QOCS: No Set-Off for Defendant

Today the Supreme Court answered the question: Is there jurisdiction in a personal injury claim that attracts the application of Part 44 Section II of the Civil Procedure Rules (CPR), which relates to Qualified One-way Costs Shifting (QOCS), to allow the set-off of an order for costs made against the Claimant against an order for costs made in the Claimant’s favour? Ho v Adelekun [2021] UKSC 43 Lord Briggs, Lady Arden, Lord Kitchin, Lord Burrows, Lady Rose

The Defendant, Ho, made a Part 36 offer to settle a personal injury claim which the Claimant, Adelekun, accepted and it was agreed that the Defendant was liable to pay the costs of the claim.

There was then a dispute as to whether Adelekun’s costs should be paid on a Fixed Recoverable Costs basis pursuant to CPR 45.29B as the Defendant contended, or on the conventional Standard Basis as Adelekun contended.

The issue was finally decided in Ho’s favour on the second appeal to the Court of Appeal and was not before the Supreme Court.

Ho was awarded her costs of the appeals as well as the hearing at first instance. Neither was that award of costs under appeal, the parties also accepting that CPR Part 44 Section II (QOCS) applied to Adelekun’s claim, including the appeal proceedings.

The question arose whether, in light of the QOCS provisions in CPR Part 44 Section II, the Court had jurisdiction to order that the costs order in Ho’s favour be set off against the order for costs in Adelekun’s favour in respect of the costs of her claim and, if so, whether any discretion to make such an order should be exercised in Ho’s favour.

The Court of Appeal, determining the issue as a first instance decision, held that it was bound by its own previous decision in Howe v Motor Insurer’s Bureau (No 2) [2017] 7 WLUK 84 that the court did have jurisdiction to make such an order, stating at the same time that it would have been inclined to conclude to the contrary if not bound by Howe and that there was “a powerful case for calling the decision in Howe into question”

Unanimously allowing Adelekun’s appeal, the Supreme Court considered that the Court of Appeal was correct to doubt whether Howe was correctly decided.

The Court did not consider that the well-established jurisdiction to direct set-off costs against costs under rule 44.12 was displaced by the QOCS scheme provided that there was an order for damages or interest and that the headroom provided by that order had not been exhausted by other means of enforcement.

It rejected the submission that it was only the net costs entitlement that had to be brought into account under rule 44.12(1).

At first blush this conclusion may look counterintuitive and unfair, but it was the result that followed from the true construction of the wording used in Part 44.

Any apparent unfairness in an individual case such as the dispute between Ho and Adelekun was part and parcel of the overall QOCS scheme devised to protect claimants against liability for costs and to lift from defendants’ insurers the burden of paying success fees and ATE premiums in the many cases in which a claimant succeeded in her claim without incurring any cost liability towards the defendant.

This construction of rule 44.14 may lead to results that appeared anomalous. No-one had claimed that the QOCS scheme was perfect. It was, however, the best solution so far that the opposing sides in the ongoing debate between claimant solicitors and defendant insurers had been able to devise.

It worked to achieve the aims for which it was introduced in the great majority of straightforward cases in which one side or the other was entirely successful.