Ho v Adelekun [2021] UKSC 43

Ms Adelekun suffered personal injury in a road traffic accident and settled her claim against Ms Ho. A costs dispute arose over whether the defendant could set off costs owed to her against costs she owed the claimant under the QOCS scheme. The Supreme Court held that set-off constitutes enforcement under QOCS.

Facts

Ms Adelekun was injured in a road traffic accident on 26 June 2012 for which she alleged Ms Ho was liable. Following unsuccessful settlement under the Pre-Action Protocol, proceedings were issued. Ms Ho made a Part 36 offer of £30,000 which Ms Adelekun accepted, with a Tomlin order made on 24 April 2017. A dispute arose over whether Ms Adelekun was entitled to fixed recoverable costs (approximately £16,700) or standard basis costs (approximately £42,000). The Court of Appeal determined only fixed recoverable costs were payable and awarded Ms Ho costs of the assessment dispute (approximately £48,600). Ms Ho sought to set off her costs entitlement against the fixed costs she owed Ms Adelekun.

Issues

Primary Issue

Whether the Qualified One-way Costs Shifting (QOCS) regime under CPR Part 44 Section II constrains the defendant’s ability to set off opposing costs orders against each other.

Secondary Issues

Whether set-off of costs against costs constitutes a form of ‘enforcement’ within the meaning of rule 44.14(1), and whether the QOCS scheme operates as a complete code regarding defendants’ use of costs orders.

Judgment

The Supreme Court allowed the appeal, overruling the Court of Appeal’s decision in Howe v Motor Insurers’ Bureau. Lord Briggs and Lady Rose delivered the judgment, holding that set-off of costs against costs is a form of enforcement for QOCS purposes.

If set-off of costs against damages is therefore a form of enforcement in this context, so as to make sense of rule 44.14, then why should set-off of costs against costs not equally be a means of enforcement? Both achieve a recovery measurable in money terms for the defendant on account of its costs entitlement.

The Court examined the language of rule 44.14(1), noting:

The requirement is to calculate A by reference to the aggregate amount in money terms of all the defendant’s costs orders made against the claimant, not the net amount arrived at by netting off opposing costs orders and striking a net balance. Costs orders in favour of the claimant are not even mentioned in the formula, and the aggregate expressly referred to is a gross not a net amount.

Regarding the operation of QOCS:

We would not accept Mr Mallalieu’s submission that QOCS is a complete costs code, or that it wholly excludes set-off of costs against costs under rule 44.12. But we would accept that QOCS is intended to be a complete code about what a defendant in a PI case can do with costs orders obtained against the claimant, ie about the use which the defendant can make of them.

Implications

This decision has significant implications for personal injury litigation. Where a claim concludes without a court order for damages (such as by settlement), defendants cannot use set-off of costs against costs to recover their costs entitlement because there is no ‘headroom’ under rule 44.14(1). The judgment reinforces QOCS protection for claimants while acknowledging the scheme is imperfect. The Court expressly invited the Civil Procedure Rule Committee to consider whether the interpretation reflects the purposes of QOCS and to amend the rules if necessary.

Verdict: Appeal allowed. The Court held that set-off of costs against costs constitutes enforcement within the meaning of CPR rule 44.14(1), and therefore where there is no order for damages or interest (as in settlement cases), a defendant cannot set off their costs entitlement against costs they owe the claimant.

Source: Ho v Adelekun [2021] UKSC 43