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Holly Tibbitts considers the operation of QOCS in multiple defendant cases

Articles | Thu 16th Nov, 2017

Qualified One Way Costs Shifting (QOCS) has been providing costs protection to claimants in ‘proceedings which include a claim for damages for personal injuries’ since its inception on 1st April 2013 (CPR 44.13).

All lawyers practising in this area will by now be familiar with CPR 44.14(1), which stipulates that:

‘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.’

In layman’s terms, an unsuccessful claimant should never have to pay a defendant’s costs except where the claim was struck out or fundamentally dishonest. Where the claim has succeeded and damages have been recovered, costs orders will be enforceable but only up to the extent of the damages and interest awarded.

The application of this rule is straightforward enough in cases involving one defendant. However, the wording of the provision has caused some confusion in multiple defendant cases. If a claimant succeeds against one defendant but not another, can the successful defendant enforce their costs against damages paid by the losing defendant? Or can a defendant’s costs only be enforced against damages paid by him?

This issue has recently been considered by HHJ Freeman in the case of Deborah Bowman v (1) Norfran Aluminium Ltd (2) R M Easedale and Co Ltd (3) Norfran Limited (Newcastle County Court, unreported). While this is a first instance decision, the issue was fully argued before the court and the judgment is well reasoned and persuasive.

The case involved claims for hand-arm vibration syndrome against three defendants. It became apparent that Second Defendant had in fact never employed the Claimant and she, therefore, discontinued against it at a relatively late stage. The Claimant subsequently settled with the First and Third Defendants at the door of court.

The Second Defendant succeeded in obtaining an order for costs against the Claimant, as was its entitlement on discontinuance under CPR 38.6. The Claimant made a cross-application for an order that the costs order should not be enforced because of the QOCS provisions.

The Second Defendant argued that the costs order was enforceable. It submitted that ‘proceedings’ in CPR 44.13 was a reference to the entirety of the claim, namely the claims against all three defendants, and ‘any order for damages’ in CPR 44.14 included orders for damages made against other parties in the proceedings. It also argued that the purposes of QOCS were to protect claimants who were not in broad terms successful, which was not the case here as the claimant had succeeded against two defendants. Further, the Claimant would not, in fact, suffer any financial loss as the costs would only be payable out of damages she received.

The Claimant’s submissions focused on set-off. It was argued that QOCS effectively provided for a set-off of costs against damages.  Set-off does not give rise to any obligation to pay money but rather reduces or extinguishes the amount a party has to pay. This implies a mutuality of liabilities between the paying and receiving party. Where a defendant is not ordered to pay damages there is no mutuality of liabilities and therefore nothing to set off against.

With reference to the speech of Lord Sumption in Plevin v Paragon Personal Finance [2017] UKSC 23, it was also argued that if separate costs orders are to be made against each defendant then these are separate ‘proceedings’ within the meaning of CPR 44.13. The relevant proceedings were consequently those against the Second Defendant. As no damages had been awarded in those proceedings QOCS had the effect that no order for costs could be enforced.

HHJ Freeman fully accepted the Claimant’s submissions. He considered that the only proper interpretation of CPR 44.14(1) was that there should be a set-off of costs against damages. That imports a mutuality of liabilities. He found it difficult to see how the Claimant handing over all her damages to pay the costs of the Second Defendant would be consistent with this. He also agreed that ‘proceedings’ in the context of QOCS must refer to the individual claims and not the entirety of the action.

He expressed the view that had the Rules Committee intended that one defendant could recover costs from a claimant out of damages paid by another defendant, it was very likely that such would have been spelt out.

It was also noted that if the Claimant had issued three separate claims there would be no question of one defendant being able to recover its costs from damages paid by another defendant. Allowing such recovery in multiple defendant claims would result in a windfall for successful defendants which was not consistent with QOCS.

Summarising his conclusions, HHJ Freeman stated that ‘on a proper construction of the QOCS rules, a claimant cannot be required to pay the costs of one defendant from damages paid to her by another defendant. To make such an order, to my mind, makes a mockery of the whole notion of set-off.’

While this case involved a discontinuance and settlement, there is no reason why the same logic should not apply to claims concluded at trial. Indeed, earlier in his judgment HHJ Freeman considered the background to QOCS implementation, including the MOJ’s Commission note on the subject, and concluded that the thinking reflected in the rules was that there should be no different approach in principle, in relation to costs, where proceedings have been discontinued as opposed to a situation where the claimant has been unsuccessful at trial.

This case provides welcome clarification that claimants can proceed against multiple defendants without the concern that they must succeed against all of them to keep their damages intact. Claimants should generally not have to pay the costs of defendants against whom they are unsuccessful, even if they do obtain damages from another party. Claimant lawyers would be well advised to add this case to their costs arsenal.

Holly’s profile is available here.

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