The long awaited judgment in Ho v Adelekun  UKSC 43 was handed down in October with the appeal being unanimously allowed.
The judgment clarifies the position in respect of the interplay between CPR 44.12 and CPR 44.14, and the effect of QOCS on a Defendant’s ability to offset an order for their own costs against the Claimant’s costs.
The issue arose from a personal injury claim which settled by way of Part 36 acceptance. A dispute ensued regarding whether fixed costs applied and the Defendant was successful on that point in the Court of Appeal. The Defendant was awarded their costs in the sum of £48,600. The Claimant had recovered damages of £30,000 and fixed costs of £16,700. As QOCS applied, and there was no order for damages, the Defendant could not offset their costs against the Claimant’s damages but argued that they could still offset part of their costs against the Claimant’s costs under CPR 44.12.
CPR 44.14 states :
44.14 – Effect of qualified one-way costs shifting
(1) Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.
(2) Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.
(3) An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record
The judgment confirms that off-setting under CPR 44.12 constitutes an enforcement for the purpose of CPR 44.14, above. As such, a Defendant’s costs can be set-off against opposing costs orders but only to the extent that those costs do not exceed the amount ordered for the Claimant’s damages and interest (absent any QOCS exceptions such as fundamental dishonesty). In this case, as there was no order for damages, there could be no offset against costs and the Defendant would recover nothing.
The word ‘order’ is key, any other form of settlement will mean that the Defendant cannot recover any of its costs unless an exception applies. A Part 36 acceptance or a Tomlin order where the damages provision is not within the order will not suffice. Similarly, where there is an order for damages but those damages are small, a Defendant’s costs (which may significantly exceed those damages) will be capped at that damages amount, even where the Claimant has recovered some costs.
The judgment has serious implications for Defendants and it was conceded that it may cause results that look ‘counterintuitive and unfair’. At paragraph 9, it was suggested that the issue may need to be reviewed by the Civil Procedure Rules Committee to put right any ambiguities. The minutes of the CPRC November meeting are now available here and confirm that the review is likely to be delayed until after the work on fixed recoverable costs is concluded.
This article originally featured in our November newsletter which can be found here. It has been updated to include the outcome of the recent CPRC meeting.