Wrong defendant named in CFA – again
I have written before about the dangers of relying on case summaries (particularly those that appear on-line) without actually reading the full judgment.
A prime example of this is the case of Engeham v London & Quadrant Housing Trust & Anor  EWCA Civ 1530. The problem was exacerbated by the fact that it has taken such a long time for the full judgment to become widely available.
The case concerned the “wrong” defendant being named in the CFA. This is hardly a new issue and I have acted for the paying party in two other reasonably well publicised cases dealing with this issue (Brierley v Prescott  EWHC 90062 (Costs) and Hailey v Assurance Mutuelle Des Motards (SCCO, 2015)).
In this case, the Court of Appeal decided that (some) costs were recoverable notwithstanding the fact the “wrong” defendant was named. Various initial on-line accounts of the decision implied that naming the wrong defendant was no longer a problem in light of this judgment, including:
“This is a helpful decision for receiving parties. It overturns a run of cases in the lower Courts which were decided the other way.”
“Whilst it is not unusual to have cases where there may be more than one potential Defendant, it is unusual to have cases where the correct Defendant(s) have not been named; this decision will now provide comfort to those solicitors who find themselves in this predicament. A small victory for Claimant solicitors…”
“an early Christmas present for Claimant Solicitors, and a lump of coal for Defendant Solicitors”
In fact, on a proper reading of the judgment, this decision was extremely fact sensitive and did not remove the underlying problem caused by naming the wrong defendant.
In very brief terms, so far as relevant, the facts of the case were:
- The CFA stated, under the ‘What is covered by this agreement’, “Your claim against the defendants L & Q for damages”.
- A letter of claim was sent to L & Q on 12 June 2008. Liability was denied and a long period of investigation followed which uncovered the identity of the contractor, APL. Proceedings were issued on 5 March 2011 against both L & Q and APL.
- Negotiation towards a settlement followed and the matter was compromised by a Tomlin Order, the material terms of which were:
“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.
4. 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 Court concluded:
“The first question is whether Ms Engeham’s action against L & Q was finally decided in her favour by an agreement to pay her damages. The answer to this question can only be ‘no’ if one reads into the win clause a requirement that it must be L & Q who actually pays the damages. I can see no reason why one should do so. It is necessary to distinguish between the scope of the CFA as regards the costs which it covers and the event which triggers the payment of those costs.
In my judgment, 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 it 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 L & Q is not relevant.
…Ms Engeham can only recover the costs of pursuing L & Q to a successful conclusion, and that is what happened when the Tomlin order was signed. I therefore consider that the judge was correct to allow Ms Engeham her costs of her action against L & Q.”
However, the issue of wider impact was:
“Both Master Haworth and, on appeal, His Honour Judge Mitchell held that the CFA was limited in its operation to the action against L & Q. That was because of the express words of limitation in the ‘What is covered by this agreement’ clause to, ‘Your claim against the defendants L & Q for damages’. Those words were not wide enough to encompass an action against anybody else. 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.”
(History does not relate how a costs judge was subsequently meant to distinguish and then apportion/divide, if at all, those costs of pursing L & Q as opposed to APL.)
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.
An interesting foot-note to this decision is how this decision was reported in Costs Law Report’s monthly bulletin. This correctly summarised the decision but then concluded:
“As we have stated many times in this bulletin, CFAs made before 1 April 2013 have a long tail. Those coming up for detailed assessment soon should be checked to ensure that too much information does not result in disaster as happened in Engeham.”
Unless I have missed something, this case has nothing to do with pre-1 April 2013 CFAs or recoverable success fees. This was a matter of simple contract law as to what was, or not, covered by the retainer. It appears to be of equal application to CFAs being entered into now or, indeed, any form of retainer.