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Christopher McClure explores a very interesting development in the applicability of QOCS following the decision of Court of Appeal in Cartwright v Venduct Engineering Limited  EWCA Civ 1654.
Introduced quid pro quo for the inter partes recovery of additional liabilities, QOCS applies to all personal injury cases commenced on or after 1 April 2013 where the claimant has not entered into a pre-commencement funding arrangement for the purposes of CPR r. 48.2.
QOCS aims to provide claimants with costs protection in the event that their claim is defeated. It does this by providing that successful defendants may enforce orders for costs ‘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.’ If the claimant has, in monetary terms, recovered nothing by way of damages and interest, then it follows that the greatest amount to which a successful defendant may enforce its award for costs is zero.
There are, of course, a number of exceptions to the general rule which prevent an unsuccessful claimant from availing itself of QOCS protection. These are found in CPR rr. 44.15 and 44.16 and apply disjunctively, as follows:
The case of Cartwright represents a very interesting development in the interpretation of CPR r. 44.14. The question for the Court of Appeal in Cartwright was this: where, in a matter to which QOCS applies, a claimant has brought an action against multiple defendants – is a successful defendant entitled to enforce a costs award in its favour against damages recovered by the claimant from an unsuccessful defendant?
The answer is yes.
Coulson LJ said the following:
“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 what 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.”
The immediate and obvious concern for claimant solicitors is that it will, in certain types of claim (usually those involving a historic act of negligence), seem necessary to adopt something of a scattergun approach to issuing against multiple defendants – one or many of whom may ultimately be found, or not found, liable. In that case, the claimant’s damages otherwise recoverable from the unsuccessful defendant(s) may be eroded or even extinguished by adverse costs orders against which a successful defendant may then enforce its award for costs. This was highlighted by the following example given by Coulson LJ in Cartwright:
“Let us assume that the claimant issued proceedings against two defendants, A and B, which went all the way to trial. The claimant recovered £100,000 against defendant A, but the claim against defendant B failed, leading B to incur £40,000 by way of costs. In circumstances where the claimant had freely sued B (so that a Bullock or Sanderson order was inappropriate), I can see no reason in principle why B should not recover the £40,000 from the £100,000 payable by A to the claimant.”
In response to concerns harboured by claimant solicitors arising as a result of having issued – or the need to issue – against multiple defendants, the Appellate Court implored practitioners to “consider carefully which [defendants] may be liable and why” but then went onto say:
“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 [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.”
Solicitors who act for claimants in cases where QOCS applies must now be as certain as they can be that they are not only pursuing the correct defendant – but that they are not pursuing an incorrect defendant. In certain cases this will obviously lead to a marked increase in the time spent by solicitors pre-issue which, frustratingly, is time not reflected by costs recovery in a case governed by any fixed costs regime.
Where, however, such a claim is subject to an hourly rate assessment (whether by reason of allocation to the multi-track, beating one’s on Part 36 Offer at trial, exceptional circumstances pursuant to CPR r. 45.29J or otherwise), it is likely that a court will be more generous in its assessment of a claimant’s pre-action costs – at least insofar as they relate to any groundwork ascertaining the correct defendants to the claim in question. This is certainly a point worth remembering when preparing budgets for presentation at a costs and case management conference.
It is, however, important to note that the successful defendant in Cartwright was actually unsuccessful in enforcing its award for costs against the claimant on the basis of an interesting technicality. Having determined that the successful defendant could, in principle, enforce its award for costs against the damages payable to the claimant by the unsuccessful defendant, the Court of Appeal went onto find that the successful defendant was unable to thus enforce for reason that the damages payable to the claimant by the unsuccessful defendant were provided for by way of a Tomlin Order rather than a direct order of the court for damages or interest.
The case put forward by the claimant was straightforward: QOCS allows a defendant to enforce its award for costs only to the extent, in monetary terms, of any “orders for damages and interest made in favour of the claimant.”
The word “orders” is crucial.
Having conducted an analysis of the authorities relating to the status of a Tomlin Order, Coulson LJ concluded that “a Tomlin Order is not an ‘order for interest and damages’ made in favour of the claimant” for the purposes of CPR r. 44.14(1). Because the claimant’s damages were provided for within the schedule to the Tomlin Order, and the schedule is not an order of the Court, there was no actual ‘order’ for damages in favour of the claimant against which the successful defendant could enforce its award for costs.
On the premise, then, that a successful defendant requires a legal instrument in the form of a court order to enforce an award for costs against damages paid by an unsuccessful defendant in a claim governed by QOCS, claimant solicitors who litigate claims involving multiple – and sometime speculative – defendants would be well advised to:
Following the decision in Cartwright it would be prudent for practitioners to conduct a review of current caseloads and consider whether any matters stand at risk of adverse recovery and then act accordingly.
Please contact Christopher McClure to discuss any query relating to this article. Christopher is based at our Manchester office and can be contacted on 0161 835 4087.
This article was first published in Litigation Futures on 16th August 2018.
LLB (Hons), PG Dip (BVC)
Tuesday 21st August 2018