Can a Discontinued Defendant in a Multi-Defendant claim enforce their adverse costs Order against a Claimant who was successful in recovering damages against a co- Defendant.

Since the introduction of the Jackson Reforms in 2013, in particular, the introduction of the Qualified One Way Costs Shifting into personal injury claims, the industrial consensus has for a long time been that a Claimant cannot be liable for a discontinued Defendant’s adverse costs. This principle has also been applied in Multi-Defendant claims in which the Claimant was successful against Defendant A and discontinued his claim against Defendant B. In the said circumstances, it has been widely accepted that Defendant B cannot recover his adverse costs of defending his claim against the Claimant.

In the recent matter of Cartwright v Venduct Engineering, the Court of Appeal considered the above issues and delivered a Judgement which may present significant implications in practice, in particular to claims in which the Claimant pursues two or more Defendant companies.

Factual Background.

On 19 November 2015, the Claimant issued proceedings against Six Defendants for noise-induced hearing loss (“NIHL”). Venduct Engineering Limited were the Third Defendant in the proceedings.

On 12 December 2016, the claimant settled his claim against the Fourth, Fifth and Sixth Defendant by way of a Tomlin Order. The Schedule for the Tomlin Order provided that:

“The claimant do accept the sum of £20,000 in full and final settlement of his cause of action against the fourth, fifth and sixth defendant, inclusive of general damages, special damages, costs of the action, interest, and CRU.”

On the 7th December 2016, the claimant served a notice of discontinuance in respect of his claim against the Third Defendant. As a general rule and in accordance with Rule 38.6(1), ‘a Claimant who discontinues is liable for the costs which the defendants against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant”.

Accordingly, the Third Defendant’s Solicitors served their adverse costs Bill of approximately £8,000.00 on the Claimant, arguing that they had the right to recover the costs they had incurred successfully defending the Claimant’s claim. They maintained that this could be paid out of the £20,000 paid by the Fourth, Fifth and Sixth Defendant pursuant to the terms of the Tomlin order.

The Claimant Solicitors counter-argued that by virtue of protection of the QOWCS regime, the Third defendant could not legally seek to take advantage of sums payable by another defendant.

The relevant provision in questions was CPR 44.14 which provides that:

 “orders for costs made against a claimant may be enforced, 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”

Pursuant to the above provision, it was submitted by the Claimant that a Tomlin Order was not in law an order for damages made in favour of the Claimant as required by Rule 44.14. It was argued by the Claimant that a Tomlin Order reflected a private contractual agreement between the parties.

The Court of appeal had to, therefore, determine two main issues arising from the factual matrix of this claim. The issues in question can be summarised as follows:

• Issue 1: Can One Defendant Take Advantage of Sums Paid to the Claimant by Another Defendant?
• Issue 2: Does It Make A Difference If Sums Are Due By Way Of A Tomlin Order?

With regards to the first issue, the Court of Appeal ruled that in Multi-Defendant claims, there was nothing within the QOWCS regime itself to prevent a discontinued Defendant from recovering their adverse costs against the Claimant, providing that the Claimant was successful in at least one of his claims against the other Defendants.

The Third Defendant’s claim, however, failed on the second issue, as the Court of Appeal did not consider that Rule 44.14 requirement was satisfied. In particular the requirement for there to be an order for damages and interest. The Court ruled that a Tomlin Order was not an “order for damages and interest made in favour of the claimant”. The Schedule of the Tomlin Order is not a part of the Order of the Court. Instead, it reflects the agreement reached between the parties.

Interestingly at Paragraph 45 of the Judgment, the Court of Appeal made the following comments.

‘a Tomlin order cannot be described as “an order for damages and interest made in favour of the claimant”. It is no such thing. It is a record of a settlement reached between the parties which is designed to have a binding effect. In that sense, as the parties agreed in the present case, it is no different to the settlement that arises when there is an acceptance of a Part 36 offer. Such acceptance does not require any order from the court, so a settlement in consequence of an acceptance of a Part 36 offer would also be outside the words of r.44.14(1).

The Judgment makes it clear that settlement by way of a Tomlin Order or a Part 36 acceptance are not covered under CPR 44.14(1) and as such the Claimant will in these circumstances still benefit from the protection that comes as a result of the operation of the QOWCS regime. Where however an Order is made by the Court, i.e a Judgment Order at Trial or Disposal hearing then this will no doubt constitute an Order for damages and interest made in favour of the Claimant and in those circumstances the discontinued Defendant will be able to enforce their adverse costs order up to the limit of the agreed amount for damages and interest.

In Summary

Whilst, the Defendant in the case of Cartwright were unable to enforce their adverse costs order, the ruling is nonetheless good news for insurance companies. Claimant’s Solicitors should therefore implement extra caution prior to litigating multiple against Defendants. Claimant’s Solicitors should also avoid the machine gun approach of litigating against many employers as is possible with little heed for the merits of the claim in the hope that something will turn up. Furthermore, as per case of PJSC Aeroflot – Russian Airlines v Leeds and another (Trustees of the estate of Berezovsky) and others the court may also Order the Claimant to pay the Defendant’s adverse costs on an indemnity basis if the Court considers that the discontinuance was unreasonably late.