Costs - Qualified one-way costs shifting

Learning Outcomes

This article explains the principle of Qualified One-Way Costs Shifting (QOCS) within the context of civil litigation costs. After reading this article, you should be able to understand the general rule of QOCS, the types of claims it applies to, the circumstances in which QOCS protection may be lost or limited by a claimant, and its interaction with Part 36 offers. This knowledge is essential for answering SQE1 questions concerning costs in personal injury claims. In addition, you should be able to distinguish between the making and enforcement of costs orders, identify the strike-out and fundamental dishonesty gateways to full enforcement, and apply the post‑April 2023 amendments to CPR 44.14 (including set‑off against the claimant’s damages, interest and costs). You should also be comfortable dealing with mixed claims (where non‑PI elements are included) and claims brought for the financial benefit of others, and appreciate how QOCS operates on appeals.

SQE1 Syllabus

For SQE1, you are required to understand the rules relating to costs, including the specific provisions for Qualified One-Way Costs Shifting (QOCS), and to be able to apply these rules to practical scenarios, particularly in the context of personal injury litigation, with a focus on the following syllabus points:

• The definition and purpose of Qualified One-Way Costs Shifting (QOCS).
• The types of proceedings where QOCS applies (CPR 44.13).
• The general effect of QOCS on a defendant's ability to recover costs from the claimant (CPR 44.14).
• The exceptions to QOCS protection, including fundamental dishonesty and mixed/third‑party benefit claims (CPR 44.16).
• Circumstances where costs orders can be enforced to the full extent because the claim is struck out on specified grounds (CPR 44.15).
• The interaction between QOCS and the costs consequences of Part 36 offers (CPR 36.17 and CPR 44.14, including set‑off post‑2023).
• The application of QOCS in appeals arising from eligible claims (CPR 44.13(2)) and the limits of enforcement at the appellate stage.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. In which types of claims does Qualified One-Way Costs Shifting (QOCS) primarily apply?
2. Under QOCS, if a claimant loses their personal injury claim, are they generally liable for the defendant's costs?
3. What does 'fundamental dishonesty' mean in the context of QOCS?
4. How does a defendant's successful Part 36 offer affect QOCS protection?

Introduction

In civil litigation, the general rule regarding costs is that the unsuccessful party pays the successful party's costs (often referred to as 'costs follow the event'). However, specific rules apply to certain types of claims, modifying this general principle. One significant modification is Qualified One-Way Costs Shifting (QOCS), introduced to protect claimants in specific proceedings, primarily personal injury claims, from the risk of facing large adverse costs orders if their claim is unsuccessful. This protection is aimed at improving access to justice.

QOCS forms part of the wider costs framework shaped by the overriding objective and costs management/budgeting. It reflects a policy choice: genuine injury claimants should not be deterred by the fear of paying substantial defence costs if they fail, but those who abuse the process or act dishonestly should not benefit. The regime has evolved since 2013. Notably, CPR 44.14 was amended in April 2023 to clarify and widen how defendants may enforce their costs against orders made in favour of claimants (including set‑off against the claimant’s own costs orders), while preserving the core protection.

Key Term: Qualified one-way costs shifting (QOCS)
A costs protection regime primarily for personal injury claimants, where costs orders made against the claimant are enforceable only to a limited extent (generally up to the aggregate of orders for damages, costs and interest in the claimant’s favour) unless specific exceptions apply (e.g., strike‑out or fundamental dishonesty).

The QOCS Regime: CPR 44.13 - 44.17

The rules governing QOCS are found in the Civil Procedure Rules (CPR) Part 44, sections 13 to 17.

Scope of Application (CPR 44.13)

QOCS protection applies automatically (meaning the claimant does not need to apply for it) to proceedings which include a claim for damages:

• for personal injuries;
• under the Fatal Accidents Act 1976; or
• under the Law Reform (Miscellaneous Provisions) Act 1934 (in relation to claims surviving for the benefit of the deceased's estate which include personal injury).

It also applies to appeals arising from such claims.

