One of the points yet to be argued in relation to the QUOCS regime, is its application to a scenario involving multiple Defendants. It is commonly in NIHL claims that a Claimant will start proceedings against half a dozen Defendants and recover damages against some of them and either discontinue or lose against the remaining Defendants who will then become entitled to their costs.
In particular, the question that then arises is to what extent is it open to a winning Defendant to recover its costs out of the Claimant’s pot of damages obtained from the losing Defendants? The answer may be that the winning Defendant can’t and simply has to stand its own costs.
The starting point is that the purpose of the QUOCS scheme is to hold a losing Claimant “harmless” from the enforcement of a costs Order made in a winning Defendant’s favour, save for certain limited exceptions, of which the only material one in a case uncomplicated by fundamental dishonesty is likely to be that of set off against a Claimant’s damages.
The QUOCS scheme has its conception in the former Legal Aid Acts and the Access to Justice Act 1999. A detailed exposition of its origins lies in the Review of Civil Litigation Costs: Final Report (December 2009): see chapters 9 and 19. The availability of set off of a Defendant’s costs against a Claimant’s damages where the Claimant had a Legal Aid certificate was canvassed in cases such Lockley.v.National Blood Transfusion Service  1 WLR 492.
In that case Scott LJ observed:
In my judgment, the following propositions can be stated.
(1) A direction for the set-off of costs against damages or costs to which a legally aided person has become or becomes entitled in the action may be permissible.
(2) The set-off is no different from and no more extensive than the set-off available to or against parties who are not legally aided.
(3) The broad criterion for the application of set-off is that the plaintiff’s claim and the defendant’s claim are so closely connected that it would be inequitable to allow the plaintiff’s claim without taking into account the defendant’s claim. As it has sometimes been put, the defendant’s claim must, in equity, impeach the plaintiff’s claim. *497
(4) Set-off of costs or damages to which one party is entitled against costs or damages to which another party is entitled depends upon the application of the equitable criterion I have endeavoured to express. It was treated by May J. in Currie & Co. v. The Law Society  Q.B. 990 , 1000, as a “question for the court’s discretion.” It is possible to regard all questions regarding costs as being subject to the statutory discretion conferred on the court by section 51 of the Supreme Court Act 1981 . But I would not have thought that a set-off of damages against damages could properly be described as a discretionary matter, nor that a set-off of costs against damages could be so described.
(5) If and to the extent that a set-off of costs awarded against a legally aided party against costs or damages to which the legally aided party is entitled, cannot be justified as a set off (i) the liability of the legally aided party to pay the costs awarded against him will be subject to section 17(1) of the Act of 1988 and regulation 124(1) of the Regulations of 1989; and (ii) the section 16(6) charge will apply to the costs or damages to which the legally aided party is entitled.
Applying these principles to the respective orders made by the district registrar and by Mars-Jones J., I conclude that neither can be criticised. In general, in my opinion, interlocutory costs incurred in the progress of an action to trial and ordered to be paid by a plaintiff to a defendant would in equity impeach the right of the plaintiff to recover from the defendant costs of the action ordered to be paid by the defendant. A set-off of costs against costs, when all are incurred in the prosecution or defence of the same action, seems so natural and equitable as not to need any special justification. I would expect a party objecting to the set-off to give some special reason for the objection. It is, in my opinion, less obvious that a set-off of costs against damages would always be justified.
It will be noted that the essence of a set off is that that there are cross claims between the Claimant and the same Defendant, which predicate a netting off of liability: the notion that a Claimant’s entitlement in damages from one Defendant should be credited to another Defendant’s entitlement to costs is wholly alien to the concept of set off, which is based on a mutuality of liabilities.
It follows that the argument that a winning Defendant should be able to attach a pot of damages obtained from another party altogether, involves a counter intuitive argument that the statutory scheme of set off permitted by the QUOCS provisions in part 44 CPR has created a wholly new legal principle, which is not properly described as set off at all.
Various terms are used in the rules whose meaning must be carefully considered in this context. Rule 2.3 defines a claimant as a person who makes a claim. It defines claim for personal injuries as meaning proceedings in which there is a claim for damages in respect of personal injuries to the claimant or any other person or in respect of a person’s death.
The rule further defines a statement of case to mean a claim form, particulars of claim where these are not included in a claim form, defence, Part 20 claim or reply to a defence. A “claim” is not the claim form, nor even the proceedings before the court, but rather the individual demand by a particular person for damages which is included in proceedings.
Each claim will generate its own costs liability: eg in proceedings where there are six defendants there will be six claims, contained in a single claim form. There could equally have been six claim forms, each containing one claim against a specific Defendant. The liability for costs as between the Claimant and each Defendant would be determined as separate exercises of the discretion and separate costs Orders would be made in respect of each claim.
