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Dan Oldroyd

Dan Oldroyd

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Supreme Court confirms that you can set-off costs against damages in Ho v Adelekun

Client Alerts07/10/2021

The Supreme Court decision in Ho v Adelekun [2021] UKSC 43 concerns a long fought issue relating to the application of Qualified One-way Costs Shifting (QOCS) and whether a defendant’s costs can be set off against a claimant’s costs in a personal injury claim. For those of you who believe this is the end for a defendant recovering costs in a personal injury claim, I suggest you read on.

Background

The rules on QOCS have been in force since 2013. It is well known that where a defendant has an order for costs in a personal injury claim it can only be enforced against a claimant where there is an “order for damages and interest” in the claimant’s favour, and the amount of the costs can only be enforced up to the level of damages and interest recovered. But the rules on QOCS contained in Section II of CPR Part 44 were silent concerning a set-off of costs against costs as a mechanism for the defendant to receive credit for any entitlement to costs against the claimant.

The issue of set-off arose following the Court of Appeal case of Cartwright v Venduct Engineering [2018] where the court held that a Tomlin order was not an “order for damages and interest” within the meaning of CPR 44.14(1). Many defendants in personal injury claims consequently found that they were unable to enforce a costs order in their favour so they looked to offset costs against costs by seeking an exercise of the court’s discretion under the general set-off provision at CPR 44.12.

Set-off in these circumstances had previously been allowed by the Court of Appeal in the under publicised case of Howe v MIB No 2. The short judgment in that case permitted a defendant to set off their costs against any costs the claimant was entitled to recover. The effect of this was to allow the defendant credit for the costs it was due by reducing the overall costs the claimant recovered. In Ho v Adelekun, the Court of Appeal considered themselves bound by Howe and, therefore, held that the defendant may set off costs against the claimant’s costs, but because of compelling arguments raised by claimant counsel not previously advanced in Howe, permission to appeal to the Supreme Court was granted.

The judgment

The appeal was allowed in full by unanimous decision. The Supreme Court found that the intention of QOCS was to set a cap on the costs that a defendant could recover out of the claimant’s damages and interest. A defendant could, therefore, recover the costs ordered, by any means available, including set-off against an opposing costs order, but only up to the monetary amount of the claimant’s orders for damages and interest.

The Supreme Court seemed unconcerned with the suggestion that by allowing the appeal, the court would be giving a green light to claimants pursuing weak interim applications and unmeritorious points, or that it would remove any real incentive to settle before trial if the adverse costs consequences of losing at trial (or failing to beat a Part 36 offer) led to a purely unenforceable costs sanction absent there being an order for damages and interest made in the claimant’s favour.

Keoghs Comment

The judgment comes as no surprise. We expected the Supreme Court would reach the conclusions it did and have changed approach and implemented strategies in order to overcome the set-off conundrum now placed before defendants when trying to receive credit for any entitlement to costs.

Keoghs will continue to challenge unreasonable and disruptive conduct from claimants to ensure that compensators are not unnecessarily ‘out of pocket’. We have taken steps to ensure a defendant can enforce an order for costs for interim applications and late acceptance of Part 36 offers where the individual circumstances of a claim make that appropriate. In addition, Keoghs will continue to ensure that any unreasonable or improper conduct giving rise to otherwise avoidable costs is properly visited back on the offending party.

For more information please contact a member of our Costs team; Howard Dean, Dan OldroydBen Petrecz or Paul Edwards.