Court of Appeal considers appropriate costs order where claimant succeeded against some defendants but failed against others

In a recent decision, the Court of Appeal ordered the losing defendants to contribute to the costs the claimant was required to pay to the successful defendants, and clarified the circumstances in which such an order (a so-called "Bullock" order) may be made: Dixon v Blindley Heath Investments Limited and others [2016] EWCA Civ 548.

Where a claimant has potential claims against more than one defendant, it may be reasonable to proceed against them all to establish which is liable. Ultimately, the claims may fail against one or more of the defendants, and the claimant may be ordered to pay the costs of the successful defendants. However, in some circumstances, the court may make a Bullock order, requiring the unsuccessful defendants to contribute to the costs the claimant is liable to pay to the successful defendants.

The present decision illustrates that the court's jurisdiction to make such an order is not confined to a narrow range of circumstances; the court will look at the position in the round in order to avoid injustice. This is clearly good news for claimants in such situations. Claimants should however remain cautious in proceeding against multiple defendants; it is clear from the decision that the courts do not wish to encourage multiple claims, and much will depend on whether it was reasonable to pursue a particular defendant.

Michael Mendelblat, a professional support lawyer in our construction disputes team, considers the decision further below.

Background

The claimant had purchased shares in a company. It brought claims against the sellers for deceit and breach of warranty on the basis that they had not disclosed that there were pre-emption agreements affecting the shares. The company's directors were later joined into the proceedings, as they had refused to register the share transfer due to the pre-emption agreements.

The court found against the directors. However, it dismissed the claims against the sellers and ordered the claimant to pay the sellers' costs. The High Court refused to order that the directors contribute to the costs the claimant was liable to pay the sellers. The claimant appealed.

Decision

Although the Court of Appeal made a number of orders regarding costs, this post focuses on the Court of Appeal's finding that a Bullock order should have been made.

The court noted that (as stated in Irvine v Commissioner of Police for the Metropolis [2005] EWCA Civ 129) the intention behind a Bullock order is to avoid an unjust result. When a claimant does not know which of two or more defendants to sue, he can claim against those it is reasonable to join and avoid having his damages eroded by the order for costs in favour of the successful defendant(s). However, as Irvine also stressed, joinder of claims against additional parties is not something the court should encourage, save with great caution.

In the present case, the judge at first instance had considered that it was not reasonable for the claimant to have brought some of the claims it maintained. The judge also considered that this case did not share several classic "hallmarks" of a Bullock order-type case, ie it was not the case that:

• The successful defendants blamed the unsuccessful defendants.
• The claimant sued two or more defendants for the same loss because it did not know who was responsible for it and each defendant blamed the other.
• The claimant's case against the successful defendants was not inconsistent with its claim against the unsuccessful defendants.

The Court of Appeal commented that these factors might be relevant but were not necessary conditions. Here, the claims against each group of defendants arose from circumstances where the claimant could not know which of two versions as to the enforceability of the pre-emption provisions to believe. Further, the lower court had overlooked the personal responsibility of one of the directors as being at the "heart of both aspects of the dispute".

Whilst the claimant was partly to blame for the successful defendants' costs by reason of its aggressive manner in conducting its claims, which justified an award of indemnity costs against the claimant, the court concluded that a Bullock order should be made against the director who was personally responsible for the chain of events leading to the claims. The appropriate proportion was for the director to pay 35% of those costs.

Comment

Whilst the facts of this case were somewhat unusual, it does indicate that the court, when considering costs orders, should take account of the claimant's overall position, looking at the overall justice of the case.

Had no Bullock order been made in this case, then the claimant, having succeeded against some of the defendants, would have had its damages eroded substantially by having to pay the costs of the successful defendants, without any contribution from the unsuccessful defendants. The court did not consider this a just result in circumstances where the conduct of one of the defendants had given rise to the action as a whole.

The judgment also indicates that the reasonableness of the claimant's actions in issuing proceedings against multiple defendants, in circumstances where individual liabilities are unclear, will be an important factor in considering the appropriate costs order. Issuing proceedings against multiple defendants may sometimes be unavoidable.  However, the question of which defendant(s) it is reasonable to pursue may be easier to establish where a pre-action protocol process is followed, so that the roles and responsibilities of each defendant may be clarified.