Damages paid under a Tomlin order are not available to meet a costs order where qualified one-way costs shifting applies

The Court of Appeal has confirmed that QOCS does not prevent a successful defendant in a multi-defendant claim from recovering their costs out of the damages obtained by the claimant from a different defendant. However, this does not extend to damages payable under the schedule to a Tomlin order, as this is not a direct order of the court and therefore falls outside Civil Procedure Rule (CPR) 44.14(1).

Background

The “qualified one-way costs shifting” (QOCS) regime was introduced for personal injury claims from 1 April 2013 following a recommendation of Lord Jackson aimed at counter-balancing the impact on claimants of the decision to abolish the recoverability of CFA success fees and ATE premiums. This change was implemented through the introduction of new Civil Procedure Rules (CPR) 44.13 to 44.17. It is important to note that the QOCS regime does not prevent a costs order being made against a claimant. It simply prevents the enforcement of the order except in certain circumstances. In particular, under CPR 44.14(1), a defendant can enforce a costs order up to the damages recovered by the claimant.

In Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654, the claimant had issued proceedings for noise-induced hearing loss against six defendants. The third defendant, Venduct, accepted that it was responsible for any liability established against the first and second defendants. The claim against the remaining defendants was discontinued following a settlement for £20,000 by way of a Tomlin order.

By virtue of CPR 38.6(1), this would ordinarily mean that the claimant was liable for the costs the defendants had incurred before discontinuance. Accordingly, Venduct sought to recover £8,000 from the claimant, relying on CPR 44.14(1).

The decision

The Court of Appeal found that the authorities were clear that a Tomlin order could not be described as “an order for damages and interest” under CPR Part 44.14(1). Rather, the schedule to a Tomlin order is a record of a settlement designed to have binding effect, similar to acceptance of a CPR Part 36 offer, which also falls outside rule 44.14(1).

Coulson LJ stated that he was “acutely aware” that this may encourage claimants to use the Tomlin order approach to avoid having to pay a successful defendant’s costs, but considered that if the intention behind the QOCS rule was to cover settlements of whatever kind, different words and greater guidance would be required.

What are the implications of this decision?

This decision confirms that CPR 44.14(1) will be interpreted strictly; costs can be recovered up to the amount of damages in favour of the claimant under qualifying orders. In co-defended QOCS claims where damages are recovered from other defendants and successful defendants are able to obtain a qualifying costs order, the latter will be able to enforce costs under this authority and rule 44.14(1). However, settlement by way of acceptance of a Part 36 offer or by way of a Tomlin Order will not qualify.

This decision may well be appealed to the Supreme Court, in which case claimants may seek to have proceedings stayed pending the appeal. Defendants may endeavour to agree costs in principle subject to the appeal.

Meanwhile, as acknowledged by the court, claimants are likely to wish to use the Tomlin order approach to avoid having to pay a successful defendant’s costs out of their damages. This decision can be read as a call for the Civil Procedure Rules Committee to revisit the question of how the rules on QOCS interact with the practice of using Tomlin orders.

The authors wish to acknowledge the assistance of vacation student Ali Shakil in preparing this article.