22/08/2018

 

 

Introduction

In the case of Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654, the Court of Appeal upheld the Costs Judge's decision that a successful Defendant in a multi-defendant claim may recover its costs under CPR 44.14(1) where the Claimant receives a sum of money from an unsuccessful Defendant.

The Defendant, however, was precluded from recovering its costs from the Claimant on this occasion because the claim was compromised by way of Tomlin Order, which is not a Court Order for the purpose of CPR 44.14(1).

 

CPR 44.14

As a reminder, CPR 44.14(1) states:

"Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant".

 

Summary of Facts

The Claimant, Mr Cartwright ("C"), issued a claim for noise induced hearing loss ("NIHL") against six Defendants. The Third Defendant, Venduct Engineering Limited ("V"), admitted responsibility for any liability established against the First Defendant and Second Defendant. C therefore discontinued his claim against the First and Second Defendants.

In December 2016, C compromised his claim against the Fourth, Fifth and Sixth Defendants by way of Tomlin Order, which made provision for C to accept the all-inclusive sum of £20,000 in full and final settlement of his claim against these Defendants. C subsequently served a Notice of Discontinuance upon V.

V's position was that, as a Notice of Discontinue had been served, a deemed costs order was made under CPR 38.6(1) that was enforceable by virtue of CPR 44.14(1). V expected C to pay its costs from the sum he received from the Fourth to Sixth Defendants.

C resisted V's claim for costs because, one, he benefitted from the protection afforded by the QOWCS regime and, two, CPR 44.14(1) did not apply because a Tomlin Order is not an "order for damages and interest made in favour of the claimant".

 

First Instance

In a reserved judgment, which the Appeal Court described as "impressive", Regional Costs Judge Hale held that:
  • In a multi-defendant case, a successful Defendant may recover its costs under CPR 44.14(1) from any sum the Claimant receives from the unsuccessful Defendant(s);
  • The amount of the successful Defendant's costs cannot exceed the level of damages and interest paid to the Claimant;
  • The schedule of a Tomlin Order is not a Court Order for the purpose of CPR 44.14(1) – Community Care North East v Durham County Council [2012] 1 WLR 338 and Watson v Sadiq [2013] EWCA Civ 822; and
  • Since C's claim was compromised by way of a Tomlin Order, V was precluded from recovering its costs from C under CPR 44.14(1).
 Appeal Can One Defendant Take Advantage of Sums Paid to the Claimant by Another Defendant?

Lord Justice Coulson emphatically agreed with Regional Costs Judge Hale that a Claimant who receives damages and interest from an unsuccessful Defendant is liable to pay any adverse costs order made in favour of the successful Defendant, limited to the amount of the Claimant's damages and interest. The wording of CPR 44.14(1) is entirely consistent with this approach.

The QOWCS regime was not intended to enable a Claimant to issue proceedings against a large number of Defendants with the comfort that if the claim fails against all bar one of the Defendants then there will be no costs liability to the successful Defendants.

A Sanderson or Bullock costs order would not be appropriate when a Claimant freely sues multiple Defendants.

Does It Make A Difference If Sums Are Due By Way Of A Tomlin Order?

Lord Justice Coulson found this limb of the appeal not "entirely easy" to decide but ultimately agreed with Regional Costs Judge Hale that a Tomlin Order is not a Court Order and that sums payable under a Tomlin Order do not fall within CPR 44.14(1).

It is a well-establish principle that the schedule of the Tomlin Order is an agreement reached between the parties that cannot remotely be described as "an order for damages and interest made in favour of the claimant". There were also practical difficulties in finding that CPR 44.14(1) covered a Tomlin Order because:

  • A Tomlin Order is often confidential and where each Defendant's liability is several, a successful Defendant with a costs order in its favour might not even see the Tomlin Order; and
  • Claims can be settled on all-inclusive basis that are commercially attractive to a Claimant (and a Defendant). During the negotiation process, the parties might not break down the sums payable in relation to damages, interest on damages, costs, disbursements, interest on costs and VAT. How would the Court identify the amount of damages and interest paid to the Claimant in such circumstances?

Part 36 Offer

The Court further observed that acceptance of a Part 36 offer would be outside the remit of CPR 44.14(1) because a Court Order is not required to accept a Part 36 offer – a Claimant who accepts a Defendant's Part 36 offer within the relevant period is entitled to a deemed costs order by virtue of CPR 44.9(c).

The Court, however, did not address whether the position would be different where the Court's permission is required to accept a Part 36 offer in circumstances set out in CPR 36.11(3)(a) to (d).

CPR 36.11(b) and CPR 36.15(4) are pertinent to multi-defendant claims in that CPR 36.15(4) expressly provides that where one or more, but not all, Defendants make a Part 36 offer that a Claimant wishes to accept then the Court's permission is required to accept that offer if either CPR 36.15(2) or (3) is not satisfied.

If permission is granted to accept the Part 36 offer, unless the parties agree costs, the Court must make a costs order under CPR 36.11(4), which states "Where the court gives permission under [CPR 36.11(3)], unless all the parties have agreed costs, the court must make an order dealing with costs, and may order that the costs consequences set out in rule 36.13 apply".

The Court also did not address settlement or compromise of a claim made by a child or protected party against multi-defendants, which of course must be approved by the Court pursuant to CPR 21.10 and 36.11.

 

Comments

This decision usefully illustrates that Defendants must take precautions to preserve their ability to recover costs from Claimants under the CPR 44.14(1) mechanism in multi-defendant claims that are compromised before trial.

Understanding and recognising the distinct differences between a simple Consent Order and a Tomlin Order is crucial to preserving a successful Defendant's entitlement to costs, as agreeing to compromise a claim by way of a Tomlin Order will defeat a successful Defendant from recovering its costs from a Claimant under CPR 44.14(1). In practice, Defendants should reserve rights to recover costs from a Claimant and prepare a suitably worded Consent Order that satisfies the requirements of CPR 44.14(1).