An Early Christmas Present

The recent case of Engeham –v- London & Quadrant Housing Ltd & Academy of Plumbing Ltd[i] represents good news for Claimant lawyers conducting work under Conditional Fee Agreements (CFA’s). In this case the Claimant was successful but the party who the Claimant was successful against was not named in the CFA. The CFA simply named one Defendant. At first instance it was held that no costs were recoverable as the CFA did not cover a claim against the ‘paying’ Defendant.

On Appeal (HHJ Mitchell) the decision was reversed. The case thereafter proceeded to the Court of Appeal which upheld the decision of HHJ Mitchell. It was determined that the definition of win in relation to the CFA should not be restricted to ‘who pays’. The meaning of win should be widely construed. The Claimant had clearly won the case and the Defendant had agreed to pay the Claimant’s costs.

This is positive news as only early this year Deputy Master Friston in the case of Hailey v Assurance Mutuelle Des Motards (relating to the same issue detailed above) ruled that costs were not recoverable by virtue of the indemnity principle. There have been other cases in the past where the same outcome was reached. This was therefore a real tool in the armoury of Defendants when challenging costs conducted under a CFA.

This is a very sensible decision but does cause some tension with the indemnity principle. The indemnity principle is well established law. In Hailey there was no liability for the Claimant to pay his Solicitors’ costs, as success under the CFA was not achieved because the case was successful against a Defendant not named in the CFA. Although the decision is fair and sensible, it clearly conflicts with the indemnity principle.

Despite this Judgment when drafting CFAs Claimant Solicitors should refrain from naming the Defendant/s in the CFA. CFAs should be drafted stating that the agreement covers “your claim against the Defendant or Defendants”. Furthermore, it is always sensible for the definition of success not to be simply based on the recovery of damages, but should also include “or where you derive any benefit from pursuing the claim”.

So, an early Christmas present for Claimant Solicitors, and a lump of coal for Defendant Solicitors!

Andrew McAulay is a Partner and head of the Costs and Litigation Funding department at Clarion Solicitors. You can contact him at andrew.mcaulay@clarionsolicitors.com, or the Clarion Costs Team on 0113 2460622.

[i] Currently unreported and available only from subscription-based websites. We will endeavour to add a link as soon as it becomes publically available.

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