Multiple defendants and application of qualified one-way costs shifting (QOCS)

Since its introduction more than five years ago, the circumstances in which QOCS applies continues to be challenged and tested. The general principle is that a claimant will not be liable to meet the defendant’s legal costs if they lose their claim unless they are found to have been fundamentally dishonest. This is because QOCS was intended to enable those who suffered injuries to bring claims against insured or self-insured or well-funded defendants without the incurring the expense of insuring against the risk of facing adverse costs in the event they lost. However, a claimant may be required to pay a defendant’s costs out of the compensation awarded (for example in the case of a failure to do better than a part 36 offer) up to the amount awarded.

But what happens in cases where there are multiple defendants and proceedings against some of them are successful and others unsuccessful? Would the claimant be afforded protection under the QOCS regime for costs incurred by the defendants against whom they were unsuccessful? Or would those costs be payable from the sum awarded against the other defendants, as with failure to beat a part 36 offer?

In Jeffrey Cartwright v Venduct Engineering Ltd , the Court of Appeal was asked to consider these very questions. The court had to decide whether the costs incurred by the defendants against whom proceedings were issued but later discontinued were payable out of the claimant’s damages received from the other defendants.

Very briefly, the claimant brought a claim for noise induced hearing loss (NIHL) against six defendants. The third defendant, Venduct Engineering Ltd, accepted it was responsible for any liability attached to the first and second defendants. The claimant then discontinued his claim against the first two defendants and later reached a compromise with the fourth, fifth and sixth defendants. This was by way of a Tomlin Order with a schedule confirming the terms of the settlement of damages, interest and costs in the global sum of £20,000. He then discontinued the claim against the third defendant. The third defendant sought to recover their costs of £8,000 from the damages pursuant to rule 44.14 of the Civil Procedure Rules. This rule essentially states that an order for costs made against a claimant may be enforced without the permission of the court, but only to the extent that costs do not exceed the amount awarded by a court order in damages and interest.

The regional costs judge at first instance held the damages agreed arose out of a Tomlin Order, which was an order, but the schedule confirming the terms of the agreement was not a court order, so the third defendant was not able to seek their costs from the agreed damages. Rule 44.14 did not apply. The same point would apply to cases are settled against some defendants by way of acceptance of a Part 36 offer (where there is again no order). The costs judge, however, went on to say if the damages had been recovered at trial, then the third defendant could have asked for their costs out of the damages.

The appeal “leap frogged” to the Court of Appeal where the judges agreed that in this case, the third defendant could not recover their costs due to the terms of the settlement, however, if these had been damages and interest awarded at court, then they could seek to recover their costs out of the claimant’s damages up to the level of damages awarded. The court was keen to emphasise that whilst QOCS was designed to safeguard claimants in bringing injury claims without risk of adverse costs, this does not mean that they have “carte blanche” to bring claims against as many parties as desired. Claimants are not to be encouraged to bring claims against any party unless they have a legitimate basis for doing so.

The claimant in this case was fortunate because, due to the manner in which their case settled, they were protected from having to pay the costs incurred by the defendants against whom they discontinued their claim.

The case serves as a warning that careful thought and thorough investigation is required before issuing proceedings against more than one defendant and later discontinuing, otherwise claimants may not have the QOCS protection.