England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		25 February 2011

Judgment on Costs

Mr Justice Supperstone :

1. On 26 January 2011 I ordered that upon the Third Defendant's application dated 8 March 2010 so much of the Amended Particulars of Claim as is directed against the Third Defendant be struck out ("the Order").
2. Paragraphs 4(iii) and 6-7 of the Order then provide as follows in relation to the Third Defendant's costs:

"4. …

(iii) The Claimant do pay the Third Defendant's costs of the Action to date in any event, including its costs of this Application and of any costs reserved, such costs to be assessed on a standard basis unless otherwise agreed in writing.

…

6. Subject to paragraph 7 below, the amount of the Claimant's liability for so much of the above costs as were incurred whilst the Claimant was an LSC funded person is to be determined in accordance with Regulation 10 of the Community Legal Service (Costs) Regulations 2000, save that any party may be permitted to enforce any such award of costs in its favour with the leave of the Court.

7. The Third Defendant's application for permission to enforce paragraph 4(iii) above by way of set-off against any award of costs and/or damages made in favour of the Claimant in these proceedings is hereby adjourned for determination by the Judge in the light of written submissions from the Third Defendant and the Claimant (such submissions to be filed and served by 4pm on 2 and 9 February 2011 respectively)."

3. Pursuant to paragraph 7 of the Order the Third Defendant made written submissions dated 1 February 2011 and the Claimant made written submissions dated 9 February 2011. By e-mail dated 9 February 2011 the Third Defendant made a further point in response to the Claimant's submissions.
4. The issue for determination is whether the costs order made in the Third Defendant's favour should be subject to a "Lockley proviso".
5. The material parts of the judgment of Scott LJ in Lockley are as follows:

"The issue in this appeal is whether, in a case where one party is legally aided, an order for costs in favour of the other party can direct that those costs be set-off against either damages or costs to which the legally aided party has become, or may in future become, entitled in the action (at 494C).

…

The operation of a set-off does not place the person whose chose in action is thereby reduced or extinguished under any obligation to pay. It simply reduces or extinguishes the amount that the other party has to pay. The operation of a set-off, in respect of the liability of a legally aided person under an order for costs does not require the legally aided person to pay anything. It does not lead to any costs being recoverable against the legally aided person (at 495G).

…

In general, in my opinion, interlocutory costs incurred in the progress of an action to trial and ordered to be paid by a plaintiff to a defendant would in equity impeach the right of the plaintiff to recover from the defendant costs of the action ordered to be paid by the defendant. A set-off of costs against costs, when all are incurred in the prosecution or defence of the same action, seems so natural and equitable as not to need any special justification. I would expect a party objecting to the set-off to give some special reason for the objection. It is, in my opinion, less obvious that a set-off of costs against damages would always be justified."

6. I agree that set-off of costs against costs is "natural and equitable". I do not understand Mr Bowen QC, for the Claimant, to be arguing to the contrary.
7. Mr Bowen does, however, submit that the Third Defendant should not be allowed to set-off its costs against any damages that the Claimant may recover in relation to the false imprisonment claim that he has made against the Third Defendant for the period 24-31 August 2007. This claim was not part of the Application.
8. Mr Bowen submits that the "connection" between the damages that the Claimant may recover for the final one week period in August 2007 and the costs incurred by the Third Defendant in defending the claims for the preceding eleven month period of the recall is not such that it is equitable to set one off against the other. He submits that the "two" false imprisonment claims are "quite separate". The first concerns the Claimant's recall, the second concerns the failure to release him on time. They are, he submits, based on different facts and involve different legal principles.
9. In my view they are so closely connected so as to make it equitable to set one off against the other. They relate to two parts (albeit one longer, one shorter) of the Claimant's imprisonment between 5 September 2006 and 31 August 2007 which the Claimant alleges was, in its entirety, unlawful and in respect of which he brought claims for false imprisonment and for breach of his Article 5 and 8 rights against the Third Defendant.
10. Further I agree with Mr Sanders, for the Third Defendant, that the factors set out in CPR, Pt.1.1 are of relevance in assessing whether a set-off as against damages would be just and equitable. I accept his submission that a Lockley proviso may restore some equality of footing as between the Claimant and the Third Defendant by mitigating the Claimant's immunity from the ordinary costs consequences of his conduct and may further save expense and court resources. Any payment of damages to the Claimant pursuant to his remaining claim would ultimately have to be met out of public funds in circumstances where the Claimant is already liable for four sets of substantial public costs incurred by the First, Second, Third and Fourth Defendants.
11. The next question Mr Bowen asks is: "Does justice require the Third Defendant to have a Lockley Order when the practical effect will be to deprive the Commission of whatever sum in damages is properly due to the Claimant?" He submits that because the Claimant's own costs of bringing these proceedings are larger than any damages that the Third Defendant will agree or be ordered to pay for the later detention, the damages will go to reduce the amount that will otherwise be paid to the Claimant's lawyers (who will be paid in any event). In other words, he submits if a Lockley Order is not made it will save the Legal Services Commission the same amount that the Third Defendant agrees or is ordered to pay in damages. Accordingly Mr Bowen submits that the decision for the court is therefore whether, in the event of the Claimant succeeding in obtaining damages, the Commission or the Third Defendant should enjoy the benefit of respectively (1) getting the money to reduce the burden on the Fund; or (2) not paying the money otherwise due by reason of the set-off. (See paras 12-20 of Claimant's written submissions).
12. In my view the question Mr Bowen asks is not the correct question. If a set-off of costs against damages is justified, as in my view it is in the present case, then the fact that the Commission will not recover the benefit of the damages to reduce the burden on the Fund is not to the point. The Commission decided to fund the action which to date has failed. The Third Defendant has incurred very substantial costs and should, in my view, be entitled to enforce the costs order made in its favour (which may not be enforced directly against the Claimant without the leave of the court as he is publicly funded) "by way of set-off against any award of costs and/or damages made in favour of the Claimant in these proceedings."
13. I reject Mr Bowen's third submission that it is premature to determine a Lockley argument now and it should be for the trial judge to exercise his discretion or the parties to agree terms. In my view the present case is distinguishable from Morgan v MoJ [2010] EWHC 2248 (QB). In Morgan the court had tried three preliminary issues which were not themselves decisive of the defendant's liability to the claimants. By contrast in the present case the court has struck out a very substantial part of the Claimant's claim against the Third Defendant as unarguable. I agree with Mr Sanders that all relevant factors going to the appropriateness of a Lockley set-off as against damages are amenable to immediate assessment.

Conclusion

14. In my judgment the Third Defendant is entitled to enforce paragraph 4(iii) of the Order by way of set-off against any award of costs and/or damages made in favour of the Claimant in these proceedings and I so order.