Simon Browne QC successfully represented a QOCS-protected Claimant against an application to enforce an adverse costs order made by a Defendant against whom she had discontinued her claim, having been successful and received damages from the other Defendants.
The Claimant (C) suffered an industrial injury and issued proceedings against three Defendants, each of whom were named on her HMRC employment schedule. The second Defendant (D2) denied having employed the Claimant, and after exchange of evidence C discontinued her claim against D2. At trial C successfully recovered £20,000 in damages against the first and third Defendants (D1 and D3). The parties were agreed that the Claimant’s claim was subject to QOCS.
D2 sought to amend the trial Order (no order as to costs) to provide that C pay D2’s costs following discontinuance pursuant to CPR 38.6. C argued if the trial Order was so amended, such an Order would be unenforceable due to the application of QOCS.
Applicant – D2
D2 argued that proceedings meant the entirety of the claim, encompassing the claim against all three Defendants. D2 could set off its costs against any order for damages made in favour of the Claimant, and in these proceedings, the damages paid by D1 and D3.
Respondent – C
C averred that the core principle of QOCS is that the Claimant is never liable to pay costs themselves, but that any costs order made would be “set-off”, or deducted, from the damages paid by the Defendant. In the context of QOCS, “proceedings” referred to individual claims, not the entirety of the claim. Any set-off could therefore only be made in relation to proceedings against D2. Given D2 had paid nil, they were limited in their recovery to nil.
HHJ Freedman found the usual Order in the event of discontinuance applied, and under CPR 38.6 D2’s costs were to be paid by C. However the effect of QOCS was the crucial issue to be determined. In finding for the Claimant, the Judge detailed:
“the whole idea of a set-off, in the context of liability for costs, is that a claimant should not be required to pay anything but rather the defendant pays less or nothing at all. That being the position, it is difficult to see how such would be consistent with the claimant in the instant case handing over all of her damages to the second defendant to meet any order for costs. In short, it would not be a set-off but rather the claimant would be paying money to the second defendant.” (para 35)
“It seems to me that the whole purpose of QOCS is to protect the claimant from financial disadvantage in proceedings which did not result in an order for damages. Such was the position as regards to the claim against the second defendant.
In these circumstances, […] on a proper construction of the QOCS rules, a claimant cannot be required to pay the costs of one defendant from damages paid to her by another defendant. To make such an order, to my mind, makes a mockery of the whole notion of a set‑off.” (paras 41 and 41)