Travelers Insurance Company Ltd v XYZ

Section 51 of the Senior Courts Act 1981 gives the court a broad discretion to order a non-party to pay costs. The only fixed requirement is that the discretion be exercised justly. Earlier decisions do not impose cumulative conditions on orders against liability insurers. Relevant considerations include funding, control or benefit, reciprocity, the exceptional nature of the circumstances, and conduct that caused costs to be incurred.

An insurer that funded common issues and stood to benefit from success could be ordered to pay the costs of uninsured claimants, even though the policy did not cover those claims. Happenstance, conflicts under a joint retainer and non-disclosure of the absence of insurance made the circumstances exceptional.

This was an appeal by Travelers against an order requiring it to pay the costs of uninsured claimants in group litigation concerning defective breast implants. Transform, the insured defendant, was insolvent. Travelers insured 197 of Transform’s 623 claims and funded the defence of common preliminary issues affecting both insured and uninsured claims.

The High Court ordered Travelers to pay the uninsured claimants’ costs under section 51 of the Senior Courts Act 1981. The central issue was whether the authorities concerning non-party costs orders against liability insurers imposed mandatory conditions which prevented that order.

Appeal dismissed. The order requiring Travelers to pay the uninsured claimants’ costs was within the discretion conferred by section 51 of the Senior Courts Act 1981.

1. The section 51 jurisdiction is broad. Its only immutable requirement is that the discretion be exercised justly. Authorities concerning the exercise of a discretion are illustrations, not prescriptive rules. This approach was supported by Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965, Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23, [2016] 4 WLR 17 and Jaggard v Sawyer [1995] 1 WLR 269.
2. The liability-insurance authorities did not establish cumulative conditions requiring proof that the insurer controlled the litigation exclusively or predominantly in its own interests. TGA Chapman Ltd v Christopher [1998] 1 WLR 12, Cormack v Excess Insurance Co Ltd [2002] Lloyd’s Rep IR 398, Palmer v Palmer [2008] EWCA Civ 46, [2008] Lloyd’s Rep IR 535 and Legg v Sterte Garage Ltd [2016] EWCA Civ 97, [2016] Lloyd’s Rep IR 390 identified relevant circumstances. Citibank NA v Excess Insurance Co Ltd [1999] 1 Lloyd’s Rep IR 122 was too prescriptive and wrong to the extent that it treated those circumstances as conditions.
3. The relevant context included the principle that a non-party who funds proceedings and stands to benefit from them will ordinarily be required to bear the successful party’s costs if the proceedings fail. This principle, stated in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807, reflected reciprocity: a person taking the benefit must accept the burden. Travelers funded the common issues and would have benefited from success.
4. The circumstances were exceptional in the proper sense: they were outside the ordinary run of litigation when viewed across the whole range of cases. The asymmetry and happenstance created by the insured and uninsured claims, the absence of a relevant policy limit, the conflict of interests concerning disclosure, and the causative effect of non-disclosure were material. Travelers’ contractual rights and the joint retainer did not determine the court’s attitude under section 51.
5. The High Court’s decision was a value judgment. The appellate court should interfere only if the judge considered irrelevant matters, failed to consider relevant matters, or reached a conclusion unsupported by the material. The judge’s conclusion that an order was just and that the circumstances were exceptional was open to her.

1. High Court of Justice, Queen’s Bench Division. Thirlwall J ordered Travelers to pay the uninsured claimants’ costs on 24 January 2017: [2017] EWHC 287 (QB).
2. Court of Appeal (Civil Division). With permission, Travelers appealed. Lewison LJ, with whom Patten LJ agreed, dismissed the appeal.