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As you may know, the rules surrounding Qualified One-way Costs Shifting (QOCS) are due to change on the 6 April 2023. This note explains the changes and how existing and future ClaimSafe After The Event legal expenses insurance policies for personal injury claims are affected.
Current position
There are occasions where both a claimant and a defendant are awarded costs. This can happen when a claimant is successful but some costs have also been awarded against the claimant. This is typically as a result of an interlocutory application, the late acceptance of an offer, or as part of the costs assessment process itself, but there can be other reasons. At present in accordance with Ho v Adelekun [2021] UKSC 43 and the Court of Appeal’s decision in Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654 a defendant who is owed costs:
- can only deduct those costs from the damages it must pay a successful claimant. The defendant cannot deduct its costs from the costs it must pay a successful claimant. This means that at worst a claimant may lose all of its damages, but the claimant’s solicitor (you) will receive all of the costs awarded to the claimant, and
- a defendant can only deduct its costs from those damages in limited circumstances - only where a Court order has been made (eg. after trial) but not in other circumstances such as when a Part 36 offer is accepted, or there is a compromise agreement.
New Position
From 6 April 2023 amended Civil Procedure Rules https://www.legislation.gov.uk/uksi/2023/105/contents/made mean that both of the above decisions will be reversed and the position will be:
- defendants will be able to set off costs orders against claimants’ costs, and
- a defendant will be able to deduct the costs it has been awarded not only from actual orders for damages made by the Court but also from deemed costs orders, eg. costs which the claimant is entitled to receive when it accepts a Part 36 offer, or the costs which a defendant has agreed to pay under a settlement agreement.
The amendments apply only to claims where proceedings are issued on or after 6 April 2023. This means that claims on which court proceedings have already been issued are unaffected, but the amendments will in future affect your existing unissued claims.
We are happy to advise however, that provided the claimant has acted reasonably, your existing ClaimSafe ATE legal expenses policy already covers any defendant’s costs awarded against the claimant and the policy wording specifically confirms that those defendant’s costs will be paid by the policy - they need not be deducted from any damages or costs paid by the defendant. The cost of these rule changes will therefore fall on the policy and not on your client.
If you have any queries regarding the above, please do not hesitate to contact us at
E: info@boxlegal.co.uk T: 0870 766 9997
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