The Court of Appeal decision in Wagenaar -v- Weekend Travel Limited and Serradj is a warning to defendants to consider their costs exposure before bringing a part 20 claim for indemnity and contribution.

Background

The claimant sustained an injury while on a ski holiday. The claimant issued proceedings against the defendant tour operator for personal injury, alleging negligence on behalf of the defendant’s agent – the ski instructor. The defendant then issued a part 20 additional claim for an indemnity and contribution against the ski instructor as a third party.

The claimant’s claim against the defendant failed and the defendant’s claim against the additional party also failed.

Costs

The trial judge ordered that costs should follow the event in both the part 7 claim and the part 20 claim. The defendant was awarded its costs against the claimant and the third party was awarded her costs against the defendant. However, the judge applied the provisions of qualified one way costs shifting (QOCS) to both claims, so that neither costs order could be enforced leaving each party to bear their own costs.

The appeal

The defendant and third party appealed.  Two main arguments were advanced:

  1. The QOCS provisions were unlawful.
  2. The QOCS provisions did not apply to the part 20 claim.

The QOCS provisions were unlawful

The defendant argued that the QOCS provisions are ultra vires as they conflict with the unfettered discretion provided to the court in s51 of the Senior Courts Act 1981. S51(3) provides that ‘the court shall have full power to determine by whom and to what extent the costs are to be paid’. The defendant argued that by limiting this discretion, the QOCS provisions went beyond the power of the civil procedure rules committee.

The Court of Appeal, led by LJ Vos, did not accept this and specifically referred to provision within the Senior Courts Act which provided that the power contained within s51 was ‘subject to the provisions of this and any other Act and to rules of court’. It was clear that the court’s powers under s51 are concerned with the court’s jurisdiction to make orders as to costs and the rule making authority has every right to control the exercise of this discretion. The Court of Appeal dismissed the defendant’s appeal.

The QOCS provisions did not apply to the part 20 claim

The third party argued that, as the defendant’s part 20 claim was for an indemnity and contribution, it did not fall within the QOCS regime. CPR44.13 limits the QOCS provisions to claims for personal injury and CPR44.13 (2) stipulates that it includes additional claims. However, the Court of Appeal held that the part 7 claim and part 20 claim were distinct and, as the part 20 claim was for an indemnity and contribution and did not include personal injury, QOCS did not apply. QOCS could not be extended to the whole of a claim in which it featured.

The court emphasised that the QOCS regime was intended to protect injured persons from facing adverse costs orders and it was not contemplated that it would also apply to costs incurred by those who disputed how damages owed to the injured party were to be split.

The fact that the defendant would have been better off if both claims had succeeded was irrelevant.  It was held that the defendant had the choice of whether to bring the part 20 claim and, by doing so, it exposed itself to a risk. The court allowed the third party’s appeal and gave permission for the costs order to be enforced.

What does it mean?

The Court of Appeal has made it clear that QOCS applies to personal injury claims only and will not be extended to any additional claims which do not involve personal injury. While previously it may have seemed prudent to bring a part 20 claim against a third party for indemnity and contribution, defendants will have to think twice and do a full assessment before exposing themselves to the additional costs risk. Alternatively, defendants may choose to wait until the outcome of the main claim, before issuing separate proceedings for an indemnity and contribution against a third party.