England and Wales Court of Appeal (Civil Division) Decisions

Hamilton v Al Fayed [2002] EWCA Civ 665 (17th May, 2002)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
(Mr Justice Morland)

		Royal Courts of Justice Strand, London, WC2A 2LL
		17th May 2002

Lord Justice Simon Brown:

1. On 21 December 1999, following a five-week trial before Morland J and a jury, Mr Neil Hamilton famously lost his libel action against Mr Al Fayed arising out of the “cash for questions” scandal. To the question “Are you satisfied on the balance of probabilities that Mr Al Fayed has established on highly convincing evidence that Mr Hamilton was corrupt in his capacity as a Member of Parliament?”, the jury returned the answer “Yes”. Mr Hamilton was ordered to pay Mr Al Fayed’s costs.
2. On 15 January 2001, following Mr Hamilton’s failed application to the Court of Appeal (Lord Phillips MR, Lord Justice Sedley and Lady Justice Hale, transcript 21 December 2000) for permission to appeal against the jury’s verdict in the light of Mr Al Fayed’s subsequently revealed purchase of documents stolen during the trial from Mr Hamilton’s counsel’s dustbin, those costs were assessed in default in the sum of £1,467,576. Some £1.19 million of that sum remains unpaid, Mr Hamilton personally having paid nothing towards it and having now been bankrupted.
3. The present proceedings relate to Mr Al Fayed’s efforts to recover his unpaid costs from a number of individuals who backed Mr Hamilton’s unsuccessful action. Stripped of inconsequential detail, the position is this. A sizeable part of Mr Hamilton’s costs had been contributed by a fighting fund conceived and raised by Lord Harris of High Cross to enable the action to be brought. The money was raised on the understanding that if the action were successful, the money would be returned, otherwise not. The fund totalled £466,320 and consisted of 484 anonymous contributions of which 308 were for £100 or less, 153 of between £100 and £5,000, and 18 of £5,000 or more. Those 18 largest contributors paid a total of £323,500 (including £100,000 paid direct to Mr Hamilton’s solicitors by the Earl of Portsmouth, the one contributor who declared himself), and against these contributors (whose names the judge required to be revealed) Mr Al Fayed sought orders for costs under section 51 of the Supreme Court Act 1981. Several of the contributors settled with Mr Al Fayed, paying him in total some £193,000. Nine, however, the respondents to this appeal, contested their liability. On 20 June 2001, for reasons given in a lengthy judgment handed down on 13 July 2001, Morland J rejected the section 51 applications. Now before us is Mr Al Fayed’s appeal, brought with permission which we ourselves gave during the course of the three-day hearing last month.
4. Section 51 provides:

“(1) … the costs of and incidental to all proceedings in …

(b) the High Court

… shall be in the discretion of the court.

…

(3) The court shall have full power to determine by whom and to what extent the costs are to be paid.”

5. Pursuant to CPR 48.2(1)(a) the respondents were added as parties to Mr Hamilton’s action for the purposes of costs only. That brought into play CPR 44.3 which sets out the court’s discretion as to costs and the circumstances to be taken into account in its exercise:

“44.3(1) The court has discretion as to-

(a) whether the costs are payable by one party to another;

(b) the amount of those costs;

…

(2) If the court decides to make an order about costs-

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order, …

…

(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances including-

(a) the conduct of all the parties;

…

(5) The conduct of the parties includes;

(a) conduct before, as well as during, the proceedings …”

6. At the heart of the judgment below, in a section headed “Funding”, Morland J said:

“69. The respondents to Mr Al Fayed’s application are pure funders. Their donations towards Mr Hamilton’s costs were not made at the result of any obligation owed to him but as an act of charity through sympathy with his predicament and in some instances affinity to the Conservative Party. They have no control over how their donation is spent. They have no part in the management of the litigation up to and including the trial. … Their only hope was that Mr Hamilton would achieve sufficient success in trial to enable their donations to be repaid to them. Why would a pure donor be in any more vulnerable position than a solicitor or counsel acting on a contingency fee? (See the observations of Rose LJ in Tolstoy -v- Aldington [1996] 1 WLR 736 at 746)

70. The position of the professional funder is very different. Almost always the funding arises out of a contractual obligation for example where the funder is a trade union, an insurer or professional or trade association. Normally such a funder exercises considerable control management and supervision of the litigation. …

71. … It would be very exceptional that a situation would arise where it would not be just and reasonable to make a S.51 order against a professional funder.

72. The reverse is the position in the case of a pure funder. It will be rare or very rare that it will be just and reasonable to make an order against him.”

7. Later in the judgment, in a long section entitled “Guidance From the Court of Appeal”, in which the judge reviewed (as I shall have to review) a number of this court’s decisions, he referred to the “exceptionality principle” a principle he regarded not as a fetter on the exercise of his discretion but nonetheless as “a very important guideline” (paragraph 109).
8. It is towards those paragraphs that the main thrust of the appeal is directed. Miss Gloster QC for the appellant challenges the view that it will only rarely or very rarely be just and reasonable to make an order against a pure funder and that some exceptional further feature is required to warrant a section 51 order. As finally formulated her argument is that:

“… the correct approach … is that, where a rich man (or company) chooses for his own reasons (political, ‘philanthropic’ or other) to fund a claimant of limited means to pursue a libel action, which would not otherwise be brought, on terms that he, the funder, will be reimbursed by the defendant if the action succeeds, fairness and justice in general require that the funder shall bear some responsibility for the costs to which the defendant has thereby been put, if the action fails. Otherwise the funder is not made responsible for the severe financial consequences of what he has enabled. … [T]he judge approached the matter from the incorrect starting point … He was … looking for some exceptional feature to take the case out of the ordinary run of pure funding cases, instead of recognising that a case which is funded as this one was is already exceptional ….”

9. That is the central ground of appeal. The other grounds arise out of the final paragraph of the judgment under the heading “Conclusion” which I now set out in full (not least because it contains in summary form most of the relevant factual background to this appeal):

“115. In reaching my conclusion to dismiss Mr Al Fayed’s application in addition to the facts applicable to individual respondents I considered all the circumstances of the case including in particular the following factors which are generally applicable:

(a) Mr Al Fayed had made the allegation that Mr Hamilton had received cash for questions, a matter of important and legitimate public interest and concern.

(b) By its verdict the Jury had found that Mr Al Fayed had justifiably accused Mr Hamilton of being corrupt as a Member of Parliament albeit that Mr Al Fayed was himself criminally corrupt.

(c) It was Mr Hamilton’s choice to sue Mr Al Fayed who if he was to justify his accusation was bound to incur a very large outlay in costs which he was unlikely to recover from Mr Hamilton as the contributors to Mr Hamilton’s costs should have realised if they had thought about it.

(d) There is no indication that the respondents who are rich or very rich would suffer any hardship by contributing towards Mr Al Fayed’s costs.

(e) It is unfair that a successful defendant who is unable to recover his outlay of costs from the claimant should not recover his outlay from the rich backers of the claimant who is impecunious.

(f) Mr Al Fayed’s Solicitors took the proper step of warning Mr Hamilton’s backers who were unknown to them that they were liable potentially to an application under S.51. It was no fault of Mr Al Fayed that backers were not alerted to this risk.

(g) Until the last minute emergence of the Mobil allegation Mr Hamilton had some realistic prospect of success viewed objectively.

(h) There were grounds of public interest for deciding that in any event the dispute between Mr Hamilton and Mr Al Fayed should be conclusively decided by a Jury.

(i) It is in the public interest and the interest of justice that a litigant of limited means asserting a right against a very rich opponent should be afforded effective access to the Courts in appropriate cases.

(j) Rich philanthropists who wish out of charity to achieve (i) above and a measure of equality of arms should not be discouraged.

(k) The respondents were entitled to have regard to (h)(i)(j) above and the honest belief of Lord Harris, the fund raiser, and Mr Hamilton’s Solicitors that success for Mr Hamilton was to be expected.

(l) The respondents were entitled to have regard to Mr Hamilton’s persistent and consistent denial of cash for questions when having in mind Mr Al Fayed’s questionable reputation for probity.

(m) Legitimate criticism was voiced as to the fairness to Mr Hamilton of the Downey Enquiry and proceedings before the Select Committee of the House of Commons.

(n) Mr Al Fayed’s misuse of the witness-box to make speeches and utterly scandalous accusations irrelevant to the dispute with Mr Hamilton.

(o) Mr Al Fayed’s ‘discreditable’ conduct after the trial in acquiring the confidential papers of Mr Hamilton’s Counsel.

(p) Most of the money received by Mr Hamilton’s Solicitors from the respondents was donated after the Solicitors had taken the decision that the case would go ahead to trial irrespective of whether or not sufficient donations were received. That decision was unknown to the respondents who were led to believe that further donations were required to bring the case to trial.

(q) In contrast to (p) above the case of Mr Hamilton would not have proceeded to the 10^th October 1999 when the stage was reached that Counsels’ briefs were about to be delivered except for the existence of the Fund.

(r) If Mr Hamilton were successful the respondent’s only expectation was a return of their contributions.

