Factual and Procedural Background
This opinion concerns two appeals arising from credit hire road traffic accident (RTA) cases where claims included damages for personal injury and credit hire costs. In both cases, costs orders were made in favour of the defendants and against the claimants, but due to the Qualified One-Way Costs Shifting (QOCS) scheme, these orders could not be enforced against the claimants. Consequently, the defendants sought non-party costs orders against the respective credit hire companies. The original decisions refused these non-party costs orders, and the defendants appealed, contending such orders should have been made. The court was invited to provide general guidance on when non-party costs orders against credit hire companies are appropriate.
The first case involved a claimant who entered into credit hire agreements with Company A following an accident. The claim included personal injury and credit hire charges exceeding £19,000. The claim was dismissed at trial, and a costs order was made against the claimant with QOCS protection. The defendant applied for a non-party costs order against Company A, which was refused.
The second case involved a claimant who entered a credit hire agreement with Company B after an accident. Liability was admitted by the defendant insurer, but the claimant discontinued the claim following allegations of dishonesty. The defendant insurer applied for a non-party costs order against Company B, which was initially granted but later overturned on appeal. The refusal was based on the defendant insurer’s "good fortune" in avoiding a judgment and costs due to discontinuance.
The two appeals were heard together to address the broader legal issues concerning non-party costs orders in credit hire claims.
Legal Issues Presented
- When and under what circumstances should a non-party credit hire company be made liable for the defendant’s costs if a credit hire claim fails?
- How does the Qualified One-Way Costs Shifting (QOCS) scheme affect the enforcement of costs orders against claimants and non-party credit hire companies?
- What is the proper legal test for identifying a credit hire company as the “real party” or a party for whose financial benefit the claim is made, thereby justifying a non-party costs order?
- How should causation and control over litigation be assessed in deciding whether to make a non-party costs order against a credit hire company?
- What guidance should be given to courts in future credit hire cases regarding the exercise of discretion to make non-party costs orders?
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Giles v Thompson [1994] AC 142 |
Validity of credit hire agreements; credit hire claims are claims by the claimant, not the credit hire company; credit hire companies fill a practical gap in providing replacement vehicles on credit. |
Confirmed credit hire claims are legally valid and the credit hire company is the real beneficiary of the claim for credit hire charges, supporting non-party costs orders when claims fail. |
| Lagden v O'Connor [2003] UKHL 64 |
Credit hire charges recoverable for impecunious claimants at higher than spot hire rates. |
Established that impecunious claimants can recover credit hire charges, relevant to the commercial context of credit hire companies' claims. |
| Symphony v Hodgson [1994] QB 179 |
Principles governing non-party costs orders; such orders are exceptional and must be justified by reason and justice. |
Guided the court on the exceptional nature of non-party costs orders and the factors to consider. |
| Dymocks Franchise Systems Pty Ltd v Todd [2004] UKPC 39 |
Clarified “exceptional” in non-party costs orders; distinguished pure funders from parties controlling or benefiting from litigation. |
Supported the principle that non-parties who control or benefit from litigation should pay costs if the claim fails. |
| Myatt v National Coal Board [2007] EWCA Civ 307 |
Non-party costs order against a solicitor found to be a “real party” to litigation. |
Illustrated that non-parties with significant interest can be liable for costs. |
| Farrell v Birmingham City Council [2009] EWCA Civ 769 |
Upheld non-party costs order against credit hire company who was the instigator and controller of the litigation. |
Confirmed that credit hire companies can be liable for costs where they control the litigation and benefit financially. |
| Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23 |
Reviewed non-party costs law; emphasized discretion must be exercised justly. |
Reinforced that non-party costs orders require just exercise of discretion. |
| Excalibur Ventures LLC v Texas Keystone Inc [2016] EWCA Civ 1144 |
Distinguished pure funding from commercial funding; commercial funders liable for costs if claim fails. |
Supported non-party costs orders against commercial funders benefiting financially from litigation. |
| XYZ v Travelers Insurance Co Ltd [2019] UKSC 48 |
Set principles for non-party costs orders against liability insurers; focused on causation and real party status. |
Clarified causation test and real party in all but name concept, noting context-specific application. |