The phrase “proceedings which include a claim for damages for personal injuries” is broad. If a claim includes personal injury damages alongside other heads of loss (e.g., property damage, credit hire, loss of earnings), QOCS applies to the proceedings. However, as explained below, where the claim includes non‑PI elements or is brought for the financial benefit of someone else, the court has powers under CPR 44.16 to permit enforcement of costs to the extent they relate to those parts. QOCS does not apply to purely non‑PI claims (e.g., defamation) and does not protect non‑party funders. It is also not engaged for standalone pre‑action disclosure applications that are not part of proceedings including a personal injury damages claim.

Key Term: Part 36 offer
A formal, written settlement offer made under CPR Part 36 with specified terms and a “relevant period” (at least 21 days). If not accepted and later beaten or not beaten at trial, it carries structured costs and interest consequences.

The General Rule and Its Effect (CPR 44.14)

The core principle of QOCS is set out in CPR 44.14(1) (as amended in April 2023). 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, costs and interest made in favour of the claimant.

Two points are critical:

• Enforcement and set‑off: Defendants may enforce adverse costs orders by setting them off against any orders in the claimant’s favour for damages, interest and (following the 2023 amendment) the claimant’s own costs orders. The claimant’s personal assets beyond those sums remain protected unless an exception applies.
• Distinguish order from enforcement: QOCS does not prevent a costs order being made against the claimant (e.g., due to failing to beat a Part 36 offer or losing an interim application). It restricts how far that order can be enforced in money terms against the claimant.

Before April 2023, enforcement was limited to damages and interest only. The Rule Committee amended CPR 44.14 to permit set‑off against costs orders in the claimant’s favour, addressing practical issues identified by appellate authority. The protection is still robust, but the pool against which set‑off may occur is broader.

Key Term: Set‑off (QOCS context)
The process by which a defendant enforces an adverse costs order by netting it against amounts ordered in the claimant’s favour (damages, interest and—post‑2023—costs), within the CPR 44.14 cap.

Worked Example 1.1

Chen brings a personal injury claim against David. The claim fails entirely at trial, and Chen is ordered to pay David's costs, assessed at £15,000. Chen recovers no damages or interest. Can David enforce the costs order against Chen?

Answer:
No. Under CPR 44.14(1), David can only enforce the costs order up to the amount of orders in Chen’s favour. Since Chen was awarded nothing, David cannot recover any costs from Chen, despite the costs order being made.

Worked Example 1.2

Aisha brings a personal injury claim against Ben. At trial, Aisha wins and is awarded £10,000 in damages and interest. However, due to failing to beat Ben's earlier Part 36 offer, Aisha is ordered to pay Ben's costs incurred after the relevant period expired, assessed at £12,000. How much can Ben recover from Aisha?

Answer:
Ben can enforce the costs order against Aisha, but only up to the amount of orders in Aisha’s favour. If the only orders in her favour are £10,000 damages and interest, Ben can recover £10,000 by set‑off. If Aisha also had an order that Ben pay some of her costs on earlier issues, Ben could set‑off against those too (post‑2023). The claimant’s personal assets remain protected beyond the aggregate of damages, interest and any costs orders in her favour.

Worked Example 1.3

Raj brings a claim for whiplash injuries following a minor car collision. Surveillance evidence produced by the defendant shows Raj engaging in strenuous physical activity shortly after the accident, contradicting his witness statement about debilitating pain. The judge dismisses the claim and finds that Raj has been fundamentally dishonest about the extent of his injuries. The defendant's costs are £20,000. Can the defendant enforce the costs order against Raj?

Answer:
Yes. Because the court found Raj to be fundamentally dishonest, QOCS protection under CPR 44.14 does not apply (CPR 44.16(1)). The defendant can enforce the full £20,000 costs order against Raj personally, seeking recovery from his assets if necessary.

Exceptions to QOCS Protection

QOCS protection is 'qualified', meaning it is not absolute. There are specific circumstances where a defendant can enforce an adverse costs order to the full extent (or to a greater extent), either automatically (without permission) or with the court’s permission.

Claim Struck Out (CPR 44.15)

Orders for costs made against the claimant may be enforced to the full extent, without the permission of the court, where the claim (or part of it) is struck out on the grounds that:

• the claimant has disclosed no reasonable grounds for bringing the proceedings;
• the proceedings are an abuse of the court’s process; or
• the conduct of the claimant or a person acting on the claimant’s behalf is likely to obstruct the just disposal of the proceedings.

