Three’s a crowd – who pays?


Pascall: Case highlights risks for funders

Posted by Matthew Pascall, senior underwriting manager at Litigation Futures Associate Temple Legal Protection

In September 2014 a UKIP MEP, Jane Collins, gave a speech at UKIP’s annual conference slandering three Labour MPs. The following month, a letter of claim on their behalf was sent to Ms Collins. It contained an offer of settlement under which Ms Collins would pay each £10,000 in damages, which they would then pay to charity.

UKIP’s National Executive Committee (NEC) discussed the letter of claim that month and referred Ms Collins to solicitors, RMPI, with whom UKIP had close ties. No settlement having been agreed, in November 2014 the three MPs issued claims against Ms Collins. Temple Legal Protection insured the MPs’ claims.

In December 2014 UKIP initially decided to allocate £10,000 to Ms Collins to help her defend the claim. Ultimately, RMPI billed £36,000 for its work defending the claim between October 2014 and June 2015. UKIP paid almost all of this.

In January 2015, counsel instructed by RMPI advised Ms Collins that she had a weak case and ought to settle. On 2 February, UKIP’s NEC decided to try and settle the claim on the best terms possible and that the party would fund any settlement.

However, by early March 2015 UKIP had decided that the case should not be settled until after the upcoming general election due in May because they did not want to appear to be conceding defeat during the campaign.

In the event, this decision and its consequences for the progress of the case and the costs caused by the inevitable delay, were to prove decisive when the court came to consider whether or not UKIP should pay any of the costs incurred by the claimants.

In March 2015, counsel again advised UKIP in pessimistic terms about Ms Collins’ chances of defeating the MPs’ claims and advised that Ms Collins should try and settle on the best available terms. UKIP was still determined to defend the claim until after the general election in May. At a hearing held in April 2015, the court decided that the words complained of were defamatory.

The election took place on 7 May 2015, after which UKIP wanted to settle the case as quickly as possible. That led to an offer of amends alongside a without prejudice offer of damages of £15,000 for each MP. By making the open offer of amends, Ms Collins was, on the face of things, conceding liability but leaving open the question of damages.

It is clear that Ms Collins felt somewhat let-down by the party. On 23 June 2015, Ms Collins told RMPI that she intended to defend the claim and represent herself. UKIP and the solicitor’s role in the case came to an end at that point. Over the following 20 months Ms Collins sought, unsuccessfully, to withdraw her offer of amends and defend the claim.

Damages were assessed in February 2017. The judge awarded each of the MPs £54,000. Ms Collins was also ordered to pay the MPs’ costs with an interim payment on account of £120,000. She failed to pay the costs.

The claimant then proceeded to issue an application for a third-party costs order against UKIP. Temple Legal Protection agreed to insure the application.

In a detailed and comprehensive judgment given in February this year, Mr Justice Warby explained his decision to order UKIP to pay the claimants’ costs between early March 2015, when the party had taken a politically motivated decision to delay settlement of the claim until after the election, up to the point in June when Ms Collins began to represent herself.

He also ordered UKIP to pay the claimants’ costs of the final assessment hearing and the subsequent enforcement costs because it was the decision to delay the case that meant no settlement was achieved at the time when that was most likely.

But for that decision, there would probably have been no need for a final assessment hearing or for the costs incurred by the claimants in enforcing the judgment given at that hearing.

A number of points emerged from the judgment:

The ultimate question in any given case is: Would it be unjust to order the third-party to pay costs;

  • When considering whether or not to order a third-party to pay costs, the court has a wide discretion. A narrow approach based on a detailed analysis of earlier decisions is not helpful;
  • Failing to warn a third party that it might become liable to pay costs if its involvement in the case continues, is a factor but not a determinative factor to take into account;
  • Whilst simply funding a case does not, of itself, make the funder liable to pay costs, if the funder exercises substantial control over the litigation and/ or could be seen as the “real” client, it is more likely that it will be ordered to pay costs. In this case, UKIP’s initial funding was with a view to simply helping Ms Collins defend the claim. A decision it took out of conscience given the context in which her speech was made. The court decided this was “pure funding” which, without more, did not make the funder liable to pay costs;
  • If the litigation is, in real terms, for the benefit of the funder, the funder may be liable;
  • Where the funder’s actions cause costs to be incurred, they are likely to be liable to pay. In this case, that conduct was UKIP’s decision to delay the case until after the general election.

Those who wish to fund litigation or perhaps drift into a position where they do so, need to be aware of the risks highlighted by this case. It is important to note the distinction drawn between those who are pure funders and those who go on to take a decisive and controlling role in the litigation.

In the latter case, if a decision to fund is taken, the funder needs to be aware of the adverse costs risks involved.

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