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QOCS and Set Off: Supreme Court ruling in Ho –v- Adelekun [2021] UKSC 43 - Rochelle Powell, Temple Garden Chambers

26/11/21. This appeal considered whether Qualified One Way Costs Shifting (‘QOCS’) could in any way constrain a defendant’s liberty to seek, or the court’s discretionary power to permit, a set-off between opposing costs orders. Overturning the Court of Appeal decision, the Court held that the setting off of costs against costs is a form of enforcement covered by the QOCS provisions. It was therefore precluded where a defendant’s costs exceeded the total of any order for damages and interest in favour of the Claimant.

Background

The appellant, Ms Adelekun, was injured in a road traffic accident on 26 June 2012 for which she alleged the respondent, Ms Ho, was liable. Ms Adelekun’s claim included damages for personal injuries. Ms Ho did not admit liability, but her solicitors offered to pay Ms Adelekun £30,000 in settlement of her claim in what was described as a “Part 36 Offer Letter”. In that letter, Ms Ho also offered to pay Ms Adelekun’s costs, such costs to be subject to detailed assessment if not agreed, if the offer was accepted. The offer was accepted and the parties agreed that Ms Ho was liable to pay Ms Adelekun’s costs of the claim. However, there was a dispute as to the basis of assessment for those costs: Ms Ho contended that Ms Adelekun’s costs were limited to fixed costs whereas Ms Adelekun argued that she was entitled to recover her costs assessed on the standard costs basis. The matter came before the Court of Appeal. It was held that only fixed recoverable costs were payable and Ms Ho was awarded the costs of the appeal. Ms Ho asked the Court if she could set off her obligation to pay Ms Adelekun the fixed recoverable costs for the claim against the much larger costs liability that Ms Adelekun owed her for the assessment dispute.

It was accepted by the parties that the QOCS scheme applied and that the claim concluded by way of an acceptance of a CPR Part 36 offer; there was no “order for damages” as within the meaning of the QOCS regime. However, the Court of Appeal held that set-off was not a form of enforcement and that the court did have power to order set-off (following the decision in Howe v Motor Insurers’ Bureau [2020] Costs LR 297), exercising it discretion in Ms Ho’s favour.

Judgment

The unanimous decision of the Supreme Court was that under the true construction of the QOCS regime, set off was a form of enforcement. It was made clear that [34]:

Rule 44.14 does not in terms operate as a total ban of set-off of opposing costs orders. It just imposes a monetary capThat will amount to a ban only if there are no orders for damages or interest (as in the present case) or if the aggregate amount of damages and interest has already been used up by other means of enforcement.

Further, the Court held that [42-43]:

QOCS is intended to be a complete code about what a defendant in a PI case can do with costs orders obtained against the claimantwe do not consider thatthe well-established jurisdiction to direct set-off of costs against costs under rule 44.12 is displaced by the QOCS scheme, provided that there is an order for damages or interest and that the headroom provided by that order has not been exhausted by other means of enforcement.”

Accordingly, the appeal was allowed.

Conclusion

This decision has significant implications for those all involved in the conduct of personal injury litigation, given that a large number of them settle.

However, the comments of the Supreme Court should be noted: it was acknowledged that the decision “may lead to results that appear anomalous” and, at the outset of their judgment, the Court questioned the “appropriateness of a procedural questions of this kind being referred to this court for determination”. It will now be a matter for the Civil Procedure Rule Committee to determine the “true” construction of the QOCS scheme and what, if any, action to take.

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