Costs Rule Changes Favour Defendants

From the 6 April 2023 rules changes to the CPR reverse previous court rulings which prevented defendants in personal injury claims from offsetting costs orders in their favour unless there was a specific court order for damages and/or interest on damages payable to a claimant.

The situation arose because of the impact of Qualified One Way Costs Shifting (QOCS) which, for those not working in the personal injury field, effectively means that successful defendants cannot enforce costs orders in their favour against an unsuccessful claimants, except in some specified limited circumstances. In addition, until this rule change comes into effect, costs orders in a defendants' favour can only be offset against amounts payable to successful claimants to the extent of the aggregate of damages and interest on damages specifically awarded to the claimant.

Two cases in the Supreme Court and Court of Appeal had reached these conclusions.

In Cartwright v Venduct Engineering Ltd the Court of Appeal ruled that defendants could not enforce costs against damages through a settlement under a Part 36 or Tomlin order.

And in Ho v Adelekun the Supreme Court made it clear that costs could not be offset against costs when QOCS applies.

See our article referring to these 2 cases back in January 2022 - Defendants unable to offset 'costs against costs' in QOCS cases 19 Jan 2022 - Article from Forbes Solicitors

This left defendants unable to offset costs against costs awarded to a claimant and also unable to offset costs against deemed orders, such as payments made following an agreed settlement including those made following acceptance of a Part 36 offer. Effectively a double whammy for defendants who had obtained a costs award in their favour but were then left with no remedy for enforcement in many cases, and so had to pay their own legal costs of obtaining that order.

These welcome changes relate to costs in claims issued after the 6 April 2023. As a result, we are likely to see a surge in proceedings being issued in the run up to that date by claimants eager to avoid the impact of these changes. In cases issues after the 1 April 2023 defendants will need to think more strategically about Part 36 offers which will have more punch when it comes to recovering an element of defendants' costs.