Murphy v Young & Co’s Brewery Plc

Section 51 of the Supreme Court Act 1981 gives the court a wide discretion to order a non-party to pay costs, but such an order remains exceptional. Funding litigation, including under a commercial insurance policy, does not by itself justify liability for the successful party’s costs. The court must consider whether the funder managed, controlled, caused or maintained the litigation, had a direct interest in its outcome, or had undertaken to meet adverse costs. A legal expenses insurer whose contractual limit has been exhausted is not ordinarily liable merely because it funded the unsuccessful party.

The Murphys’ wrongful-dismissal claim against Youngs failed, while Youngs succeeded on a counterclaim and recovered almost all of its costs. The Murphys had legal expenses insurance with Sun Alliance, but the £25,000 limit had been exhausted by their own costs. Youngs joined Sun Alliance and sought an order requiring it to pay Youngs’ costs under section 51 of the Supreme Court Act 1981. A deputy High Court judge refused the application, finding no maintenance, management, control, bad faith or public-policy basis for overriding the contractual limit. The appeal concerned whether commercial funding by a legal expenses insurer made such an order reasonable and just.

The appeal was dismissed unanimously, with costs. Lord Justice Phillips delivered the leading judgment. Lord Justice Butler-Sloss and Sir John Balcombe agreed.

1. Jurisdiction and governing approach. Section 51 confers a wide power to determine by whom costs are paid, extending to non-parties. Following Aiden Shipping [1986] A.C. 965, an order against a non-party is exceptional. The ultimate question is whether the order is reasonable and just on the facts. The relevant principles guide the discretion but do not fetter it.
2. Procedural safeguards. A non-party must be brought before the court so that it can make representations and, where appropriate, adduce evidence. Joinder may provide a convenient procedure, although an originating summons might sometimes be preferable.
3. Funding is insufficient by itself. The court rejected any automatic rule that a funder must pay the successful party’s costs. More is required than funding under a commercial agreement. The approach in Cooper v Maxwell (Transcript 20th March 1992) supported the conclusion that funding alone does not justify an order.
4. Relevant exceptional circumstances. These may include wanton and officious intermeddling, management or control of the litigation, a direct commercial interest, a contractual obligation to indemnify adverse costs, or responsibility for pursuing and conducting the case. The position of a liability insurer with a capped policy is fact-sensitive; an order is not automatically justified because the cap may be exceeded.
5. Application. Sun Alliance had no interest in the result, had not initiated or controlled the litigation, was contractually bound to fund it to the policy limit, and had not intermeddled. Legal expenses insurance was a legitimate and publicly beneficial form of cover. Exhaustion of the limit therefore did not make it reasonable and just to order Sun Alliance to pay Youngs’ costs.

• Court of Appeal (Civil Division). Appeal dismissed with costs.
• High Court, Queen’s Bench Division. Mr Griffiths-Williams QC, sitting as a Deputy High Court Judge, refused Youngs’ application for an order requiring Sun Alliance to pay Youngs’ costs.