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On appeal from: [2020] EWCA Civ 517

This appeal concerns the operation of a scheme known as Qualified One Way Cost Shifting (“QOCS”), located in Part 44 of the Civil Procedure Rules. QOCS applies to most personal injury claims and ordinarily has the effect of limiting the amount of legal costs payable by a claimant to a defendant where a claimant loses on part or all of their claim.

Facts

The Appellant was injured following a road traffic accident with the Respondent on 26 June 2012. Some years later, the Respondent offered to pay the Appellant £30,000 to settle her claim. She also offered to pay the Appellant’s legal costs up to that point. The offer was accepted and a settlement agreement was concluded.

There was, however, a dispute regarding the extent of the pre-settlement costs owed by the Respondent. The Court of Appeal upheld the Respondent’s contention that she was only liable for £16,700 of the pre-settlement costs. Reflecting the fact that she had succeeded on this point, the Court of Appeal made a costs order that the Appellant should pay the Respondent’s legal costs of about £48,600 for the hearings dealing with that dispute.

The Respondent accepted that because she had agreed to pay the Appellant the £30,000 by way of a settlement agreement rather than being ordered to pay that amount by a court, this meant that there were there were no orders for damages and interest for the purposes of CPR 44. There was nothing, therefore, against which she could enforce the Court of Appeal costs order under the QOCS regime.

The issue was whether the Respondent could nonetheless avoid paying the £16,700 that she owed the Appellant for the pre-settlement costs, because it was cancelled out by the £48,600 that the Appellant owed her under the Court of Appeal costs order. The Court of Appeal concluded that she could, leading the Appellant to appeal to the Supreme Court.

Judgment

HELD – The Supreme Court unanimously allowed the appeal.

It was agreed by both parties that the question was one of construction of the language of the QOCS provisions in CPR rule 44.14.

The Court held that the effect of rule 44.14(1) is to create a monetary cap on the amount that a defendant can recover in costs from the claimant, set at the level of the aggregate amount in money terms of all court orders for damages and interest in a claimant’s favour. The defendant must keep a running account of all costs recoveries which it makes against the claimant, and cease enforcement once that monetary cap is reached.

The Respondent nonetheless argued that she could set off the opposing costs orders against each other because the monetary cap created by rule 44.14(1) only applied to the net costs liability of a claimant after all opposing costs orders had been netted off. Therefore, despite the aggregate amount of court orders for damages and interest in the Appellant’s favour being zero, the Respondent argued that the £16,700 owed by her for the pre-settlement costs could still be netted off against £16,700 of the Court of Appeal costs order.

The Court rejected this argument. The setting off of costs against costs is a form of enforcement covered by the QOCS provisions just as the setting off of costs against damages is. A calculation of a claimant’s net costs liability was therefore an incorrect approach, as the bar to enforcement in the QOCS provisions applied to the gross amount of a defendant’s costs orders against a claimant rather than the net amount.

The effect of this is that the Respondent must pay the Appellant the full pre-settlement costs of £16,700 on top of the £30,000 agreed to in the settlement agreement, but cannot enforce the Court of Appeal costs order at all.

Lord Briggs and Lady Rose recognise that this conclusion may lead to results which at first look counterintuitive and unfair. But the conclusion follows from the wording of the QOCS provisions in CPR Part 44, and any apparent unfairness in an individual case is part and parcel of the overall balance struck by the QOCS regime.

 

For a PDF version of the Judgment, see: Judgment (PDF)

For a non-PDF version, please see: Judgment on BAILII (HTML version)

If you would like to watch the hearing, please see below:

29 June 2021 Morning session Afternoon session
30 June 2021 Morning session