QOCS, SET OFF AND COSTS: THE COURT DOES NOT HAVE POWER TO SET OFF COSTS AGAINST COSTS: COUNTY COURT DECISION
In Darini -v- Markerstudy Group (24th April 2017) His Honour Judge Dight considered an important issue in relation to set off and costs. A copy of the judgment is available here. HMC25855_DariniOlsoyvMarkerstudy_ApprovedJudgment_24042017 (2) and has kindly been provided by Gavin Lampert of Lucas & Co. It is important that you read the discussion of this case in Faulkner -v- Secretary of State for Energy and Industrial Strategy  EWHC 296 (QB) Mr Justice Turner discussed in detail here.
The claimants had brought a personal injury action. The action was discontinued and, therefore, a deemed costs order made in favour of the defendant. However the claimants had the protection of one way costs shifting. The costs order could not be enforced without permission of the court.
- The defendant sought to set aside the notice of discontinuance.
- The defendant’s application was unsuccessful.
- The district judge ordered that the defendant pay the claimant’s costs.
- The district judge ordered that the costs that the defendant had been ordered to pay should be set off against the costs the claimant had to pay.
The claimants appealed against the order setting off the costs:
- Firstly on the grounds that the district judge had to power to order a set off.
- Secondly that the outcome was so unjust that, if the district judge had such a power, she should not have exercised it.
THE DECISION OF THE CIRCUIT JUDGE ON APPEAL
The judgment contains a detailed review of the rules, legislation and case law. The circuit judge concluded that there was no right of set off
There are, therefore, in my judgment, three situations, on a proper construction of the rules, in which a set-off can take place: first, where a costs order is made against the claimant, it can be set off against damages and interest only; secondly, where the claimant’s claim has been struck out on the grounds that it is an abuse, enforcement, including set-off, may be allowed in full without the permission of the court; and thirdly, where there is a finding on the balance of probabilities that a claimant is fundamentally dishonest, the courts may allow set-off to the full extent, but that is a matter of the court’s discretion. Those three analyses accord, in my judgment, with the policy objective of protecting a claimant in personal injury claims. The facts of the present case do not satisfy any of the three situations. Sub-rules 15 and 16 simply do not come into play, and this was not a case where the learned district judge was seeking to set off costs against damages and interest; rather, she was seeking to set off costs against costs. She had, in my judgment, therefore, no jurisdiction; the criteria were not satisfied.Even if she had a general jurisdiction under CPR 44.12, and bearing in mind that an appellate court can only overturn an exercise of discretion of a lower court where the lower court has acted in a way which no judge properly directing himself on the law could have exercised such discretion, I would nevertheless have overturned her decision for the reasons given by the claimant in Mr Mallalieu’s skeleton in the sections that I cited above.
EXERCISE OF THE DISCRETION
The judge did not need to give a judgment in relation to the exercise of the discretion. That part of the judgment refers to the claimant’s counsels skeleton argument and accepts the submission.
“In his skeleton, Mr Mallalieu says as follows in paragraphs 48 to 50:
I don’t understand this. At paragraph 6 of the judgment the Judge says:
“It was on 16th July 2016 that the defendant sought to set aside the notices of discontinuance and asked for the claims to be struck out, after a finding that the claims were fundamentally dishonest, and asked for the claimants to pay the defendant’s costs of the application.
If the claimants had been found to be fundamentally dishonest why were they still entitled to QOCS protection?
It seems to be a very unjust outcome, and I hope the insurers appeal.
I think you have misread the report. The defendant applied for an order that the claimants were fundamentally dishonest but did not succeed. If the defendant had succeeded then the QOCS protection would not have applied. It is because the defendant failed in the application that it had to pay the claimants’ costs.