There have been several cases dealing with the pitfalls and dilemmas facing receiving parties in regard to claims involving multiple defendants and it can often prove to be difficult to guarantee the receiving parties’ costs are met in these circumstances.
The starting point is CPR 44.2, has the claimant been successful? Whilst the general rule is that the unsuccessful party should pay the successful party’s costs, the court may make a different order, as demonstrated in the case of Oberholster v Little and another (discussed later).
So, when there are multiple potential defendants to a case, who should pay the costs? The danger if you only pursue the claim against one defendant and fail, is that the claimant will lose the prospect for damages and costs. The answer? You sue multiple defendants.
Suing multiple defendants must however be carefully considered. If one or some of the defendants are successful in establishing
, that they are only partially liable, the consequences can be equally disadvantageous.
For example, if you succeed against only one Defendant, this could annihilate the claimant’s damages through an adverse costs order(s) in favour of the other defendant(s). Furthermore, discontinuance could prompt automatic costs orders.
Therefore, careful consideration needs to be made when identifying defendant(s). The merits against each defendant must be considered and the cost implications in relation to issuing proceedings against multiple defendants, should be reviewed to establish that it is both reasonable and equitable.
Adding additional defendants will slow the process, and increase costs, so you need to be realistic and understand the costs risks and, unless you can specifically agree costs with the settling or remaining defendants at the point of settlement, you are extremely unlikely to be able to escape paying the costs of a defendant against whom you have discontinued.
So how do you displace the general rule CPR 44.2 (2)? There is discretion to depart from the general rule and to make another order. The relevant factors to be considered in exercising this discretion are set out at CPR 44.2(4) and include the conduct of all the parties, and whether it was reasonable for a party to raise, pursue, or contest a particular allegation or issue.
It is important to be aware that the discretion of the court “as to whether costs are payable by one party to another” (r.44.2(1)(a)) is wide enough to enable the court to make co-defendant costs orders.
The application to obtain a co-defendant costs orders can take two forms either a ‘Sanderson’ order or ‘Bullock’ order.
- Sanderson Order: An order which requires the losing defendant to pay the costs of both the claimant and the successful defendant. See Sanderson v Blyth Theatre Co  2 KB 533, CAA (Note: in this case the Court made a Bullock Order)
- Bullock Order’ - An order which requires the claimant to pay the successful defendant’s costs in the first instance but allows the claimant to recover them from the losing defendant as part of the costs of the action. See Bullock v London General Omnibus Co  1 KB 264, CA
A Sanderson order will always be more attractive to the claimant. However, it is not always obvious whether there has been a successful or unsuccessful party and whether a ‘Sanderson’ order or ‘Bullock’ order will be achievable. The writer refers to the case of Oberholster v Little and another.
This case involved the claimant pursuing Optical Express (D2) to undertake ophthalmic surgery. The surgeon was Dr Oberholster (D8). The claimant brought a claim against Optical Express, along with six other Optical Express companies who were included due to the uncertainty about which company contracted with the claimant.
Liability was denied by all defendants. The Claimant made an offer to all defendants in the sum of £105,000.00 in full and final settlement of the claimant’s claim net of any payments due to the CRU, plus payment of the claimant’s legal costs, to be assessed if not agreed.
D2 accepted an offer in the sum of £105,000.00 in full and final settlement of the claimant’s claim, net of any payments due to the Compensation Recovery Unit, plus payment of
her legal costs, to be assessed if not agreed.
An agreement was also reached with the other Optical Express companies to discontinue the claims against them, with no order as to costs.
D8 (the surgeon) remained. The claimant did not intend to pursue further damages but the claimant and D8 could not agree liability in relation to costs. If the claimant discontinued against D8 there would be a requirement to persuade the Court to depart from the general presumption that D8 should recover its costs. Instead, the claimant stated they were under no duty to discontinue and were entitled to resolve the question of costs before having the case dismissed.
The judge refused to strike out the claim and applications were determined against D8, who was ordered to pay the claimant’s costs of proceeding against them.
D8 appealed, seeking a Bullock Order (claimant to pay their costs and seek resolution from D2); or alternatively a Sanderson order (D2 to pay their costs); or alternatively no order for costs between claimant and D8.
Freedman J dismissed the appeal he determined that there was ‘not a sufficient basis to overturn or vary the decisions’ and ‘the decisions of the Judge were well within the generous ambit of discretion available to a Judge deciding costs issues, and a fortiori where the decision is about broad-brush costs issues which the parties have entrusted to the Court to decide without requiring a trial. As set out above, the decisions in this case were reasoned and justifiable. There were no errors of principle.’
The judge had used his broad discretion on the facts holding that the cases of D2 and D8 were inextricably linked, and it was difficult to see how the two could not stand or fail together on the facts e.g. the acceptance of the Part 36 offer by D2 which indicated that D8 would also fail as the expert evidence confirmed that the ultimate responsibility for consent lay with the surgeon.
It is therefore important to be aware of the cost liabilities and pitfalls with pursuing multiple defendants and the wide discretion of the court to determine the same. Understanding the potential liabilities when entering into negotiations for settlement of a claim so you do not become liable for the costs of the remaining defendants is critical.
It is therefore important to encourage collaboration between the defendants, if possible, and to attempt to get the defendants to agree an apportionment between themselves.
Put yourself in a position of understanding the costs order you want and the options available prior to discontinuing against a defendant or accepting that Part 36 offer.
Discontinuance will give rise to an order for payment of defendants’ costs unless you can be shown good reason applies not to, and potentially limit your costs against the unsuccessful defendant. Consider the case of Haynes v Department for Business, Innovation and Skills  EWHC 643 (QB) where the Claimant made a Part 36 offer to one Defendant to settle her claim for £18,000. The offer was accepted, and the Claimant ultimately discontinued against the remaining 9 Defendants. The Claimant contended she should be entitled to all her costs. The Defendant contended that she should not be entitled to any costs relating to pursuing the 9 Defendants against whom she failed, and only 1/10 of ‘generic’ costs. The SCCO preferred the Defendant’s interpretation. Therefore, remember when settling by way of Part 36 offer, always specify what the agreement is in relation to costs incurred against the remaining Defendants and to generic costs, by way of a consent order.
Alternatively if you chose not to discontinue as in the above case, and seek summary determination as in the case of Oberholster v Little and another, be aware that ‘exactly how far the court will be prepared to look into the previously unresolved substantive issues will depend on the circumstances of the particular case, not least the amount of costs at stake and the conduct of the parties.’ The court is able to utilise its broad discretion with ultimate regard to the overriding objective.
Remember if there is no good reason to make any other order, the fall-back outcome will be no order as to costs.
By Costs Lawyer Rowena Edwards