Holly Tibbitts considers the important Court of Appeal decision in Cartwright v Venduct Engineering
How does the QOCS regime operate in a case where there are multiple defendants and the claimant succeeds against some but not others? Does the Claimant still have QOCS protection against the defendants against whom she has lost? Or are those defendants able to enforce costs orders against the damages she has received from the losing defendants?
For several years the answers to these questions were uncertain: they were not addressed directly within the rules and there was no judicial guidance on the issue. Many claimant practitioners consequently breathed a sigh of relief in August last year when HHJ Freedman handed down the judgment in Bowman v Norfran Aluminium Ltd & ors (unreported, Newcastle County Court, 11th August 2017). He concluded that a claimant did retain QOCS protection against the defendants against whom she had not succeeded and a costs order obtained by one defendant could not be enforced against damages paid by another.
However, this relief was short-lived. Only a few months later, Regional Costs Judge S Hale in Cartwright v Venduct Engineering Ltd (unreported, Leicester County Court, 6th December 2017) reached precisely the opposite conclusion: a defendant who had successfully defended a claim could enforce their costs against damages obtained by the claimant from other unsuccessful defendants. Practitioners were therefore left with two entirely conflicting decisions on how QOCS operated in multiple defendant cases.
Thankfully the Court of Appeal understood the importance of resolving this issue and allowed a leapfrog appeal in the case of Cartwright, which was heard on 28th June 2018. Handing down the lead judgment Lord Justice Coulson concluded that Regional Costs Judge Hale had been right: a defendant against whom a claimant had lost or discontinued was in principle entitled to enforce the costs order against a claimant who had obtained some damages, even though the source of the claimant’s damages was another defendant. The Court stated that any other result would give claimants carte blanche to commence claims against as many defendants as he or she likes without any adverse consequences and would encourage the bringing of hopeless claims.
This is obviously not the result that claimants and their representatives were hoping for. It means that even if a claimant succeeds in obtaining some damages, unless she has been successful against all defendants she may find her damages substantially reduced or entirely eliminated by an enforceable defendant’s costs order.
However, there is a very important caveat in the judgment. CPR 44.14(1) only allows enforcement of costs orders against damages obtained by way of a court order. In Venduct the damages were due by way of a schedule to a Tomlin order. It is well established that a schedule to a Tomlin order is not part of the order itself. The Court of Appeal concluded that there was consequently no court order for damages against which the costs could be enforced. It was also agreed that as the acceptance of a Part 36 offer does not require an order of the court, settlement in consequence of acceptance of a Part 36 offer would also fall outside CPR 44.14(1) and a costs order would not be enforceable against damages obtained as a result of such a settlement.
This suggests indicates that a claimant can safely settle a claim in multiple defendant cases by way of a Tomlin order or acceptance of a Part 36 offer. Any remaining defendants against whom the claim is lost or discontinued will not be able to enforce their costs orders against damages received by the claimant pursuant to such settlements.
What if the Claimant finds herself at trial having lost against some defendants but succeeded against others? The judgment hints that she may be able to avoid enforceable costs orders in those circumstances by seeking a Bullock or Sanderson order. Claimant practitioners should be alive to this at the outset. The contents of the pre-action correspondence, particularly if the defendants are blaming each other, could be key in supporting such an application at the conclusion of trial.
Overall, the decision in Venduct is likely to be seen as a victory for defendants. However, it at least provides some clarity to claimants about what can be done to avoid an enforceable costs order in multiple defendant cases.
Article by: Holly Tibbitts