District Judge Pal Sanghera looks at some recent court rulings that deal with attempts to make non-parties pay the successful party's court costs

The client's opponent is penniless.

Can costs be recovered from a non-party? The court's jurisdiction to order costs in litigation arises from section 51 of the Supreme Court Act 1981 (as amended by the Courts and Legal Services Act 1996).

Costs are in the discretion of the court and it has full power to determine by whom they are to be paid.

In Aiden Shipping Co Ltd v Interbulk Ltd [1986] 2 All ER 409, the House of Lords held that this power was not limited to those who were parties to the litigation.

Non-parties could be ordered to pay costs where justice so required.

The procedure for going after a non-party is in the Civil Procedure Rules 1998 rule 48.2.

The principles to be applied on applications for non-party orders were established in Symphony Group v Hodgson [1993] 4 ALL ER 143.

Briefly, these are that:

- Such orders are exceptional;

- They will be even more exceptional where the applicant could and should have joined the non-party in the original proceedings;

- A warning about costs should be given at the earliest opportunity;

- The trial judge should normally determine any application;

- The procedure is summary;

- Witnesses enjoy immunity;

- Applications should not be motivated by resentment of an inability to obtain an effective order for costs against an impecunious litigant.

Subsequent cases have considered and largely followed Symphony.

In Murphy v Young & Co's Brewery plc and Sun Alliance and London Insurance plc [1997] 1 ALL ER 518, the claimants were unsuccessful and were unable to pay the costs.

However, they did have legal expenses insurance with cover up to 25,000.

The total costs were 42,806.

The defendants sought an order for costs against the insurers.

The Court of Appeal decided that the mere fact of funding cannot give rise to a cost liability.

The insurers had no interest in the litigation and did not initiate it or interfere in it.

There had been no 'wanton and officious intermeddling' without justification or excuse in litigation in which they had no interest.

Furthermore, the contractual limits of cover had been reached and the funders were under no duty to pay any more.

In Hamilton v Al Fayed & others [2002] 3 ALL ER 641, a considerable part of the claimant's costs was funded by donors.

The court confirmed that access to justice had to take precedence over a claim for costs by the successful party.

Lord Justice Simon Brown said: '...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.'

Lord Justice Chadwick likened these cases to conditional fee agreement and pro bono cases.

He found no difference, saying: '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.'

But what does 'a pure funder' mean? Lord Justice Chadwick defined this as a person who provides funding but other than a desire to have reimbursement, has no interest in the litigation.

Lady Justice Hale was reluctantly persuaded to agree that a pure funder was not liable to the successful party.

However, she provided some support for the suggestion that, in certain circumstances, pure funders could be ordered to pay.

She said it was arguable that they should be more discriminating and should put sums aside against the risk of an adverse costs order.

There would be cases where an order was justified, for example, where the litigation was oppressive, malicious or pursued for some ulterior motive.

But the fact that the litigation was unmeritorious, while powerful evidence, would not in itself be sufficient.

Mr Justice Pumfrey in Princo v Phillips (2003) Lawtel 17 September, made a cost order against a non-party where the action was only defended because of the non-party's funding of it and the funding was for its own commercial interest.

The funding was causative of the costs and the non-party were therefore held to be liable in costs.

In another recent case, Yeshekel Arkin V (1) Borchard Lines Ltd (2) Zim Israel Navigation Co Ltd & Others (2003) Lawtel 28 November, the claimant had no funds to pay for any aspect of the litigation.

He could not get legal aid or after-the-event insurance.

He entered into an agreement with a professional funding company, whereby it funded certain aspects of the litigation.

Under the agreement, the funder was to receive a share of any damages recovered.

Mr Justice Colman, sitting in the Commercial Court on 27 November 2003, first identified three principles of public policy:

- The rule that costs follow the event had the aim of deterring ill-founded claims or defences;

- The courts should discourage interference by funders in the running of the litigation;

- Access to justice for impecunious claimants had to be supported.

While the funder shared in the damages, it did not control or interfere in the litigation itself.

Where the claim also had a substantial basis, the aim of access to justice required that no order for costs should be made.

It would act as a disincentive to professional funders.

The effect of all these cases is that before embarking on any application for a costs order against a non-party, the following questions should be considered.

- Has the non-party caused the litigation?

- Is this funder interested in the outcome or is he a pure funder?

- Has he exercised any control over the conduct of the case? If so, has such control had an adverse effect on the administration of justice?

- Is there a contractual arrangement underpinning the funding?

- Is such an order in the interests of justice? In the words of Lord Phillips in Murphy '...the ultimate question is what is reasonable and just on the facts of the individual case, so that principles are guidelines rather than fetters?'

If the decision is then made to go ahead, the first step is an application, on notice, for such a person to be made a party for the purposes of costs.

Justice requires that a person, against whom such an order is sought, must be given a reasonable opportunity to attend before the court and have his say.

District Judge Pal Sanghera sits at Coventry and Nuneaton county courts and is a recorder