(s) None of the respondents took any active part in the litigation or had any detailed knowledge of the merits of Mr Hamilton’s claim.

(t) Mr Al Fayed’s state of mind indicating resentment as expressed to the Independent journalist on the 10^th January 2000.

‘I am going for the bastards who think they are members of the Establishment who pay his fees and want to bring me down. I am going for people who encourage him, like the Lord Harris and that … Earl of Shit’

(u) At the conclusion of the trial Mr Hamilton’s Counsel did not submit that costs should not follow the event or ask for a reduced costs order. I cannot with hindsight say what my reaction would have been if Mr Hamilton’s Counsel had made any such submissions. In any event it is irrelevant because the respondents were not then parties to the proceedings.”

10. Miss Gloster advances three main criticisms of paragraph 115 of the judgment. She contends, first, that it is impossible to see what weight was attached to which factors: no reasoned analysis is provided of how the judge came to his conclusion. Secondly, she submits that certain of the factors ought not to have been taken into account at all, notably the second limb of factor (b) and factors (n), (o) and (t). Thirdly, she complains that the judge left out of account what she calls “the inequitable basis on which the funds were provided”, namely, the contributors’ understanding that if Mr Hamilton’s claim succeeded, their contributions would be refunded, whereas if it failed they would make no contribution to Mr Al Fayed’s costs.
11. It is convenient at this stage to deal with that third criticism which the appellant’s skeleton argument puts in these terms:

“This factor is of great significance, given that the funders’ primary stated motivation was to create a level playing field. What these funders have done is, on the contrary, to create an uneven playing field. Their stance is: you (the defendant) have no choice about whether to play this game; we are going to provide the means to start and continue it; if our side wins, you pay us; but if you win we will not pay you. In fact, it appears that the judge … treated this, the basis on which the fund was raised, as a factor in the funders’ favour, see factor (r).”

12. The reference to the funders’ own motivation being “to create a level playing field” is a reference to Lord Portsmouth’s statement:

“What concerned me was that either Mr Hamilton’s solicitors would be unable to conduct the case properly through a lack of funds or he would have to fight the case himself. My sole concern was to see that justice was done and, to this end, to ensure that the case was contested on a level playing field.”

13. Other funders spoke of wanting to give Mr Hamilton the chance to clear his name. The Duke of Devonshire, who had met neither party, states that he made his contribution “to enable a case of genuine public interest and some constitutional importance to be brought before the court”.
14. I have no doubt that the judge did indeed regard factor (r) as being in the respondents’ favour: whatever the result of the action they stood to make no profit from their contribution; at best they would get it back. Theoretically, no doubt, they could have given the money to Mr Hamilton’s solicitors on terms which would have precluded Mr Hamilton, had he won, from recovering that part of his costs. That, however, is an unlikely scenario and, so far as I am aware, has not been a feature of any funding case. Arguably, moreover, such an arrangement would in fact tilt the balance in favour of the unfunded party, just as if one side’s counsel were acting pro bono.
15. Whether the funding in this case was to be regarded as “inequitable” - whether, to use the sporting metaphor, it created an uneven as opposed to a level “playing field” - depends no doubt upon one’s point of view. The funders wanted to ensure that Mr Hamilton was able to bring and fight his claim on equal terms with Mr Al Fayed; Mr Al Fayed, given that he would have been liable for Mr Hamilton’s costs (including the funders’ contributions) had he lost, now wants to recover his own costs, having won.
16. In my judgment, therefore, this point on analysis is subsumed within the central ground of appeal to which I earlier referred. Competing public interests are in play and the critical question is which of them ultimately must prevail?
17. First, however, it is necessary to examine the existing case law to see whether, as the respondents contend, the judge below was right to conclude in effect that “pure” funders are generally exempt from section 51(3) liability for the successful unfunded party’s costs. A large number of authorities were placed before us. I propose to concentrate on those which point most helpfully to the general principles in play.
18. My starting point must be with the single House of Lords authority on section 51, Aiden Shipping Limited -v- Interbulk Limited [1986] AC 965 in which Lord Goff, giving the only reasoned speech, found no justification for implying into the provision a limitation that costs were only to be paid by parties to the proceedings, but nonetheless recognised that “in the vast majority of cases, it would no doubt be unjust to make an award of costs against a [non-party]”, and that he could not imagine such an award being made “against some person who has no connection with the proceedings in question”.
19. I pass to Symphony Group plc -v- Hodgson [1994] QB 179 in which Balcombe LJ, summarising various categories of case in which, following Aiden Shipping, costs order had been made against non-parties, included:

“(2) Where a person has maintained or financed the action. This was undoubtedly considered to be a proper case for the exercise of the discretion by Macpherson of Cluny J in Singh -v- Observer Limited [1989] 2 All ER 751, where it was alleged that a non-party was maintaining the plaintiff’s libel action. However, on appeal the evidence showed that the non-party had not been maintaining the action and the appeal was allowed without going into the legal issues raised by the judge’s decision: see Singh -v- Observer Limited [1989] 3 All ER 777n.”

20. In deference to Miss Gloster’s argument, I should, I think, cite just one paragraph from Macpherson J’s judgment in Singh:

“During argument reference was made to common circumstances in which others pay for the litigation of a party, for example, legally aided cases, insurance cases and union-assisted cases which make up much of today’s non-jury list. But legal aid is statutory and so are the restrictions on recovery of costs from the fund. The legal aid authorities can control the hardship which may be caused to successful litigants, who may not recover their costs, by requiring counsel to give fearless opinions as to the merits of the case as a condition of continuing legal aid. Insurance companies are subrogated to their insureds’ rights, and both they and unions invariably pay the costs of unsuccessful litigation. Otherwise, injustice would certainly result and I do not believe that if, for example, unions decided simply to refuse to pay costs in these cases, the court would not step in.” (p 757)

21. Balcombe LJ identified in Symphony a number of material considerations to have in mind in the exercise of the section 51(3) power. For present purposes only the first need be noted:

“(1) An order for the payment of costs by a non-party will always be exceptional: see per Lord Goff in Aiden Shipping …. The judge should treat any application for such an order with considerable caution.”

22. As to what is meant in this context by “exceptional” (a word used in most of the cases which followed Symphony) let me turn next, out of chronological sequence, to Morritt LJ’s judgment in Globe Equities Limited -v- Globe Legal Services Limited & Others [1999] BLR 232, the final, and as I think compelling, authority on the point:

“21. The principal argument was directed to the question whether the circumstances in these applications could properly be regarded as ‘exceptional’. Counsel for Miller Gardner [a firm of solicitors] submitted that they could not. In addition to the judgment of Balcombe LJ in Symphony Group plc -v- Hodgson he referred to similar statements in [a series of further cases]. But these statements left open the question by what standard the circumstances are to be judged in ascertaining whether they are exceptional. That question was answered by Phillips LJ in Chapman -v- Christopher [1998] 1 WLR 12 at page 20 where he said:

‘The test is whether they [sc the features relied on] are extraordinary in the context of the entire range of litigation that comes to the courts.’

I would also comment that there appears to me to be a danger of treating the requirement that the circumstances are ‘exceptional’ as being part of the statute to be applied. It is not. The epithet originates in the first proposition enunciated by Balcombe LJ in Symphony Group plc -v- Hodgson but it is based on what Lord Goff said in Aiden …. In none of the cases to which I have referred have ‘exceptional circumstances’ been elevated into a pre-condition to the exercise of the power; nor should they be.

Ultimately the test is whether in all the circumstances it is just to exercise the power conferred by subsections (1) and (3) of section 51 Supreme Court Act 1981 to make a non-party pay the costs of the proceedings. Plainly in the ordinary run of cases where the party is pursuing or defending the claim for his own benefit through solicitors acting as such there is not usually any justification for making someone else pay the costs. But there will be cases where either or both these two features are absent. In such cases it will be a matter for judgment and the exercise by the judge of his discretion to decide whether the circumstances relied on are such as to make it just to order some non-party to pay the costs. Thus, as it seems to me, the exceptional case is one to be recognised by comparison with the ordinary run of cases not defined in advance by reference to any further characteristic.”

23. A section 51 order was duly made in that case. Put simply, the firm of solicitors against whom it was made had created a limited liability company through whom to lease their office premises. The company litigated with the freeholder and lost. The case did not accordingly fall “in the ordinary run of cases where the party is pursuing the claim for his own benefit through solicitors acting as such”. No more, submits Miss Gloster, does a funding case like the present. Given that “the test is whether [funding as here] [is] extraordinary in the context of the entire range of litigation that comes to the courts” (Chapman -v- Christopher) and that “the exceptional case is one to be recognised by comparison with the ordinary run of cases” (Globe), a funded case, by the very fact of it being such, is, the appellant submits, exceptional. The present appeal, therefore, cannot be decided by reference to “the exceptionality principle”; rather, as Morritt LJ put it in the passage already cited, “the test is whether in all the circumstances it is just to exercise the power”.
24. I turn, therefore, to the funding cases themselves, the first of which to come before the Court of Appeal was Cooper -v- Maxwell (unreported) 20 March 1992. In that case provisional liquidators, having successfully resisted Mr Kevin Maxwell’s application to be excused from answering their questions on the ground of privilege against self-incrimination, sought a section 51 order against Mr Maxwell’s mother who had funded his costs both at first instance and on appeal. Rejecting their application, Dillon LJ in the leading judgment said this:

“The development of the authorities has not been that there will automatically be an order for costs against a person who is not a party to the proceedings if that person has funded the litigation. More is required. It is not suggested that a bank which funded litigation by providing an overdraft for a party’s litigation on commercial terms would automatically be ordered to pay the other side’s costs if the litigation was unsuccessful. The position could be different with a trade union which has an interest in funding the litigation of a member in the industrial field and habitually does pay the costs if the litigation fails. I do not see that there is anything in the circumstances of Mrs Maxwell in the present case which makes it right that the court should make an order against her to pay the costs of Mr Kevin Maxwell’s unsuccessful appeal.”

