QOCS Costs Set Off Limited To Damages And Interest

• Published date: 02 December 2021
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: BLM
• Author: Mr Paul Wainwright

Ho (Respondent) v Adelekun (Appellant) [2020] UKSC 43

As the late, great Stephen Hawking once said, "one of the basic rules of the universe is that nothing is perfect. Perfection simply doesn't exist... Without imperfection, neither you nor I would exist." The Supreme Court Justices certainly agreed with the sentiment when considering the proper operation of Qualified One Way Costs Shifting (QOCS), and the drafting of CPR 44.14, The issue under consideration was whether, in the context of the QOCS regime, courts had a jurisdiction to set-off costs vs costs (rather than merely damages and interest).

QOCS was introduced in April 2013, in exchange for a bar on recovery for most ATE premiums, to insulate genuine claimants who bring unsuccessful injury claims, from a liability to pay their opponent's costs. This approach protects those claimants from meeting the costs incurred by (comparatively) well-funded insurers, NHS Trusts or local authorities. The asymmetry of the relationship - private individual versus experienced 'repeat player' defendants - provides the policy justification for this protection.

The general effect of QOCS is that a claimant pays nothing where their claim is dismissed at trial. However, matters become more complicated where there have been successful Part 36 offers by defendants, or discrete interlocutory applications won and lost by either side during the course of the litigation. Crucially, the rules are silent as to what should happen when a claimant's damages and interest alone are not sufficient to satisfy any adverse costs liability in favour of a defendant and whether any shortfall can be set off by defendants against costs that would otherwise be payable in favour of a claimant.

The Court of Appeal in Howe v MIB (No. 2) [2020] Costs LR 297 permitted the set off of costs vs costs but the issue was doubted when considered by a differently constituted Court of Appeal in Ho v Adelekun, hence the further appeal to the Supreme Court.

The Supreme Court

In Ho, the Supreme Court unanimously held that any costs orders against a claimant may be enforced, without permission of the court, where the aggregate amount is not more than a claimant's damages and interest only, per CPR, r. 44.14(1).

The argument that QOCS is a complete costs code or that it wholly excludes set off under r.44.12 was rejected. However the court stated that "QOCS is intended to be a complete code about what a defendant in a personal injury case can do with costs...