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Set off and QOCS - what it is and how it applies in PI litigation

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Claimant’s invariably argue that in QOCS cases, the recovery of a Defendant’s costs is limited to the value of the Claimant’s damages. But can the recovery of a Defendant’s costs be extended to include the Claimant’s own award for costs as well as damages? Let’s take a closer look:


(i) The Claimant makes a claim

(ii) The Defendant makes a Part 36 offer of say, £5,000

(iii) The Claimant presses on towards trial but then, ultimately decides to accept the Part 36 offer out of time.

Between points (i) and (ii) the Claimant incurred, let us say, £10,000 worth of costs.

Between points (ii) and (iii) let us say, the Defendant incurs £20,000 worth of costs.

How does QOCS apply?

My view is that CPR rule 44.12, which relates to set off, kicks in prior to CPR rule 44.13, which relates to QOCS.   What that means in practice is that in the above scenario: 

Firstly, the Defendant pays the Claimant £5,000 damages.

Secondly, the Defendant sets off the first £10,000 of their £20,000 costs against the Claimant’s costs of £10,000.

Thirdly, the remaining £10,000 of the Defendant’s costs are subject to QOCS so can only be enforced up to the limit of the Claimant’s £5,000 damages. 

The net effect is that the Defendant has recovered £15,000 of their costs rather than only £5,000 of their costs had the parties’ costs not been set off. The Claimant not only receives no damages but is also potentially liable for his own solicitor’s unrecovered costs.

My view is that the purpose of the Jackson reforms was to prevent recovery of ATE insurance premiums and success fees against defendants.   The quid pro quo was that Claimants were not going to be prejudiced by adverse costs orders when bringing an unsuccessful claim i.e. they would not find themselves in a worse position after bringing proceedings than they would have been had they not brought proceedings at all.

Set off and QOCS is an important discussion point but it seems to me that if my reading of the rules is correct, then in the above scenario, one of the main purposes of QOCS has arguably been undermined. On the other hand it can equally be argued that it must have been intended that the rules on Set Off and QOCS would operate as set out in the example above as the rules could easily have been worded differently had that not been the case.