6th October 2021
The Supreme Court has, today, handed down judgment in the important case of Ho v Adelekun  UKSC 43. This concerns interpretation of the rules surrounding Qualified Once Way Costs Shifting (QOCS) and what funds can be taken into account in relation to enforcement of the defendant’s costs.
The original claim was about a Road Traffic accident. Mrs A was injured in a collision with a car driven by Mrs H back in 2012. Insurers for Mrs H made a Part 36 offer of £30k which was accepted. A battle began over costs. Mrs A argued that she was entitled to costs on the standard basis. Those costs totalled about £42k. The insurers argued that she was only entitled to fixed recoverable costs at £16,700. That particular dispute ended up in the Court of Appeal who found in favour of the Defendant, Mrs H. So the claimant’s costs were limited to £16,700. The costs of the appeal were £48,600. The issue was whether the defendants could recoup some of those costs as a set off against the £16,700.
This takes us to CPR 44.14 that says –
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.
The settlement of £30k was protected by QOCS as it was not part of any order for damages and interest. It was a settlement. But could the defendants enforce part of their appeal costs against the £16,700? There were two Court of Appeal decisions on the point. In the case of Howe v Motor Insurers’ Bureau  Costs LR 297, the court decided that enforcement of costs against costs was not affected by QOCS and allowed a set off in similar circumstances. In this case the Court of Appeal took a different view and thought that a set off was not appropriate. However, they considered themselves bound by Howe. Which is why we ended up in the Supreme Court.
The Supreme Court noted that in many cases there won’t be any issue. If the Defendants’ costs are less than the damages and interest, then they can be offset against that money pursuant to CPR 44.14. But what happens when the costs exceed the damages and interest? Can the shortfall by deducted from the claimant’s costs? The issue was whether the attempted set off against costs amounted to enforcement, which would invoke CPR 44.14, or was simply covered by the general rules on set off under CPR 44.12. The Justices found that it was indeed enforcement. This meant that the cap on deductions prevailed. 44.14 clearly limits such deductions to orders for damages and interest. That is where the line is drawn and there can be no enforcement of the defendants’ costs against a separate order for costs in favour of the claimant. So the Defendants had to pay the £30k damages that were protected as they were not covered by an ‘order’, the £16,700 costs of the original claim and their own costs of the appeal.
The position is that under QOCS there is no set off of costs against costs.
Interestingly, the Supreme Court expressed unease that they were called upon to adjudicate on this point. Lord Briggs and Lady Rose, giving the lead judgment, observed that this was really matter for the rules committee. This is not the first time that these rules come under scrutiny and it is surely time for a root and branch review.