The Issues:

The Claimant suffered an industrial injury and issued proceedings against three Defendants.

The second Defendant (D2) denied having employed the Claimant, and after exchange of evidence the Claimant discontinued the claim against them. At trial Claimant 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.

The 2^nd Defendant sought to amend the trial Order (no order as to costs) for the Claimant to pay the 2nd Defendant’s costs following discontinuance pursuant to CPR 38.6.

The Claimant maintained that if the trial Order was so amended, such an Order would be unenforceable in any event as QOCS would apply.

The 2nd Defendant argued that proceedings meant the entirety of the claim, encompassing the claim against all three Defendants. Therefore, the 2nd Defendant could set off its costs against any order for damages made in favour of the Claimant to be paid by the 1^st and 3^rd Defendants.

The Claimant averred that the core principle of QOCS is that the Claimant would never be liable to pay costs themselves, but that any costs order made would be “set-off”, or deducted, from the damages paid by the Defendant seeking to set-off. 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 the 2^nd Defendant and as they had paid nil in damages, they were not entitled to seek a set-off against damages paid by the remaining Defendants.

Held:

HHJ Freedman found the usual Order in the event of discontinuance applied, and under CPR 38.6 the 2^nd Defendants costs were to be paid by the Claimant. 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.”

Conclusion:

This would seem to be the first reported decision, albeit which is not binding, on the effect of QOCS in claims where there are multiple Defendants.

The view taken by HHJ Freedman was to the effect 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” and as such a Claimant cannot be required to pay the costs of one Defendant against whom a claim fails, from damages paid to her by another Defendant. 

Whilst HHJ Freedman took that position as regards to the claim against the 2nd Defendant this issue is to be tested again in a case being appealed from the Regional Costs Judge S. Hale which has been leapfrogged to the Court of Appeal.

[CLICK HERE FOR FULL COPY OF THE JUDGEMENT]  

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