25. I come next to Murphy -v- Youngs Brewery [1997] 1 WLR 1591 in which the court had to address “the critical question … whether the mere fact that Sun Alliance have funded the Murphys’ legal expenses under a policy of insurance, up to the limit of the cover under that policy, makes it reasonable and just that Sun Alliance should be ordered to pay Youngs’ costs. In giving the leading judgment in this court, Phillips LJ dealt first with Thistleton -v- Hendricks (1992) 32 Con LR 123, a first instance decision much relied upon by the successful defendant there (as, indeed, it has been by Miss Gloster before us):

“That case involved a claim by a builder against a house owner and a counterclaim by the house owner. The latter was successful and recovered damages of some £19,000 on the counterclaim. The builder’s costs had been funded by his mother under loans motivated by maternal affection and made in the belief that her son’s claim was bona fide. Judge Hicks QC, sitting as an Official Referee, ordered the mother to contributed £7,000 towards the house owner’s costs. In so doing he had particular regard to the following facts: (i) the mother knew that her son would be unlikely to be able to pay any costs ordered in favour of the house owner; (ii) the builder was the plaintiff in the litigation; (iii) the house owner was a private individual. Judge Hicks considered that these circumstances justified his reaching a different conclusion from that of the Court of Appeal in Cooper -v- Maxwell …” (p1603)

26. Phillips LJ then outlined the circumstances of Cooper -v- Maxwell, cited (as I have already done) from Dillon LJ’s judgment in that case, and continued:

“This decision demonstrates a proposition that [counsel] has not sought to challenge. Funding alone will not justify an order against the funder under section 51. I do not consider that an order under section 51 will normally be appropriate where a disinterested relative has, out of natural affection, funded costs of a claim or a defence that is reasonably advanced. [Counsel] has urged that the special feature that makes it reasonable and just to make an order under section 51 in the present case is that Sun Alliance has funded the Murphys’ costs under a commercial agreement. This, it seems to me, reduces the central issue in this case to the following: should a legal expense insurer be permitted to cap its liability, or should the provision of such cover render the insurer liable to pay the costs of the successful adverse party, regardless of any contractual limit of liability?

… I accept the submission that legal expenses insurance is in the public interest, particularly if it is on the terms of the cover in the present case [terms which required the assured to satisfy the insurers that they had reasonable grounds for pursuing or defending the proceedings]. Such insurance not only provides desirable protection to the assured, it is of benefit to the adverse party in that (i) it is likely to ensure that careful consideration is given to the merits of the litigation at an early stage and (ii) it provides a potential source of funding of the adverse party’s costs, should the assured be unsuccessful. The latter has proved illusory in the present case because of the limit of cover, but evidence before the court suggests that it is unusual for the limit of cover to be exceeded. That very evidence leaves me uncertain what the effect on the availability of such cover would be if legal expense insurers were exposed to costs orders under section 51, but I do not believe that that question is critical to the answer in this case.” (pp1603-1604)

27. Sir John Balcombe added:

“The legal expenses insurance with which we are here concerned did not relate to a specific piece of litigation, and this distinguishes this case from one where a third party funds a particular claim and has a direct commercial interest in the outcome of that claim.”

28. It is convenient at this stage to mention two further insurance cases, Chapman Limited -v- Christopher [1998] 1 WLR 12 (the case mentioned by Morritt LJ in the context of exceptionality) and Cormac -v- The Excess Insurance Company Limited (transcript 16 March 2000, unreported save briefly in The Times of 30 March 2000). The insurers in both those cases, unlike the Sun Alliance in Murphy, gave cover against specific liability and therefore had a direct commercial interest in the outcome of the litigation. In each case the insured defendant failed to defeat the claim and in each his liability to the plaintiff exceeded the limit of the indemnity provided. In Chapman the insurers were held liable under section 51 for the successful plaintiff’s costs; in Cormac they were not. In Chapman Phillips LJ, again giving the leading judgment, described the underwriters as “the defendants in all but name”, having earlier observed that “it must be rare for litigation to be funded, controlled and directed by a third party motivated entirely by its own interests”. In those circumstances he regarded it as “a paradigm case” for a section 51 order.
29. In Cormac, for reasons which are not presently material, a different view was taken of the insurers’ role and consequent liability. There is, however, one passage in Auld LJ’s leading judgment which is relied on by both sides in the present appeal, and which I must , therefore, cite:

“[Counsel for the successful uninsured plaintiffs] submitted that where a non-party funds an unsuccessful action, particularly one who has an interest in its outcome, there is a strong public policy reason for making a section 51 order the norm. He referred to Phillips LJ’s citation in Chapman, at 22E-F of Sir Thomas Bingham MR’s words in Roache -v- News Group Newspapers Limited The Times, 23 November 1992, that the principle that costs normally follow the event is ‘of fundamental importance in deterring plaintiffs from bringing and defendants from defending actions which they are likely to lose’. [He] referred also to what he propounded as a general principle, that a maintainer of unsuccessful litigation, particularly one who has an interest in its outcome, should normally pay the costs of the adverse successful party.

However, the authorities and passages from the judgments on which [counsel] relied for those propositions indicate only that they may, depending on the circumstances, be relevant and justify such an outcome, not that they necessarily do. … Moreover, as Judge Bowsher QC observed in Gloucestershire Health Authority and Others -v- M A Torpy and PTRS Limited [1999] 1 LlIR 203 at 205, such a public policy consideration may not be so strong in the case of insured defendants as it is for insured plaintiffs. A plaintiff can choose whether to sue, the cause of action, the amount to claim and when to sue. A defendant has no choice in those matters.”

The respondents rely on the first of those paragraphs in which, they say, the court can be seen to have rejected Miss Gloster’s central argument. She, however, relies on the second paragraph which, she submits, goes some way towards reinstating the relevance of the successful party being, as here, the defendant and unable therefore to escape the costs of the litigation.

30. I now leave the insurance cases and turn to two cases touching upon the exercise of the section 51 discretion in the context of applications for the stay of funded proceedings. The first of these is Condliffe -v- Hislop [1996] 1 WLR 753, where the court refused to stay a libel action being brought against Private Eye by a bankrupt plaintiff with the financial support of his mother. The following passages in Kennedy LJ’s leading judgment are helpful:

“… we have looked at a number of cases decided since 1986, but none of them has led me to conclude that the court has any right to fetter the plaintiff because of the assistance which his mother has given him and the stance which she has taken in relation to this case. A number of the cases have been concerned with orders for costs at the conclusion of litigation, an issue with which we are not concerned …. [I]t has become the practice in defamation actions for the defendants, if they discover that the plaintiff has financial support, to seek an undertaking that the supporter will pay the defendant’s costs if his claim fails. That of course leads on to the question of how defendants are to discover if a plaintiff has financial support, a point considered by a committee chaired by Neill LJ in the Supreme Court Procedure Committee Report on Practice and Procedure in Defamation (1991). There is also the further question of how a court should react if an acceptable undertaking is not forthcoming.

In Broxton -v- McClelland (unreported), 6 November 1992 an undertaking was offered on behalf of the plaintiff which the defendant considered to be unsuitable. In that case the plaintiff in a libel action was being maintained by a French company, which offered a limited undertaking as to costs and Drake J, being satisfied that an order for costs against the company would be difficult to enforce, upheld an order made by a deputy master that the action be stayed until a fuller undertaking was given. That decision, as I shall endeavour to explain in due course, may well have been correct on its facts, but in my view it is of no assistance to the defendant in the present case.

In McFarlane -v- EE Caledonia Limited (No 2) [1995] 1 WLR 366 Longmore J at the request of the successful defendants ordered that costs be paid by a commercial organisation which had funded the plaintiff under the terms of a contract which would have given the organisation 12.5 percent of the plaintiff’s damages. Having referred to Hill -v- Archbold [1968] 1 QB 686 he said[1995] 1 WLR 366, 373:

‘It may well be that it is not necessary to every case of lawful maintenance that the maintainer should accept a liability for a successful adverse party’s costs; for example, a member of a family or a religious fraternity may well have a sufficient interest in maintaining an action to save such maintenance from contractual illegality, even without any acceptance of liability for such costs. But in what one may call a business context (eg insurance, trade union activity, or commercial litigation support for remuneration) the acceptance of such liability will always, in my view, be a highly relevant consideration.’