These strike‑out scenarios align with the court’s case management powers (CPR 3.4) and reflect culpable conduct or baseless pleadings. Once one of the CPR 44.15 gateways is engaged, QOCS drops away and the defendant’s costs can be enforced in the usual manner.

Fundamental Dishonesty (CPR 44.16)

This is a significant exception. QOCS protection is lost where the claim is found on the balance of probabilities to be fundamentally dishonest. If fundamental dishonesty is established, the court will normally order the claimant to pay the defendant's costs, and the defendant can enforce that order fully against the claimant's assets.

Key Term: Fundamental Dishonesty
Dishonesty which goes to the root of either the whole claim or a substantial part of the claim; more than mere inaccuracies or minor exaggerations. The civil standard applies (balance of probabilities), and the court assesses dishonesty by reference to the claimant’s actual state of knowledge/belief and the objective standards of ordinary decent people.

The court must be satisfied that the dishonesty is 'fundamental'. Examples include staging accidents, fabricating injuries or deliberately grossly inflating losses. Minor inconsistencies or honest mistakes do not usually meet this threshold. The court can make a finding of fundamental dishonesty even if the claimant succeeds on some issues; the question is whether dishonesty taints the claim fundamentally.

Claims for the Benefit of Others and Mixed Claims (CPR 44.16(2)–(3))

Beyond fundamental dishonesty, CPR 44.16 recognises two further categories where the court may permit enforcement beyond the usual CPR 44.14 cap:

• Claims made for the financial benefit of a person other than the claimant (e.g., where a claim is advanced in the claimant’s name but the real beneficiary is a third party, such as a credit hire company seeking its charges).
• Proceedings that include claims which do not arise from personal injury (e.g., combining PI with a discrete property damage claim or a pure credit hire claim).

In these cases, the court may permit enforcement to the extent that it is just, typically limited to the costs attributable to the non‑PI or third‑party benefit element. The court retains a discretion and will tailor any order to the justice of the case.

Worked Example 1.4

Maya sues for personal injury and also includes a substantial credit hire claim payable to the hire company. She recovers nothing at trial. The judge finds the PI element was genuine but dismisses the hire claim, noting it was pursued mainly for the hire company’s benefit. The defendant’s costs are £18,000.

Answer:
The court may permit enforcement under CPR 44.16(2)–(3) to the extent the costs relate to the credit hire element, which was for the benefit of another and not part of the PI damages properly. QOCS does not prevent the court allowing enforcement of a proportion of the £18,000, reflecting the costs attributable to the hire claim. The PI element remains protected absent fundamental dishonesty or strike‑out.

Worked Example 1.5

Owen brings proceedings for personal injury and for damage to his motorcycle (property damage) arising from the same accident. He loses on both heads of claim and is ordered to pay the defendant’s costs of £12,000.

Answer:
QOCS applies because the proceedings included a PI claim. However, under CPR 44.16(3), the court can permit enforcement to the extent the costs relate to the non‑PI property damage claim. The judge may, for example, assess that £4,000 of the defence costs were attributable to the property damage issue and allow enforcement of that sum, while the remainder stays within the QOCS cap.

Interaction with Part 36 Offers

Part 36 offers are formal settlement offers made under CPR Part 36, which carry specific costs consequences if rejected. QOCS interacts with Part 36 in a particular way, primarily governed by CPR 36.17 and CPR 44.14.

If a claimant fails to accept a defendant's Part 36 offer and subsequently fails to obtain a judgment more advantageous than the offer, the usual Part 36 costs consequences apply (i.e., the claimant is generally ordered to pay the defendant's costs from the date the relevant period expired and interest on those costs). However, the QOCS rule in CPR 44.14 still limits the enforcement of that costs order. The defendant can only recover costs up to the aggregate of any orders in the claimant’s favour for damages, interest and (post‑2023) costs.

This means that even if a claimant makes a poor decision in rejecting a reasonable Part 36 offer, their personal liability for the defendant's subsequent costs is capped by the amounts they recover in the proceedings. The practical upshot after April 2023 is that defendants may set‑off their Part 36 costs not only against the claimant’s damages and interest, but also against any costs orders made in the claimant’s favour (for example, costs awarded on earlier issues).

Worked Example 1.6

Lina wins her personal injury claim and is awarded £20,000 damages and interest. She had rejected a defendant’s Part 36 offer of £22,000. The court orders that Lina pay the defendant’s post‑relevant period costs of £15,000. On an interim application earlier in the case, the court had ordered the defendant to pay Lina £3,000 of her application costs.

