Exceptional non-party costs order made against insurer AIG in High Court proceedings

Posted: 11/01/2019

Penningtons Manches’ group action professional negligence lawyers have successfully obtained a High Court non-party costs order under section 51 of the Senior Courts Act 1981 against insurers AIG (Europe) Limited (AIG). Penningtons Manches acts for over 80 individuals who lost over £3 million in deposits in the failed and allegedly Mafia and IRA connected Jewel of the Sea holiday development in Calabria, Southern Italy.

In 2017, the Court of Appeal upheld the High Court’s decision that Giambrone, a firm of Italian lawyers praticising in London, was negligent and in breach of trust when acting for investor clients in respect of the development. Following this, the team at Penningtons Manches, led by David Niven and David O’Brien, applied for a non-party costs order against Giambrone’s professional indemnity insurers, AIG, the defendants having themselves failed to satisfy costs orders.

Exercising the court’s discretion to award non-party costs in “exceptional” circumstances, Mr Justice Foskett held that “AIG’s funding of the defence did materially increase the costs expended by the Claimants in pursuing the claims” and summarily found that the claimants spent “twice as much on pursuing their claims than they would have done if AIG had not funded the defence of the claims in the way it did.” Mr Justice Foskett also praised the “immaculate fashion” in which Penningtons Manches had presented the case to the court.

In making this ruling, Mr Justice Foskett held that “where an indemnity insurer substantially relinquishes control of the conduct of the litigation to the insured (or fails to take steps to control it when there are grounds for intervening), and does so in the expectation that it will be immune from a costs liability towards the opposing party if the opposing party is successful, that expectation is open to be falsified by the court in a section 51 application, particularly if the prospects of success for the insured are assessed as poor.”

Partner David Niven, who leads the group action professional negligence team at Penningtons Manches, said: “We are delighted with this decision. As Mr Justice Foskett acknowledges in his judgment, this litigation has been “fiercely contested”, even though our clients succeeded on substantively all points at trial. I am confident that this will result in a substantial payment of my clients’ costs.”

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