That seems to me to be the correct approach. The existence of a business relationship will not always lead the court to expect acceptance for liability for costs (eg if the financial backer is a bank lending money to a plaintiff, or in some cases an insurer: see Tharros Shipping Co Ltd and Den NorskeBank Plc -v- Bias Shipping Ltd (No 3) [1995] 1 Lloyds Rep 541) but it will be a highly relevant consideration.” (pp761-762)

31. Having then observed that there is at present no power to require a party who is maintained but who does not satisfy the requirements of order 23 to give security for costs, Kennedy LJ continued:

“Nevertheless the court is entitled to protect its own procedures, and as Sir Thomas Bingham MR said is Roache -v- News Group Newspapers Limited the principle that in the ordinary way costs follow the event ‘is of fundamental importance in deterring plaintiffs from bringing and defendants from defending actions which they are likely to lose’. If that principle is threatened, as for example if an insurer or a trade union were known to be giving financial support to a party without accepting liability for the costs of the other side if the supported party were to lose, then, as it seems to me, the court might, at least in some cases, be prepared to order that the action be stayed …. Normally the better course will be to let the action proceed to trial and then, if need be, consider the powers of the court under section 51 of the Supreme Court Act 1981 (as in Macfarlane’s case [1995] 1 WLR 366) but if the circumstances suggest that the litigating party or the maintainer may not be bona fide, or that if that party were to lose an order for costs would be difficult to enforce against the maintainer, then, as it seems to me, a stay could be imposed.”

32. He concluded, however, that, even were there a discretion to stay the case, he would not exercise it:

“No-one has suggested that the plaintiff’s claim is not bona fide. His mother is not a lady of great wealth, and there is no reason to suspect that when giving financial support to her son she has any ulterior motive to serve.”

That conclusion notwithstanding, Miss Gloster seeks to rely on the judgment as a whole. Underlying it, she submits, is the assumption that ordinarily speaking the funder of proceedings is on risk as to costs.

33. Before turning to the second of the “stay” cases, I should mention Metalloy Supplies Ltd -v- MA (UK) Ltd [1997] 1 WLR 1613 in which this court allowed a liquidator’s appeal against a section 51(3) order, Millett LJ observing, at pp 1619-1620:

“It is not an abuse of the process of the court or in any way improper or unreasonable for an impecunious plaintiff to bring proceedings which are otherwise proper and bona fide while lacking the means to pay the defendant’s costs if they should fail. Litigants do it every day, with or without legal aid. If the plaintiff is an individual, the defendant’s only recourse is to threaten the plaintiff with bankruptcy. If the plaintiff is a limited company, the defendant may apply for security for costs and have the proceedings dismissed if the plaintiff fails to provide whatever security is ordered.

The court has a discretion to make a costs order against a non-party. Such an order is, however, exceptional, since it is rarely appropriate. It may be made in a wide variety of circumstances where the third party is considered to be the real party interested in the outcome of the suit. It may also be made where the third party has been responsible for bringing the proceedings and they have been brought in bad faith or for an ulterior purpose or there is some other conduct on his part which makes it just and reasonable to make the order against him. It is not, however, sufficient to render a director liable for costs that he was a director of the company and caused it to bring or defend proceedings which he funded and which ultimately failed. Where such proceedings are brought bona fide and for the benefit of the company, the company is the real plaintiff. If in such a case an order for costs could be made against a director in the absence of some impropriety or bad faith on his part, the doctrine of the separate liability of the company would be eroded and the principle that such orders should be exceptional would be nullified. The position of a liquidator is a fortiori.”

That passage is, of course, strongly relied on by the respondents.

34. Millett LJ next had to consider section 51 in Abraham -v- Thompson [1997] 4 All ER 362, the other case, like Condliffe, in which the defendant was attempting to stay a funded action - in Abraham’s case until the plaintiff agreed to disclose the identity of the third party funders. The first paragraph of Millett LJ’s supporting judgment, in part echoing what he had said in Metalloy, is again relied on by the respondents:

“It is not an abuse of the process of the court for an impecunious plaintiff to bring proceedings for a proper purpose and in good faith while being unable to pay the defendant’s costs if the proceedings fail. If the plaintiff is an individual the court has no jurisdiction to order him to provide security for the defendant’s costs and stay the proceedings if he does not do so. It may be unjust to a successful defendant to be left with unrecovered costs, but the plaintiff’s freedom of access to the courts has priority. The risk of an adverse order for costs and consequent bankruptcy has always been regarded as a sufficient deterrent to the bringing of proceedings which are likely to fail. Where there is no risk of personal bankruptcy, as in the case of a plaintiff which is a limited company, the court has a statutory jurisdiction to award security for costs; but even in this case it will frequently not do so if this will have the effect of stifling bona fide proceedings. It is preferable that a successful defendant should suffer the injustice of irrecoverable costs than that a plaintiff with a genuine claim should be prevented from pursuing it.”

35. There is, however, a later passage in Millett LJ’s judgment upon which the appellant seeks to rely:

“In a number of cases starting with Hill -v- Archbold [1967] 3 All ER 110 Lord Denning MR suggested that a stranger who funded litigation should be required to undertake to pay the costs of the other side, and that the proceedings could be struck out if such an undertaking was not forthcoming. Lord Denning did not, however, suggest that the court should require the undertaking to be fortified or order the third party to provide security for costs. Thus the mischief which he identified was not the risk that the successful party might be left with unrecovered costs, but that proceedings might be financed by a party who was immune from personal liability for an adverse order for costs. This mischief has now been remedied by section 51 of the Supreme Court Act 1981.

The jurisdiction conferred by section 51, however, is normally exercised after trial, and then with caution and only after proper consideration of all the circumstances. It is inappropriate to pre-empt the decision by exacting an undertaking from a third party at an interlocutory hearing before the outcome of the proceedings is known. … In making the order for disclosure in the present case the judge was adopting the approach foreshadowed by Kennedy LJ in Condliffe -v- Hislop [1996] 1 All ER 431 at 439. In my judgment such an approach would not be justified unless there was clear evidence of an abuse of the process of the court and, for the reasons I have given, the presence of unlawful maintenance is not by itself such an abuse.”

36. The next pair of authorities to which I must refer are Tolstoy -v- Aldington [1996] 1 WLR 736 (the case referred to in paragraph 69 of Morland J’s judgment below) and Hodgson -v- Imperial Tobacco Ltd [1998] 1 WLR 1056. Both were concerned with the liability to section 51 orders of solicitors acting as such, in Tolstoy on a pro bono basis and in Hodgson under a conditional fee agreement.
37. In Tolstoy the Court of Appeal held that the judge below had been wrong to make a costs order against the solicitors under section 51(3) but upheld the order on the very different ground that their conduct had been so unreasonable as to found a wasted costs order under section 51(6) of the Act. The relevant passage in Rose LJ’s leading judgment is for present purposes this:

“In my judgment [counsel for the solicitors] is correct in his submission that there are only three categories of conduct which can give rise to an order for costs against a solicitor: (i) if it is within the wasted costs jurisdiction of section 51(6) and (7); (ii) if it is otherwise a breach of duty to the court …; (iii) if he acts outside the role of solicitor, eg in a private capacity or as a true third party funder for someone else.

There is, in my judgment, no jurisdiction to make an order for costs against a solicitor solely on the ground that he acted without fee. It is in the public interest, and it has always been recognised that it is proper, for counsel and solicitors to act without fee. The access to justice which this can provide, for example in cases outwith the scope of legal aid, confers a benefit on the public. Section 58 of the Act of 1990, which legitimises conditional fees, inferentially demonstrates Parliament’s recognition of this principle. For it would be very curious if a legal representative on a contingent fee and, therefore, with a financial interest in the outcome of litigation, could resist an order for costs against himself but one acting for no fee could not. Whether a solicitor is acting for remuneration or not does not alter the existence or nature of his duty to his client and the court, or affect the absence of any duty to protect the opposing party in the litigation from exposure to the expense of a hopeless claim. In neither case does he have to ‘impose a pre-trial screen through which a litigant must pass’: see per Sir John Donaldson MR in Orchard -v- South-Easter Electricity Board [1987] QB 565, 572-574.”

