This 2021 decision interpreted the version of CPR 44.14 then in force. A personal injury defendant owed costs to the claimant but had a larger costs order in her own favour. Could she cancel one against the other when payment of the settlement had produced no court order for damages?
Qualified one-way costs shifting (QOCS) limits recovery of costs against a personal injury claimant. Under the wording applicable to Ms Adelekun’s case, the relevant cap referred to orders for damages and interest in the claimant’s favour. A costs award could still be made for the defendant: the difficulty was enforcing it.
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The disputed question was whether using one costs order to cancel another is enforcement. In Howe v Motor Insurers’ Bureau, the Court of Appeal held that set-off was not enforcement and was unaffected by QOCS. In April 2020 a differently constituted Court of Appeal doubted that conclusion but considered itself bound by Howe. It therefore held that it had jurisdiction to order set-off and exercised its discretion in Ms Ho’s favour. Permission to appeal was given on whether set-off was available. There was no appeal against that exercise of discretion if an order could be made.
The costs in dispute
Ms Adelekun was injured in a road traffic accident on 26 June 2012 and alleged that Ms Ho was liable. Her solicitors notified Ms Ho’s insurers under the relevant pre-action protocol on 15 January 2014. Liability was not admitted, and proceedings were issued on 7 January 2015. On 19 April 2017 Ms Ho’s solicitors offered £30,000 in a letter described as a Part 36 offer, together with costs. Ms Adelekun accepted, and a consent Tomlin order was made on 24 April 2017.
The parties agreed that Ms Ho was liable for the costs of the claim, but not about how those costs should be assessed. Ms Ho said that only fixed recoverable costs under CPR Part 45 were payable, about £16,700. Ms Adelekun said that the accepted offer entitled her to assessment on the standard basis, about £42,000. Deputy District Judge Harvey held that only fixed costs were payable. His Honour Judge Wulwik reversed that decision, but the Court of Appeal restored it. Ms Ho was awarded the costs of that assessment dispute before the district judge, the circuit judge and the Court of Appeal.
The costs awarded to Ms Ho, including the later hearing on set-off, were said to be about £48,600. She asked for the £16,700 fixed costs she owed to be set against that liability, so that neither sum would be paid in cash. She accepted that she still had to pay the agreed damages and interest, and that she could not recover the balance, about £31,900, from Ms Adelekun. Ms Adelekun said that even this limited cancellation was prohibited.
QOCS applied because the proceedings included a personal-injury claim. It was also agreed that acceptance of the offer produced no order for damages within rule 44.14. The Supreme Court treated that conclusion as following from Cartwright v Venduct Engineering Ltd: damages payable under a settlement are not an order for damages and interest, even where the agreement is annexed to a Tomlin order. There was therefore no amount beneath the QOCS cap.
Set-off as enforcement
Lord Briggs and Lady Rose gave the judgment, with which Lady Arden, Lord Kitchin and Lord Burrows agreed. They regarded the issue as one of construction. They noted Sir Rupert Jackson’s proposals and later statements made when the rules were introduced, but the enacted scheme differed from his recommendation: it does not restrict the orders a court may make, but limits the use a defendant may make of them. An explanatory memorandum described a successful claimant as having to meet an adverse costs order only to the extent that it could be set off against damages received. That pointed away from treating costs owed to the claimant as an additional fund.
The court rejected the argument that QOCS answers every costs question or abolishes the power in CPR rule 44.12 to direct a costs set-off. It accepted a narrower proposition. QOCS is a complete code governing what a defendant may do with costs orders against the claimant. The defendant may recover by any available means, including set-off against an opposing costs order, but only up to the claimant’s orders for damages and interest.
The rule as then framed required two totals: the costs ordered against the claimant and the damages and interest ordered in her favour. Enforcement without permission could not exceed that second total, subject to exceptions not in issue.
A recovery need not involve cash. If damages and interest are £20,000 and the defendant’s costs orders total £30,000, the defendant may set costs against those damages only up to £20,000 and cannot enforce the remaining £10,000 by any means. Since cancelling costs against damages is enforcement, cancelling costs against costs is enforcement too: both appropriate something owed to the claimant in order to satisfy the defendant’s costs entitlement. Rule 44.14(3), which prevents the unenforced part of a costs order from being recorded as an outstanding judgment, supported that wide meaning. It was irrelevant that set-off does not appear among the enforcement methods listed in CPR Part 70.
The ordinary set-off power therefore did not permit a defendant to bypass the cap that applied to these proceedings. The Court recognised that the result might seem anomalous and left any change of policy to the Civil Procedure Rule Committee.
Verdict: The Supreme Court unanimously allowed Ms Adelekun’s appeal. On the wording applicable to her claim, setting costs against costs was enforcement, and there was no damages order to provide an enforceable amount. The earlier decision fixing her recoverable costs was unaffected.
Source: Ho v Adelekun [2021] UKSC 43
