Court of Appeal clarifies recovery of costs as exception to QOCS

Published 18 julio 2018

Where a Claimant pursues multiple Defendants, recovering damages from some and discontinuing his claims against others, can the Defendants against from whom proceedings have been discontinued recover their costs from the damages paid by the others? The Court of Appeal's judgment in Cartwright v Venduct Engineering Limited, handed down on 17 July 2018, clarified whether costs may be recovered in accordance with Rule 44.14 of the Civil Procedure Rules 1998.

Mr Cartwright pursued a claim for noise induced hearing loss against six Defendants, recovering damages and costs from three of the Defendants with the settlement being recorded in a Tomlin Order. A Tomlin Order is a mechanism for the resolution of proceedings consisting of a Consent Order staying the proceedings which is approved by the Court, and a schedule settlement agreement which is not approved by the Court. In this case the settlement reached saw a lump sum paid to the Claimant which was not broken down between damages and costs. The settlement was recorded in the schedule to the Tomlin Order. 

Mr Cartwright discontinued his claim against the Third Defendant, which then sought to recover its costs from the damages paid by the other Defendants.

Lord Justice Coulson confirmed that where damages are paid by one Defendant, the costs incurred by another Defendant may be recovered from the Claimant up to the level of those damages paid. He noted that Lord Justice Jackson intended the QOCS regime to deter frivolous claims and that accordingly it is necessary for Defendants against whom claims are discontinued to be able to recover their costs in order to discourage hopeless claims.

The Court was then required to consider whether the costs may be recovered where the claim is compromised by a Tomlin Order or by the acceptance of a Part 36 offer, rather than a Consent Order or judgment of the Court. Rule 44.14(1) provides that:

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.  

As the settlement in this case was recorded in the schedule to a Tomlin Order, it did not fall within the scope of Rule 44.14(1) and the Third Defendant was unable to recover its costs as the damages had not been paid following an Order.

Where claims are pursued against multiple Defendants to trial, and damages are paid by one or more Defendants but not by others, this judgment will enable the Defendants against whom the claim has failed to recover their costs from the damages paid by the others. However, recovery is limited to circumstances in which the damages are paid pursuant to a Court Order. Where cases are compromised without an Order or by use of a Tomlin Order recovery is not permitted , while Rule 44.14 discourages the prosecution of hopeless and frivolous claims to trial its ambit is limited.

Following this ruling Claimants are likely to seek to protect themselves from losing part of their damages in multi-defendant claims. Defendants will need to be alive to the possibility of seeking to strike out unmeritorious claims at the earliest stage. Where a claim is struck out as disclosing no reasonable grounds for bringing the proceedings costs can be recovered, as an exception to the QOCS principles by Rule 44.15.a.