On 15th January 2021, HHJ Gargan, sitting in the County Court at Middlesbrough, handed down judgment in the case of Jim Sutcliffe v (1) Aftab Ali; (2) Aviva Insurance.
Sutcliffe represents the latest Circuit Judge’s decision on the issue of whether a party who brings an unsuccessful counterclaim for damages for personal injury has the benefit of Qualified-One Way Costs Shifting (“QOCS”) such that he can avoid the enforcement of a costs order made in favour of a successful claimant.
Landscape prior to Sutcliffe
Prior to Sutcliffe, there had been two decisions from the Circuit bench on this issue, reaching diametrically opposed conclusions:
In those earlier cases, both Judges agreed that for the purpose of CPR Part 44 a “claimant” included a party making a counterclaim or an additional claim; thus in relation to his/her own claim for personal injuries, a party making a counterclaim/additional claim was entitled to the benefit of QOCS protection.
HHJ Freedman and HHJ Venn diverged on the construction of the word “proceedings” for the purpose of CPR r. 44.13(1). HHJ Freedman considered the word had to be given a wide meaning such that QOCS protection extended to the costs of the whole action – both the original claim and the counterclaim/additional claims. Conversely, HHJ Venn held that “proceedings” should be construed narrowly and should apply only to the counterclaim/additional claim itself and not to the original claim for damages (in relation to which the Defendant remained an “unsuccessful defendant”).
Facts of Sutcliffe
The facts of Sutcliffe are extremely common place. The claim concerned a road traffic accident on a roundabout involving two cars. Both drivers alleged to have suffered injury. The Claimant issued proceedings against the Defendant driver; the Defendant counterclaimed against the Claimant and his insurer.
At trial, HHJ Gargan found that the accident had been caused by the Defendant’s negligence and entered judgment for the Claimant. He dismissed the counterclaim.
The Defendant argued that the Claimant’s costs order should not be enforced because, by reason of his counterclaim for damages for personal injury, the Defendant was entitled to the benefit of QOCS in relation to the costs of the claim.
Decision in Sutcliffe
HHJ Gargan reviewed the decisions in Ketchion and Waring, as well as a host of authority from the higher courts including:
The learned Judge disagreed with HHJ Freedman that Cartwright was authority for the proposition that the word “proceedings” should be given a wide construction. In HHJ Gargan’s view, it was simply authority for the proposition that the word “proceedings” should not be given the unduly restrictive construction which was argued for by Counsel in that case .
At  HHJ Gargan set out what he considered to be a summary of the principles expounded in the relevant authorities. The summary repays quotation in full:
“49. In my judgment the authorities establish the following basis propositions:
49.1. “proceedings” is not a term defined in law or a term of art. Its meaning depends on the context and the underlying purpose of the provision in which the term appears. Therefore at times it can refer to the whole action whilst at others its meaning is more restricted: see Plevin per Lord Sumption at paragraphs 19 and 20 and the decisions of the Court of Appeal in Wagennar and Howe;
49.2. For the purposes of CPR 44.13 proceedings should not be construed in its widest sense (as being equivalent to the entire action): see Edis J in Parker and the decision in Wagennar;
49.3. Equally for the purposes of CPR 44.13 “proceeding” should not be given an overly narrow construction: Cartwright;
49.4. For the purposes of CPR 44.13 “proceedings” would encompass a personal injury claim against multiple defendants but would not include Part 20 claim for an indemnity arising out of the facts which gave rise to the claim: see Wagennar and Cartwright;
49.5. “proceedings” in CPR r 44.13 was used because the QOCS regime is intended to catch claims for damages for personal injuries, where other claims are made in addition by the same claimant: Wagennar;
49.6. Given there is no direct authority on the issue I must determine, the correct approach per Coulson LJ in Cartwright is:
1. First to consider whether, as a matter of principle, it is appropriate to allow the defendant to prevent enforcement of the costs order by reason of his additional claim for damages for personal injury; and
2. Then to test that answer against the authorities and the words of the CPR.”
HHJ Gargan considered that the underlying purpose of QOCS was to preserve access to justice for personal injury litigants but to reduce the disproportionate costs incurred by unsuccessful defendants in meeting success fees and ATE premiums . The solution was for defendants to waive their entitlement to costs generally, and for claimants (even if unsuccessful) to end up no worse off than if proceedings had never been brought, unless the exceptions in CPR r. 44.15 or 44.16 applied . The decisions in Cartwright and Wagennar were consistent with those principles.
