A claimant's QOCS protection will only be lost if the claim is found to be fraudulent, the claimant fails to beat a Part 36 offer or the case has been struck out. In most cases therefore, a defendant will still be able to seek costs protection by relying upon Part 36. However, the message now being given loud and clear by the Ministry of Justice (MoJ) is that in order to secure any costs protection and avoid punitive sanctions defendants must, at the earliest possible opportunity, make good fighting offers under Part 36.
This is particularly relevant to MoJ portal cases for Stage 3 hearings. Properly valuing a claim at an early stage should either bring the claim to a conclusion quickly or provide costs protection if the case progresses.
The reformed sanctions under Part 36 will continue to give protection to defendants and allow them to recover costs from a claimant (notwithstanding the new QOCS regime). Any costs recovery will be limited to the amount of damages awarded to the Claimant at the conclusion of the case. However, a claimant will be able to seek a 10 per cent uplift on disputed damages and on costs should a defendant fail to beat a claimant’s Part 36 offer. Such sanctions will, therefore, weigh in a claimant's favour should a defendant fail to properly value a claim at an early stage.
Even as now drafted, the rules will not always allow a defendant to recover all costs. For example, if a defendant makes a Part 36 offer of £5,000 (including an enhancement to encourage early settlement) which is rejected, and at trial a year later the claimant recovers £4,000, all that the defendant can recover in costs will be £4,000. If the defendant’s costs of taking the matter on to trial are £7,000, the defendant is still worse off. It is true to say, however, that things could have been much worse as was originally proposed to the MoJ!
Therefore, an appropriate additional calculation will need to be factored into early offers, and at each stage the case is reviewed as it heads towards trial so that defendants balance the costs being incurred with any offers made.