Accidents: Litigation over credit hire takes up a lot of county court time
Credit hire organisations (CHOs) are the real beneficiary of claims to recover their charges and so should pay the defendants’ costs when cases fail, the Court of Appeal has ruled.
It does not matter whether or not the CHC is linked to the law firm representing the client, said Lord Justice Birss, the deputy head of civil justice, in a decision celebrated by defendant lawyers.
He said it was important to give guidance on how the county court should approach such cases given their impact on its workload.
“Anecdotally, credit hire RTA cases represent a significant volume of the trial work of district judges, outside the small claims track,” he said. “The evidence in this case bears that out.”
In 2023, Anexo Group – the listed law firm and credit hire group that owned one of those involved in the case, Direct Accident Management Ltd (DAML) – said that it had on average around 10 barristers in court each day representing clients.
Birss LJ said: “That amounts to well over a thousand cases a year just for that group. Since there were about 1,700 fast-trial trials in 2023, this data corroborates the anecdotal impression that handling credit hire claims is a substantial undertaking for the county court, supporting the idea that general guidance on this issue would be worthwhile.”
In Tescher v Direct Accident Management, the court considered appeals from two cases where the county court had refused to make non-party costs orders against the CHOs – DAML, where the solicitors were Bond Turner, also part of Anexo, and Spectra Drive, connected to DGM Solicitors (a trading name for Infinity Law), which acted for the claimant.
In the DAML case, the judge had rejected the claim and in Spectra it was discontinued. As there were also personal injury (PI) claims, the claimants were protected by qualified one-way costs shifting, which was not displaced.
Birss LJ said district judges should first ask whether, in the circumstances, an NPCO against the CHO should be made and then, if so, deciding on the amount of costs.
While acknowledging that the claimant benefited, first with the car and then by the CHO litigating to extinguish their debt, he held that the CHO was ultimately the beneficiary of the litigation.
For these purposes, it did not matter who appointed the solicitors – the CHO has “sufficient control of the litigation” thanks to the credit hire agreement – while the agreement was the “fundamental cause of the legal costs incurred by the defendant”, which was enough to establish causation.
This all meant that, “absent some reason why not, when a claimant has been ordered to pay the costs and QOCS applies, a non-party cost order against the credit hire company is likely”.
It was not “relevant” that credit hire “achieves a worthy societal purpose”, and there was “no suggestion here that fixing credit hire companies with costs risk when the claims fails would prevent them from offering the service”.
Such a risk, Birss LJ said, “is a healthy discipline”, stressing that nothing CHOs did was improper or unlawful.
When it came to the costs order, the main options were all the costs, an apportionment based on the sizes of the credit hire and PI claims, and the extra costs attributable to the credit hire as compared to the litigation without it.
“When the credit hire claim is several times larger than the PI claim (as in both DAML and Spectra) an order for all the costs of the litigation would be likely, absent some special feature,” the judge said, which was the position in the DAML case and that was the order he made.
For Spectra, he reinstated the deputy district judge’s order that it pay 65% of the costs, which had been overturned by the circuit judge.
Birss LJ added that he did not take account of the links between the solicitors and the CHOs. “The non-party costs in the circumstances described above would be the likely result regardless, and so there should be no need for evidence of this kind to be given to the court deciding on the non-party costs order.”
A DAML spokeswoman said: “The result is disappointing, albeit it is confined to those cases that are unsuccessful, and they are small in number. Nevertheless permission to appeal has been sought in order to appeal to the Supreme Court.”
Graeme Mulvoy, partner at HF, which acted for the defendant in the DAML case, said: “It is hugely satisfying to secure this victory for Admiral and bring an end to a hard-fought battle spanning a number of years.
“It was right for us to leapfrog this case to the Court of Appeal and this decision will hopefully see more discipline from CHOs when pursuing unmeritorious claims given the risks associated with that approach.”
Gary Herring, partner and head of credit hire at Keoghs, which acted for the defendant Axa in Spectra, added: “This is a transformative result for the insurance industry.
“It finally brings the legal recourse for costs into line with the economic and commercial realities of modern credit hire litigation, namely that the CHO are clearly the financial beneficiary and the controlling influence in any normal claim for credit hire charges.
“This judgment makes abundantly clear that it is the CHO who is now squarely on the hook for the costs of unsuccessful litigation, which we hope will finally instil a ‘healthy discipline’ and act as a strong deterrent to the presentation of unmeritorious or exaggerated claims.”
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