Edwin Coe obtains exceptional order for non-party costs against insurer AIG

In high-profile litigation against a firm of solicitors who had committed numerous and sustained breaches of trust, Edwin Coe has successfully obtained an order that the firm’s insurer pay the claimants’ costs in the High Court. This order, for payment of costs by a non-party to the litigation, is only awarded in exceptional circumstances and the total amount of costs payable by the insurer is likely to be in the millions of pounds.

The order was made in proceedings in which Edwin Coe represents over 90 claimants, individuals from the United Kingdom and the Republic of Ireland, who lost approximately £3.5 million paid to purchase holiday homes in the South of Italy. The Italian mafia and the IRA were involved in the developments in question, which were seized by Italian financial police and never completed. In the meantime, the purchasers’ deposits were paid away unlawfully by the firm who had been nominated by the developers and were acting for the purchasers.

The purchasers brought suit against the firm, whose defence was in large measure funded by their insurer, AIG. As the Court found, the litigation was fought fiercely and unreasonably on the part of the defendants:

“Every possible point was taken on behalf of the Defendants and such concessions as were made were made very late and made only when the position being maintained hitherto was plainly untenable.”

The purchasers prevailed at trial on all points and then again before the Court of Appeal and the Supreme Court, in appeals pursued fruitlessly by the defendants. After having been awarded its costs against the defendants, the purchasers then applied to have those costs paid by their insurer.

Costs are not automatically awarded against an insurer who funds the defence. In this case, however, the Court was persuaded that such an order was appropriate: Mr Justice Foskett found that AIG had bankrolled the Defendants’ unreasonable conduct for their own commercial reasons and in so doing had failed to exercise the powers they enjoyed to require the Defendants litigate reasonably. In the judge’s words:

“The objective observer, which I was for this purpose, could readily conclude that this was a war of attrition, but one which would probably have been substantially avoided if AIG’s funding had not been provided and AIG had exercised proper control over the expenditure.”

As well as granting the purchasers costs in the High Court, the Court also awarded them the costs of the application.

David Greene, Senior Partner and Head of Litigation and Dispute Resolution at Edwin Coe and the partner in charge of this litigation, says:

“This decision is an important victory for our clients, who have suffered both delay and needless expense due to the conduct of both the defendants and AIG. The way in which AIG funded and directed (or refused to direct) the defence in these proceedings deserved condemnation, and our clients deserved compensation; this decision provides both.”