Ho v Adelekun

Under qualified one-way costs shifting, set-off of a defendant’s costs against costs payable to the claimant is a form of enforcement. Rule 44.14(1) permits enforcement by any available means only up to the aggregate monetary amount of orders for damages and interest made in the claimant’s favour. Reciprocal costs orders must not first be netted.

The cap is mechanical and applies to gross costs recovery. Where no order for damages or interest exists, the defendant cannot enforce a costs order through costs against costs set-off. The scheme neither prevents the court from making costs orders nor abolishes its jurisdiction under rule 44.12 to direct set-off. It limits the use which the defendant may make of the resulting order.

Ho v Adelekun concerned the operation of qualified one-way costs shifting after a personal injury claim settled through acceptance of a £30,000 Part 36 offer. A Tomlin order recorded the settlement, but no court order for damages or interest was made. The claimant was entitled to fixed recoverable costs of about £16,700, while the defendant obtained costs orders of about £48,600 from a subsequent dispute over the basis of costs assessment.

The costs assessment dispute culminated in [2019] EWCA Civ 1988. On the later set-off issue, the Court of Appeal, [2020] EWCA Civ 517, considered that set-off should be treated as enforcement but regarded itself as bound by Howe v Motor Insurers’ Bureau, [2020] Costs LR 297. It therefore permitted the defendant to set off the opposing costs orders.

The central issue was whether rule 44.14 of the Civil Procedure Rules 1998 limits the defendant’s ability to enforce a costs order by setting it off against a costs order owed to the claimant.

1. Appeal allowed unanimously. Lord Briggs and Lady Rose delivered a joint judgment with which Lady Arden, Lord Kitchin and Lord Burrows agreed. The defendant could not set off her costs of the assessment dispute against the fixed costs payable to the claimant because there was no order for damages or interest providing headroom under rule 44.14(1).

2. Section II of Part 44 of the Civil Procedure Rules 1998 is not a complete code governing every aspect of costs in personal injury proceedings. It is, however, a complete code governing the use which a defendant may make of costs orders obtained against a claimant. The defendant may recover those costs by any available means, including set-off against an opposing costs order, only up to the aggregate monetary amount of the claimant’s orders for damages and interest.

3. Rule 44.14(1) requires two gross aggregates. The first is the monetary amount of all costs orders in the defendant’s favour. The second is the monetary amount of all orders for damages and interest in the claimant’s favour. If the first exceeds the second, enforcement must stop when the second amount is reached. Costs payable by the defendant to the claimant are not included in the statutory formula and cannot first be netted against the claimant’s costs liability.

4. Set-off is enforcement in the QOCS context. Set-off against damages gives the defendant a measurable monetary recovery by avoiding payment of part of the claimant’s asset. Set-off against costs has the same character and additionally requires a direction under rule 44.12. The omission of set-off from Part 70’s list of enforcement powers did not govern the contextual meaning of enforcement in rule 44.14.

5. QOCS does not prevent a judge from making a single costs order adjusted to reflect the parties’ relative success. Nor does it abolish the jurisdiction under rule 44.12 to direct costs against costs set-off. That jurisdiction may operate where an order for damages or interest provides unused headroom, but any monetary benefit obtained by set-off counts towards the rule 44.14 cap.

6. Howe v Motor Insurers’ Bureau, [2020] Costs LR 297, was incorrectly decided in treating costs against costs set-off as unaffected by QOCS. Any apparent unfairness or anomaly resulting from the proper construction of the rules was a matter for the Civil Procedure Rule Committee to consider.

1. United Kingdom Supreme Court: In Ho v Adelekun, [2021] UKSC 43, the court unanimously allowed the claimant’s appeal and held that the defendant could not set off opposing costs orders where no order for damages or interest provided headroom under rule 44.14(1).

2. Court of Appeal: In [2020] EWCA Civ 517, the court considered that set-off should fall within enforcement under rule 44.14 but regarded itself as bound by Howe v Motor Insurers’ Bureau, [2020] Costs LR 297. It exercised its discretion to permit set-off and granted permission to appeal.

3. Court of Appeal: In the earlier costs assessment dispute, [2019] EWCA Civ 1988, the court held that the claimant was entitled only to fixed recoverable costs and awarded the defendant the costs of the assessment dispute.

4. County Court appeals: Deputy District Judge Harvey held that only fixed recoverable costs were payable. His Honour Judge Wulwik reversed that decision, before the Court of Appeal restored the fixed-costs determination.