PME v The Scout Association [2023] EWHC 158 (SCCO) – Another attempt to sidestep the effect of QOCS

Highlights

1. QOCS does not impact on the Courts jurisdiction to make third party costs orders, so long as r. 44.16(2)(a) is engaged: “the proceedings include a claim which is made for the financial benefit of a person other than the claimant…”;
2. However, at common law, a solicitor pursuing costs proceedings in a client’s name is not, absent some exceptional factor, at risk of a third-party costs order.

The facts

The procedural history of the claim is somewhat convoluted. However, the relevant facts are relatively straightforward:

The Claimant was represented by BBK and accepted a Part 36 offer from the Defendant in respect of a Personal Injury claim to which QOCS applied before issue of proceedings. It being agreed that the Defendant pay the Claimants costs to be assessed if not agreed.

BBK acted under a CFA which provided that any shortfall between the costs the Claimant was liable for under the CFA to BBK be capped at 15%. The Defendant made an offer on costs which was rejected by the Claimant.

At a provisional assessment the Claimant recovered less than the offer of costs made by the Defendant. At an oral review hearing, the Claimant lost and the first costs order was made against them. The Claimant appealed to a costs judge and raised issues late in the day, with the result that the judgment was given on the preliminary issues but not on the substantive appeal.

Those proceedings went no further while the Claimant appealed the preliminary issues judgment to the High Court. The Claimant lost the High Court appeal and a second costs order was made. The substantive appeal from the oral review was then heard by the costs judge and the Claimant lost again – resulting in an order that the Claimant pay the costs of the initial appeal.

In total the Defendant had incurred an estimated £40,000 or more in defending the costs proceedings. Following the judgment in Ho v Adelekun [2021] UKSC 43the Defendant accepted that it could not set off its costs against the Claimants damages or costs. Instead, somewhat creatively, the Defendant applied for a third party costs order and permission to enforce the costs order against BBK under CPR 44.16(2)(a) & (3) on the grounds that “the proceedings include a claim which is made for the financial benefit of a person other than the Claimant” as well as under section 51 of the Senior Courts Act 1981. BBK was made a party for the purposes of costs.

The argument for a costs order

The Defendant accepted that while the Claimant had repeatedly lost, BBK had not acted in a way that was liable to invoke the wasted costs jurisdiction. Instead the Defendant argued that the costs proceedings were for all practical purposes directed by and for the benefit of BBK – not the Claimant.

The Judgment

The judgment is quite lengthy, dealing with yet another preliminary matter of no practical relevance to this note. However, the judgment can be summed up very simply. There is a long chain of authority perhaps best summed up by HHJ Stephen Davies in Tinseltime Limited v Roberts [2012] EWHC 2628 (TCC) that solicitors acting under a CFA are no more likely to face a costs order than solicitors acting under a more traditional retainer [at paragraphs 56-7]:

[56]“…(1) The starting point in any case must be the first principle stated by Lord Brown in Dymocks, namely that the ultimate question is whether in all the circumstances it is just to make a non-party costs order, that this is a fact-specific enquiry, and that it must be recognised that in a particular case the court may have to balance a number of different considerations, some of them conflicting.

(2) The starting point when considering the position of a solicitor is that it must be shown that he has in some way acted beyond or outside his role as a solicitor conducting litigation for his client to make him liable for a non-party costs order.

(3) The starting point when considering the position of a solicitor acting under a CFA is that the fact that he stands to benefit financially from the success of the litigation, in that otherwise he will not be able to recover his profit costs or his success fee, does not of itself mean that he has acted in some way beyond or outside his role as a solicitor conducting litigation for his client.

[57]… It follows, in my judgment, that there must be something beyond this combination of factors by themselves which would render it just to make a non-party costs order in such circumstances. Whilst it is unrealistic to seek to identify what will or will not be sufficient in any individual case, I do consider that in the majority of cases there will be present either some financial benefit to the solicitor over and above the benefit which he can expect to receive from the CFA, or some exercise of control of the litigation over and above that which would be expected from a solicitor acting on behalf of a client, or some combination of both.”

In the instant case the Judge held at paragraph 133:

“It is in my view clear from Flatman v Germany first that a solicitor cannot be said to be acting outside the role of a solicitor if the solicitor is doing no more than the legislation pertaining to CFAs renders lawful, and second that in such circumstances it would not be right to conclude that the solicitor is “the real party” or even “a real party” to the litigation. It seems to me that those principles, in particular, preclude the making of an NPCO in this case”. (Our emphasis)

Summary

This is one of the more inventive attempts by a defendant to avoid QOCS. It was however, doomed to failure. It is perfectly true that the costs proceedings were more or less only of interest to BBK. However that, in combination with CPR r.44.16 does not add anything to the case law surrounding section 51. Acting as a solicitor and performing the usual functions (including commencing costs proceedings to which only they have a real interest) is not outside the role of a solicitor – a fundamental requirement before making a non-party costs order.

If the only requirement of the test was that a solicitor be the or a ‘real’ party to litigation, then in almost all cases that a solicitor was acting under a CFA (even more so if the CFA was a CFA lite) the solicitor would be open to a non-party costs order – irrespective of whether QOCS (or any other form of costs protection) applied. This cannot be and is not correct.