High Court exercises discretion not to order set-off in QOCS case

The court has power to order a set-off against costs where qualified one-way costs shifting (QOCS) applies, a High Court judge has ruled, but he also decided to exercise his discretion not to do so in the case before him.

Faulkner v Secretary of State for Business, Energy and Industrial Strategy [2020] EWHC 296 (QB) was an industrial disease claim where the judge at the case management conference (CMC) ordered a preliminary issue hearing on diagnosis and causation. He awarded the defendant £3,500 in costs for the CMC.

However, the claimant then served notice to discontinue. The defendant responded by applying to set this aside so that it could then seek to strike out the claim and thereby strip away the QOCS protection the claimant otherwise enjoyed.

Turner J refused the application and awarded the claimant costs of £7,000. The defendant argued that this should be set off against the earlier award made in its favour.

Having reserved judgment, the judge then emailed the parties to question whether it would be theoretically open to the defendant to claim to set off not just the £3,500 but all of its costs for which the claimant would be deemed liable under CPR 38.6.

The claimant’s barrister, well-known blogger Gordon Exall, conceded that it could be but urged the judge against such an action.

The claimant contended that, under CPR 44.14(1), any costs order in his favour was not an order for either damages or interest and so remained within the scope of QOCS.

The defendant responded that the reduction of the claimant’s entitlement to costs would operate as a set-off and not by way of enforcement as per CPR 44.12.

Finding for the defendant, Turner J said he was bound by the ruling of the Court of Appeal in Howe v Motor Insurers’ Bureau [2017] EWCA Civ 932 that set-off was not a form of enforcement.

Lord Justice Lewison said part 44.14 enabled enforcement without the permission of the court whereas part 44.12 requires a court order before one set of costs could be set off against another.

In the alternative, the claimant argued that the court retained a residual discretion not to exercise such a power.

Turner J agreed. Here it was “readily apparent” that the application to set aside the notice of discontinuance was “very weak” and the bid to strike out the resurrected claim under CPR 44.15 was “doomed to failure”.

He continued: “If the defendant had ever considered that such a strike-out application had realistic prospects of success, then it could and should have made it while the claim was still proceeding and weeks before the notice of discontinuance had been served.

“It was entirely inconsistent for the defendant to proceed towards the hearing of a preliminary issue in a case in which, as they were later to argue, the claimant’s case was so weak that it could have been struck out without the need for any such issue to be heard.

“One can understand the tactical reasons behind the defendant’s application, but it was deeply flawed.”

Furthermore, the judge said, if the claimant had not served notice to discontinue, the hearing of the preliminary issue would have gone ahead and the defendant would have incurred more costs and the claimant would have maintained QOCS protection.

“It is not without irony that the defendant sought to set aside a notice of discontinuance which, albeit served late in the day, had had the effect of saving it money. I can well understand the defendant’s frustration that the notice was not served earlier, but the resilience of the QOCS regime is such as to limit very strictly the inroads which can be made into the scope of its application.”

As a result, Turner J decided to exercise his discretion against allowing the defendant to set off any sum against the claimant’s costs of successfully resisting the set-aside application, leaving the claimant entitled to claim his costs of £7,000.

Gordon Exall (instructed by Atherton Godfrey) for the claimant and James Williams (instructed by CMS Cameron McKenna Nabarro Olswang) for the defendant.

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Costs News
Published date
27 Feb 2020

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