Answer:
Under CPR 44.14 (post‑2023), the defendant can enforce by set‑off up to the aggregate of orders in Lina’s favour for damages, interest and costs. The defendant can net £15,000 against the £20,000 damages and interest, leaving £5,000 payable to Lina. The defendant may also set‑off against Lina’s earlier £3,000 costs order. If set‑off is exercised, Lina could receive £2,000 net, or the court may direct how set‑off should operate to avoid injustice. Lina’s personal assets remain protected beyond the aggregate of orders in her favour.

Revision Tip

It’s essential to distinguish between the making of a costs order and its enforcement when considering QOCS. QOCS does not prevent a costs order being made against a claimant (e.g., after rejecting a Part 36 offer or losing an interim application), but it significantly restricts the defendant's ability to enforce that order and recover the money from the claimant personally. Since April 2023, enforcement may occur by set‑off against the claimant’s damages, interest and costs orders.

Exam Warning

Do not confuse the effect of fundamental dishonesty with the effect of failing to beat a Part 36 offer under QOCS. Fundamental dishonesty removes QOCS protection entirely, allowing full enforcement of costs. Failing to beat a Part 36 offer does not remove QOCS protection; it simply means a costs order is likely to be made against the claimant, but its enforcement remains capped by CPR 44.14(1) at the aggregate of damages, interest and (post‑2023) costs in the claimant’s favour.

Policy Considerations

The introduction of QOCS aimed to balance the scales between claimants (often individuals with limited resources) and defendants (often insurers or large organisations) in personal injury litigation. By removing the fear of potentially crippling adverse costs orders, QOCS encourages individuals with genuine claims to seek redress without the risk of financial ruin if the claim fails. However, the exceptions, particularly for fundamental dishonesty and strike‑out, act as a deterrent against fraudulent or grossly exaggerated claims, and CPR 44.16 ensures that claims pursued largely for third‑party benefit or non‑PI elements do not escape appropriate costs consequences.

The 2023 update to CPR 44.14 reflects a further policy refinement: enabling set‑off against the claimant’s costs orders reduces anomalies that previously arose where defendants could not practically enforce Part 36 or other adverse costs orders despite claimants receiving costs in their favour. The overarching aim remains consistent with the overriding objective—access to justice, fairness and proportionality.

Key Term: Wasted costs order
A costs order against a legal representative personally where the court is satisfied their improper, unreasonable or negligent conduct caused unnecessary costs, and it is just to make the order. QOCS does not protect against wasted costs orders because they are directed at representatives, not the claimant.

Key Point Checklist

This article has covered the following key knowledge points:

• QOCS primarily applies automatically to proceedings including a claim for damages for personal injuries, FAA 1976 claims and LR(MP)A 1934 survival claims; it also applies to appeals in such cases.
• The general rule (CPR 44.14) prevents enforcement of costs orders against a QOCS‑protected claimant beyond the aggregate of damages, costs and interest awarded in the claimant’s favour.
• Enforcement typically occurs by set‑off against orders in the claimant’s favour; since April 2023, this includes set‑off against the claimant’s own costs orders.
• QOCS protection is lost outright if the claim is struck out on specified grounds (CPR 44.15) or found to be fundamentally dishonest (CPR 44.16(1)), allowing full enforcement of costs.
• Under CPR 44.16(2)–(3), where a claim is pursued for the financial benefit of another or includes non‑PI elements, the court may permit enforcement to the extent costs relate to those parts.
• Failure to beat a defendant's Part 36 offer triggers adverse costs and interest consequences under CPR 36.17, but QOCS still caps enforcement by CPR 44.14.
• QOCS protects against enforcement of interim costs orders and final costs orders in money terms beyond the cap; it does not prevent costs orders being made.
• Wasted costs orders target legal representatives; QOCS protection does not apply to them.
• Always separate the making of a costs order from its enforcement; apply the CPR 44.14 cap and consider exceptions under CPR 44.15–44.16.

Key Terms and Concepts

• Qualified one-way costs shifting (QOCS)
• Fundamental Dishonesty
• Part 36 offer
• Set‑off (QOCS context)
• Wasted costs order