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Landmark Supreme Court costs decision; Victory for fairness on adverse legal costs

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On 6 October 2021, the Supreme Court handed down their judgment in the case of Ho v Adelekun. The judgment was unanimously agreed by the five presiding Justices.

Shoosmiths’s serious injury team welcomes this decision, which has the effect of limiting the financial exposure of claimants in personal injury actions.

This case related to a road traffic accident in 2012. Miss Adelekun (the claimant) brought a personal claim against Mrs Ho (the defendant) for injuries sustained in the accident. The issues determined by the Supreme Court did not relate to the accident itself, but to the way in which legal costs could be recovered.

Due to the unusual circumstances of this case, there was a requirement for each party to pay some of the other party’s costs. Neither Mrs Ho nor Miss Adelekun had acted improperly in the course of the case. The issue to be determined was whether these costs could be set off from one another, meaning that only the balance would be payable if there was anything left after one side’s costs had been deducted from the other.

Qualified One-way Costs Shifting

The normal position in these types of claims is that the claimant has the benefit of ‘Qualified One-way Costs Shifting’ (QOCS). This means that, if the claimant’s case is unsuccessful, she is not required to pay the defendant’s costs. QOCS was introduced to level the playing field, by addressing an imbalance of power and resources between a claimant, who is usually an individual, and a defendant, who is usually in these cases an insurance company, or the NHS. The introduction of QOCS was deemed necessary by the government in 2013 when they sought to make litigation cheaper for losing defendants by abolishing recovery of claimants’ success fees in no win no fee agreements and most insurance premiums.

Conversely, if the defendant is unsuccessful (i.e. if the claimant wins her case), the defendant is liable to pay the claimant’s costs.

The court rules allow that a set off of costs can be applied, but this is limited to the claimant’s damages only – not costs.

This means that the claimant can be required to pay a contribution to the defendant’s costs in the event she becomes liable, but only up to the amount of damages she recovers. It has the effect of protecting individuals (who have been negligently injured by the defendant) from facing a defendant’s cost liability, by capping it to the amount of damages they have received.

This is significant, as many claimants in personal injury claims have sustained considerable losses as a result of physical injuries, are unable to work, or need funds for care and assistance, and simply could not afford to pay any contribution towards the defendant’s costs over and above any damages they have received.

The decision in Ho v Adelekun

In this case, the defendant’s costs were much higher than the claimant’s. Applying a set off to costs would mean that the claimant would have to pay the difference, which was much more than the damages cap and would effectively not have recovered anything in relation to her own legal costs. Miss Adelekun was an individual and therefore had finite resources. The claimant argued that a cost set off would undermine the QOCS principle, in that she would become liable to pay part of the defendant’s costs.

The defendant relied on a provision in the Civil Procedure Rules whereby the court has discretion, in certain circumstances, to order a set off for costs.

This case had previously been heard in the Court of Appeal. The court, at that stage, felt bound by a previous case which had allowed a costs set off despite expressing concerns about the decision in that case. Miss Adelekun therefore appealed the decision and the matter was determined at the Supreme Court, which is the final court of appeal and highest court in England, Wales and Northern Ireland.

The Justices of the Supreme Court unanimously decided to allow the appeal, meaning that a cost set off was not applied. The court considered that this approach was more in keeping with the QOCS regime which was designed to promote fairness in protecting claimants from a liability to pay the defendant’s costs in these circumstances.

Natasha Read, principal associate within Shoosmiths’ serious injury team (Birmingham office) reflects on the judgment:

‘This is a decision which will be welcomed by our clients and those who represent them. Prior to today, the legal position was wholly unsatisfactory and clearly inconsistent with the spirit of QOCS; which is to promote fairness, address inequality of arms and allow access to justice.’

‘A large proportion of our clients have been financially devastated as a consequence of their injury, through no fault of their own. Exposing them to a liability for the defendant’s costs by way of set off, which they might have to pay out of their own pocket, simply adds insult to injury.’

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