Ho v Adelekun [2021] UKSC 43 – set off is a form of enforcement

Articles | Fri 8th Oct, 2021

For some reason QOCS doesn’t stop the court making an order for the claimant to pay the defendant’s costs; it just limits the extent to which the defendant can enforce that order.

So what if the case partially succeeds, but partially fails, so that the court orders the defendant to pay damages to the injured person, but also makes a costs order in favour of the defendant?

The crux of QOCS is r.44.14(1): “Orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.”

So the defendant can recover its costs, up to the limit of the damages it was ordered to pay.  The injured person will never have to put his or her own money down, but he may end up with nothing after the defendant has deducted what it is owed.

In Cartwright v. Venduct [2018] EWCA Civ 1654 the Court of Appeal held that if the case settles by agreement, there is no “order for damages and interest made in favour of the claimant,” so there is nothing from which the defendant’s costs may be subtracted.  The defendant has to pay the amount agreed and cannot deduct a sum for its own costs, even if those costs have been ordered by the court.  This is true even if the case settles by means of one side accepting the other’s Part 36 offer.

Personal injuries litigation is not like arguing about a debt.  The amount of the loss depends on the prognosis, and it may take years after an injury before that is clear.  Medical professionals may not agree on what the prognosis is.  They may not even agree on the diagnosis.  Medical controversy is endemic to personal injuries litigation.  In this perplexity, it is often the case that an injured person decides that an offer previously made by the defendant is so attractive that he or she must take it.  They then face an automatic order to pay the defendant’s costs since the offer.

Following Cartwright v. Venduct, claimants accepting Part 36 offers late started to argue that there was no “order for damages and interest” in their favour and therefore nothing from which the defendant could subtract their costs.

In response, defendants purported to set off their entitlement to their costs against their liability to pay the claimant’s costs incurred before the defendant’s offer.

In Ho v. Adelekun [2021] UKSC 43, handed down yesterday, the Supreme Court holds that defendants cannot do this.  To set off the defendant’s costs against the claimant’s costs is a form of enforcement which is not permitted by QOCS.

Ho had agreed to pay Adelekun £30,000 in damages for personal injury.  Adelekun’s costs were £16,700.  For reasons immaterial, Adelekun also had a liability to pay £48,600 in Ho’s costs.  Ho could not deduct the £48,600 from the £30,000 because there was no “order for damages and interest”.  So Ho purported to set off the £48,600 against the £16,700.  Ho won in the Court of Appeal in April last year but the Supreme Court yesterday reversed that decision.

So if a claimant recovers damages and costs by agreement, but has an order – for any reason – to pay the defendant’s costs, the defendant cannot retain any part of the money in satisfaction of its own costs entitlement.

It may be that this discourages defendants from making Part 36 offers, or to withdraw offers in existing cases.  There must now be an incentive for Defendants to force matters through to an “order for damages and interest.”  In some cases.

But the injured person never wanted to bring a personal injury claim in the first place.  A wealthier country would have Legal Aid.  We have to regard this as a welcome restatement that QOCS means QOCS.