Ridley v Dubai Islamic Bank PJSC

The power to set off a costs order against a judgment debt is discretionary. The governing question is whether set-off would be just and equitable. The court must assess the circumstances in which the costs order arose, including whether set-off could hinder the fair and expeditious conduct of related proceedings or weaken the deterrent effect of adverse costs orders. The existence of a substantial outstanding judgment debt does not make set-off automatic. The court may also consider the judgment creditor’s conduct, available security and the practical prejudice likely to result from either outcome.

The defendant sought to set off a costs award of £47,479.99 against a judgment debt of approximately US$433 million plus interest. The costs award arose from the defendant’s unsuccessful challenge to permission granted for the claimant to serve proceedings out of the jurisdiction and by an alternative method. The underlying proceedings concerned the claimant’s challenge to his continued imprisonment in Dubai and alleged breaches of a restructuring agreement.

The court was required to determine whether set-off was just and equitable, having regard to the judgment debt, the defendant’s security over land, the parties’ conduct and the possible effect of set-off on the underlying litigation.

1. Application refused. It was not just and equitable to set off the claimant’s costs award against the defendant’s judgment debt.
2. The court accepted that the jurisdiction to set off a costs order against a judgment debt is discretionary under CPR 40.13. The governing test is whether set-off is just and equitable: Fearns v Anglo Dutch Paint and Chemical Company Ltd [2010] EWHC 2366 (Ch), [2011] 1 WLR 366.
3. The court accepted that, as a matter of English law, the contractual cause of action under the restructuring agreement had merged in the earlier judgment: Republic of India v India Steamship [1993] AC 410. That did not determine the discretionary set-off question.
4. The relevant context included the claimant’s challenge to his continued imprisonment, the allegation that the judgment creditor’s conduct had caused or prolonged that imprisonment, and the delay caused by the unsuccessful challenge to service out. Set-off could weaken the practical deterrent effect of adverse costs orders and encourage delay in litigation concerning the claimant’s liberty.
5. The defendant would suffer no real prejudice from refusal of set-off. The costs award was modest in comparison with the judgment debt, and the defendant retained security over the Plantation Land. Earlier findings concerning the land’s value did not establish that the security was currently worthless.