A section 51 application was made because the cover was limited under the defendant’s liability policy and insufficient to pay all the damages, let alone any part of the costs, and the defendant was not worth powder and shot. Nonetheless the claim fell squarely within the cover provided by the policy. It was an insured claim, and could have been pursued (subject to the limit of cover) directly against the insurer under the 1930 Act if the insurer had not put the defendant in funds (up to the policy limit) with which to settle it.
Drawing upon general principles about the section 51 jurisdiction Phillips LJ identified two separate bases upon which a liability insurer might become exposed to non-party costs liability. The first basis (by no means limited to insurers) may be labelled intermeddling. Repeating dicta of his own in Murphy v Young and Co’s Brewery Plc [1997] 1 WLR 1591 he said: ‘In Giles v Thompson [1994] 1 AC 142, 164 Lord Mustill suggested that the current test of maintenance should ask the question whether: ‘there is wanton and officious intermeddling with the disputes of others in which the meddler has no interest whatever, and where the assistance he renders to one or the other party is without justification or excuse.’ Where such a test is satisfied, I would expect the court to be receptive to an application under section 51 that the meddler pay any costs attributable to his intermeddling.’
The second arose from the combination of the insurer’s interest in the outcome of the proceedings, its contractual obligation to indemnify the defendant for its costs liability and its exercise of control over the conduct of the defence. In a case where there was no limit of cover which excluded such a contractual obligation in relation to costs he regarded a section 51 order as a convenient time and cost-saving short-cut to recovery against the insurer of an insolvent defendant under the 1930 Act. He regarded a case where a limit of cover excluded the insurer’s contractual liability for costs, as it did in that case, as a ‘more complex’ example of the second type, calling for a more nuanced approach.
The claimant company relied upon five features of the case which justified a section 51 order, namely that: ‘(1) the insurers determined that the claim would be fought; (2) the insurers funded the defence of the claim; (3) the insurers had the conduct of the litigation; (4) the insurers fought the claim exclusively to defend their own interests; (5) the defence failed in its entirety.’
The Court of Appeal agreed. The claim had been funded and defended by the insurers purely in their own interests, regardless of the interests of the assured defendant, who had been entirely without means from start to finish, and who would have been content to settle the case at the outset rather than contest it. The insurers were regarded as the real defendants in all but name. In passing Phillips LJ rejected the submission that exceptionality was to be measured by comparison with other insurance cases rather than the generality of cases, and the argument that an insurer who stayed within the bounds of his rights and obligations under the policy should never be exposed to liability beyond the limit of cover by means of a section 51 application.
Judges:
Phillips LJ
Citations:
[1997] EWCA Civ 2052, [1998] 2 All ER 873, [1998] 1 WLR 12, [1997] CLC 1306
Links:
Statutes:
Jurisdiction:
England and Wales
Citing:
Cited – Giles v Thompson, Devlin v Baslington (Conjoined Appeals) HL 1-Jun-1993
Car hire companies who pursued actions in motorists’ names to recover the costs of hiring a replacement vehicle after an accident, from negligent drivers, were not acting in a champertous and unlawful manner. Lord Mustill said: ‘there exists in . .
Cited by:
Cited – Travelers Insurance Company Ltd v XYZ SC 30-Oct-2019
Challenge to the making of a non-party costs order under section 51 of the Senior Courts Act 1981 against the product liability insurer of one of the defendants in litigation being managed under a Group Litigation Order (‘GLO’). Many of the . .
Applied – Citibank NA v Excess Insurance Co Ltd 1999
A section 51 application was prompted by the reporting of the Chapman case, and decided by Thomas J specifically upon the basis that the continued defence of the quantum of the claim after judgment on liability had been conducted by the insurers . .
Cited – Palmer v Palmer CA 18-May-2007
. .
Cited – Palmer v The Estate of Kevin Palmer Deceased and others CA 6-Feb-2008
The judge had concluded that the insurers’ conduct of an unsuccessful defence was sufficiently self-motivated to make it the real defendant in all but name, and the Court of Appeal dismissed the appeal against an order that it be liable in costs as . .
Lists of cited by and citing cases may be incomplete.
Insurance, Costs
Leading Case
Updated: 04 May 2022; Ref: scu.142449