Catalano v Epsley-Tyas Development Group Ltd [2017] EWCA Civ 1132

On 28 July the Court of Appeal handed down judgment clarifying the application of the transitional provisions concerning Qualified One-way Costs Shifting (‘QOCS’). The principal issue in Catalano concerned the availability of QOCS protection for a claimant who had originally taken out a pre-April 2013 conditional fee agreement (‘CFA’) and then took out a further CFA, after April 2013, and attempted to argue that QOCS protection should apply.

Since the introduction of QOCS protection as part of the Jackson reforms in April 2013 losing personal injury claimants are generally protected against enforcement of adverse costs orders. To balance the scales, defendants no longer have to pay success fees or insurance premiums.

In this case it was held that it doesn’t matter whether the original CFA was terminated or not, the transitional provisions are clear and claimants should not be allowed to cherry pick which funding regime they would like: “the framers of the rules could not have intended that a claimant should be able to blow hot and cold in that way.” Where the claimant has entered into a CFA with his lawyer before April 2013 then it is not open to the claimant to obtain QOCS protection by terminating it after April 2013 and entering into a new one with the same lawyer.

The facts

The claimant made a claim for noise-induced hearing loss but discontinued shortly before trial. The original CFA was taken out in June 2012 under the old regime, i.e. with a success fee that would be recovered from the paying party. The claimant subsequently entered into a new CFA under the new regime in July 2013, shortly before proceedings were issued. The unsuccessful claimant - she had discontinued - sought the protection of QOCS and relied on the second CFA.

Litigation services

The claimant argued that the litigation services provided to her by her solicitors were provided under the second CFA (i.e. after April 2013) and therefore the first CFA should be ignored.

The Court of Appeal decision

The court had no hesitation in dismissing the claimant’s argument; the transitional arrangements were clear: the existence of “a funding arrangement” (i.e. the first CFA) entered into pre-commencement meant that QOCS could not apply. The Court dismissed the claimant’s attempt to interpret this as meaning “an unterminated funding arrangement”.

On the facts, the solicitors clearly did provide litigation services under the first CFA and the actual issue of proceedings was not required. Carrying out ‘chargeable’ work such as instructing medical experts will be litigation services and engage the transitional provisions. Therefore, where a claimant has entered into a CFA before April 2013 and has been provided with litigation services, he or she is prevented from obtaining QOCS protection.

Change of lawyers

This case dealt with the situation where the same lawyers represented the claimant under both CFA agreement and the original CFA was terminated after 1 April 2013. The court speculated as to what the position would have been had the claimant terminated the original CFA before 1 April 2013 and then instructed new solicitors after 1 April 2013. Had work been carried out under the first CFA it was considered “doubtful” that the claimant could obtain QOCS protection. However, (although making plain that no concluded view was expressed) it was highlighted that it could be argued that the second CFA extinguished the first one in such circumstances.

What this means for you

This decision shuts the door generally on claimants ripping up their old CFAs with their existing lawyers and switching over to QOCS part way through a claim. It means that a winning defendant in such a case will maintain the right to enforce a costs order. It is always important to establish whether older claims have ever been funded by old style pre April 2013 funding arrangements to ensure the winning defendant’s costs recovery is pursued where possible. For the time being the door has been left ajar for the situation concerning termination of a pre-April 2013 and a change of lawyer and a new CFA. However, the force of this decision highlights the uphill task that such a claimant will have in trying to obtain QOCS.