Beware of creating a third party costs liability

Beware of creating a third party costs liability

A judge has ruled that UKIP is to be jointly and severally liable alongside Jane Collins, MEP, for part of a £670,000 legal bill run up by Sarah Champion, Sir Kevin Barron and John Healey (the “Labour MPs”) who accused Jane Collins of slander and libel following her speech at the UKIP party conference in 2014.

The quantum of the liability has yet to be determined but it is expected to be up to £200,000. The impact of the Order is reported in the press to be a significant blow to the party’s financial position.

Background

As discussed in our recent article on third party costs liability (found here), the court may use its discretion to order that a non-party, also referred to as a third party, pay costs (section 51 of the Senior Courts Act 1981).

This provision recognises that a third party funding litigation and receiving the benefit of it should also bear the risks of the claim i.e. the costs associated with bringing it.

Decision

The Labour MPs brought an action against Jane Collins in 2014 and following long-running litigation she was ordered to pay damages of £54,000 to each of the Labour MPs plus an interim payment on account of their costs of £120,000. Jane Collins failed to pay and the Labour MPs sought a third party costs order against UKIP having become aware of its involvement and it having funded part of Jane Collins defence of their proceedings. The Labour MP’s full costs claim runs to nearly £670,000.

At a hearing this month, UKIP was made jointly and severally liable with Jane Collins for the Labour MPs costs incurred during specific time periods where UKIP’s actions were felt to have been material. The court made the liability order having been satisfied that “deliberate and calculated decisions” were taken by UKIP so as to “ensure for Party political and specifically electoral reasons that the claimants’ action should not be settled before the General Election”. UKIP’s involvement was such that it took UKIP’s role away from being classified as a pure funder (as UKIP had contended) and into the realms of controlling the course of the action for its own ends, thereby justifying the making of the discretionary third party costs order.

Comment

This is yet another example of a third party costs order being made. The case should sound a note of caution for others who may be considering whether to become involved with funding litigation or otherwise entering into arrangements to enable a party to pursue or defend a claim.

Before taking such a step you should apprise yourself of the risk of inadvertently creating a costs liability. A failure to appreciate the position could be extremely costly.

Contact our experts for further advice

Katie Philipson

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