Engeham v London & Quadrant Housing Trust & Anor

This appeal raises a question of the proper construction of a conditional fee agreement ("CFA"), and, in particular, whether the outcome of the action represented a “win” for the claimant, Ms Linda Engeham, in her action for personal injuries under the terms of the CFA. Principal Costs Officer Lambert, and on appeal from him, Master Haworth both considered that it did not constitute a win. By contrast, His Honour Judge Mitchell, sitting with Master Hurst, Senior Costs Judge in the decision under appeal dated 14 July 2014 thought that it was a win. The second defendant, The Academy of Plumbing Limited (in Liquidation) ("APL") appeals from the order of His Honour Judge Mitchell with the permission of Lewison LJ.

Ms Engeham lived in a flat rented from the first defendant, London & Quadrant Housing Trust Limited, (“L & Q”). She complained to L & Q about a leak in her bathroom. Although Ms Engeham did not discover these facts until later, what then happened was that L & Q instructed a contractor, Homeserve PLC, who, in turn, instructed APL. APL attended the premises on 8 March 2008 to attend to the leak. Despite this, on 9 March 2008 the plaster ceiling in Ms Engeham's bathroom fell on her and caused her injury.

As subsequently formulated, Ms Engeham's claim was that APL had negligently failed to turn off the water supply which would otherwise stop the leak. L & Q was responsible for the negligence of APL. Claims were also made against other parties but were discontinued before service of the proceedings.

In June 2008, Ms Engeham instructed Anthony Gold Solicitors under a CFA. At that stage, the sole target of the claim was L & Q. The CFA contained the following clauses. Firstly, under the heading, "What is covered by this agreement", there are the following bullet points:

The document, "Conditional fee agreements, what you need to know" which is referred to in the second of those clauses was annexed to the CFA. Amongst other things, it contained a section headed, "Law Society Conditions" which it explained was part of the agreement. One section of that was headed, "Explanation of words used". It included a clause defining what was meant by "a Win" and that read:

This clause was taken from the Law Society's model CFA in its 2000 Edition. The Law Society's CFA was amended in 2000, the enlarging words, "or in any way you derive benefit from pursuing the claim" did not appear in the earlier 1995 edition.

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 an order in so-called, "Tomlin" form, dated the 26 July 2011. Apart from the usual Tomlin terms granting a stay and limited liberty to apply, the material terms were,

I should mention that the Tomlin order is not signed by or on behalf of the first defendant, but I do not think anything turns on that. The Tomlin order plainly has the necessary degree of finality for the purposes of the win clause by precluding the claimant from continuing the action, except for the limited Tomlin purpose.

When Ms Engeham sought to recover her costs, APL argued that the CFA covered only the action insofar as it related to L & Q. Ms Engeham had not won against L & Q within the definition of the CFA because such damages as she recovered would be paid by APL. It followed that Ms Engeham was not liable to pay her solicitors their basic charges, disbursements and success fee. Under the indemnity principle, Ms Engeham could only recover costs which she herself was liable to pay. She was not liable to pay her solicitors anything, so she couldn’t recover from APL. 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. However, according to APL, it did not follow that Ms Engeham was entitled to recover her costs of the action insofar as it related to L & Q. This was because APL had the further point on which it succeeded before Master Haworth but on which it lost before His Honour Judge Mitchell. It was argued that the result of the action brought by Ms Engeham against L & Q was not a win within the meaning of the CFA. The Tomlin order recorded that the damages would be paid by APL and not by L & Q. Accordingly, the results of the action did not fall within the definition. There had been no “court decision”, no “agreement to pay damages” and no “way that you derive benefit from pursuing the claim” in the sense of the claim against L & Q."

His Honour Judge Mitchell rejected this argument and awarded Ms Engeham her costs of the proceedings against L & Q. He did so on the basis that the words of the "win" clause were wide and Ms Engeham had derived benefit from pursuing her claim. She had derived £10,000 plus her costs.

APL is aggrieved by the decision of His Honour Judge Mitchell and appeals to this court. Lewison LJ gave APL permission for a second appeal on the basis that the CFA included Law Society standard terms and that the point might therefore have wider importance.

Mr Stacey, who appeared for APL at the hearing of the appeal, submits that the words, "your claim for damages" and "your claim" does not mean any claim for damages or any claim which might be brought. It meant the claim for damages which was in the contemplation of the parties at the time the CFA was concluded. This could only be the claim against L & Q because the identity of APL and the potential claim against them only came to light in subsequent investigations. In support of this, he relies on the identification of L & Q as the target of the action. Viewed in that way, there had been no win.

Mr Mallalieu for L & Q submitted that in order to recover her costs, Ms Engeham must establish that she had won her claim against L & Q, whether by decision or agreement to pay damages or that she had derived some other benefit by pursuing the action. He does not, however, accept that a win requires actual payment by L & Q. He submits that the Tomlin order provides, in terms, for the payment of damages of £10,000 in respect of both claims and therefore, including the claim against L & Q. Paragraph 1 of the schedule to the Tomlin order recorded that the payment of damages discharged the liability of each of the defendants in respect of the claims made by the claimant in this action. The fact that it was to be paid by APL did not mean that there had been no win against L & Q. The result of the action against L & Q was an agreement to pay damages and Ms Engeham had derived benefit from pursuing the claim. He submits that the identity of the payer is not relevant. He accepted that if he was wrong about this, then the fact that the Tomlin order recorded that APL were to pay Ms Engeham the costs of both actions, including the action against L & Q would not on its own amount to a benefit.

In the end, this is a very short point. 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. The answer to the first of these questions is now resolved by the common ground between the parties. As to the second of these questions, what Ms Engeham was concerned to achieve by her claim was damages for her injury. 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.

I asked Mr Stacey what would happen if instead of suing APL directly Ms Engeham had only sued L & Q and L & Q had brought Part 20 proceedings against APL who made the payment in any overall settlement. Mr Stacey said that his argument would still apply and Ms Engeham would not get her costs. It is, in my view, not realistic to suggest in those circumstances that Ms Engeham has not secured an agreement to pay her damages and that that this should not be regarded as a win. Other examples abound, such as a parent or a related company, a shareholder or a simple well-wisher making the payment of damages.

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.

Mr Stacy submitted that the effect of this conclusion would be that Ms Engeham could find herself liable for costs of pursuing other parties, such as the additional parties named on the claim form but who were never served with proceedings. I do not see why that should be so. That is again to confuse the question of the scope of the CFA with the definition of the event which triggers the payment of costs. 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.

Accordingly, I would dismiss the appeal.

I agree.

I also agree.