Earl known as 'Q' is refusing to pay Fayed libel costs

The main backer of Neil Hamilton's failed libel action set himself on collision course with the courts yesterday when he declared he would fight any attempt to make him pay Mohamed Al Fayed's costs.

The main backer of Neil Hamilton's failed libel action set himself on collision course with the courts yesterday when he declared he would fight any attempt to make him pay Mohamed Al Fayed's costs.

The Earl of Portsmouth, earlier known as "Q" to preserve his anonymity, risks possible contempt proceedings if he refuses to contribute to the estimated £2.5m legal costs.

The earl, who has a family fortune of some £120m, is believed to be the biggest donor to the £400,000 fighting fund set up by Hamilton supporters for the libel action.

After the collapse of the former Tory MP's case on Tuesday, Mr Justice Morland ordered that the names of those who gave £5,000 or more to the fund be handed over to Mr Fayed's lawyers so they could be pursued for costs.

But the Earl of Portsmouth, speaking publicly for the first time about his role in the affair, remained defiant yesterday and made clear he would not be paying without a fight.

Lord Portsmouth previously lost £500,000 backing the historian Count Tolstoy in his unsuccessful libel defence against Lord Aldington after the count said Cossacks had been sent back to die under Stalin at the end of the Second World War.

He said he would want the court to hear how Mr Fayed managed to run up more than £1m in legal costs. "I shall be vigorously resisting any attempt by Mr Fayed to take my cash," he told BBC Radio Four's Today programme.

"If he wants me to contribute towards his costs, he will have to take me to court and if he does that I shall attempt to procure that he and his legal team come to court to explain certain things to the judge."

With Mr Fayed spending huge sums in the Court of Appeal and House of Lords to prevent the case coming before a jury, Mr Hamilton had to fight "all the way", the Earl said.

"Mr Fayed spent, I believe, something like three-quarters of a million pounds and delayed the case by 18 months in what looks suspiciously like an effort to avoid appearing in court before a jury," he said. Lord Harris of High Cross, the chairman of the fighting fund, has already indicated he is "highly disinclined" to reveal the identity of the donors.

Among those donors known are Norris McWhirter, founder of The Guinness Book of Records, the Greek socialite and columnist Taki Theodoracopulos and the political columnist Simon Heffer.

The controversy emerged as the Government confirmed that it was planning a shake-up of the libel laws to ban the kind of fighting-fund used by Mr Hamilton in his pursuit of Mr Fayed. David Lock, a minister in the Lord Chancellor's department, said the Government would issue a consultation paper in the new year to look at ways of preventing the use of such funds to drive up the costs of libel actions.

"The issue raised is how much, if you put somebody else in funds in order to bring a libel case and then make the other side incur very substantial costs, are you financially liable for those costs which you have caused to be run up?" Mr Lock said.

"There clearly is an issue which needs to be discussed but the Government has not formed any clear views on this."

Separate changes to the libel laws will be coming into force in 2000 to make cases quicker and cheaper and to provide access to the libel courts for people without the backing of substantial financial funds, added Mr Lock.