CFAS: NEVER NAME THE DEFENDANT! (2)
the Conditional Fee Agreement, under the heading “What is covered by this agreement” said:-
“Your claim against the defendant L & Q for damages”.
In fact proceedings were issued against both L & Q and the Academy of Plumbing Ltd (APL) and was settled by a “Tomlin” order, the relevant terms of which read:-
“2. [APL] do pay the Claimant’s costs of this action, such costs to be assessed on a standard basis by way of detailed assessment if not agreement.
- Upon payment by [APL] of the agreed sum and costs, [L & Q and APL] be discharged from all further liability to the Claimant in respect of the claims made by the Claimant in this action.
- The Claimant has agreed to accept the sum of £10,000 plus costs in full and final settlement of the claims brought in this action.
- The sum of £10,000 be paid by [APL] to the Claimant’s solicitors by 4 pm on 26 July 2011.”
I deal with the issue of a win below but in relation to the named defendant both courts below held that Ms Engeham could not recover any costs in relation to the action against APL as the words in the Conditional Fee Agreement quoted above “were not wide enough to encompass an action against anybody else.”
That matter was not before the Court of Appeal as Ms Engeham did not pursue that point but the court confirmed the correctness of the lower courts’ decision:-
“On this further appeal, Ms Engeham does not seek to challenge those conclusions, and I consider that she was right to do so. It follows, that the only costs which she can now recover are costs which relate to her action against L & Q.”
Thus naming a defendant means that costs cannot be recovered in relation to work against any other party and thus it remains crucial not to name the defendant in any Conditional Fee Agreement – see my post CFAs: Never Name the Defendant! (1)
This case thus follows the reasoning in
dealt with in my post referred to above.
What the Court of Appeal was actually considering here was whether the outcome of the action represented a win for the claimant Ms Engeham under the terms of the Conditional Fee Agreement.
The Principal Costs Officer and Master Haworth held that it was not a win, but on further appeal HH Judge Mitchell sitting with Master Hurst, Senior Costs Judge, held that it was a win and APL now appealed against that decision, seeking to restore the order of the first two courts.
The definition of a win was the one contained in both the Underwoods Model Conditional Fee Agreement and the Law Society Model Conditional Fee Agreement:-
“Your claim for damages is finally decided in your favour, whether by a court decision or an agreement to pay you damages or in any way that you derive benefit from pursuing the claim.
‘Finally’ means that your opponent:-
- is not allowed to appeal against the court decision; or
- has not appealed in time; or
- has lost any appeal.”
APL argued that Ms Engeham had not won against L & Q and as they were the only defendant named in the Conditional Fee Agreement she had not won anything under that agreement and so was not bound to pay her solicitors anything and under the indemnity principle she could not recover costs from anyone in respect of her non-existent liability to pay costs.
Here the terms of the Tomlin order provided for payment of damages by APL but that such payment acted as a discharge for both L & Q and APL.
The Court of Appeal upheld the decision of HH Judge Mitchell that APL were liable for the costs of Ms Engeham’s action against L & Q.
The court pointed out that as far as Ms Engeham was concerned the object was to obtain damages for her injuries. She had done that. She had won. True it was that the action against L & Q was not finally decided in her favour by an agreement to pay her damages if one read into the Conditional Fee Agreement a clause that it must be L & Q who actually pay the damages, but there was no reason to do so.
As the court said:-
“It frequently occurs that a settlement is achieved with an action, but the person who pays the damages is not the defendant who is being sued.”
The Court of Appeal said that the parties could not have contemplated “that a win was restricted to causing L & Q to be the payer, even if L & Q was the only anticipated defendant at the date of the CFA. I therefore consider that the “win” clause in the CFA is not limited by reference to the identity of a person who actually pays the damages. Once one construes the CFA in that way, it seems to me that the Tomlin order is plainly an agreement to pay damages within the meaning of the CFA. The fact that those damages were to be paid by APL and not L & Q is not relevant.”
The Court of Appeal also pointed out that had Ms Engeham just sued L & Q and L & Q had brought Part 20 proceedings against APL, who then made payment in an overall settlement, she would have won against L & Q.
The court said:-
“Other examples abound, such as a parent or a related company, a shareholder or a simple well-wisher making the payment of damages.”
That is perhaps not a valid point – the “win” would still have been against the named defendant, whoever actually paid the damages. The argument here was that there had not been a win within the proceedings against the named defendant.
This is a very fact specific case. A differently worded Tomlin order may have resulted in Ms Engeham recovering no costs. As Simon Gibbs says in his always excellent blog – Wrong defendant named in CFA – again:-
“The important point to note is that for many – probably most – cases where the wrong defendant is named, this decision will be of no assistance. The Court of Appeal has recognised that expressly naming one party as defendant in a CFA limits the scope of what the agreement covers. Perhaps the classic example of this problem arises where a CFA in a highway tripping claim names a local authority as defendant but it is subsequently discovered the correct defendant is actually another party (eg utilities company), with the claim then being successfully pursued against that other party. Ordinarily, and absent a rather unusual final costs order, there will be no recoverable costs given the limitation of the CFA.”
As the High Court said in
“If the CFA as drafted is such that it can include a claim against any potential Defendant, then the present problem would not arise.”
the High Court said that it is commonly the case that Conditional Fee Agreements do not identify the opponent and that there is no requirement that they should, provided that “the particular proceedings” to which they relate are specified. The court said:-
“…the sin therefore was one of addition: including an unnecessary detail.”
As stated in my post – Conditional Fee Agreements, Damages-Based Agreements and Contingency Fees:-
“The key lesson to be drawn from these cases is that the defendant should never be mentioned in a Conditional Fee Agreement, but rather simply the date of the accident, and possibly the rough location, so that “the particular proceedings” are specified.”
The decision in Engeham has been widely misreported, as pointed out by Simon Gibbs. I suspected that that was the case and as I said in my post:-
“I have not yet got the full Judgment and my advice remains that you should not name the defendant in a Conditional Fee Agreement.”
That advice is reinforced, not changed, by the Court of Appeal’s decision in this case.
Please see my related blogs:-