CPRC Restricts Set-Off of Costs Against Non-‘Orders for Damages’ in ‘Mixed Success’ PI Claims

In several liability, multi-defendant personal injury (PI) cases [noise-induced hearing loss (NIHL), asbestosis, pleural thickening, HAVS, etc.], it is not surprising for claimants to spuriously issue proceedings against several defendants, many or all of which exhibit differing positions on breach of duty, causation and limitation, only to file pre-trial discontinuances against defendant(s) with the best prospects of success.

In the past, qualified one-way costs shifting (QOCS) precluded discontinued defendants, in PI proceedings, from recovering their costs under CPR 38.6, which is why discontinuances were rarely made in haste.

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What if defendants tried to ‘recover costs from a claimant out of damages paid by another defendant’?

When this argument was first made, in the case of Bowman v Norfran Aluminium Limited & Ors (Newcastle Count Court, 2017), His Honour Judge Freedman opined that, if the Civil Procedure Rule Committee (CPRC) had anticipated that such a tactic would be used, then it was ‘very likely, if not inevitable’, that this would have been ‘spelt out’ in the rules on QOCS application.

Seeing that it had not been ‘spelt out’, we publicised, in edition 203 of BC Disease News (here), that the defendant’s cunning application, in Bowman, had failed.

However, in edition 237 of BC Disease News (here), we wrote about the case of Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654, in which BC Legal put forward the same argument, but this time, with resounding success. 

The Court of Appeal found that the correct interpretation of CPR 44.14(1) implies that, in PI actions where QOCS applies, the costs of a successful defendant can be enforced against the opposing party, up to the level of damages awarded against an unsuccessful, paying defendant.

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The right to set-off costs was deemed, in principle, to be effective against:

  • Damages ordered at trial;
  • Damages paid under consent orders (with exceptions); and
  • Damages paid under provisional damages orders.

Lord Justice Coulson, at paragraph 34 of his judgment, acknowledged that his decision could have a momentous impact on PI claims handling:

‘I understand of course that in NIHL claims, it is often necessary for a claimant to consider carefully which of his or her former employers may be liable and why. I understand too that, because it is a divisible injury, there may be times when a claimant may have to issue proceedings against a number of such employers, even if it is known that the claim against employer A is likely to be stronger than the claim against employer B. But none of that can 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’.

It was predicted that this new legal precedent could lead to more favourable settlements for defendant parties. Further, that claimants might be more cautious when selecting parties to bring claims against.

Then again, the legal principle established in Cartwright could not be regarded as the silver bullet for all defendants. It did not permit a defendant to enforce its costs if damages were paid to a claimant under a Tomlin Order (as was the case in Cartwright), or by Part 36 offer.

Neither method of payment could be construed as ‘an order for damages’ and both were deemed to have fallen ‘outside of the words of CPR 44.14’, as they do not require an order of the court to take effect.

For Cartwright to have universal purpose, i.e. for costs to be validly set-off against Tomlin orders and Part 36 offers, Coulson LJ indicated that the CPRC would need to intervene.

However, on the advice of the lacuna sub-committee, the CPRC has elected not to revise the rules on QOCS by incorporating an extension of the landmark ruling into the 113th update to the CPR.[i]

Committee meeting notes recorded that the Court of Appeal’s interpretation of CPR 44.14 had been ‘logical’:

‘Overall, it is a matter of freedom of contract for parties to decide how to deal with compromises and whether to incorporate them in judgments or (as a Tomlin order is) mere contractual agreements. To extend CPR 44.14(1) to Tomlin orders would lead to questions as to whether CPR 44.14(1) should apply to pre-action settlement agreements’.

In the ‘unlikely’ event that a Tomlin order is not complied with and is instead enforced by a judge, the sub-committee concluded that it would be ‘better left for the courts to decide’ if the judgment compelling enforcement would reformulate the Tomlin order so that it became an ‘order for damages’.

In the alternative, the sub-committee has invited defendants to seek their costs through common law vehicles (Bullock[ii] and Sanderson[iii] orders[iv]), as a means to overcome the ‘sting in the tail’ that Cartwright presents.

 

[i] Neil Rose, ‘QOCS rule to change but not in relation to Tomlin orders’ (18 February 2020 Litigation Futures) <https://www.litigationfutures.com/news/qocs-rule-to-change-but-not-in-relation-to-tomlin-orders> accessed 18 February 2020.

[ii] Bullock v London General Omnibus Company [1907] 1 KB 264.

[iii] Sanderson v Blyth Theatre Company Limited [1903] 2 KB 533.

[iv] Philip Turton, ‘“Bullock, Sanderson and all that Jazz” The Cost of Losing against one Defendant and Winning against Another’ (April 2009 Ropewalk Chambers) <https://www.ropewalk.co.uk/uploads/pdfs/Bullock-Sanderson-and-All-That-Jazz-An-article-by-Philip-Turton-1.pdf> accessed 21 February 2020.