Cartwright v Venduct Engineering Ltd  EWCA Civ 1654
The above case was originally heard by Regional Costs Judge Hale and was then leapfrogged to the Court of Appeal. The upshot is that “successful” Defendants can take advantage of the sums paid to the Claimant by an “unsuccessful” Defendant, but not when the matter settles by way of a Tomlin Order.
The Claimant issued a claim for Noise Induced Hearing Loss against six named Defendants, for which Venduct Engineering Ltd were the Third Defendant. Venduct agreed to be responsible for any liability established against the First and Second Defendant.
The Claimant later discontinued against the First and Second Defendant and the claim duly settled against the Fourth, Fifth and Sixth Defendants by way of a Tomlin Order. Settlement was reached in the sum of £20,000 inclusive of damages and costs. At the same time, the Claimant filed a Notice of Discontinuance against the Third Defendant (Venduct).
Venduct argued that they were entitled to recover costs as a result of the claim which could be paid out of the damages agreed with the Fourth, Fifth and Sixth Defendants. The Claimants argument was that the QOWCS regime applied.
The Court of Appeal, led by Lord Justice Coulson, considered that there were two issues in the case:-
- Can a Defendant take advantages of damages paid to the Claimant by another Defendant?
- Does it make a difference if the matter settled by way of a Tomlin Order?
The Court of Appeal considered that the purpose of QOWCS was not to provide a complete protection for Claimants but rather to ensure that they were not worse off after conducting litigation. Coulson LJ stated:
“In my view, a result which requires a Claimant, in the appropriate case, to pay to a successful Defendant the amount of a costs order made in favour of that Defendant, out of sums payable by way of damages and interest to the Claimant by an unsuccessful Defendant, is precisely in accordance with that Sir Rupert [Jackson] calls ‘the necessary elements of a one-way costs shifting regime’. 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.”
Coulson LJ considered that any other result would provide the Claimant with carte blanche to commence proceedings against as many Defendants as they like, without any threat of costs liability. This is particularly relevant in cases such as NIHL, HAVS and other industrial disease claims where it is often the case that there are multiple Defendants with differing positions on liability etc. However, Coulson LJ considered that the difficulties that this leads to “cannot override the need to ensure that Defendants such as Venduct are not faced with a hopeless claim, in respect of which they have to incur costs, only for that claim to be discontinued shortly before Trial.”
The Court of Appeal’s approach was to discourage claims with little chance of success and for Claimant’s to consider who to issue proceedings against, rather than just issuing against all potential Defendants. The amount that can be recovered by a successful Defendant was limited to the amount ordered for damages.
Whilst the Court of Appeal agreed that they would be able to recover costs from the damages awarded to the Claimant by the “unsuccessful” Defendants, in the case of Cartwright however it was advised that Venduct would not be able to as the matter had settled by way of a Tomlin Order.
Coulson LJ agreed with Regional Costs Judge Hale that a Tomlin Order was not an Order of the Court but an agreement between the parties and thus did not fall under CPR 44.14(1). The Tomlin Order itself is enforceable but the schedule of the Order is not. The Court likened it to the acceptance of a Part 36 offer which would also be outside CPR 44.14(1).
The Court also considered, as in the case of Cartwright, that there would be practical difficulties where the matter settled for a global amount inclusive of costs. How can the Court assess the amount awarded for damages (and thus the cap on what a successful Defendant could recover? Alternatively there may be occasions where the settlement includes some kind of benefit in kind, such as relocation in the employment, that would not have a financial value.
Effect on matters going forward
It is clear now that Claimant Solicitors will need to consider prior to issuing proceedings as to the validity of issuing against each potential Defendant. Failure to do so could open up the potential for professional negligence proceedings against them where the Claimant’s damages are reduced or wiped out when having to pay out to a successful Defendant.
The decision could also mean the end of settling such cases by way of a Tomlin Order. Whilst the Claimant would undoubtedly prefer to do so, co-Defendants may liaise in a claim to ensure that settlement does not occur this way in order to pave the way for potential cost recovery against the Claimant. However, as Part 36 offers also don’t fall under CPR 44.14(1), this avenue is still likely to be used instead.