The Claimant had brought a claim for noise induced hearing loss against six Defendants. The claim had been compromised against three Defendants by way of a Tomlin Order, allowing for the Claimant to recover damages and costs of the action against those three parties. The Claimant then discontinued his claim against Venduct, who then sought to recover its costs out of the damages the three paying Defendants had agreed to pay to the Claimant.
At first instance, the District Judge held that the successful Defendant could not recover their costs as the damages arose out of the Tomlin Order and not an Order of the court.
The Defendant’s appeal was leapfrogged directly to the Court of Appeal to consider this fundamental question under the QOCS regime, namely the entitlement of a Defendant to enforce an adverse costs order against damages recovered by a Claimant from an unsuccessful co-Defendant.
In determining the first aspect of the Appeal, whether or not a Defendant can take advantage of damages paid to a Claimant by an unsuccessful Defendant, the Court found in the Defendant’s favour, considering that the Costs Judge was right to conclude that a Claimant who has an order for Damages and interest payable by a Defendant is liable to pay the successful Defendants’ costs, up to the limit of the Order for damages and interest payable by the unsuccessful Defendant.
However, the Court of Appeal agreed with the Costs Judge’s decision below on the applicability of the QOCS regime to multi-defendant cases, that a “successful” Defendant could not recover their costs against a settlement agreement made as a result of a Tomlin Order (or indeed following acceptance of a Part 36 Offer) as a Tomlin Order is not an “order for damages and interest made in favour of the claimant” as the schedule is not a part of the Order of the court, instead it reflects the agreement reached between the parties.
Such acceptance does not require any order from the court, so an acceptance of a Part 36 offer or Tomlin Order would be outside the words of r.44.14(1). Therefore, the successful Defendant could not seek to recover their costs against the damages and interest that would be recovered by the Claimant pursuant to either a Tomlin Order or acceptance of a Part 36 offer.
All lawyers practising in this area will by now be familiar with CPR 44.14(1), which stipulates that:
'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.'
So where the claim has succeeded and damages have been recovered, costs orders will be enforceable but only up to the extent of the damages and interest awarded. The application of this rule is straightforward in cases involving one defendant but Claimant lawyers will have to take great care when concluding claims against multiple Defendants and the terms of any settlements that may be reached.
It is important to note that if an Order for costs is made by the court for a successful Defendant and the Claimant does obtain an Order for damages to be paid, then the successful Defendant will be able to look to recover their costs against damages recovered.
In highlighting this issue where there are multiple Defendants, the Court of Appeal reminded Claimant lawyers that;
“It is important that claimants are discouraged from bringing proceedings which are unlikely to succeed. Claimants with QOWCS protection should not think that this general principle does not apply to them, or that they can issue proceedings against any number of defendants with impunity”.