In the recent decision of Howe -v- MIB  EWCA Civ 932 the Court of Appeal extended the scope of qualified one way costs shifting (QOCS) protection to claims against the Motor Insurers Bureau. Michelle Reilly takes a look at the decision, and considers how it will affect statutory claims for personal injury.
QOCS was extended to personal injury claims in April 2013 as part of Lord Justice Jackson’s civil justice reforms, and was implemented by the introduction of rules 44.13 – 44.17 of the Civil Procedure Rules 1998 (CPR). QOCS means that a successful claimant can enforce a costs order against a defendant, but a defendant cannot enforce a costs order against a claimant save in limited circumstances. Those circumstances include claims in which the claimant had no reasonable grounds to bring proceedings, or when the claim was an abuse of process, or fundamentally dishonest.
The Uninsured and Untraced Drivers Agreements fulfil the UK’s obligations under European law to provide a compensation fund for victims of accidents caused by uninsured and untraced drivers. All motor insurers in the UK are members of the Motor Insurers Bureau (MIB) and contribute to the fund. The MIB is responsible for holding and distributing the fund in accordance with the agreements.
The Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 were implemented by the UK to give effect to the Fourth Motor Directive and established the Motor Insurers’ Information Centre (MIIC). The purpose of the Directive is to facilitate the recovery of compensation by victims of motor accidents occurring anywhere within the European Union. It enables victims to seek compensation from their own national compensation body, which for the UK is the MIB.
In this case, the claimant was severely injured when his lorry collided with a wheel that had fallen off a lorry in front of him. He brought a claim against the MIB for personal injury under the Untraced Drivers Agreement. However, the claim was dismissed because of limitation. The court ordered the claimant to pay the MIB’s costs of defending the claim.
The claimant argued that as the claim was for personal injury, he was protected under the QOCS provisions in CPR 44. The first instance judge rejected this argument on the basis that the claim was not one for damages for personal injury (as would be protected by QOCS) but was in fact a claim brought under Regulation 13 of the Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 - Regulation 16 of which provides that any sum ‘due and owing’ under those regulations is recoverable as a civil debt. As such, QOCS did not apply.
The question before the Court of Appeal was whether the reference in CPR44.13 for ‘damages for personal injuries’ can be interpreted to include a claim for compensation under Regulation 13, which by virtue of Regulation 16 should be recoverable as a ‘civil debt’.
In considering whether the claimant’s claim fell within the scope of QOCS, the Court of Appeal considered the legal background of both QOCS and the Regulations together with the rules of interpretation between national (domestic) and EU law.
When interpreting domestic law, a member state must have regard to:
- the Marleasing principle – that domestic law should, so far as possible, be interpreted in a sense which is not inconsistent with the Directives
- the principle of equivalence - to identify a comparator, which in this case would be the remedies a victim would have against an insured driver
- the principle of effectiveness – that the domestic laws should not make it impossible or excessively difficult to exercise European laws.
The Court of Appeal found that the European Court of Justice (now the Court of Justice of the European Union) had previously made clear that whether costs are recoverable is a matter for an individual member state.
However, domestic law should be interpreted compatibly with the objective of the Directive to which it gives effect. Article 6.1 of the Fourth Directive provides that ‘each member state shall establish or approve a compensation body responsible for providing compensation to injured parties …’ In the case of Moreno -v- MIB it was held that the Directive’s purpose is to give the same rights to victims of uninsured drivers as afforded to victims of insured drivers. It would therefore breach the principle of equivalence if the rules relating to recoverable costs against the MIB were less favourable to a claimant than if he/she pursued a claim against an insured driver and was protected by QOCS.
Applying those rules of interpretation, there is a clear distinction between ‘damages’ and ‘debt’. A debt is a definite sum of money and a claimant need not show loss, only that the debt has become due. In contrast, damages are an amount assessed by the court as a consequence of a breach of an obligation. Whilst it would be a departure from a strict and literal application to interpret ‘damages for personal injuries’ in the same way as ‘compensation for a civil debt’, it would not go against the grain of the CPR, which, in a glossary of terms contained in appendix E to the CPR describes ‘damages’ as a ‘sum of money awarded by the court as compensation to the claimant’.
In this case, Regulation 16 provides that ‘a sum due and owing’ is recoverable as a civil debt. However, the claimant was not pursuing a sum ‘due and owing’ as the amount of the claim was still unknown and had not been assessed. Only when it had been assessed could it fall within Regulation 16. As such, it was still a claim for damages and QOCS should apply.
The decision will have a major impact on claims in which the claimant has the option to pursue someone other than the person at fault, for example insurers, tour operators, or as in this case, the MIB. Indeed, many claims had been stayed pending the decision in this case.
The decision shows that the courts are open to extending the scope of QOCS protection beyond negligence based personal injury claims to personal injury claims based on a breach of statutory duty. The effect of this decision is that defendants facing statutory claims will need to factor in the economic consideration of defending a claim in which they may no longer be able to recover costs if successful.
Defendants will also need to consider the grounds to disapply QOCS protection as set out at CPR44.15 and 44.16. This includes claims found to be fundamentally dishonest, or brought for the financial benefit of someone other than the claimant. Early consideration should be given to whether it is appropriate to make a well-judged part 36 offer to afford costs protection.
This decision also comes close on the heels of the Court of Appeal case of Cameron -v- Hussain & LV Insurance. In that case, which is subject to appeal, the court decided that claimants would be able to pursue insurers for claims involving unnamed motorists. Before this case, such cases would have been referred to the MIB.
Unfortunately, for now at least, this latest decision is likely to cause uncertainty for insurers. It is an area which had, arguably, been clear cut for many years, in terms of claimants knowing who to approach for compensation.