Hamilton v Al-Fayed (No 2)

JurisdictionEngland & Wales
JudgeLord Justice Simon Brown,Lady Justice Hale,Lord Justice Chadwick
Judgment Date17 May 2002
Neutral Citation[2002] EWCA Civ 665
Docket NumberCase No: A2/2001/1718
CourtCourt of Appeal (Civil Division)
Date17 May 2002
Mostyn Neil Hamilton
Mohamed Al Fayed
(1) Sir Robert Mcalpine Limited
(2) Lord Hanson
(3) Mr Richard Clay
(4) the Duke of Devonshire
(5) Mr Christopher Sharples
(6) Mr David Wills
(7) Mr Taki Theodoracopulos
(8) the Earl of Portsmouth
(9) Henry James (Bud) Smith
Respondents (as to Costs)

[2002] EWCA Civ 665


Lord Justice Simon Brown

Lord Justice Chadwick and

Lady Justice Hale

Case No: A2/2001/1718





(Mr Justice Morland)

Miss Elizabeth Gloster QC, James Price Esq, QC & Lawrence Harris Esq (instructed by Messrs D J Freeman) for the Defendant

Sir Sydney Kentridge QC & Simon Salzedo Esq (instructed by Messrs Mischon de Reya/Messrs Russell Jones & Walker) for the First to Sixth Respondents)

Philip Heslop Esq QC & Orlando Fraser Esq (instructed by Messrs Peters & Peters) for the Seventh Respondent

John Wardell Esq (instructed by Messrs Forsters) for the Eighth Respondent

The Ninth Respondent did not appear and was not represented

Lord Justice Simon Brown

On 21 December 1999, following a five-week trial before Morland J and a jury, Mr Neil Hamilton famously lost his libel action against Mr Al Fayed arising out of the "cash for questions" scandal. To the question "Are you satisfied on the balance of probabilities that Mr Al Fayed has established on highly convincing evidence that Mr Hamilton was corrupt in his capacity as a Member of Parliament?", the jury returned the answer "Yes". Mr Hamilton was ordered to pay Mr Al Fayed's costs.


On 15 January 2001, following Mr Hamilton's failed application to the Court of Appeal (Lord Phillips MR, Lord Justice Sedley and Lady Justice Hale, transcript 21 December 2000) for permission to appeal against the jury's verdict in the light of Mr Al Fayed's subsequently revealed purchase of documents stolen during the trial from Mr Hamilton's counsel's dustbin, those costs were assessed in default in the sum of £1,467,576. Some £1.19 million of that sum remains unpaid, Mr Hamilton personally having paid nothing towards it and having now been bankrupted.


The present proceedings relate to Mr Al Fayed's efforts to recover his unpaid costs from a number of individuals who backed Mr Hamilton's unsuccessful action. Stripped of inconsequential detail, the position is this. A sizeable part of Mr Hamilton's costs had been contributed by a fighting fund conceived and raised by Lord Harris of High Cross to enable the action to be brought. The money was raised on the understanding that if the action were successful, the money would be returned, otherwise not. The fund totalled £466,320 and consisted of 484 anonymous contributions of which 308 were for £100 or less, 153 of between £100 and £5,000, and 18 of £5,000 or more. Those 18 largest contributors paid a total of £323,500 (including £100,000 paid direct to Mr Hamilton's solicitors by the Earl of Portsmouth, the one contributor who declared himself), and against these contributors (whose names the judge required to be revealed) Mr Al Fayed sought orders for costs under section 51 of the Supreme Court Act 1981. Several of the contributors settled with Mr Al Fayed, paying him in total some £193,000. Nine, however, the respondents to this appeal, contested their liability. On 20 June 2001, for reasons given in a lengthy judgment handed down on 13 July 2001, Morland J rejected the section 51 applications. Now before us is Mr Al Fayed's appeal, brought with permission which we ourselves gave during the course of the three-day hearing last month.


Section 51 provides:

"(1) … the costs of and incidental to all proceedings in …

(b) the High Court

… shall be in the discretion of the court.

(3) The court shall have full power to determine by whom and to what extent the costs are to be paid."