The word “proceedings” has an elasticity of meaning. A recent restatement of authority and the correct approach to determining what parts of an involved piece of litigation are separate proceedings for the purposes of costs is to be found in the case of Plevin v Paragon Personal Finance Limited  UKSC 23.
In that case Lord Sumption observed at paragraphs 18 to 20:
18. It is clear that for some purposes the trial and successive appeals do constitute distinct proceedings. In particular they are distinct proceedings for the purpose of awarding and assessing costs: see Masson, Templier & Co v De Fries  1 KB 535, 538-539 (Vaughan Williams LJ); Wright v Bennett  1 KB 601; Goldstein v Conley  1 WLR 281, at paras 79 (Clarke LJ), 107 (Sir Anthony Evans). The authorities were helpfully reviewed by Rix LJ in Hawksford Trustees Jersey Ltd v Stella Global UK Ltd (No 2)  1 WLR 3581. In that case, the Court of Appeal held that for the purpose of section 29 of the Access to Justice Act 1999, the costs incurred in respect of an ATE premium were recoverable only in the proceedings to which the policy related, ie as part of the costs of the trial if the policy related only to the trial, and not as part of the costs of the appeal. In Gabriel v BPE Solicitors  AC 1663, para 16, this court applied the same principle when holding that a trustee in bankruptcy, by prosecuting an appeal to the Supreme Court, did not expose himself to liability for the costs of the distinct proceedings conducted by the bankrupt at trial or on appeal to the Court of Appeal.
19. However, “proceedings” is not a defined term in the legislation, nor is it a term of art under the general law. Its meaning must depend on its statutory context and on the underlying purpose of the provision in which it appears, so far as that can be discerned. The context in which the word appears in section 46(3) of LASPO is different and so, in my judgment, is the result.
20. The starting point is that as a matter of ordinary language one would say that the proceedings were brought in support of a claim, and were not over until the courts had disposed of that claim one way or the other at whatever level of the judicial hierarchy. The word is synonymous with an action. In the cases cited above, relating to the awarding or assessment of costs, the ordinary meaning is displaced because a distinct order for costs must be made in respect of the trial and each subsequent appeal, and a separate assessment made of the costs specifically relating to each stage. They therefore fall to be treated for those purposes as separate proceedings. The present issue, however, turns on a different point. The question posed by section 46(3) of LASPO is whether the fact of having had an ATE policy relating to the trial before the commencement date is enough to entitle the insured to continue to use the 1999 costs regime for subsequent stages of the proceedings under top-up amendments made after that date. The fact that costs are separately awarded and assessed in relation to each stage does not assist in answering that question.(emphasis added)
It follows that for the purposes of costs, the making of a costs Order divides the stages of litigation into separate proceedings: it defines the scope of what are the relevant proceedings.
Where a costs Order is made in favour of a Defendant and the costs liabilities in the other claims in the proceedings were determined by other Orders it can be seen that the relevant proceedings for application of the QUOCS rules, are the claim against the Defendant which led to the costs Order in its favour which for the purposes of costs is to be treated as separate proceedings.
Section II of part 44 CPR applies the scheme of QUOCS. Rule 44.1
(1) This Section applies to proceedings which include a claim for damages
(a) for personal injuries;
(b) under the Fatal Accidents Act 19767; or
(c) which arises out of death or personal injury and survives for the benefit of an estate by virtue of section 1(1) of the Law Reform (Miscellaneous Provisions) Act 19348,
but does not apply to applications pursuant to section 33 of the Senior Courts Act 19819or section 52 of the County Courts Act 198410 (applications for pre-action disclosure), or where rule 44.17 applies.
(2) In this Section, ‘claimant’ means a person bringing a claim to which this Section applies or an estate on behalf of which such a claim is brought, and includes a person making a counterclaim or an additional claim.
Rule 44.14 CPR provides as follows:
(1) Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.
(2) Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.
(3) An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.
The effect of this rule is to permit the Defendant to set off a costs Order (once the costs have been agreed or assessed) made in its favour as against any order for damages and interest made in favour of the Claimant. See rule 44.12 CPR for a like provision which permits set off in respect of costs.
Rule 44.15 provides:
Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the proceedings have been struck out on the grounds that –
(a) the claimant has disclosed no reasonable grounds for bringing the proceedings;
(b) the proceedings are an abuse of the court’s process; or
(c) the conduct of –
(i) the claimant; or
(ii) a person acting on the claimant’s behalf and with the claimant’s knowledge of such conduct, is likely to obstruct the just disposal of the proceedings.
Rule 44.16 provides:
(1) Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim is found on the balance of probabilities to be fundamentally dishonest.
