Liability of insurers for third party costs

Under s51 of the Supreme Court Act 1981, the High Court has a discretion as to the award of costs in proceedings, and in particular – under s51(3) – ‘The court shall have full power to determine by whom and to what extent the costs are to be paid.’ It is established that s51(3) can be used against a person who is not a party to the proceedings as such but whose support or intervention has been the cause of costs being incurred. That power is, however, to be exercised in exceptional circumstances only: Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965. A question which arose in a series of cases decided between five to 10 years ago was whether s51(3) could be used to award costs against the liability insurers of an unsuccessful defendant who had effectively run the defence. The courts concluded that this was possible, but only if the insurers had been the cause of the claimant having incurred costs. In the most recent decision, Plymouth & South West Co-operative Society Ltd v Architecture, Structure & Management Ltd [2006] EWHC 3252 (TCC), HHJ Anthony Thornton QC has reaffirmed the availability of the costs order against liability insurers.