17 October, 2017
QOCS Prevents Defendants from Setting off Costs against Damages Awarded to a Claimant by Another Defendant
In the recent Judgment of Bowman v Norfran Aluminium Ltd (1), R M Easedale and Co Limited(2), Norfran Ltd(3) the Court dismissed the second Defendant's Application to recover its costs from the Claimant's damages, something the Court considered to be a set-off.
By way of background the claimant brought a claim for damages for hand/arm vibration and CTS against three defendants. The claimant discontinued against the second defendant when it became clear that the claimant was never in fact employed by the second defendant. The first and third defendants subsequently settled the claim on the day of the trial and agreed to pay the claimant damages of £20,000.
Having discontinued the claim against the second defendant, the claimant was liable to pay the second defendant's costs under CPR 38.6. The question which then arose was whether the claimant was entitled to the protection of QOCS. The second defendant argued that the claimant did have QOCS protection, but that it was entitled to recover its costs against the £20,000 of damages paid by the first and third defendants.
At the hearing the Judge concluded that the claimant was entitled to QOCS protection and the second defendant should bear its own costs. Within the judgment HHJ Freedman concluded that such an Order would be a set off and in his view the whole idea of set off (in this context) is that a claimant should not be required to pay anything and the defendant pays less or nothing at all. That being the position, he deemed that if were the intention of the Rules Committee that one defendant could recover costs from a claimant out of damages paid by another defendant, it would have been clearly stated in the rules. He also noted that if he were to allow the application then this would have resulted in a windfall for the second defendant which goes against the whole ethos of QOCS.
This particular issue is proving controversial and goes against the grain of what Forbes had been experiencing in practice. It is not yet known whether the settlement on the doorsteps of the Court precluded the Claimant from seeking a Bullock Order. In addition given the three Defendants were effectively the same entity there does not appear to have been any discussion in relation to whether a Sanderson Order was appropriate. Given the lack of discussion on these matters we consider the Judgment to have its limitations. Given the rather fact specific nature of this case it is unlikely that many similar cases, involving such closely linked Defendants, will arise often.
The High Court recently confirmed that Bullock and Sanderson orders (which permit a successful defendant to claim its costs from the unsuccessful defendant in certain circumstances) are still good law and can provide an opportunity for co-defendants to recover their costs. It appears that neither the successful Defendant nor the Claimant elected to address the Judge on these potential avenues. Whilst we cannot be certain, we suspect that this was probably because the three defendants were effectively the same company.
As a final discussion point it strikes us as arguable that this type of costs recovery is not a set off. For there to be a set off, in our view, there needs to be reciprocal liabilities. No such reciprocal liabilities existed in this case, the Claimant having discontinued against the successful Defendant. Whether this will ultimately lead to an Appeal and/or a future decisions which conflict with this judgment on this issue only time will tell.