Set-Off Of Costs Against Damages Or Costs | The Principles
The parties each enjoyed “distinctly mixed fortunes” in this claim against the police, as described by HHJ Turner …
(i) The defendant won on the central issue relating to the common law claim;
(ii) However, causation was an important aspect of this defence and the defendant abandoned it during the course of the trial;
(iii) The claimants also sequentially abandoned various aspects of their claims both in common law and under the Human Rights Act;
(iv) The claimants were successful in their human rights claims although they did not succeed in establishing the full extent of the breaches alleged.
Each claimant was awarded £5,000 and a formal declaration was made as follows:
“The Defendant breached the Article 2 investigative duty by failing to take steps to prevent the key police officer witnesses from conferring prior to providing their first written accounts, for the reasons outlined in the judgment.”
The defendant was awarded 50% of its costs and sought to set these off against the award of damages.
In determining this issue, HHJ Turner set out the criteria to applied, as identified by Scott LJ in the leading case of Lockley v National Blood Transfusion Service  1 W.L.R. 492:
“1. A direction for the set-off of costs against damages or costs to which a legally aided person has become or becomes entitled in the action may be permissible.
2. The set-off is no different from and no more extensive than the set-off available to or against parties who are not legally aided.
3. The broad criterion for the application of set-off is that the plaintiff’s claim and the defendant’s claim are so closely connected that it would be inequitable to allow the plaintiff’s claim without taking into account the defendant’s claim. As it has sometimes been put, the defendant’s claim must, in equity, impeach the plaintiff’s claim.
4. Set-off of costs or damages to which one party is entitled against costs or damages to which another party is entitled depends upon the application of the equitable criterion I have endeavoured to express. It was treated by Mr. Justice May in Currie v. Law Society as a “question for the court’s discretion” (see page 1000 A-B). It is possible to regard all questions regarding costs as being subject to the statutory discretion conferred on the court by section 51 of the Supreme Court Act 1981. But I would not have thought that a set-off of damages against damages could properly be described as a discretionary matter, nor that a set-off of costs against damages could be so described.
5. If and to the extent that a set-off of costs awarded against a legally aided party against costs or damages to which the legally aided party is entitled, cannot be justified as a set off (i) the liability of the legally aided party to pay the costs awarded against him will be subject to section 17(1) of the Act and Regulation 124(1) of the Regulations; and (ii) the section 16(6) charge will apply to the costs or damages to which the legally aided party is entitled.”
Applying this criteria, he held:
“… I am satisfied that it is appropriate, with one exception, for the defendant’s costs order in this case to be set off against the damages award and any earlier interlocutory costs orders made in favour of the claimant. The exception to which I refer is the costs relating to a claim brought by the second claimant in false imprisonment which was settled following the second claimant’s acceptance of a Part 36 offer. This claim was, in my view, sufficiently distinct from the matters which fell for determination within the context of the rest of the litigation that the damages and costs relating thereto should be paid by the defendant and not extinguished by the application of a set off.”