In most cases, therefore, legal expenses insurers ought not to be faced with section 51 orders - but Murphy clearly leaves scope for them to be caught if the circumstances are right, for example, if the insurer has encouraged the assured to proceed with the claim for ulterior motives, such as testing a legal principle. The power under section 51 is not the only remedy that a successful party may have where the losing party is unable to pay a costs award. However, under the 1930 Act, the insurer can take the benefit against the third party of any rights the insurer had against the insured. Those who are faced with defences under the 1930 Act should not forget the Court's powers under section 51. Those powers will not allow them to recover on the claim, but it may allow them to recover the bulk of their costs.
Mutual insurers are at risk too.
Section 51 orders would appear to be more likely against a Defence Club by virtue of the agreements contained within the Club Rules which generally provide that the Directors of the Club will have conduct of the litigation and that the Club will pay for it. In view of the importance of arbitration in the insurance and shipping fields, it is worth mentioning that no similar power to that under section 51 of the Supreme Court Act exists under the Arbitration Act 1996. However, those involved in arbitrations might consider whether arbitration clauses should specifically give the arbitrators the same power as the Court. Neil Hamilton's libel action offers a timely reminder to all those involved with litigation behind the scenes that the extent and scope of their involvement may land them with a hefty bill if the case fails. The Courts are taking a more active rile in managing litigation, and costs are an important consideration.