38. The Court of Appeal in Hodgson -v- Imperial Tobacco, albeit dismissing the solicitors’ appeal against the refusal to make a pre-emptive order in their favour relating to costs, nevertheless made plain that no adverse order could be made by reference to their having entered into a lawful conditional fee agreement:

“There is no reason why the circumstances in which a lawyer, acting under a CFA can be made personally liable for the costs of a party other than his client should differ from those in which a lawyer who is not acting under a CFA would be so liable. Any suggestion by the defendants’ lawyers, and any concern of the plaintiff’s lawyers, that the position of the plaintiff’s lawyers is different from that of any other legal advisor is misconceived. The existence of a CFA should make a legal advisor’s position as a matter of law no worse, so far as being ordered to pay costs is concerned, than it would be if there was no CFA. This is unless, of course, the CFA is outside the statutory protection. (p1065)

Just as in the Tolstoy-Miloslavsky case it was made clear that it is in the public interest and perfectly proper for counsel and solicitors to act without fee, so it must now be taken to be in the public interest, and should be recognised as such, for counsel and solicitors to act under a CFA. There are no grounds for treating the party who is or has been represented under a CFA differently from any other party. The same is true of their lawyers. (p1067)”

39. The final Court of Appeal decision in point is Faryab -v- Smyth (Third Party Izzo and Others) (transcript 27 November 2000) in which the successful respondent in this court applied for a section 51 order against four individuals who in varying amounts had put up the £40,000 which the appellant, Mr Faryab, had been required to pay into court as security for costs in the appeal. Although the monies had been loaned to Mr Faryab on terms that they would be repayable together with a substantial premium (in practice, although not in law, dependent upon the outcome of the appeal), the court found that “in fact the lenders were helping Mr Faryab for motives other than the hope of gain”. In giving the leading judgment, Robert Walker LJ noted that the most important statements of principle are those in Symphony Group -v- Hodgson and, in relation to insurers, Murphy -v- Youngs Brewery and Chapman Limited -v- Christopher; he stated that “a costs order of this sort will always be exceptional and must always be based on a substantial connection between the litigation and the person against whom the costs order is sought” and concluded:

“… I do not consider that it would be fair, just or reasonable to make any costs order against [the named lenders]. To do so would have the practical effect of giving Ms Smyth a larger layer of security than that which this court thought fit to order for her.”

40. Within that substantial body of Court of Appeal authority, submit the respondents, the immunity of “pure” funders from section 51 liability is clearly to be seen established - pure funders being those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course. Cooper -v- Maxwell is directly in point, there being no logical distinction between a disinterested relative and other funders. That case clearly prevails over Judge Hicks’ decision in Thistleton, a decision about which Phillips LJ in Murphy clearly had reservations if, indeed, he did not implicitly over-rule it - see in particular his reference to a disinterested relative funding “costs of a claim or a defence that is reasonably advanced” (my emphasis). The facts of Murphy itself support the view that mere funders (as opposed to those with a direct commercial interest in the litigation) ought not to be liable for costs. Auld LJ in Cormack rejected the contended-for principle that the funder of unsuccessful litigation, even one who had an interest in its outcome, should normally pay the other side’s costs - see paragraph 29 above. Millett LJ in Metalloy held that neither a director nor a liquidator is liable for costs merely for causing a company “to bring or defend proceedings which he fund[s]” - see paragraph 33 above. The governing principle is as stated by Millett LJ in Abraham -v- Thompson (see paragraph 34 above):

“It may be unjust to a successful defendant to be left with unrecovered costs, but the plaintiffs freedom of access to the courts has priority. … It is preferable that a successful defendant should suffer the injustice of irrecoverable costs than that a plaintiff with a genuine claim should be prevented from pursuing it.”

41. That principle should encompass funded claims no less than claims advanced without providing security for the defendant’s costs. “Genuine” for this purpose must mean in good faith as perceived by the funders. Furthermore, argue the respondents, if lawyers acting under CFAs are not amenable to section 51(3) orders, no more should pure funders be liable. Finally, they contend, the present case is a fortiori to Faryab: there, after all, the funders stood to make a substantial profit - see paragraph 39 above.
42. Miss Gloster for the appellant contends the contrary. She submits that the most that the Court of Appeal authorities establish is, as was held in Maxwell and stated by Phillips LJ in Murphy:

“Funding alone will not justify an order against the funder under section 51. I do not consider that an order under section 51 will normally be appropriate where a disinterested relative has, out of natural affection, funded costs of a claim or a defence that is reasonably advanced.”

43. To exempt (“normally”) from liability a “disinterested relative” moved by “natural affection” (like Mrs Maxwell) is one thing; to exempt backers like the present respondents whose motives are likely to be less pure is another. Faryab was a very different case, the critical feature there being that the funders’ contributions had gone to meet a specific order for security for costs. Dicta in certain of the cases strongly support the view that the funder of a losing party ought in principle to carry liability for the other side’s costs. That appears to have been the underlying assumption in Condliffe (consider not least Kennedy LJ’s reference to the practice in defamation cases of seeking the funder’s undertaking to pay the defendant’s costs if the claim fails). Some suggestion of that approach is also to be found in Millett LJ’s judgment in Abraham -v- Thompson (cited in paragraph 35 above). Certainly Lord Denning MR in Hill -v- Archbold (the authority to which Millett LJ there referred) only regarded the maintenance of claims and defences respectively by unions and insurers as justified “provided always that the one who supports the litigation, if it fails, pays the costs of the other side”. The ruling principle, she submits, is that articulated by Sir Thomas Bingham MR in Roache: “that in the ordinary way costs follow the event … [a] principle … of fundamental importance in deterring plaintiffs from bringing and defendants from defending actions they are likely to lose”. Justice requires that funders who enable litigation to be fought, and who in a real sense, therefore, may be regarded as responsible for it, should pay the unfunded party’s costs if it fails.
44. It is time to state my conclusions on the appeal. As I observed earlier (see paragraph 16 above) conflicting principles are here in play and only one can prevail. Should the law accord priority to the funded party gaining access to justice or to the unfunded party recovering his costs if he wins?
45. Although none of the authorities to my mind precisely dictates the result of this appeal, I conclude that on balance they clearly favour the respondents’ argument and that the unfunded party’s ability to recover his costs must yield to the funded party’s right of access to the courts to litigate the dispute in the first place. That seems to me to be the essential policy underlying the cases. Perhaps most conspicuously this is so in two of the categories of case discussed above: the CFA cases and those concerning security for costs. The respondents’ argument arising out of the CFA ruling is really a very powerful one: if in these cases solicitors (or, indeed, barristers) are not to be liable for the other side’s costs if their client’s claim fails, why should the pure funder be? True, the client may obtain insurance and secure the other side’s costs in that way, but this will not always be so and is certainly not a condition of acting under a CFA. True too, the lawyers will generally not be prepared to act under a CFA unless the claim has reasonable prospects of success thus arguably securing in a different way the public interest referred to by Sir Thomas Bingham in Roache (of deterring actions likely to be lost), deterrence perhaps less likely to be achieved in funding cases where the backers will probably not be exercising the same careful judgment as the CFA lawyers. As against that, however, it must be remembered that in CFA cases the lawyers are entitled to a substantial uplift in costs if the claim succeeds, and for this the defendant will be liable. The defendant’s potential liability for costs in a CFA case is therefore greater than in an ordinary case and, of course, greater still than if the claimant is either unrepresented or represented pro bono. It could, indeed, be argued that unless both sides’ costs are (a) the same and (b) actually able to be recovered in the event of success, the playing field of justice is uneven. That, however, is very plainly not the approach taken by the law. Rather, the law’s policy with regard to CFAs is plainly to favour access to justice.
46. The court’s approach to security for costs is similar - see in particular Millett LJ’s judgment in Abraham -v- Thompson cited in paragraph 34 above. The law allows a claimant to litigate, at any rate at first instance, however clear it is that the defendant’s costs could not be met - even, indeed, if the claimant can be shown to be expending all his assets in meeting his own costs. This same policy, moreover, underlies the legal aid scheme as it applies at first instance: the only circumstances in which the successful unfunded party can recover his costs from the fund are (a) if he is the defendant and (b) if he would otherwise suffer hardship. True it is that in a legal aid case - as Macpherson J pointed out in Singh (see paragraph 20 above) - counsel are required “to give fearless opinions as to the merits of the case as a condition of continuing legal aid”. Against that, however, it should be borne in mind that in legal aid cases the sanction of bankrupting the unsuccessful funded party - which Millett LJ in Abraham said “has always been regarded as a sufficient deterrent to the bringing of proceedings which are likely to fail” - is unavailable.
47. By the same token that Phillips LJ in Murphy found legal expenses insurance to be in the public interest (see paragraph 26 above) so too in my judgment the pure funding of litigation (whether of claims or defences) ought generally to be regarded as being in the public interest providing only and always that its essential motivation is to enable the party funded to litigate what the funders perceive to be a genuine case. This approach ought not to be confined merely to relatives moved by natural affection but rather should extend to anyone - not least those responding to a fund-raising campaign - whose contribution (whether described as charitable, philanthropic, altruistic or merely sympathetic) is animated by a wish to ensure that a genuine dispute is not lost by default (or, as concerned Lord Portsmouth here, inadequately contested). I recognise, of course, the very real differences between Murphy’s case and the present, not least in that the two specific benefits identified by Phillips LJ as likely to accrue to the other party from legal expenses insurance - the early consideration of the claim’s merits and the provision of funds which may cover an adverse costs order - are substantially less likely to accrue in the case of pure funding (although it is by no means impossible that the funds provided may enable the funded party to meet at least part of his costs liability if he loses). Whereas in Murphy, however, the court expressed itself unconcerned as to whether or not the making of section 51 orders against insurers would reduce the availability of such cover, here it seems to me plain beyond question that if pure funders are regularly exposed to liability under section 51, such funds will dry up and access to justice will thereby on occasions be lost.
48. In expressing my conclusions thus far I have intentionally spoken in very general terms and sought to deal with pure funding cases as a broad category. It seems to me that nothing could be more inconvenient and productive of satellite litigation than to hold that some pure funding cases are likely to attract section 51 orders, others not, depending merely on the sort of considerations which moved Judge Hicks to decide against the funder in Thistleton. For my part, therefore, whilst I am disposed to accept Miss Gloster’s argument that hitherto the courts have not clearly laid down a rule that pure funders are generally to be regarded as exempt from section 51 orders, I am against her submission that they should ordinarily be held liable. So long as the law continues to allow impoverished parties to litigate without their having to provide security for their opponent’s costs, those sympathetic to their plight should not be discouraged from assisting them to secure representation. Thus is access to justice promoted and, another benefit too - fewer litigants in person.
49. It follows that I would support the approach taken by the judge below as expressed in paragraphs 69-72 of his judgment (see paragraph 6 above) and would accordingly reject the central ground of this appeal (see paragraph 8 above).
50. As to Miss Gloster’s three criticisms of paragraph 115 of the judgment below, I have already dealt with the third (see paragraphs 11-16 above) and can take the other two really very shortly. The first criticism - that in paragraph 115 the judge merely catalogued the factors (some in favour of Mr Al Fayed, some against him) to which he had regard, without explaining how he reached his conclusion - seems to me misplaced. Essentially the judge decided that there was nothing so exceptional in the circumstances of this case to justify making section 51 orders against the respondent funders. Paragraph 115 was designed merely to demonstrate that in so deciding he had overlooked nothing which could be thought to compel a different conclusion. What, however, this criticism does highlight is, I would suggest, the enormity of the exercise that would need to be undertaken in every case of pure funding were the court not to lay down a clear and strong presumption either for or (as I think) against section 51 liability generally in these cases.
51. The second criticism - that the judge took into account against Mr Al Fayed certain matters which should not strictly have counted against him (at any rate as to liability for costs as opposed to quantum) - I find altogether more persuasive. Take, for example, sub-paragraph (t): it seems to me quite wrong that Mr Al Fayed should be penalised for expressing, however abusively, his no doubt heartfelt views about this funding campaign. It is not, I think, necessary for present purposes to discuss the other sub-paragraphs individually. Overall, indeed, I have some considerable sympathy for Mr Al Fayed however obviously open to criticism some aspects of his conduct may have been. He was, after all, resoundingly vindicated by the jury in his contest with Mr Hamilton - and that despite the strong prejudice which a jury might initially have been expected to feel against him - and yet at the end of the day he has been left hugely out of pocket. Even though, as I have sought to explain, the policy of the law in these cases favours access to justice over the recoverability of costs, I think it right to recognise that it is Mr Al Fayed and others in his position who are required to pay the price of that policy. The court should rather sympathise with their predicament than rub salt into their wounds. But even acceding to this particular criticism of the judgment and exercising our discretion afresh, we must, I believe, inevitably reach the same ultimate conclusion as the judge below. This was a case of pure funding by contributors whose essential motive was to allow Mr Hamilton to litigate his claim. They acted rather through sympathy with his cause than out of malice towards Mr Al Fayed. (The contrary case advanced against Mr Taki Theodoracopulos who had battled with Mr Al Fayed down the years was rejected by the judge who was satisfied that “Mr Theodoracopulos’s main motive for contributing was charity”, a finding not challenged on this appeal.) Although, moreover, Miss Gloster, in a supplementary skeleton argument, sought to contend that the contributors were “at best reckless” in supporting a claim so conspicuously lacking in merit, in the course of the appeal hearing she expressly withdrew that allegation of recklessness together with any suggestion that the contributors should have read any of the documentation underlying the litigation (most particularly Sir Gordon Downey’s July 1997 report on the cash for questions inquiry). There is in short nothing in the facts of this case to take it out of the general principle which for my part I would lay down: that pure funders generally are exempt from section 51 liability.
52. This conclusion makes it strictly unnecessary to deal with the arguments, advanced by way of the respondents’ notice, that the judge ought in any event to have dismissed these applications on grounds of causation. I propose nevertheless to deal with it briefly since it illustrates the sort of difficulty likely to arise in these cases if funders are ordinarily to be held liable under section 51.
53. The argument was advanced most strongly on behalf of Lord Portsmouth whose £100,000 contribution was made on 26 October 1999, after Mr Hamilton’s solicitors had taken the decision to proceed with the case irrespective of whether any further donations were made - after, as the judge put it, “the Rubicon was crossed” with the delivery of counsel’s briefs on 10 October 1999 - see sub-paragraphs (p) and (q) of paragraph 115.
54. Given that proof of causation is a necessary pre-condition of the making of a section 51 order against a non-party - as to which there is ample authority and, as I understand it, no dispute - Mr Wardell submits that the bare facts just recited demonstrate of themselves that in Lord Portsmouth’s case such proof was wanting - that, indeed, Lord Portsmouth’s contribution plainly did not cause Mr Al Fayed to incur any costs which he would not otherwise have incurred.
55. The judge dealt with this argument in paragraph 110 and 111 of his judgment as follows:

