Radical amendments to the Civil Procedure Rules, enacted on 30 January 2023 and in force from 6 April 2023 reverse the rulings in Cartwright v Venduct Engineering Ltd and Ho v Adelekun so that defendants will be entitled to set off costs not only against orders but also deemed orders and agreements to pay damages, as well as claimant costs, in personal injury claims where proceedings are issued on or after 6 April 2023.

Prior to April 2023, defendant costs could generally be enforced up to an amount equivalent to the aggregate of court orders for damages and interest in favour of the claimant, effectively capping the amount that defendants could enforce.

In 2018, the Court of Appeal ruled in Cartwright v Venduct Engineering Ltd that defendants could not enforce costs against damages recovered through a settlement under a Part 36 or Tomlin order.  Three years later, in Ho v Adelekun the Supreme Court established that defendants could not set off adverse costs ordered in their favour against cost orders made in the claimant’s favour under the qualified one-way costs shifting scheme.

Conceding that this outcome could lead to results that ‘at first blush look counterintuitive and unfair’, Lord Briggs and Lady Arden reasoned that it was the ‘best solution so far that the opposing sides in the ongoing debate between claimant solicitors and defendant insurers have been able to devise’.

It appears that the new, government-led, rules explicitly reverse Cartwright and Ho and raise the general enforcement cap, giving defendants an absolute right to enforce up to the level of any damages or costs recovered by claimants.

A spokesperson for the Association of Personal Injury Lawyers said the amendments to the rules 'completely undermines the whole purpose of the current system by allowing losing defendants to seek to recover more of their costs from successful claimant.  The purpose and principle behind QOCS was to enable injured individuals to continue to bring legitimate claims against well-resourced defendants. It was the compromise achieved when success fees and after-the-event insurance premiums were no longer recoverable from losing defendants. From April, defendants will be given the upper hand against injured people who should never have had to bring claims for compensation in the first place.'

Commentators have predicted that defendants’ Part 36 offers will in the future have ‘much more bite’ and that the rules will dramatically change the cost/risk/benefit analysis of making or resisting interim applications and post-settlement costs disputes, including detailed assessments.

It remains to be seen whether there is a rush to issue proceedings prior to the inception of the new rules in April in order to avoid the effect of the change.  Practitioners will be wise to consider whether they have an increased need for ATE cover to protect their clients against adverse costs claims.

Here at Box Legal we have been offering after the event legal expense insurance since 2004 and have a wealth of experience. We have competitively priced ATE insurance policies available for all types of personal injury claims (including policies priced and suitable for the new whiplash regime) and can also arrange legal expense insurance cover for non-personal injury claims such as housing disrepair and financial mis-selling matters.

The number and variety of cases we arrange cover for is always increasing and so please contact us to discuss any after the event insurance requirements. We are happy to discuss and develop ATE insurance for case types we do not already insure.

If you would like to speak to us or obtain further information then please call on 0870 766 997, or email info@boxlegal.co.uk