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High court rejects costs setoff in QOCS claim

Updated: Jun 29, 2023

The High Court rejected a defendant’s bid to escape the full rigour of the qualified one-way costs shifting (QOCS) regime in a ruling handed down this week.

High court rejects costs setoff in QOCS claim

In Chappell v Mrozek the claimant, who was injured in a motorcycle collision, accepted a Part 36 offer of £250,000 some 20 months after it had expired.

The parties agreed the usual order for costs, with the claimant entitled to his costs until 21 days after the offer was made, and the claimant to pay the defendant’s costs thereafter. The claimant then sought to rely on QOCS, asserting that the defendant could not enforce the costs order in his favour.

The defendant failed to pay the settlement of £250,000, and so the claimant applied to court for an order for payment.

The defendant then sought to argue that this order for payment counted as ‘an order for damages and interest’ under the procedural rules governing the set-off of costs orders. This meant that the costs order made in his own favour could be enforced against this order, the defendant argued.

Master Stevens noted that the Ministry of Justice is consulting on changes to the QOCS rules to deal with this very issue of costs offsetting.

However, she observed that no rule changes had yet been finalised in this area, and in any event she needed to base her decision on the rules that were in force when the settlement was reached in the claim before her.

Following analysis of the policy background to QOCS, and the relevant rules and case law – with the authorities bundle stretching to 612 pages – Master Stevens rejected the defendant’s arguments.

She ordered the settlement sum to be paid to the claimant without any deduction. The costs order made against the claimant in respect of late acceptance of the offer was not to be set off against any part of the sums ordered in the claimant’s favour.

Summarising the arguments made by claimant counsel Andrew Hogan, Master Stevens noted that the civil procedure rules obliged a paying party to pay the settlement sum within a specified time.

She added: ‘It cannot be fair or right that a paying party is financially rewarded (by securing an order for damages and interest) against which it can enforce costs orders, only through the deliberate breach of an obligation imposed by the CPR to pay an agreed sum.’

In her final conclusions, the judge remarked: ‘I consider it important to recognise the unfairness to the claimant, and those trying to advise him as well, if my finding was against him… the defendant confirmed that they accepted the claimant’s suggested costs liability so the only issue was the QOCS set-off.

The defendant’s decision to challenge the position judicially has resulted in the claimant being denied any payment of his agreed damages to date. That is unfortunate and [there is] case authority for the proposition that the claimant is entitled to receive the offered sum without awaiting set-off of an unquantified costs liability.’

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