“110. Argument about causation has featured extensively in this case. In my judgment but for the existence of the Fund Mr Hamilton’s case would not have proceeded so that by the 10^th October 1999 the case was almost ready for trial the following month. The subsequent large donations were made in the belief that without further substantial funding the trial might not take place. Unknown to the donors the decision to cross the Rubicon had been taken whether or not further funding was forthcoming by Hamilton’s solicitors.

111. If it had been just and reasonable to make a section 51 order against those funders who contributed before the 10^th October 1999, in my judgment it would have been unjust and unreasonable not to have made an order against those who contributed after the 10^th October 1999. The distinction is artificial. The fund-raising by Lord Harris was on-going and repeated. Mr Hamilton’s claim to clear his name could not be prosecuted and brought to a conclusion at trial without continual funding.”

56. That reasoning, submits Mr Wardell, is unsustainable. In particular the last sentence of paragraph 111 is belied by the judge’s earlier finding in paragraph 33 of his judgment that “the probabilities are that the case would have proceeded to trial and concluded as it did irrespective of whether or not there had been further funding after 10^th October 1999”. The mere fact that the later contributors knew nothing of the Rubicon having been crossed cannot logically avail the appellant. Nor can the fact that the solicitors no doubt hoped for and perhaps even expected further contributions to be made.
57. The argument, I have to say, appears to me not merely irresistible but also to demonstrate that there would need to be further factual exploration along these lines in all these pure funding cases were they not to be subject to a general presumption against section 51 liability in any event. As already indicated, it is upon such a presumption - not displaced on the facts of this case - that I would dispose of the present appeal. It is accordingly unnecessary to follow up the conclusion I have reached on the separate issue of causation by relating it to the various contributions made here by the individual respondents.
58. I would dismiss this appeal.

Lord Justice Chadwick:

59. The power of the High Court to determine by whom the costs of proceedings in that court are to be paid is conferred by section 51(3) of the Supreme Court Act 1981. Whether or not that power should be exercised (and, if so, in what manner) is, subject to the provisions of the 1981 Act or any other enactment and to rules of court, in the discretion of the court – see section 51(1) of that Act. An appellate court should not interfere with an order of the trial judge in respect of costs unless satisfied that he has erred in the exercise of that discretionary power.
60. In the present case, following the trial of defamation proceedings brought by an impecunious claimant, the judge dismissed an application by the defendant, as the successful party in those proceedings, for orders that the respondents to that application (who were amongst those who had provided funding towards claimant’s costs) should contribute towards his costs. The defendant appeals to this Court. It is submitted on his behalf that the judge erred in the three respects to which Lord Justice Simon Brown has referred: that is to say, (i) that, in exercising his discretion, he took into account factors which ought not to have been taken into account, (ii) that he failed to take into account what is described as “the inequitable basis on which the fund was raised and the money contributed”; and (iii) that, in relation to the factors which he was entitled to and did take into account, he failed to give any sufficient indication as to the weight which he attributed to each – or, indeed, whether some were weighed in favour of, or against, the orders sought.
61. I agree with Lord Justice Simon Brown that there is force in the criticism that the judge took into account factors which should have had no place in the exercise of discretion in which he was engaged. The judge should not have allowed the factors which he listed under sub-paragraphs (o) (Mr Al Fayed’s ‘discreditable’ conduct after the trial) and (t) (Mr Al Fayed’s state of mind indicating resentment as expressed to a journalist from the ‘Independent’ after the trial) in paragraph 115 of his judgment to affect his decision. If he intended to list those factors only to discount them, he should have said so. Nor could factor (n) (Mr Al Fayed’s misuse of the witness-box to make speeches and ‘utterly scandalous allegations’) have any relevance to the question whether an order for costs should be made against those who had funded the claimant; although, as Lord Justice Simon Brown has pointed out, that factor – if it had led to the waste of court time at the trial - might have been relevant to the amount of any such order.
62. In those circumstances, whether or not there is also force in the other criticisms made of the judgment below, it is necessary for this Court to consider, for itself, whether this was a case in which an order for the payment of the successful defendant’s costs should have been made against those who had funded the claimant. In order to answer that question it is necessary to address the issue which lies at the heart of the appellant’s submissions: whether fairness and justice will, in general, require that where C, for reasons of his own, funds the litigation costs of A, an impecunious claimant, in defamation proceedings brought by A against B in which B is successful, C should contribute to the costs which B will (by reason of A’s impecuniosity) be unable to recover under an order for costs against A alone?
63. The starting point, as it seems to me, is to recognise that, where there is tension between the principle that a party who is successful in defending a claim made against him ought not to be required to bear the costs of his defence and the principle that a claimant should not be denied access to the courts on the grounds of impecuniosity, that tension has to be resolved in favour of the second of those principles - see the observations of Lord Justice Millett in Mettaloy Supplies Ltd v MA (UK) Ltd [1997] 1 WLR 1613, 1619H, and Abraham v Thompson [1997] 4 All ER 362, 377d-g. As it was put in the second of those cases:

