Naming wrong defendant in CFA
One of the long running battle grounds in costs litigation concerns the consequences of naming the wrong opponent in a conditional fee agreement. Because this is ultimately a contractual issue, it remains just as relevant today as under the now revoked Conditional Fee Agreement Regulations. Paying parties argue that no costs are recoverable where the incorrect opponent is named in the CFA. I have argued the point both successfully (Hailey v Assurance Mutuelle des Motards) and unsuccessfully (Brierley v Prescott).
In Engeham v London and Quadrant Housing Trust & Another  EWCA Civ 1530 the Court of Appeal, without hearing argument on the issue, accepted that costs could not be recovered from a party different to the one named in the CFA.
The Court of Appeal has now revisited the issue in Malone v Birmingham Community NHS Trust  EWCA Civ 1376. Here, the CFA stated, under the heading “What is covered by this agreement”:
“All work conducted on your behalf following your instructions provided on [sic] regarding your claim against Home Office for damages for personal injury suffered in 2010.”
In the event, the claim succeeded against Birmingham Community NHS Trust, rather than the Home Office. At first instance and on the initial appeal, the Defendant successfully argued no costs were payable. On the facts of the case, the Court of Appeal allowed the appeal. The Court accepted that the reference to “Home Office” was descriptive of the instructions received rather than of the work to be done. It related to past instructions rather than future work.
Although the Claimant was successful on the particular facts of the case, the decision does little to stop challenges in very similar situations. The Court of Appeal’s commentary on HHJ Stewart QC’s decision in Law v Liverpool City Council  EWHC 90020 (Costs) is as important as the Malone decision itself:
“In that case the CFA was stated to cover: ‘Your claim against Liverpool City Council for damages for personal injury suffered on 26th March 2003’. Proceedings were brought against the Council as the occupier of the property where the injury was suffered and a defence was served. Subsequently the Council stated that the property had been transferred shortly prior to the accident to a housing association, which was then added as a second defendant. The claim continued against both defendants and was settled by them, with both defendants acknowledging liability in principle for costs, subject to any points about the CFA. The housing association contended that as the CFA had never been varied to include it, there was no CFA in relation to the claim against it.
HHJ Stewart QC held that the claim against the housing association was not covered by the CFA. His stated starting point was that a CFA which covers a claim against one defendant cannot be construed to encompass a claim against another defendant. He said that the fact that parties are often added to claims should be dealt with by careful drafting of the CFA or by appropriate amendments.
There are a number of obvious differences between that case and the present one. In particular: (i) the wording used was more specific and restrictive – ‘Your claim against Liverpool City Council…’; (ii) there was no apparent careless drafting; (iii) the Council was an appropriate defendant; (iv) the Council remained a defendant up to and including settlement. It is also to be noted that the argument that the wording used was meant to be merely descriptive rather than prescriptive does not appear to have been raised. HHJ Stewart QC’s starting point bypassed that issue. In any event, little assistance is to be derived on issues of construction such as this from different cases, on different facts, involving materially different wording.”
The impact of this decision is likely to increase, rather than decrease, the level of satellite litigation generated where the incorrect opponent is named in a CFA. The decision gives significant encouragement to paying parties that such a challenge may fall into the Law v Liverpool City Council category whilst offering a glimmer of hope to receiving parties that the full factual matrix will be found to be favourable to them.