HHJ Gargan considered it instructive to apply a worked example – suppose a car pulls out from a side road into the path of a motorcyclist causing the latter to sustain catastrophic injuries valued in excess of £1million. In the process, the car driver sustains minor whiplash injuries valued at a few thousand pounds. Given the nature and complexity of the motorcyclist’s injuries it could be assumed he would need to instruct a number of different experts (e.g. orthopaedics, neurology, neuropsychology, accommodation, care etc.) and his legal costs would be substantial (HHJ Gargan posits the figure of “well over” £100,000). Presume the motorcyclist succeeds at trial. If HHJ Freedman were correct in Ketchion, the successful motorcyclist would be debarred from enforcing his costs order against the car driver; thereby substantially reducing his compensation (as he would have to meet such costs himself). HHJ Gargan did not consider that such a result advanced “any legitimate aim – such as promoting efficient litigation. It merely provides a windfall benefit for the insured defendant.” . He did not consider such a result was consistent with the aims of the Jackson Reforms. Moreover, in more modest claims where, say, the motorcyclist’s damages were in the region of £2,500, applying the result in Ketchion would be equally inappropriate – it was unlikely that the motorcyclist would find solicitors to act for him once it was apparent the car driver was bringing a counterclaim for personal injury; if the counterclaim was arguable, the solicitors would realise they were unlikely to obtain an enforceable costs order and, given legal costs would likely exceed the damages the claimant would recover, there would be little point in the solicitors or the motorcyclist pursing the action. Such a result would, in HHJ Gargan’s view, limit, rather than promote, access to justice .
HHJ Gargan also took the view that the approach in Ketchion would encourage defendants to raise weak/tenuous claims and would give rise to considerable satellite litigation as successful claimants sought to obtain their costs .
HHJ Gargan considered the result in Waring to be consistent with the general aim of the Jackson Reforms . The Reforms were not intended to provide defendant insurance companies with a defence to a claim for costs where their insured could be persuaded to bring a counterclaim for personal injury. As a matter of principle, HHJ Gargan considered Waring to be more consistent with the principles underpinning the QOCS regime .
HHJ Gargan also considered Waring to be consistent with the Court of Appeal’s decision in Wagennar  and that there was nothing in the Rules themselves which prevented the word “proceedings” being construed in the manner identified by HHJ Venn in Waring .
HHJ Gargan preferred the view reached in Waring. In his concluding paragraph, the learned Judge pithily summarised the position thus (at ):
“In my judgment, the defendant is not to be viewed as an unsuccessful claimant in the proceedings as a whole but rather as the unsuccessful defendant in the claim – albeit that he was also the unsuccessful claimant in his own personal injury claim”.
Notwithstanding the force of HHJ Freedman’s judgment in Ketchion, anecdotal evidence suggests that the majority of practitioners considered the analysis of HHJ Venn in Waring to have been correct and the result reached in that case to represent an accurate statement of principle.
HHJ Gargan’s careful analysis adds further support to the conclusion that the outcome in Waring was correct and accurately represents the law. HHJ Gargan’s judgment reminds us of the importance of the rationales underpinning the QOCS regime and highlights the need to bear those aims in mind when construing the relevant Rules and how they operate in practice.
It is suggested that the analysis in Waring and now Sutcliffe is correct and should be followed. HHJ Gargan’s “worked examples” show the undesired effects of the contrary conclusions (as reached in Ketchion), which would clearly fly in the face of the aims of QOCS and likely produce unjustifiable results.
In short, it is suggested that the word “proceedings” should be construed such that an unsuccessful personal injury counterclaimant cannot hide behind the QOCS regime to avoid enforcement of a successful claimant’s costs order. As HHJ Gargan puts it, the Defendant is not to be viewed as an ‘unsuccessful claimant’, but rather, an ‘unsuccessful defendant’ in the claim.
Given the competing decisions at non-binding Circuit Judge level what is clear, however, is that this issue would benefit from authoritative guidance from the Court of Appeal in the near future.
Jake Rowley is a member of the Farrar’s Building Personal Injury and Civil Fraud Teams. Jake frequently delivers training, seminars and workshops upon request. Please direct any such request to the Farrar’s Building Clerking Team.