“It may be unjust to a successful defendant to be left with unrecovered costs, but the plaintiff’s freedom of access to the courts has priority. . . . It is preferable that a successful defendant should suffer the injustice of irrecoverable costs than that a plaintiff with a genuine claim should be prevented from pursuing it.”

It is true that the rule that the costs of litigation generally follow the event – which gives effect to the first of those principles – was described by Sir Thomas Bingham, Master of the Rolls, in Roache v News Group Newspapers Limited and others [1998] EMLR 161 as “of fundamental importance in deterring plaintiffs from bringing and defendants from defending actions they are likely to lose”. But “the risk of an adverse order for costs and consequent bankruptcy has always been regarded as a sufficient deterrent to the bringing of proceedings which are likely to fail” – see Abraham v Thompson (ibid, at page 377). An impecunious claimant who is not deterred by the risk of bankruptcy is not to be prevented from pursuing a genuine claim.

64. It may be said that a defendant does not choose to be sued. It may be said that, if he is obliged to incur costs in the successful defence of a claim brought against him, it is unjust that he should suffer financially because he is unable to recover those costs from an impecunious claimant. It may be said that it is unjust that a defendant should have to face a claim brought by a claimant who, if unsuccessful, will not be in a position to meet an order for costs made against him. But the courts have had to balance the risk of injustice to the defendant in those circumstances against the risk of injustice to a claimant who is denied access to the courts to pursue a genuine claim; and the scales have come down in favour of the latter.
65. Access to the courts is one thing; effective access with the benefit of legal representation is another. That is not to suggest that those who choose to represent themselves – or who are forced by circumstances to do so – do not receive a full and fair hearing. The need to ensure, so far as possible, that whatever points can properly be made in support of the case advanced by an unrepresented claimant are identified and considered is well recognised; and judges should be, and almost universally are, scrupulous in seeking to meet that need. But it would be idle to pretend that an unrepresented claimant in complex proceedings will not be at some disadvantage against a skilled and experienced advocate. In some cases the perception of disadvantage may be so overwhelming that the unrepresented claimant will be deterred from bringing his claim at all. Defamation proceedings before a jury may be regarded as a paradigm example of such a case. It is of little consolation to an impecunious claimant to learn that he has access to the courts to pursue his claim - notwithstanding his inability to meet an order for payment of the defendant’s costs if that claim is unsuccessful – if he perceives, rightly or wrongly, that the claim has no reasonable prospect of success in the absence of an “equality of arms”. The need to promote “equality of arms” in civil litigation, where practical, may be seen as a necessary adjunct to the need to afford access to the courts in pursuit of genuine claims. The point is recognised by the principle, set out in CPR1.1(2)(a), that dealing with a case justly includes, so far as practical, ensuring that the parties are on an equal footing.
66. It is important, therefore, that a court which is invited to make an order for costs against persons who have, in one way or another, assisted a claimant to obtain the legal representation which will put him on an equal footing with the defendant should recognise that, if such orders become commonplace, the form of assistance which has led to the making of the order is unlikely to be forthcoming in future cases. It is one thing to make a finite monetary contribution to the claimant’s fighting fund or to contribute time and skill pro bono or under a no-win/no-fee arrangement; it is quite another thing to accept an unlimited liability to contribute to the defendant’s costs if the claim fails.
67. The courts have recognised the need to protect legal advisers who have acted for a claimant on a pro bono basis from exposure to orders, made under section 51(3) of the 1981 Act, for payment of the successful defendant’s costs – see Tolstoy-Miloslavsky v Aldington [1996] 1 WLR 736. It is, I think, instructive to note the basis upon which Lord Justice Rose rejected the application in that case, (ibid at page 746B):

“It is in the public interest … for counsel and solicitors to act without fee. The access to justice which this can provide, for example in cases outside the scope of legal aid, confers a benefit on the public.”

That protection has been extended to those who act under a conditional fee arrangement which satisfies the conditions applicable to such an agreement by virtue of section 58 of the Courts and Legal Services Act 1990 – see Hodgson and others v Imperial Tobacco Ltd and others [1998] 1 WLR 1056. In giving the judgment of the Court, Lord Woolf, Master of the Rolls, said this, at page 1067F:

“Just as in the Tolstoy-Miloslavsky case it was made clear that it is in the public interest … for counsel and solicitors to act without fee, so it must now be taken to be in the public interest … for counsel and solicitors to act under a C.F.A.”

Parliament having enacted that conditional fee agreements which satisfy the applicable conditions are not to be unenforceable, notwithstanding that those providing legal representation under such agreements have a direct interest in the outcome of litigation to which they are not party, the courts must accept that it is in the public interest that legal representation should be available on no-win/no-fee terms. The public interest is served by facilitating access to justice by such arrangements in cases where publicly funded legal assistance is not available.

68. It may be said that the potential injustice to the successful defendant in a case where the claimant has been represented under a conditional fee agreement is avoided – or, at the least, mitigated - by the feature that such claimants are almost invariably advised to purchase “after the event” insurance cover against their own liability for the successful defendant’s costs. After the event insurance cover is a sensible protection for the claimant against the risk of personal bankruptcy; and, when in place, it provides a source from which the successful defendant’s costs can be met. But insurance cover is not a requirement under the 1990 Act, nor – so far as appears from the material which has been shown to us - is the existence of such cover a pre-condition imposed by the General Council of the Bar or the Law Society before barristers or solicitors may accept instructions under conditional fee agreements. There is no reason to think that a barrister or solicitor who accepted such instructions in circumstances in which the claimant was unable to obtain – or refused to obtain – after the event insurance cover would, on that ground alone, be exposed to liability for the costs of a successful defendant.
69. The appellant relies heavily on what is said to be the unfairness inherent in a funding arrangement which has the consequence that, if the claim succeeds, the funders will be reimbursed out of costs which the claimant will recover from him but that, if the claim fails, he will not recover his costs from the funders. But that is a feature inherent also in a conditional fee agreement. And it is accepted that it is in the public interest to facilitate access to justice by an agreement which has that effect. Indeed, it is accepted that it remains in the public interest to fund litigation by that means notwithstanding that the other party to the proceedings – usually a defendant - is exposed to the risk of liability for the uplifted fees payable under the conditional fee agreement if the claim succeeds.
70. For my part I can see no difference in principle, in the context of facilitating access to justice, between the lawyer who provides his services pro bono or under a conditional fee arrangement, the expert (say an accountant, a valuer or a medical practitioner) who provides his services on a no-win/no-fee basis, and the supporter who – having no skill which he can offer in kind – provides support in the form of funding to meet the fees of those who have. In each case the provision of support – whether in kind or in cash – facilitates access to justice by enabling the impecunious claimant to meet the defendant on an equal footing.
71. It follows that I would hold that – in the interests of justice generally – fairness to the successful defendant does not, as a general rule, require that where a pure funder provides financial support towards the litigation costs of an impecunious claimant, he should contribute to the costs which that defendant will (by reason of the claimant’s impecuniosity) be unable to recover under an order for costs against the claimant alone. In that context I use the expression “pure funder” to denote a person who provides funds to meet the litigation costs of a claimant in circumstances in which he, himself, has no collateral interest in the outcome of the claim – other than as a source of reimbursement of the funds which he has provided.
72. It follows, also, that I would dismiss this appeal. As Lord Justice Simon Brown has pointed out, on the evidence before the judge the respondents were “pure funders” in the sense which I have described.

