HT-2023-000006 - [2024] EWHC 2914 (TCC)

Fecha: 15-Nov-2024

Set Off

227.

In paragraphs 86 to 90 of its Submissions on Costs, J&BH submits as follows:

86.

In cases where there are different judgments in favour of both the Claimant and the Defendant, including judgments/orders on costs, the Court’s practice is generally to allow those cross-judgments to be set-off against each other. In other words, only a single net balancing payment needs to be made.

87.

The principle and application of this power was explained in Fearns v Anglo-Dutch Paint & Chemical Co Limited [2010] EWHC 2366 (Ch), [2011] 1 WLR 366 at [36] to [38]:

“36.
As well as by agreement, cross-liabilities can be netted off (and thus extinguished to the extent of the other) pursuant to a judgment of the court. Before such a set-off can be effected it is of course necessary that the existence and amount of each liability has been established by agreement or judgment.
37.
CPR r 40.13 applies where the court gives judgment for specified amounts both for the claimant on his claim and against the claimant on a counterclaim: in such circumstances the court may order the party whose judgment is for the lesser amount to pay the balance. More generally, it has long been the practice of the courts as part of their inherent jurisdiction over their own proceedings to allow cross-judgments given in the same action, or in different actions, to be set off against each other: see Edwards v Hope (1885) 14 QBD 922; Reid v Cupper [1915] 2 KB 147 and In re A Debtor (No 21 of 1950) (No 2); Ex p The Petitioning Creditors v The Debtor [1951] Ch 612. As these cases show, this jurisdiction encompasses judgments for damages and also orders for costs. Unlike legal or equitable set-off, such a "set-off" involves treating the judgment in favour of one party as satisfying pro tanto the judgment in favour of the other. There is accordingly an extinction of liabilities.
38.
It is clear from the authorities mentioned, and from the word "may" in CPR r 40.13(2), that the power of the court to order such a set-off is discretionary. In Edwards’s case Brett MR, at p 926, and Bowen LJ, at p 927, described the power as "an equitable jurisdiction" . By this they plainly did not mean a jurisdiction exercised by courts of equity (as they were referring to the practice of the common law courts) but a jurisdiction to order a set-off where the court considers it just and equitable to do so.”
[emphasis added]

88.

Such a set-off, and order for a single net payment, was made in Fearns where the claimant had judgment in its favour for c.£36k but was ordered to pay c.£300k as an interim payment on account of the defendant’s costs. The Court ordered that these cross-orders/entitlements were to be set-off at [68] to [77], explaining at [76] that:

“Applying the test for equitable set-off or exercising the court’s discretion, the connection between the two sums is such that justice plainly requires that they be set off. If one looks simply at the position of Mr Fearns and leaves aside the effect of the order on his creditors, I cannot see how it could be right for him to receive a payment of damages without giving credit against the payment for the liability in costs which he has incurred in pursuing the claim to recover those damages. The justice of the matter seems to me equally clear if one considers the effect on Mr Fearns’s creditors, for whose benefit the litigation has in large part been maintained. It would in my view be manifestly unjust that they should receive a share of the damages free of the liability to make a payment on account of the defendants’ costs which was part of the cost of obtaining the damages award.”
[emphasis added]

89.

In this case too, the Court should allow a set-off or mutual extinguishing of the various Judgment debts. It would be manifestly unjust and inequitable for the Claimant to receive payment of the main judgment sum without giving credit against that payment for the liability in costs it has incurred in pursuing the claim to recover the main judgment sum.

90.

Given the Claimant’s financial position, any other order would undermine the intent and purpose of CPR Part 36 and be inequitable:

90.1

Any payment to the Claimant would likely go to its bank account with NatWest. That account is frozen/ non-operational because of debts owed by the Claimant to NatWest (see p37B of Transcript of hearing on 1 June 2023 [Trial Bundle/ p4379] and email from NatWest to the Claimant on 21 June 2023 [Trial Bundle/ p1358]), so it is unlikely that the Claimant will be able to pay any sums out of it.

90.2

As the Court has already found, the Claimant does not otherwise have any money to pay sums to the Defendant and owes in excess of £300,000 to HMRC and NatWest. The Court found in at para. 65 of its Judgment No. 2 as follows:

“65.
Here it seems to me that the “underlying realities” support the proposition that A&V as a company is highly unlikely to be able to pay the judgment debt:
(1)
On any view A&V is a small company;
(2)
It appears no longer to be actively trading;
(3)
It owes its banker and HMRC together sums well in excess of £300,000.”

228.

I accept those submissions.

229.

I calculate the amount due on the account between the Parties as follows:

Sum due from J&BH to A & V other than costs		£161,144.36
Sum due to A & V for costs		£10,820.55
Sum due from A&V to J&BH	4.12.23-1.03.24	(£6,636)
Sum due from A&V to J&BH	1.03.24 to 18.06.24	--(£88,956.50
Copying costs		(£3,130.80)
Interest on costs due from J&BH to A & V		£1,708.11
Interest on costs due from A & V to J&BH		(£2,171.94)

Mr Smith's fees		-(£13,962.00)
JBH Costs		(£20,822.00)
Interest on the above		(£4,696.46)

		£33,298.02