QOCS, multi-party actions and Sanderson orders: the applicability of Cartwright in practice

Issues surrounding qualified one-way costs shifting (QOCS) in multiple defendant cases notably found their way to the Court of Appeal back in 2018 with Cartwright v Venduct Engineering Ltd [2018].

The judgment confirmed that successful defendants in multi-party actions are able to recover their costs out of the damages paid to a claimant by a separate, unsuccessful defendant (so long as the costs do not exceed the damages pursuant to QOCS). However, the unfortunate caveat was that defendants can only enforce those costs where ‘orders for damages and interest [are] made in favour of the Claimant’, as per rule 44.14 (1) of the Civil Procedure Rules (CPR).

In Cartwright, the claim was settled by way of a Tomlin order, and the court held that a typical schedule to a Tomlin order does not constitute an ‘order for damages’ for the purposes of rule 44.14 of the CPR. The defendant could therefore not enforce its order for costs.

Settlement by way of Part 36 was also confirmed by the court to fall outside the definition of an ‘order for damages’, and therefore the judgment was thought to be of less assistance in practical terms to defendants than first hoped.

Case study

Kennedys recently represented a hospital trust (in an unreported case) in respect of an interesting application on this issue that would eventually have prompted an order for damages at the hearing, notwithstanding the fact the claim had settled by way of Part 36.  

Background

The claimant sought to accept a Part 36 offer made by the trust in settlement of the whole action, having previously discontinued against another defendant shortly after the defence stage. When ratifying the order giving effect to that discontinuance, the claimant expressed their intention to, following any subsequent settlement, apply for an order that the successful defendant’s costs be met by the unsuccessful defendant (colloquially known as a Sanderson order). The court acknowledged this in the order, however confirmed the default position is that the claimant would be required to meet the co-defendant’s costs out of his damages (per QOCS and Cartwright).

The claimant therefore issued an application pursuant to rule 36.15 of the CPR. This rule requires claimants to seek court permission to accept a Part 36 offer from one defendant in full and final settlement, where permission to accept has not been provided by the co-defendant(s). There was no such permission in this case because the co-defendant was seeking to recover its costs and the claimant/trust both considered each other should pay. Adjoined to this was an application for a Sanderson order.

The application was resisted on the basis that the trust was not party to the issuing of the claim against the co-defendant, who was sued by the claimant of their own accord. Cartwright therefore, in our view, applied and the claimant was liable for the co-defendant’s costs of successfully defending the claim. 

Outcome

The hearing was listed before a Deputy Master of the High Court. However, the claimant settled the co-defendant’s costs shortly prior to the hearing, in order to secure its agreement to the acceptance of the trust’s Part 36 offer.

Comment

Following Cartwright, there was some scepticism from defendants that claimants could commence proceedings against as many defendants as they wish, armed with the knowledge that, if the claim fails against all but one defendant, they will incur no costs liability to the successful defendant(s) if they settle with a Tomlin order or by way of acceptance of a Part 36 offer. The claimant’s concession in this case suggests that there is perhaps a mechanism under the Part 36 rules (in multiple defendant cases) for defendants to secure an order for damages required under rule 44.14 of the CPR. We are, however, yet to see a reported case on this particular issue.

Cartwright, along with the Supreme Court’s judgment in Ho v Adelekun [2021], prompted the government to launch a consultation in May 2022, proposing revisions to the CPR provisions relating to QOCS. The proposals are aimed at making the QOCS provisions fairer whilst ensuring claimants bear adequate financial risk in personal injury/clinical negligence litigation.

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