Set off to get lift off: changes to the QOCS regime

In a newly published consultation by the Civil Procedure Rules costs sub-committee, the Government is proposing changes to the QOCS regime that will put the costs recovered by a claimant at risk of being eaten up by a defendant’s costs order.

The proposals are:

• To take up the invitation by the Supreme Court in Ho v Adelekun [2021] UKSC 43 to address the tension between CPR 44.14 (QOCS) and CPR 44.12 (set off) and allow a defendant’s costs order to be set off against both costs and damages
• To resolve the issue caused by the Court of Appeal in Cartwright v Venduct Engineering [2018] EWCA Civ 1654 where the Court of Appeal stated that acceptance of a Part 36 offer does not create an enforceable order for the purposes of QOCS.

The decision of the Supreme Court in Ho was that in where at the end of trial both claimant and defendant have costs orders in their favour (for example, the claimant does not beat the defendant’s offer), the defendant’s costs could only be enforced up to the amount of any order for damages and interest made in favour of the claimant – CPR 44.14(1).  Any amount above that is unenforceable, and cannot be set off against the amount of costs that the claimant receives.

Therefore, in practice, if the claimant recovers £10,000 by way of damages and interest and £20,000 by way of costs but the defendant has costs order of £12,000 in its favour as well, only £10,000 of that is enforceable against the claimant.  Lord Briggs in the Supreme Court referred to this as “counterintuitive and unfair”.

The proposed amendment to CPR 44.14 would allow the full £12,000 to be enforced against damages and costs and allow set off against costs under CPR 44.12.

The Government believes that the changes should be made to ensure that adverse behaviours in litigation are discouraged and the claimant bears adequate risk.  One risk of QOCS is that unmeritorious cases are run with no financial risk to claimants but with significant financial consequences to defendants, even if they are the winning party. Although these changes do not resolve that issue, or the issue of not being able to enforce a deemed costs order following discontinuance, these changes seek to redress the balance in the circumstances where there is partial success on both sides. The upshot will be that solicitors acting for claimants, and no longer just their clients, will be at risk of losing out.  However, the Government expects this will focus minds more sharply on settlement and discourage running unmeritorious issues.

Jasmine Murphy