(2) Orders for costs made against the claimant may be enforced up to the full extent of such orders with the permission of the court, and to the extent that it considers just, where –
(a) the proceedings include a claim which is made for the financial benefit of a person other than the claimant or a dependant within the meaning of section 1(3) of the Fatal Accidents Act 1976 (other than a claim in respect of the gratuitous provision of care, earnings paid by an employer or medical expenses); or
(b) a claim is made for the benefit of the claimant other than a claim to which this Section applies.
(3) Where paragraph (2)(a) applies, the court may, subject to rule 46.2, make an order for costs against a person, other than the claimant, for whose financial benefit the whole or part of the claim was made.
The detail of the QUOCS rules was refined when the Civil Procedure Rules Committee drafted the provisions, consequent to further work undertaken by the Civil Justice Council. In its Response To Ministry of Justice Commissioning Note entitled “Implementation Of Part 2 Of The Legal Aid, Sentencing And Punishment Of Offenders Act 2012: Civil Litigation Funding And Costs – Issues For Further Consideration By The Civil Justice Council” June 2012 it had this to say about QUOCS and discontinuance in paragraphs 90 to 94:
90. Again, we start with the position as stated in the MoJ’s Commissioning Note, which is that QOCS protection will be allowed in claims that are discontinued during proceedings and for appeal proceedings. This is straightforward and was generally agreed by the group when it first considered the points.
91. The policy as set out by the MoJ would amount to a substantial change to the provisions of Part 38.6(1) in respect of personal injury claims. At present, this rule provides that:
Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant.
92. Following initial discussions a difference of views emerged which, in essence, amounted to those representing defendants and insurers arguing that they would face significant risks if QOCS protection were to be allowed as a matter of course in the manner set out in the CN.
93. Those arguments are probably beyond the narrow remit which we were given in the CN and, in any event, were not favoured by a majority. It is nevertheless worth examining the main points which were put forward in support.
94. First, that allowing QOCS protection in claims which are discontinued after proceedings would disadvantage defendants since they would have been put to irrecoverable cost as a result of the now-discontinued claim. That is indeed the case, but the outcome is consistent with the general policy aim of QOCS protecting claimants who are not, in broad terms, successful
The argument that a Claimant might put forward in a scenario where he has won and lost against various Defendants to try to preserve his damages from the losing Defendants is simple.
So far as costs issues are concerned, the claim against a winning Defendant is a separate and distinct set of proceedings. A costs Order may have been made in the Defendant’s favour but the Claimant to the proceedings against the winning Defendant has the benefit of QUOCS, and because within those proceedings no Orders for damages and interest were made in favour of the Claimant against the winning Defendant, there is nothing which can be set off against the Claimant’s costs liability.
The structure of section II of part 44 CPR is sequential. The starting point is to determine what are the proceedings to which rule 44.13 applies. In this context, at the time the deemed costs Order was made in favour of theDefendant, the relevant proceedings for the purposes of costs were the proceedings against the Defendant per the approach in Plevin.
Rule 44.14 then follows sequentially on from 44.13 CPR. It can be argued that the scope of the enforcement permitted by the rule must be limited to an order for damages or interest made in the same proceedings within which the deemed costs Order is made.
Such a construction is to be preferred to any alternative suggestion put forward by the Defendant because of the following factors:
(i) The sequential placing of the rule just after 44.13, which defines the scope of QUOCS protection according to the particular proceedings in which there is a claim for personal injuries.
(ii)The express wording of rule 44.14(2) which provides that enforcement can only take place after “the proceedings” have concluded and the costs have been quantified
(iii)The wording of the further exceptions in rule 44.15 where enforcement is only permissible where “the proceedings” have been struck out
(iv) The wording of the further exceptions in rule 44.16 where enforcement is only permissible where “the claim” is tainted by fundamental dishonesty, or there is a mix of claims.
Moreover such a construction accords with the statutory purpose behind QUOCS that (i) absent clear, well defined and limited exceptions a winning Defendant will stand their own costs and (ii) a losing Claimant is able to litigate, being held harmless from costs Orders obtained by a winning Defendant.
Conversely it would be inconsistent to interpret rule 44.14 to allow enforcement where in any proceedings the Claimant recovers a fund of damages and interest from another Defendant that the Claimant is liable to make a payment to a Defendant in separate proceedings.
Such a construction would also avoid a number of absurd and inconsistent results, where for example a Claimant reaches a settlement with some Defendants pre the issue of proceedings, so no Order for damages or interest is ever made, or where the three Defendants are sued in a separate action to three other Defendants possibly some years apart.
It is hard to see why such a hypothetical Claimant should be better off than a Claimant who has chosen to join all the Defendants in one action and hence is a powerful pointer to the construction submitted above.
QUOCS remains one of the more opaque areas of the Civil Procedure Rules and even now, some 4 years on since the implementation of the scheme there are many aspects of the rules which require clarification.