Motorola Solutions, Inc & Anor v Hytera Communications Corporation Ltd & Ors

Equitable set-off does not generally prevent enforcement of an immediately enforceable costs order merely because the party liable to pay has a separate, larger claim arising from related litigation. The doctrine requires closely connected competing claims and manifest injustice. A judgment debt is not extinguished or netted against another liability until established by agreement or judgment.

The court may stay proceedings brought by a party who has failed to comply with costs orders made in connected earlier proceedings. The jurisdiction protects the court’s process and supports prompt compliance with its orders. Payment into court will not ordinarily be ordered retrospectively where it would alter the effect of existing costs orders.

The claimants had commenced proceedings to enforce a US judgment for approximately US$600 million against the defendants. Earlier freezing-order proceedings brought in support of the proposed enforcement claim had resulted in Court of Appeal and Supreme Court costs orders requiring the claimants to pay the defendants approximately £509,932, together with further Supreme Court costs.

The costs remained unpaid. The first defendant applied for a stay of the enforcement proceedings until compliance. The claimants argued that the US judgment gave rise to an equitable set-off and cross-applied for payment of the costs into court. The issues were whether equitable set-off applied, whether the enforcement proceedings should be stayed, and whether payment into court should be ordered.

1. Equitable set-off. The principles in Geldof Metaalconstructie NV v Simon Carves Ltd [2010] 4 All ER 847 and Fearns v Anglo-Dutch Paint & Chemical Co Ltd [2011] 1 WLR 366 were applied. The relevant claims must be so closely connected that it would be manifestly unjust to enforce one without taking the other into account. Equitable set-off does not itself extinguish or reduce either liability. Netting requires agreement or judgment establishing both liabilities.
2. The claimants’ liability arose from immediately enforceable English court orders, whereas the alleged cross-claim was a claim to enforce a foreign judgment which had not yet been converted into an English judgment. The freezing-order application was not sufficiently closely connected with the transactions giving rise to the Illinois judgment debt. It was not manifestly unjust for the first defendant to enforce the costs orders. No equitable set-off therefore arose.
3. Stay of proceedings. The court’s inherent jurisdiction extends to staying fresh proceedings where a claimant has failed to pay costs ordered in earlier proceedings connected with the same subject matter. Investment Invoice Financing Ltd v Limehouse Board Mills Ltd [2006] 1 WLR 985 provided the applicable pragmatic approach: the question is whether continuation of the second proceedings would be abusive in light of the earlier proceedings, their outcome and the unpaid costs.
4. The claimants were invoking the court’s process offensively, could pay the costs, and had deliberately declined to comply with orders requiring direct payment. Their asserted foreign judgment and the availability of execution remedies did not provide sufficiently strong reasons to displace the normal consequence of non-compliance. The enforcement proceedings were stayed until the outstanding costs orders were complied with.
5. Payment into court. The cross-application was dismissed. Ordering payment into court would effectively vary the Court of Appeal and Supreme Court costs orders after the event. The claimants should have raised that issue before the courts making those orders, and it was inappropriate to alter their direct-payment terms at this stage.

The judgment records that an earlier freezing order was set aside by the Court of Appeal on 11 January 2021, with costs orders made against the claimants. The Supreme Court refused permission to appeal on 23 February 2022 and made a further costs order. Picken J subsequently decided a service issue in [2022] EWHC 2887 (Comm) and directed that any stay application be made formally.