Costs success in the Court of Appeal

The Court of Appeal recently found in my client’s favour when it came to recovering the costs of her injury claim from the insurers who had compensated her. I acted for Mrs Engeham in her claim for compensation resulting from injuries sustained when her bathroom ceiling fell on her. At the beginning of the case, she entered a “no win, no fee” arrangement or conditional fee agreement (CFA) with us to pursue a claim against her landlord. Her landlord was named on the CFA as the defendant in her case. It subsequently transpired that a plumbing company who had attended to the leak shortly before her ceiling collapsed were also a potential defendant in the claim. Court proceedings were issued against both her landlord (the First Defendant) and the plumbing company (the Second Defendant) and after negotiations, the Second Defendant’s insurers signed a court order agreeing to pay Mrs Engeham £10,000 in compensation plus her costs.

However, at “detailed assessment” hearing to decide the amount of those costs, the costs officer (a court official) held that the CFA, which only named the First Defendant and not the Second Defendant did not cover the claim against the Second Defendant who had ultimately settled the case. The CFA was invalid. Mrs Engeham was not responsible for payment of any costs under the CFA and so she was not entitled to recover them from the Second Defendant’s insurers.

I appealed but at a rehearing, the Costs Judge upheld the costs officer’s decision. In the Judge’s opinion, Mrs Engeham did not secure a “win” within the meaning of the CFA as this “win” was not against the opponent named in the CFA, the First Defendant. The First Defendant had not agreed to pay damages and costs: the Second Defendant had.

The definition of “win” in the CFA was as follows: “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.” I appealed to the County Court Judge who overturned the previous decision on the basis that the Costs Judge had focused on who was paying, which was not the right approach. The County Court decision highlighted that the definition of “win” in the CFA was when the claim was decided in the Claimant’s favour whether by payment of damages or in any other way that benefit was derived from pursuing the claim. The Judge concluded that, as Mrs Engeham had derived benefit from pursuing the claim (she had received £10,000 compensation), she had secured a “win” within the meaning of the CFA. It was not a question of who paid, the definition of “win” was much more widely drafted than that. She had secured a “win” and she was therefore liable for her costs under the CFA, and so was entitled to recover them.

The Second Defendant’s insurers appealed this decision but the Court of Appeal upheld the County Court decision. The Court of Appeal considered it was not realistic to say that Mrs Engeham had not won her case. She had secured an agreement by way of a consent order for payment of damages. This was the act that triggered payment of costs due under the CFA. Whilst these were the costs of the claim against the First Defendant (and so the costs relating exclusively to the pursuit of the Second Defendant were not recoverable), the Court of Appeal highlighted that the definition of “win” did not read “an agreement by the First Defendant to pay you damages” it read “an agreement to pay you damages.” It did not matter who paid. To focus on who the paying party was would cause problems in a variety of cases, including Part 20 claims, and claims where payment was made by a subsidiary or parent company and was not a realistic approach. It followed that the appeal was disallowed.

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