Q&As

Where a payment on account costs order is made, can the paying party seek to rely on an agreement containing a right of set-off which was not part of the proceedings but which is itself being disputed?

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Produced in partnership with Nicholas J Browne of Just Costs
Published on LexisPSL on 24/10/2016

The following Dispute Resolution Q&A produced in partnership with Nicholas J Browne of Just Costs provides comprehensive and up to date legal information covering:

  • Where a payment on account costs order is made, can the paying party seek to rely on an agreement containing a right of set-off which was not part of the proceedings but which is itself being disputed?
  • What is set-off?
  • Interim payment order conditions
  • Courts’ discretion
  • Disputed agreement of set-off

Where a payment on account costs order is made, can the paying party seek to rely on an agreement containing a right of set-off which was not part of the proceedings but which is itself being disputed?

What is set-off?

Set-off comes into being where parties have financial liabilities to one another. A right to set-off allows parties to deduct one party’s liability from the other leaving an outstanding balance to be paid by the other affected party who will be indebted to the other.

There are five main types of set-off:

  1. legal set-off

  2. equitable set-off

  3. contractual set-off

  4. insolvency set-off

  5. bankers’ set-off

For information on the different types of set-off, see Practice Note: Types of set-off.

In the scenario in this Q&A, it would appear legal set-off applies. This type of set-off can be used as a defence to civil proceedings and can only be used when the court action has not reached a conclusion. This type of defence allows the debtor to set-off monetary liabilities that may or may not have been incurred during the claim in question. If an assessment of costs has not yet been finalised, as it has not in this question as the court’s order relates solely to an interim payment, the paying party is still able to raise the right of set-off as a defence against paying the full amount of the interim.

Interim

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