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QOCS - The Court of Appeal reluctantly allows the defendant to offset the costs of an appeal

Siu Lai Ho (Defendant/Appellant) v Seyi Adelekun (Claimant/Respondent) (2020) [2020] EWCA Civ 517 CA (Civ Div) (Sir Geoffrey Vos C, Newey LJ, Males LJ) 09/04/2020 (Lawtel)

The facts

The Claimant issued a personal injury claim under the RTA pre-action protocol. The Defendant denied liability, and the claim exited the protocol and was allocated to the fast track. The Claimant applied to reallocate the claim to the multi-track but, before the application was heard, the Defendant made a Part 36 offer and agreed to the matter being reallocated to the multi-track. The Part 36 offer letter stated that the Defendant would pay the Claimant's costs in accordance with CPR r.36.13, such costs to be assessed if not agreed. The Claimant accepted the offer of £30,000 and the parties signed a consent order which included an agreement that the Defendant would pay the Claimant's reasonable costs on the standard basis, to be assessed if not agreed.

The costs - fixed or standard basis?

The parties did not agree on costs. The Defendant argued that the fixed costs regime under Pt 45 should apply, and a deputy district judge agreed. The decision was reversed by a Circuit Judge, but the Court of Appeal allowed the Defendant's appeal.

The Court of Appeal held that the Defendant had not offered to pay standard rather than fixed costs and the parties had not contracted out of the fixed costs regime. It made a costs order in the Defendant's favour.

Can the Defendant off set its costs?

The Defendant argued that it was entitled to set off its costs of the appeal against the order for the fixed recoverable costs of the claim generally.

Put simply, the Claimant argued the case fell within the scope of the qualified one-way costs shifting (QOCS) regime, which was a self-contained code providing claimants with costs protection.

The Court of Appeal found that it was bound by the case of Howe v Motor Insurers' Bureau (Costs) [2017] 7 WLUK 84. It had to proceed on the basis that it had jurisdiction to direct the set-off of the parties' respective costs entitlements.

However, if there was not already an authority on the issue, Lord Justice Newey remarked that he would have been "inclined" to conclude that where the QOCS regime applied, "the Court has no jurisdiction to order costs liabilities to be set off against each other". He proceeded to assert that he found the "contention that Section II of CPR Part 44 represents a self-contained code and that, accordingly, a defendant can recover costs he has been awarded only by set-off against damages and interest under CPR 44.14 or, where appropriate, by invoking CPR 44.15 or CPR 44.16" to be convincing.

Forbes comment

The Court of Appeal made it clear in the Judgment that it had doubts regarding the right to set off against costs in case subject to QOCS and that if it was not bound by Howe then it would have come to a different conclusion, describing the set-off issue as "a point of some general importance" and commenting there was a "powerful case" for calling Howe into question.

Lord Justice Newey and Males also suggested that the Civil Procedure Rule Committee "may wish to consider whether costs set-off should be possible in a QOCS case".

The Claimant/ Respondent has been given permission to appeal to the Supreme Court.

For more information contact Siobhan Hardy in our Insurance department via email or phone on 0113 386 2686. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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