QOCS: setting off costs against costs

05 Jul 2019

The introduction of Qualified One Way Costs Shifting (QOCS) to personal injury claims was designed to protect an honest claimant from being placed in a worse financial position as a result of bringing a claim against a successful defendant. As Rupert Jackson recommended in his original report, ‘It seems to me that a person who has a meritorious claim for damages for personal injuries should be able to bring that claim, without being deterred by the risk of adverse costs[1].

However, where damages are awarded to the claimant, deductions can be made to cover the defendant’s costs. Previously a claimant may have given insufficient thought to an offer made by his opponent, on the basis that his after the event (ATE) insurer would meet any adverse costs liability. Now, the risk of his damages being used to satisfy any liability for the defendant’s costs[2] makes it even more crucial that he pay attention to the advice given to him by his advisors.

In the event that a defendant successfully beats its own Part 36 offer and then enforces their costs liability, wiping out the entirety of the claimant’s damages, the focus is shifted to the claimant’s costs. It must be questioned whether it is reasonable for a claimant’s representatives to recover their fees from the defendant especially where an early Part 36 offer has left their client with no damages.

Set off

To allow set-off of costs would not, in my judgment, go against the thrust of his recommendations, and I do not consider that there is anything in the detailed rules setting up the QOCS regime which disapplies the court's power to order set-off.[3]

The provisions in respect of set-off[4] have always provided the court with discretion to order that one party’s costs liability be set off against its own costs entitlement.

After some debate as to how this rule would operate in conjunction with the newly introduced QOCS regime, the Court of Appeal[5] provided some much needed guidance and confirmed that there is nothing within Section II of CPR 44 which fetters the discretion of the court to make an order for set off.

Case study 1

BLM was instructed on behalf of the defendant, who obtained an order for costs in its favour following a successful appeal dismissing certain heads of loss claimed by the claimant. As the defendant’s appeal costs exceeded the claimant’s damages the court was invited to order that any remaining balance be set off against the claimant’s costs.

The claimant’s solicitors rejected this submission, prompting a standalone application. The District Judge concluded that it was just that an order for set off be made in the circumstances, the claimant having pursued unsustainable heads of loss and failing to make any offers to compromise the appeal.

Case study 2

BLM was instructed on behalf of the defendant, who obtained an order for costs in its favour after the claimant accepted a Part 36 offer significantly out of time.

Similarly to the above, it was submitted that the claimant’s rejection of the defendant’s reasonable offer was prompted by his pursuit of an unsustainable head of loss. The defendant was put to significant expense in defending this unreasonable aspect of the claim for several months after the offer expired. Having regard to the claimant’s conduct and the defendant’s last approved budget, it was argued that an order for set-off against costs would be just in all the circumstances.

On this occasion, the claimant/his solicitors consented to the application and the making of an order pursuant to CPR 44.12.

Practical implications

  1. Part 36 offers
    There may be merit in reminding claimants (and particularly their solicitors) of the set-off provisions when making settlement offers.

  2. Costs budgets
    Defendants should not make the mistake of filing insufficient costs budgets on the misunderstanding that any costs entitlement will be limited to the claimant’s damages only. In some multi-track matters, the claimant’s costs may well be as much as the damages awarded and defendants should therefore not limit their own recovery by submitting a budget that does not reflect the work required. 

  3. Costs orders made at trial
    Where a matter proceeds to trial and the defendant believes that they have made a good Part 36 offer, they should be prepared to make submissions on the question of costs and invite the court to make an order for set-off there and then. Such applications will be even more likely to succeed where the defendant is able to provide a summary of their costs incurred, as against their last approved budget.

  4. Late acceptance of a Part 36 offer
    Whilst late acceptance of a Part 36 offer will not constitute a deemed Order for assessment,[6] it frustratingly does not alter the requirement for payment of the claimant’s damages within 14 days of acceptance[7]. Some unscrupulous claimants and/or their solicitors will seek to enforce payment of damages, notwithstanding ongoing disputes as to costs, although such conduct will often be given short shrift.

    However, in cases subject to fixed costs in particular, an appropriate alternative may be to propose agreeing an Order for set off, in order to facilitate the immediate payment of damages.

  5. Applying for an order for set off during the detailed assessment proceedings
    Whilst it is preferable for the order giving rise to a detailed assessment to include a provision in relation to set off, there is nothing to prevent a defendant from making such an application within the assessment proceedings themselves.

  6. Claimant’s solicitors protecting their own interests
    It is anticipated that some solicitors will seek to oppose any application for an order for set off, in order to try and maximise the recovery of their fees. Such firms should be reminded of the decision in Myatt v National Coal Board (Number 2) [2007] 1WLR 1559 and the risk to those who seek to put their own financial interests ahead of their clients’.

    To discourage unreasonable claimant behaviour the threat of an application for an order making them personally liable for any additional fees incurred may assist. This will be on the basis that such firms are party to conditional fee agreements which limit their fees to those recovered from the defendant.

Throughout litigation adequate warnings can be provided to claimants in relation to costs penalties for misgivings. Claimants need to be made aware that costs set off can and will be allowed in certain cases. Finally, defendants should not be afraid of taking a robust approach and seeking to penalise claimants and/or their solicitors who fail to accept reasonable offers and then look to hide behind the provision of QOCS to pursue the recovery of their own fees.

This article is authored by:

Rachael Round, senior claims advisor
E: rachael.round@blmlaw.com
D: +44 (0)161 838 3942

Marie Ingoe, professional support lawyer
E: marie.ingoe@blmlaw.com
D: +44 (0)161 838 3996

 


 

 

[1] Review of Civil Litigation Costs: Final Report (2009)

[2] I.e. by way of the Defendant enforcing his costs entitlement against the Claimant’s damages.

[3] Stewart J Howe v MIB (No. 2) [2017] EWCA Civ 932

[4] Now contained in Rule 44.12

[5] First in Howe v MIB (No. 2) [2017] EWCA Civ 932 and again in Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654 (17 July 2018).

[6] Pursuant to CPR 44.9

[7] Pursuant to CPR 36.14.

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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