Lady Justice Hale:

73. I am reluctantly persuaded to agree. This is a situation in which the greater good of the community must prevail over considerations of justice to the individuals concerned. If we were simply concerned with the individuals in this case, I would have concluded that the injustice to Mr Al Fayed in not making the orders he seeks was much greater than the injustice to the respondents in making them.
74. It is unjust to Mr Al Fayed because the normal principle is that the successful party to litigation is entitled to his costs. There are at least two reasons for this. The principled reason is that a person should not have to bear the cost of vindicating his rights. In practice, he will often be considerably out of pocket in doing so, because a standard costs order will not allow him to recover all that he has had to pay his own lawyers. But the courts do not take the view taken in other countries, and in some tribunals in this country, that litigants should bear their own costs. The pragmatic reason for this is that the risk of an adverse costs order is seen as a deterrent to bringing bad claims or defending good ones (see Roache v News Group Newspapers Ltd (1992) Times, 23 November [1998] EMLR 161, per Bingham MR; TGA Chapman Ltd v Christopher [1998] 1 WLR 12, per Phillips LJ at p 22).
75. The courts do accept that an impecunious individual cannot be prevented from litigating just because he may not be able to pay the other side’s costs if he loses (see Metalloy Supplies Ltd v MA (UK) Ltd [1997] 1 WLR 1613, per Millett LJ at pp 1619-1620; Abraham v Thompson [1997] 4 All ER 362, per Millett LJ, at p 377). But it does not follow that those who assist such a person to bring a claim which he would not otherwise have been able to bring should not generally be placed in the same position in which he would have been had the resources been his. As I understand it, costs orders are not normally made against trade unions who fund their members’ claims against employers, but it is taken for granted that they will in fact meet the costs ordered against their members. The same is true of liability insurers, because the costs are included in the cover. In both cases, the court would otherwise probably make a costs order against them unless there was a good reason not to do so (see Singh v Observer Ltd [1989] 2 All ER 751, per Macpherson J at p 757; exceeding the limits of cover may sometimes be a good reason, cf TGA Chapman Ltd v Christopher [1998] 1 WLR 12 and Cormack v The Excess Insurance Company Ltd (2000) Times, March 30). This is so, even though the trade union is simply providing a service for its members and does not stand to gain anything directly from the litigation, whereas the liability insurer is protecting his own interests at least as much as those of his insured.
76. It is quite difficult to understand why there should be any difference between ‘pure’ funders such as those in this case and trade union funders. It is true that trade unions will not fund cases which they consider unmeritorious and exercise a degree of control over the litigation they do fund. But it could well be said that ‘pure’ funders ought to be more discriminating in deciding what to fund. They should not be able to put their heads in the sand and support unmeritorious litigation at no risk of further cost to themselves just because they happen to sympathise with the unsuccessful litigant. Sympathy for a person or his cause may be understood: but we would not in other contexts regard it as any substitute for a hard-headed assessment of the legal and factual merits of his case.
77. There is no reason in principle why those who fund other people’s litigation should not be expected to put sums aside to cover against the risk of failure or take the risk of an adverse costs order. One can only speculate as to why those funders who have already settled with Mr Al Fayed were persuaded to do so, but it is at least possible that they recognised the justice of his claim. The only possible injustice to the funders in this case was that they were not warned of the risk. That, as the Judge accepted, was not the fault of Mr Al Fayed or his advisers. They did everything they could to warn of their intention to make these applications. Those warnings were not passed on. Given the present uncertainty in this area of the law, they should have been.
78. Lord Justice Simon Brown has set out the authorities. To make a costs order against a person who is neither a party to the proceedings nor directly interested in the outcome is of course exceptional (see Aiden Shipping Ltd v Interbulk Ltd [1986] AC 965; Symphony Group Plc v Hodgson [1994] QB 179, CA). But outside funding other than from liability insurers, trade unions or statutory sources is exceptional, in the sense that it is outside the general run of cases coming before the courts (see TGA Chapman Ltd v Christopher [1998] 1 WLR 12, per Phillips LJ at p 20; Globe Equities Ltd v Globe Legal Services and Others [1999] BLR 232, per Morritt LJ at para 21). Only two authorities have been cited to us which clearly deal with private funders, mothers in each case, one going one way (Cooper v Maxwell, unreported, 20 March 1992, CA) and one going the other (Thistleton v Hendricks (1992) 32 Con LR 123). There is no case dealing with a public campaign such as this.
79. I do not find the comparison with legal aid particularly helpful. This was a statutory scheme involving public funds in which Parliament had to make some difficult policy choices. It was decided that the fund should be able to recover the costs of successful litigation but should not have to pay the costs of unsuccessful litigation save in cases of hardship or on appeal. The fact that Parliament made those choices does not necessarily indicate where justice lies in cases where public funds are not involved or how the courts should exercise the open discretion given them by section 51 of the Supreme Court Act 1981.
80. Nor do I find the comparison with lawyers who offer their services free or under conditional fee agreements particularly helpful (see Tolstoy-Miloslavsky v Aldington [1996] 1 WLR 736, CA; Hodgson v Imperial Tobacco Ltd [1998] 1 WLR 1056, CA). There is a distinction between those who provide legal services for the litigant and those who provide the money to pay for those legal services. In the case of pro bono lawyers, this is pure altruism. They do not expect to get their costs from the other side even if they win. In the case of CFAs, there is no altruism, rather a cold calculation of the risks, but there is a risk. Parliament decided that their clients should then be able to recover not only the standard costs but also the uplift from the other side. That again is a controversial policy choice. As part of the CFA package, the client normally takes out after the event insurance to cover against the risk of having to the pay the other side’s costs, and that premium is also recoverable from the other side. This too is a policy choice made by Parliament.
81. The relevance of those developments, it seems to me, is not so much in their detail as in the clear evidence they give of a trend in public policy towards funding access to the courts (I would not be so presumptuous as to assume that access to the courts and access to justice were synonymous, although of course it is always the courts’ aim to achieve both procedural and substantive justice). Access to the courts is a fundamental aspect of the rule of law in a democratic society, guaranteed to everyone by Article 6(1) of the European Convention on Human Rights. It should not be denied to those who cannot afford to pay the court’s fees (see R v Lord Chancellor, ex parte Witham [1998] QB 575, DC).
82. But our system of adversarial justice depends heavily upon the use of lawyers to conduct litigation. We do have tribunals which are, or were originally intended to be, more specialist in their knowledge of the law, more inquisitorial in their approach to the facts and thus less heavily dependent upon lawyers to assist them, where costs orders are accordingly rare or entirely unknown. But these are outside the ordinary court system. However hard the courts try to accommodate litigants in person it is unrealistic to suggest that such litigants are not often at a considerable disadvantage. It is also a disadvantage for the court.
83. It used to be thought that the answer to this problem lay in public funding for those who had a reasonable case to bring or defend but were unable to afford lawyers to help them do so. Parliament no longer takes that view. The eligibility criteria for public funding have been much restricted, as has its scope. The gap has been filled by permitting methods of funding which were previously not allowed, principally conditional fee arrangements, and by encouraging greater use of other methods, such as legal expenses insurance (as in Murphy v Young & Co’s Brewery [1997] 1 WLR 1591, CA), which were previously uncommon. Private or voluntary funding from people with no direct interest in the outcome of the case must now be seen as part of this picture. If the policy of the law is now to encourage such alternative methods of securing access to the courts, then the funders should not be discouraged by the fear of having to pay more. I am prepared to assume that the risk of adverse costs orders would make the task of raising such funds a great deal more difficult.
84. If the general policy is accepted, the court cannot start drawing distinctions according to whether or not it approves of the litigation in question. It could not, for example, say that it was right to fund Private Eye in defending a libel action but wrong to fund Mr Hamilton in bringing this one, or right to fund an environmental challenge to a major development but wrong to fund patients pressing for an inquiry into medical incompetence. Still less would it be proper to distinguish on the basis of whether the court approved or disapproved of the individual parties to the litigation. Justice should be blind to such things. It is regrettable indeed if Mr Al Fayed has gained the impression that the outcome of his application was in any way influenced by the court’s views about him personally.
85. It might be more practicable to distinguish on the basis of whether the party funded had a reasonable prospect of success in the litigation. But experience with legal aid has shown that this is difficult to predict in advance, particularly where the outcome depends upon credibility or the impression made in the witness box. Lawyers give advice on the basis that what their client tells them is honest and accurate (although they should draw attention to the difficulties which a court may have in accepting the evidence). It is unreasonable to expect funders to be any more sceptical. In practice, there has to be a general approach, whether for or against making such orders, even if there may sometimes be exceptions.
86. On balance, the arguments in favour of a general approach that ‘pure’ funders should not be expected also to fund the opposing party’s costs outweigh the arguments in favour of a general approach that they should. There must, however, be exceptional cases where it would be quite unjust not to make an order: principally where the litigation was oppressive or malicious or pursued for some other ulterior motive. The fact that it was quite unmeritorious would be powerful evidence of ulterior motive but neither a necessary nor a sufficient criterion in itself.
87. In the end, I am driven to the view that the law must protect the people who club together to support someone who would not otherwise be able to fund his case, so that such a person is not denied access to the courts, even though the result will be unfair to the other side if he loses. The costs sanction will still be a deterrent to the actual party funded, who will stand to lose a great deal more than his case, as indeed has Mr Hamilton here.
Order: Appeal dismissed. The appellant to pay the costs of each individual respondent, with payments on account of £10,000 to the seventh respondent and £20,000 to the first to sixth respondents. Permission to appeal to the House of Lords refused. (Order does not form part of the approved judgment)