Faulkner v Secretary of State for Business, Energy And Industrial Strategy

Where the QOCS regime applies, a costs order in favour of a claimant may be set off against costs for which the claimant is liable. Such a set-off is not enforcement within CPR 44.14. The discretion under CPR 44.12 remains fact-sensitive and must be exercised in accordance with the overriding objective. It is inappropriate to adopt a general rule governing every unsuccessful application connected with discontinuance. Relevant considerations include the strength and purpose of the application, whether it was tactically contrived, and whether allowing set-off would undermine the protection intended by QOCS.

The claimant brought a personal injury claim arising from alleged occupational exposure to harmful dust. The claim was discontinued after the court had ordered a preliminary issue concerning diagnosis and causation. The defendant unsuccessfully applied to set aside the notice of discontinuance and was ordered to pay the claimant’s costs.

The defendant sought to set off those costs against costs previously awarded to it, including costs deemed payable on discontinuance under CPR 38.6. The central questions were whether set-off was available despite QOCS protection and, if so, whether the court should exercise its discretion against set-off on the facts.

1. Set-off and enforcement. The Court of Appeal’s decision in Howe v Motor Insurers' Bureau (2017) WL 05659795 established that set-off is not a form of enforcement. CPR 44.14 therefore did not prevent the court from considering a set-off under CPR 44.12. The defendant succeeded on that issue. The contrary approach in Darini v Markerstudy Group (24 April 2017, unreported), which treated the QOCS provisions as excluding set-off, was no longer good law on that point.

2. Discretion. The power under CPR 44.12 is discretionary. The court rejected any general rule that set-off must be refused whenever a defendant unsuccessfully applies to set aside a notice of discontinuance in QOCS proceedings. The discretion exists to provide flexibility for the overriding objective, and each case must be decided on its own facts.

3. The reasoning in Darini v Markerstudy Group concerning the fact-sensitive exercise of discretion remained sound. Howe v Motor Insurers' Bureau did not cast doubt on that approach because the discretion in that case had been argued only as a proposed general rule, rather than on particular facts.

4. On the facts, the defendant’s application was very weak and its proposed strike-out application was doomed to fail. The application was tactically motivated and inconsistent with the defendant’s earlier conduct. Allowing set-off would make the claimant bear the costs of an unsuccessful application and would undermine the strict protection afforded by QOCS. The court therefore exercised its discretion against set-off.

5. The claimant was entitled to the full costs order of £7,000.