since.

When legal aid for personal injury claims was abolished by the government and replaced by the conditional fee agreement (CFA) regime, following the enactment of the Access to Justice Act on 1 April 2000, losing claimants instead protected themselves against adverse costs orders by taking out after-the-event (ATE) insurance. In return for a premium recoverable from the opponent if the claimant succeeded, the insurer would pay the winner’s costs in a losing case. As we now know, ATE premiums (and also success fees) became casualties of the Jackson reforms, when they ceased to be recoverable from losing parties in most types of litigation under section 44(4) of the Legal Aid (Sentencing and Punishment of Offenders) Act 2012 (LASPO) (there were exceptions for mesothelioma, privacy, and, for a limited time, insolvency actions).

Where did that leave “old” CFAs? The answer was a carve-out provided for in section 44(6) of LASPO. Those signed before 1 April 2013 would continue to operate as before. As a result, in a winning case, the success fee and ATE premium would remain payable by the loser, and where it was lost, any adverse costs would continue to be covered by the policy. From the losing claimant’s point of view, this was, in effect, a CFA regime version of a football pools order. Clear enough so far.

The issue in Catalano v Espley-Ty development Group, decided by the Court of Appeal on 28 July 2017, addressed a different situation since it involved both an “old” pre-1 April 2013 CFA and a “new” CFA made after that date.

On 13 June 2012, Ms Catalano had signed a CFA to support her claim for damages for noise induced hearing loss. On that date too, her application for an ATE policy had been unsuccessful so that in the event of the case being lost, Ms Catalano had no insurance to shield her from having to pay her opponent’s costs straightaway: in other words, she had no football pools or any other type of costs protection.

Following implementation of the Jackson reforms on 1 April 2013, the introduction of qualified one-way costs shifting (QOCS) in CPR 44.13-14 appeared to throw Ms Catalano a lifeline, at least so she thought on her legal advisers’ advice. The rule at CPR 44.14(1) provides that, in a personal injury claim, costs orders made against a claimant can be enforced only to the extent that the amount payable does not exceed any damages and interest awarded to that claimant. Accordingly, on 15 July 2013, Ms Catalano traded in her old CFA and replaced it with a new CFA in the belief that, if she if she lost, she would be able fall back on QOCS protection. This would give her the costs comfort that had been denied her when her application for ATE insurance had been turned down, in the event that she lost the case or decided to discontinue it (which, in fact, she did).

Unfortunately Ms Catalano had not reckoned with CPR 47.17. This short rule provides as follows:

“This section [CPR 44.13 QOCS] does not apply to proceedings where the claimant has entered into a pre-commencement funding arrangement (as defined in rule 48.2)”.

In CPR-speak, a “pre-commencement funding arrangement” is a CFA which provides for a success fee, so on the basis of the existence of the first CFA which Ms Catalano had signed on 13 June 2012, QOCS was unavailable and Espley-Ty could enforce its deemed costs order against her following the discontinuance.

The rationale for the rule was explained by the Court of Appeal. But for CPR 44.17, it said, a claimant with a strong claim would be able to continue the claim and recover the success fee and ATE premium, but if prospects changed adversely, to discontinue the action and escape the costs consequences relying on QOCS:

“Such a construction would lead to a situation where a claimant could have the best of both worlds.”

These were the words of Longmore LJ. Ms Catalano’s appeal against the refusal to give her QOCS protection failed.

All very logical, but what happens if a situation arises in which the claimant is not trying to acquire costs protection where none existed before, and the reason for trading in the old CFA arises from an eventuality totally unrelated to obtaining a football pools order or equivalent?

Consider this scenario. Suppose the claimant Mr C has an “old” CFA for a personal injury claim, which appears to have better than 50% prospects. Suppose next that Mr C dies after 1 April 2013, with the result that (as frequently is the case under its terms), the CFA automatically ends. Suppose finally that Mr C’s executrix presses on with the claim and loses, perhaps because her husband is no longer alive to provide instructions and give evidence. On the basis of the reasoning in Catalano, Mrs C will have no QOCS protection because Mr C had entered into the “old” CFA, it being a “pre-commencement funding arrangement.”

Or will she? It was not Mrs C, the executrix, who had entered into the pre-commencement funding arrangement, nor had she been the claimant at the time that that had been done: that had been her husband. The executrix would be a new claimant and, accordingly, the transitional provisions in CPR 44.17 would not apply to her. And why should they? Had her husband been alive to see the claim through to the end, his CFA and ATE insurance cover would have survived with him to give him protection against any adverse costs orders. Merely by dint of his untimely death, it would be an injustice, surely, for his estate to incur a liability for costs under CPR 44.17, which would not have arisen had he lived? In any event, the rationale underlying the transitional provisions must be that you have pre-LASPO litigants, to whom the pre-1 April 2013 rules apply and post-LASPO litigants who are subject to the rules in force from that date. It could not be the intention of the rules that some litigants would be stuck in the middle: starting a case with the costs protection benefits available under the old CFA regime, only subsequently for them to be lost due to an event such as death wholly outside their control, and with nothing such as the equivalent of a football pools order to replace them.

Looking at the problem from the point of view of a claimant who is not trying to obtain the equivalent of a football pools order where one did not exist before, was not an issue which was before the Court of Appeal in Catalano; no view was advanced about it. But if it is felt that Catalano answered every point thrown up by CPR 44.17, the court has another thing coming. As with so many of the 1 April CPR changes, they contain fruit ripe to be picked for satellite litigation and will remain so for a considerable time to come.


Article written by Colin Campbell. First appeared in Thomson Reuters Practical Law blog on August 15 2017.

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