Consultation on qualified one-way costs shifting closes — is there appetite for further reform?

The Ministry of Justice opened a consultation in May 2022, proposing changes to the existing rules which govern Qualified One-way Costs Shifting (‘QOCS’).

The recent ruling by the Supreme Court in Ho v Adelekun [UKSC 2021], that the existing Civil Procedure Rules which govern existing “set-off” of opposing costs orders could only be made against an award of damages and not costs and damages led to an outcome described by Mr Justice Briggs in Ho as both “counterintuitive and unfair”.

The Supreme Court ruling and clarification in Ho also affected how practitioners could ‘work around’ the previous Court of Appeal authority in Cartwright v Venduct Engineering [CA 2018], which had held that a Part 36 offer would not create an enforceable order for the purpose of QOCS. Prior to Ho, which limited set-off to damages, the parties could still reach an agreement for a specific set-off against costs.

The proposed changes

In essence, the Ministry of Justice proposes to allow parties to ‘set-off’ opposing costs orders against damages and costs and against ‘deemed orders’ for costs (including and especially Part 36 offers) without the permission of the court.

Weightmans has submitted a response supporting the proposed revisions to both ‘set-off’ and to ‘deemed orders’, on the basis that the existing Civil Procedure Rules allow, as was the case in Ho, a claimant to pursue unmeritorious points at no risk to themselves and with significant costs risk to the defendant.

Further reform?

The consultation also asked whether further reform was needed to ensure an appropriate balance between the interests of claimants and defendants in personal injury litigation.

Our view is that whilst accepting that any reform of civil justice will not be perceived by all parties as “perfect all of the time”, taken in the round, QOCS has been successful. It has promoted access to civil justice by shielding genuine claimants from adverse costs orders whilst at the same time extinguishing a compensator’s need to pay ATE premiums and success fees.

We believe for the reasons set out below that QOCS should be extended to cases of diffuse mesothelioma which are currently exempt pursuant to Section 48 of LASPO.

Reasons

Claims for mesothelioma are, in the overwhelming majority of cases, successfully pursued against compensators. Limitation and breach of duty arguments rarely feature in the context of a line of appellate court decisions stretching through Willmore v Knowsley Metropolitan Borough Council [2011] UKSC10, Sienkiewicz v Greif Limited [2011] UKSC10, and more recently Bussey v East Anglia Heating [2018], EWCA Civ 243.

Causation is rarely, if ever, challenged once a diagnosis has been made, given the universal acceptance that mesothelioma arises from asbestos exposure.

Whilst recognising that the latency between exposure and onset of symptoms means that mesothelioma in common with other “long-tail” disease claims involves historical, not recent exposure, the judicial and legislative landscape effectively means that the claimant is simply required to evidence employment and exposure to asbestos.

The ELTO database provides accurate and up to date details of historical employers’ liability insurance.

The Compensation Act [2006] acts to provide 100 %, full recovery against any one tortfeasor even if other tortfeasors are insolvent or insurers cannot be traced.

In cases where no solvent tortfeasor or historical insurer can be identified, the Mesothelioma Payment Scheme (funded by insurers) provides compensation for the claimant or his/her estate.

Whilst accepting that mesothelioma damages sound much higher than, say, claims for Noise Induced Hearing Loss (NIHL), or Hand Arm Vibration Syndrome (HAVS), the valuation of mesothelioma claims is ordinarily formulaic and driven principally by the income of the claimant or the deceased.

Conversely, it is the exception in claims for NIHL and HAVS for arguments on limitation, causation, breach and apportionment not to feature. Given the divisible nature of both conditions, they are more likely to be multi rather than single defended in order to maximise the claimant’s recovery of damages with appreciable time taken in corresponding with and dealing with separate issues with each defendant. Such claims also attract higher repudiation rates than mesothelioma claims – see Civil Justice Committee Report on Noise Induced Hearing Loss, September 2018.

There is no proper basis to distinguish mesothelioma cases from other claims for occupational disease which are subject to QOCS.

Costs inflation in mesothelioma cases – the review

In order to better understand concerns raised both by solicitors and fee earners within our firm and by clients of the firm as to the level of costs incurred in mesothelioma cases, we caused a review to be undertaken of all mesothelioma costs data from 2014/2015 to date.

That data is reproduced below:

The counter arguments

Past opposition to removal of the LASPO exemption has centered around the following lines of argument;

(i) Mesothelioma claims are not part of the “compensation culture” which the rules on QOCS were designed to address.

Our response:

Whilst we agree with the first element of this statement, we do not agree that the removal of success fees and ATE premiums and the introduction of QOCS was designed to address the so-called compensation culture.

(ii) A claimant shouldn’t have to shop around for the best deal for cost protection when time is precious.

Our response:

QOCS provides a mesothelioma claimant with greater costs protection than a claimant who proceeds without the benefit of an ATE policy in place. The protection afforded by QOCS should allow the claimant or the estate to commence the claim immediately.

(iii) Mesothelioma claimants should not be at risk of paying costs.

Our response:

We repeat the comments above.

(iv) Is there is a risk of reduced damages if a claimant can’t trace all exposure?

Our response:

By reason of the Compensation Act [2006], a claimant only has to establish exposure against one tortfeasor in whole or in part for that tortfeasor to be responsible for 100 % of damages.

The costs of ATE premiums and success fees

We have set out above our own data, evidencing the costs inflation seen in mesothelioma claims. The ATE premium and success fees contribute significantly to this. Current ATE premiums range in cost from £1,000 to £35,000 (staged) with an average ballpark figure of £7,500.

Success fees are charged at 27.5 % to 100 %, with the latter frequently charged by counsel advising on any aspect of the case. For cases where damages exceed £250,000, a higher success fee is claimed and often ordered, even though the higher damages award is simply due to a raised multiplier or multiplicand with no other complicating feature.

By way of example, on a routine case where base costs of £30,000 are claimed, with a success fee of 27.5 %, compensators will be charged an additional £8,250 plus VAT.

For a disbursement counsel bill of £7,500 where a 100 % mark up is claimed, an additional £7,500 is costed into the bill to be paid by compensators.

Conclusions

The overwhelming majority of mesothelioma claimants are referred by the many Asbestos Victims Support Groups who do valuable work advising and supporting their clients. The cases are referred to one of several skilled and experienced claimant law firms well versed in mesothelioma litigation. We do not believe that removal of the LASPO exemption will prevent mesothelioma claimants from accessing justice and compensation.

Leaving these cases as exempt risks them being seen as an anachronism of a tired and old system with the unnecessary and excessive ATE premiums and mark-up (success fees) shouldered by compensators. Conversely, by removing the CFA, mesothelioma claimants would also benefit as per Simmons v Castle to an additional 10 % in respect of general damages - to the value £6,365-£11,446 on the basis of the current JC Guidelines.

The simple and workable solution is to extend QOCS to mesothelioma cases.