Pursuant to CPR 48.2(1)(a) the respondents were added as parties to Mr Hamilton's action for the purposes of costs only. That brought into play CPR 44.3 which sets out the court's discretion as to costs and the circumstances to be taken into account in its exercise:

"44.3(1) The court has discretion as to—

(a) whether the costs are payable by one party to another;

(b) the amount of those costs;

(2) If the court decides to make an order about costs—

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order, …

(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances including—

(a) the conduct of all the parties;

(5) The conduct of the parties includes;

(a) conduct before, as well as during, the proceedings …"


At the heart of the judgment below, in a section headed "Funding", Morland J said:

"69. The respondents to Mr Al Fayed's application are pure funders. Their donations towards Mr Hamilton's costs were not made at the result of any obligation owed to him but as an act of charity through sympathy with his predicament and in some instances affinity to the Conservative Party. They have no control over how their donation is spent. They have no part in the management of the litigation up to and including the trial. … Their only hope was that Mr Hamilton would achieve sufficient success in trial to enable their donations to be repaid to them. Why would a pure donor be in any more vulnerable position than a solicitor or counsel acting on a contingency fee? (See the observations of Rose LJ in Tolstoy v Aldington [1996] 1 WLR 736 at 746)

70. The position of the professional funder is very different. Almost always the funding arises out of a contractual obligation for example where the funder is a trade union, an insurer or professional or trade association. Normally such a funder exercises considerable control management and supervision of the litigation.

71. … It would be very exceptional that a situation would arise where it would not be just and reasonable to make a S.51 order against a professional funder.

72. The reverse is the position in the case of a pure funder. It will be rare or very rare that it will be just and reasonable to make an order against him."


Later in the judgment, in a long section entitled "Guidance From the Court of Appeal", in which the judge reviewed (as I shall have to review) a number of this court's decisions, he referred to the "exceptionality principle" a principle he regarded not as a fetter on the exercise of his discretion but nonetheless as "a very important guideline" (paragraph 109).


It is towards those paragraphs that the main thrust of the appeal is directed. Miss Gloster QC for the appellant challenges the view that it will only rarely or very rarely be just and reasonable to make an order against a pure funder and that some exceptional further feature is required to warrant a section 51 order. As finally formulated her argument is that:

"… the correct approach … is that, where a rich man (or company) chooses for his own reasons (political, 'philanthropic' or other) to fund a claimant of limited means to pursue a libel action, which would not otherwise be brought, on terms that he, the funder, will be reimbursed by the defendant if the action succeeds, fairness and justice in general require that the funder shall bear some responsibility for the costs to which the defendant has thereby been put, if the action fails. Otherwise the funder is not made responsible for the severe financial consequences of what he has enabled. … [T]he judge approached the matter from the incorrect starting point … He was … looking for some exceptional feature to take the case out of the ordinary run of pure funding cases, instead of recognising that a case which is funded as this one was is already exceptional …."


That is the central ground of appeal. The other grounds arise out of the final paragraph of the judgment under the heading "Conclusion" which I now set out in full (not least because it contains in summary form most of the relevant factual background to this appeal):

"115. In reaching my conclusion to dismiss Mr Al Fayed's application in addition to the facts applicable to individual respondents I considered all the circumstances of the case including in particular the following factors which are generally applicable:

(a) Mr Al Fayed had made the allegation that Mr Hamilton had received cash for questions, a matter of important and legitimate public interest and concern.

(b) By its verdict the Jury had found that Mr Al Fayed had justifiably accused Mr Hamilton of being corrupt as a Member of Parliament albeit that Mr Al Fayed was himself criminally corrupt.

(c) It was Mr Hamilton's choice to sue Mr Al Fayed who if he was to justify his accusation was bound to incur a very large outlay in costs which he was unlikely to recover from Mr Hamilton as the contributors to Mr Hamilton's costs should have realised if they had thought about it.

(d) There is no indication that the respondents who are rich or very rich would suffer any hardship by contributing towards Mr Al Fayed's costs.

(e) It is unfair that a successful defendant who is unable to recover his outlay of costs from the claimant should not recover his outlay from the rich backers of the claimant who is impecunious.

(f) Mr Al Fayed's Solicitors took the proper step of warning Mr Hamilton's backers who were unknown to them that they were liable potentially to an application under S.51. It was no fault of Mr Al Fayed that backers were not alerted to this risk.

(g) Until the last minute emergence of the Mobil...

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