| Goknur v Aytacli [2021] EWCA Civ 1031 |
Refused non-party costs order against director controlling and funding insolvent company’s litigation; emphasized economic reality. |
Stressed looking at the overall economic reality rather than rigid categories in non-party costs orders. |
| Mee v Jones (Select Car Rentals) [2017] EWHC 1434 (QB) |
Upheld non-party costs order against credit hire company post-QOCS; confirmed discretion unaffected by new rules. |
Supported making non-party costs orders against credit hire companies despite QOCS protections. |
| Kindertons v Murtagh [2024] EWHC 471 (KB) |
Non-party costs order against credit hire company where claim failed and claimants were dishonest; assessed control and causation. |
Confirmed credit hire company as real party benefiting financially and liable for costs; endorsed broad causation test. |
| Nelson's Yard Management Company v Eziefula [2013] EWCA Civ 235 |
Clarified that success prospects do not justify relieving claimants of costs liability on discontinuance. |
Applied to reject “good fortune” argument as a basis to deny non-party costs orders. |
| Hodgson v Imperial Tobacco [1998] 1 WLR 1056 |
Established that lawyers acting under CFAs are not personally liable for costs beyond normal rules. |
Distinguished credit hire companies from no-win no-fee lawyers for non-party costs liability. |
Court's Reasoning and Analysis
The court began by identifying the central question of when a non-party credit hire company should be liable for defendant's costs when a credit hire claim fails. It reviewed the factual backgrounds of the two cases, noting the significant volume of credit hire litigation and the impact of the QOCS scheme protecting claimants from costs liability.
The court analysed the nature of credit hire agreements, relying on Giles v Thompson and Lagden v O'Connor, confirming that credit hire claims are claims made by the claimant but for the financial benefit of the credit hire company. The court emphasized that litigation or settlement is practically inevitable for credit hire companies to recover their charges, especially where the claimant is impecunious.
Turning to non-party costs orders, the court reviewed the statutory framework under s51 of the Senior Courts Act 1981 and the discretion exercised by courts, guided by authorities such as Symphony v Hodgson and Dymocks v Todd. The court noted that non-party costs orders are exceptional but justified where the non-party substantially controls or benefits from the litigation.
The court considered the impact of the QOCS scheme and CPR r44.16, particularly the exception for claims made for the financial benefit of a person other than the claimant, such as credit hire companies. It explained that while QOCS protects claimants, it does not extend protection to such non-parties, who are usually liable for costs.
In applying these principles to the cases, the court found that the credit hire companies were the real beneficiaries of the credit hire claims and that the litigation was fundamentally caused by the credit hire agreements. The court rejected arguments focusing on control through solicitor appointment as irrelevant given the contractual and commercial realities. It also rejected the "good fortune" argument used to deny a non-party costs order in the Spectra case, citing established authority that the prospect of success does not justify relieving costs liability on discontinuance.
The court distinguished credit hire companies from lawyers acting under CFAs, noting the different nature of their interests and control over litigation.
Ultimately, the court concluded that non-party costs orders against credit hire companies are likely to be appropriate where the claimant is ordered to pay costs and QOCS applies, absent special circumstances. The court proposed a two-step approach: first, determine if the non-party costs jurisdiction is engaged; second, decide the extent of costs payable, potentially apportioning costs between personal injury and credit hire elements.
Holding and Implications
The court ALLOWED BOTH APPEALS.
It ordered a non-party costs order against Company A (DAML) for all the defendant’s costs and against Company B (Spectra) for 65% of the defendant’s costs. The court rejected the lower courts’ refusals to make such orders, finding that the credit hire companies were the real beneficiaries of the claims and that their involvement caused the costs incurred.
The decision clarifies that in credit hire cases involving QOCS, non-party costs orders against credit hire companies will commonly be justified when claims fail, reinforcing the commercial and practical realities of credit hire litigation. The ruling provides guidance for future cases, promoting consistent application of the law and ensuring that credit hire companies bear appropriate costs risk, thereby maintaining a "healthy discipline" in the credit hire industry.
No broader precedent beyond the direct effect on the parties was established, but the judgment offers structured guidance to courts handling similar credit hire costs disputes.