Hamilton v Al Fayed (No 2)

Reference: [2003] QB 1175; [2003] 2 WLR 128

Court: Court of Appeal

Judge: Simon Brown, Chadwick and Hale LJJ

Date of judgment: 17 May 2002

Summary: Costs - application for contributors to fighting fund to pay costs of successful defendant - discretion as to costs under Supreme Court Act 1981 s 51



Mr Hamilton was a former Member of Parliament who brought proceedings for libel against Mr Al Fayed over allegations broadcast on television that he took cash in return for asking questions in the House of Commons. Mr Hamilton lost his libel action before Morland J and a jury on 20 December 1999. He had been able to pursue his libel action because of a fighting fund to which a number of individuals had contributed. After the jury’s verdict in the libel action, Mr Hamilton was ordered to pay costs to Mr Al Fayed. He was also ordered to pay costs of his failed application to the Court of Appeal (Lord Phillips MR, Sedley and Hale LJJ) [2001] EMLR 394 for permission to appeal against the jury’s verdict. Mr Hamilton was bankrupted leaving £1.19m of the assessed costs unpaid. In these proceedings Mr Al Fayed attempted to recover his unpaid costs from members of the fighting fund invoking section 51 of the Supreme Court Act 1981. Before the hearing, several of the contributors settled with M


The issue was whether pure funders are generally exempt from section 51(3) liability for the successful unfunded party’s costs, the starting point being the decision of the House of Lords on section 51, Aiden Shipping Ltd v Interbulk Ltd [1986] AC 965, 980 – 981. This involved conflicting principles: should the law accord priority to the funded party gaining access to justice or to the unfunded party recovering his costs if he wins?


The holding was that the unfunded party’s ability to recover his costs must yield to the funded party’s right of access to the courts to litigate the dispute in the first place. That is the essential policy underlying the cases on the subject – in particular the CFA cases and those concerning security for costs.


This a useful decision in clarifying the potential liability to costs of a third party who provides funding to enable a claimant to litigate his claim. The Court of Appeal made clear that there was no sensible basis for a court to distinguish between cases according to whether it approves or not of the particular litigation. The policy arguments favour a general approach that ‘pure’ funders should not be expected also to fund the opposing party’s costs.