QOCS protection and multiple defendants

Judgment has now been released in the recent case of Bowman v Norfan Aluminium Limited & Ors which deals with the important question of whether, in claims against multiple defendants, a claimant who has succeeded against one defendant, has the benefit of QOCS protection from another defendant whom they have discontinued against.

The issue presented itself in the form of two linked applications – an application by the second defendant [whom the claimant had discontinued against] to set aside an order that there be no order as to costs between the claimant and the second defendant; and an application by the claimant that, if the second defendant’s application was successful, the order may not be enforced as a result of the operation of Qualified One-way Costs Shifting (QOCS).

The action itself concerned a claim for damages in respect of hand vibration/carpal tunnel syndrome arising out of employment. Notwithstanding that liability and causation remained live issues throughout, the matter was resolved on the day of trial [28/06/17] by the first and third defendants.

The claimant had discontinued against the second defendant on 22/11/16 when it became clear that the claimant had never been employed by the second defendant – despite the claim being brought against all three defendants due to HMRC records stating that the claimant had been employed by all three defendants from 2003 onward.

Particulars were served seeking confirmation that the claimant had been employed by the second defendant – clarification was provided by the second defendant that the claimant had not been employed. The claimant’s name appeared on HMRC records due to the second defendant’s purchase of the first defendant’s assets, before transferring these to the third defendant a month later – the second defendant had only been involved for administrative reasons. Upon providing this information, the claimant was invited to discontinue.

The second defendant’s defence reiterated that the claimant was never employed and later the claimant was again invited to discontinue, this time with drop hands as to costs. It was not until witness evidence was served, and the accuracy of the information contained therein confirmed by the first and third defendants, that the claimant discontinued.

The starting point on the Claimant’s application, as set out in CPR 38.6, was:

“(1) Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant”.

This was considered alongside the relevant notes to the White Book at p1195 – in order to satisfy ‘orders otherwise’ the claimant must show either (i) a change in circumstances or (ii) some form of unreasonable conduct on the part of the defendant – failing this the claimant who discontinues must pay the costs of the party against whom the action has been discontinued.

In hearing the arguments, HHJ Freedman was unconvinced that there had been any change in circumstances – the second defendant’s witness statement merely confirmed that which was pleaded in the defence. Furthermore, far from acting unreasonably, the offer to discontinue with drop hands as to costs was considered to be very reasonable. Consequently, being satisfied that there was no basis to depart from the usual rule, it was ordered that the claimant do pay the second defendant’s costs.

Turning then to the claimant’s application, the question of whether the order could be enforced fell to be adjudged – the claimant having successfully recovered £20,000.00 paid by the first and third claimants and the second defendant seeking to set-off its costs against damages [CPR 44.14].

The claimant’s position was that the underlying premise to QOCS was that in circumstances where the claimant was ordered to pay the costs of a defendant, no payment would actually be made. Instead the costs would be set-off against damages payable by that defendant. Accordingly, a set-off could only be in relation to proceedings against the second defendant and since there would be no payment of damages, there was nothing to set-off – if damages paid by other defendants was taken into account this would constitute a payment and be contrary to the QOCS regime.

The court agreed with the claimant’s comments that a set-off imports a mutuality of liabilities, and in the context of a liability for costs “a claimant should not be required to pay anything but rather pays less or nothing at all.” A payment out of damages to meet the second defendant’s costs would not be a set-off – it would simply be the claimant paying money to the second defendant.

The second defendant argued that proceedings, as referred to in 44.13, meant the entirety of proceedings [one indivisible claim involving all three defendants] and that the proper interpretation of ‘any orders for damages’ in 44.14 covered any order for damages made against other parties in the proceedings.

The claimant’s submissions sought guidance from Plevin v Paragon Personal Finance [2017] UKSC 23, specifically at paragraph 20:

“The starting point is that as a matter of ordinary language one would say that the proceedings were brought in support of a claim, and were not over until the courts had disposed of that claim one way or the other at whatever level of the judicial hierarchy. The word is synonymous with an action. In the cases cited above, relating to the awarding or assessment of costs, the ordinary meaning is displaced because a distinct order for costs must be made in respect of the trial and each subsequent appeal, and a separate assessment made of the costs specifically relating to each stage. They therefore fall to be treated for those purposes as separate proceedings”.

It was argued that although the analogy related to costs orders at different stages of proceedings, it followed that it must also apply to separate costs orders made against individual defendants.

In finding for the claimant, HHJ Freedman commented “I think that the word proceedings, in the context of QOCS must refer to individual claims and not the entirety of the action” and that this was appropriate in view of the many instances where there would be separate and different costs orders between a claimant and individual defendants. Furthermore, the learned Judge was not troubled by the wording ‘any orders for damages’ – finding that the correct interpretation of this was to cover different types of damages [periodical, lump, interim].

It was the court’s view that if a defendant was entitled to recover its costs from the damages paid by another defendant, this would be a windfall and inconsistent with the ethos of QOCS. Consequently, the claimant was found to be entitled to QOCS protection and, therefore, despite having a costs order in its favour, the second defendant had to bear its own costs.