The recent Supreme Court case of Ho -v- Adelekun is the most significant recent piece of case law in the world of costs. The full judgement and details are here. It concerns the ability of Defendants to set off costs to which they are entitled against costs which a Claimant can recover.
Defendants have for some time been unable to enforce their “adverse” costs against damages agreed under the terms of a Tomlin Order (this is a Court of Appeal case Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654).
What has been happening since then in common practice is Defendants have instead been setting those costs off against any costs to which the Claimant is entitled. In Ho -v Adelekun the Supreme Court has ruled that such set off cannot be made.
So now the combined effect of Cartwright and Ho makes it very unfavourable for Defendants because you can have a not uncommon situation where a Defendant makes a P36 offer early in a case, which the Claimant does not accept. This offer expires (but is not withdrawn) and the claim goes on for some time, with the Defendant potentially incurring significant costs in that period. Then the situation/evidence changes, the case suddenly seems to be worth a lot less and a Claimant decides to accept the early part 36 offer out of time.
The Claimant can then recover all their costs up to the date of the expiry of the offer from their opponent, but the Defendant in practical terms cannot recover the costs the belated P36 acceptance entitles to them from the date of expiry up to the date of acceptance because Cartwright prevents them enforcing them against damages agreed in a Tomlin Order (or by the deemed order for costs arising out of the Part 36 acceptance) and Ho prevents them from setting these costs off against the costs the Claimant is entitled to up to the date of expiry of the offer.
Paul Kay
Senior Costs Draftsman for R Costings Ltd
t: 01480 463499 ext: 310