The quirks of QOCS: Ho v Adelekun

The Supreme Court’s decision in Ho v Adelekun [2021] UKSC 43, on qualified one-way costs shifting (QOCS) and set off, lays out temptation for personal injury claimants and their lawyers. Should a claimant now take a chance on that interim application? Now, as long as there is no order for damages – easily achieved through a settlement or discontinuance later – the claimant will not actually have to pay the defendant’s costs if the application is lost, and will get to keep costs if the application is won. And then, also, an even more certain bet, once the claim has settled, and knowing then that there is no order for damages, should a claimant take a chance on a costs argument, to try to get more, without risk of paying defendant’s costs if he loses? Such is the effect of Ho, in the Court’s decision that a set off of defendant’s costs against claimant’s costs is useless if there is no order for damages and interest. Given this, when coupled with the Court of Appeal decision in Cartwright v Venduct Engineering [2018] EWCA Civ 1654 which excludes damages settlement from the fund for defendant’s costs under QOCS, one has to imagine that the temptation will be irresistible, and a wave of such opportune litigation will follow – and that there will be a corresponding wave of application by defendants to create damages orders, or otherwise secure costs, possibly from the claimant’s solicitors themselves.

Deterrence deleted?

Taking a chance is one thing, but actively pursuing a frivolous or bad point is another. The Supreme Court acknowledged that QOCS is not perfect, but I would argue that it has made the system even worse. Paying adverse costs was a key deterrent required in Sir Rupert Jackson’s original vision of the QOCS regime in his Final Report in 2009. That deterrent has now all but gone after Ho. Some claimants will benefit. Defendants will be prejudiced by either not being able to recover costs while still having to pay them, or the blackmailing effect of that outcome forcing them to concede to bad points. The Supreme Court acknowledged that the result in Ho would appear to be unfair. Other litigants will find their cases delayed by other ‘have a go’ applications in the court system.

It seems to be a feature of the 2013 Jackson costs reforms, and specifically CPR amendments from that time, that they cater more for trial outcomes – and stakeholders often see the reforms as lacking in respect of claims that conclude by settlement (which most do). QOCS is an example where defendants are unhappy that a fund against which to enforce costs orders is likely to only be created at trial. Claimants were unhappy that indemnity costs apply only for bettering their offer at trial, and not on late acceptance (Hislop v Perde [2018] EWCA Civ 1726). Defendants are unhappy that the power to limit Protocol fixed costs in CPR 45.24 applies only where there is judgment (Williams v SoS for Business [2018] EWCA Civ 852). The list goes on. While late acceptance and unreasonable exits have other outlets (exceptional circumstances and Part 44 conduct provisions), there really is no cure for the problems with QOCS, other than a revision to the QOCS rules.

The original intention

The original purpose of QOCS was to facilitate an end to recoverable ATE premiums. QOCS is intended to protect personal injury claimants from a net liability to pay defendant’s costs, as recognised by the Court of Appeal in cases such as Cartwright. But the way it has been implemented, and then interpreted by the courts, has extended its protection to claimants’ solicitors pursuing an agenda of their own, such as strategic litigation about costs to enrich themselves. If I’m not mistaken, risk in costs proceedings was excluded by ATE policies before 2013, so that has come as a gift.

Conclusion

Views on whether the CPR require amendment to rebalance the position under QOCS are likely to be drawn along party lines. The Supreme Court said that the Civil Procedure Rule Committee was better placed to deal with this issue. Surely now there will be reconsideration of the QOCS rules to see if the policy intentions were delivered. The drafting issue identified in Cartwright, that settlements, including Part 36 settlements, are safe from enforcement, seems the hardest to justify – after all, what is the qualitative difference between damages ordered at trial and damages under a settlement? The Ho result, that claimants can keep costs despite losing, is also hard to justify in the context where the claimant’s solicitor likely took on the whole claim on a no win, no fee basis. Over to the CPRC.

Matthew Hoe is a member of the Costs SFT for the Forum of Insurance Lawyers, director of litigation and dispute resolution at Taylor Rose MW, and acted for the defendant in Ho v Adelekun: taylor-rose.co.uk