The Court of Appeal has upheld a first instance decision confirming that a successful defendant can recover costs from damages payable to a claimant by an unsuccessful co-defendant in the same proceedings.
However, such a recovery is limited to where an order of the court, awarding that sum of damages, has been made. It is not permissible for a defendant to enforce where the damages have been agreed by a Part 36 offer or in a Tomlin Order, which are not deemed orders of the Court within the ambit of CPR 44.14, standing in contrast to a consent order.
The ruling is good news for insurers and companies in occupational diseases, who are often brought into multi-defendant cases by claimants in hope, rather than expectation, of bringing a successful claim against one of a number of parties.
Nonetheless, it is apparent that the ruling may encourage claimants and their representative to seek to agree settlements in this way, so as to avoid having to pay a successful defendant’s costs order, and this may require a change in the Civil Procedure Rules.
The Claimant issued proceedings against six named defendants in response of a noise induced hearing loss claim. The Third Defendant, Venduct accepted any liability which may be established against the First and Second Defendant, however, the claims against them were discontinued by consent.
The Claimant compromised the claims against D4, D5 and D6 via a Tomlin Order. The claim against Venduct was discontinued following service of the appropriate notice. Under CPR 38.6(1) following service of such a notice, the claimant is ordinarily liable for the costs incurred by the defendant up to that date. Venduct sought recovery of their costs, namely from the damages payable to the Claimant under the terms of the Tomlin Order.
Judge Hale in the Nottingham County Court determined that whilst the Tomlin Order was enforceable, it was not an order of the Court for the purposes of CPR 44.14. Venduct therefore had no entitlement to recover their costs following discontinuance.
On appeal, the decision of Regional Costs Judge Hale was upheld.
The appeal dealt with two issues:
- Whether Venduct could enforce an order for costs out of sums payable to the Claimant by way of damages and interest by other defendant(s) in a multi-defendant case;
- If yes, whether this enforcement is possible where the sums payable were agreed by way of a Tomlin Order, as opposed to a Court order
The Court of Appeal concluded that it was correct that a claimant "who has an order for damages and interest payable by defendant A is liable to pay out of that amount any adverse costs orders in favour of defendant B, but only up the limit of the order for damages and interest payable by defendant A."
The Claimant had submitted that the proceedings against each of the 6 defendants represented separate proceedings. Counsel for Venduct stated that the wording of CPR 44.14 allowed a successful defendant to enforce a costs order, provided the claimant was entitled to damages from an unsuccessful defendant, regardless of the source of the funds. It defied common sense to suggest the 6 claims were in fact separate sets of proceedings.
Lord Justice Coulson agreed, stating "any other result would give a claimant carte blanche to commence proceedings against as many defendants…whilst remaining safe in the knowledge… he or she will incur no costs liability to the successful defendants".
Referring to the purpose of the Jackson reforms, he stated that "claimants are discouraged from bringing proceedings which are unlikely to succeed," and that those claimants with QOCS protection should not think they can issue proceedings with "impunity".
The Court of Appeal concluded that Judge Hale had been correct to exclude from enforcement those sums payable pursuant to the Tomlin Order.
The Claimant submitted that CPR 44.14 did not cover an agreement by way of a Tomlin Order instead referring only "any order for damages and interest made in favour of the claimant". Counsel for Venduct argued that it would be "absurd" for a claimant to be liable to meet a costs order if the damages were payable on a simple Court order (including by extension, consent orders), but not if it was subject to a Tomlin Order.
Venduct also highlighted that acceptance of a Part 36 offer would also result in the same conclusion of no liability for a costs order, as such a situation also fell outside CPR 44.14.
Whilst acknowledging that a finding confirming CPR 44.14 only covered court orders and not Tomlin Orders/Part 36s settlement was "odd and counter-intuitive", Lord Justice Coulson found there was no express guidance to the contrary, and therefore, the decision on first instance was correct.
What can we learn?
The immediate application of the principle likely to be limited to orders made at trial against multiple defendants, with the most likely application being to claims for occupational disease.
There are also clear benefits to co-defendants in such matters should one defendant settle matters by way of consent order as opposed to a Tomlin Order. This may require co-operation between co-defendants when making offers and settling claims.
Nonetheless, it is unlikely to bring about any further control to the approach of some claimant solicitors who seek to issue proceedings en masse against a variety of defendants. Any settlement against one defendant by way of Part 36/Tomlin Order, can then result in discontinuances against other defendants without consequences.
It is possible that the ruling may result in the greater use of Sanderson and Bullock orders which allow those co-defendants who successfully defend a claim to seek their costs back from unsuccessful defendants, if apparent that they are unable to recover them from the claimant.
Lord Justice Coulson did acknowledge that any amendment to CPR 44.14 to resolve the now-apparent inconsistency on costs recovery following discontinuance of a claim is not a matter for the Court, but for the Ministry of Justice and Civil Procedure Rules Committee.