Michael Wilson & Partners Limited v John Forster Emmott

Equitable set-off may, in principle, be asserted against a costs order by reference to an unpaid judgment debt where the transactions are sufficiently closely connected and enforcement without regard to the cross-claim would be manifestly unjust.

The party asserting set-off must establish a realistically arguable cross-claim. The defence reduces the judgment debt when asserted but does not automatically extinguish liability. Whether it is available in fact should ordinarily be decided in the proceedings where the issue properly arises, such as an application concerning a statutory demand or a substantive claim.

An application to reopen a reserved judgment requires genuinely new evidence that could not, with reasonable diligence, have been produced at the original hearing.

The judgment determined three applications in long-running enforcement proceedings arising from an arbitral award in favour of John Forster Emmott against Michael Wilson & Partners Ltd (MWP).

• MWP sought to rescind arbitration and court costs orders and to debar Mr Emmott from participating until costs were paid.
• Mr Emmott sought a declaration that he could set off costs orders against the judgment debt.
• MWP also sought to reopen the reserved hearing on the basis of a spreadsheet said to show that the judgment debt had already been exhausted.

The court also considered limitation arguments under the Limitation Act 1980, the effect of funding and assignment arrangements, and the proper forum for resolving disputed accounts.

1. Reopening application. The application was dismissed. New evidence for this purpose had to be evidence that could not, with reasonable diligence, have been put before the court at the original hearing. The spreadsheet and related material did not satisfy that requirement. The application also involved an impermissible collateral attack and introduced limitation arguments without proper notice.
2. Limitation. Section 7 of the Limitation Act 1980 limits the time for commencing enforcement proceedings concerning an award. Section 24(1) concerns a fresh action upon a judgment. Neither provision barred reliance on a judgment where enforcement of the award as a High Court judgment had already been commenced in time.
3. Rescission of costs orders. MWP failed to establish that Mr Emmott’s right to seek assessment of his arbitration or court costs was time-barred. Issues concerning service, the adequacy of bills and compliance with assessment directions belonged, where applicable, before the costs judge. Alleged breaches of undertakings could not properly be determined while related contempt proceedings remained unresolved. The rescission application was dismissed and certified as totally without merit.
4. Set-off. The court applied the established equitable set-off test: whether the relevant transactions had a sufficiently close relationship and whether it would be manifestly unjust to enforce the claim without regard to the cross-claim. A costs liability could in principle be set off against the unpaid judgment debt. Set-off operated as a defence and reduced the judgment debt, with interest calculated to the date when the right was asserted; it did not itself extinguish liability unless agreed or determined by a court or tribunal.
5. Mr Emmott was entitled to a limited declaration of principle. The factual availability and amount of set-off required proof to the applicable standard in the relevant statutory-demand proceedings, the Part 7 claim or another properly constituted proceeding. The disputed spreadsheet was inadequate for resolving the final account summarily. The debarring application therefore also failed.

First-instance decision. The judgment records earlier enforcement and related proceedings but does not state an appellate route to this court.