Yehuda Tescher v Direct Accident Management Limited

Where a QOCS-protected road-traffic claim combines personal injury with credit hire charges based on alleged impecuniosity, the credit hire company will ordinarily be the real beneficiary of the credit hire litigation. Deferred payment linked to recovery of the hire charges makes litigation or settlement practically inevitable and supplies sufficient causation and effective control for a non-party costs order under the Senior Courts Act 1981 and Civil Procedure Rules 1998. The claimant’s genuine benefit and legal liability for the hire debt do not alter that practical and economic reality. The court should first decide whether the jurisdiction is engaged, then determine a just amount. A likely success at trial does not justify relieving a claimant who discontinues, or the credit hire company, from costs.

These conjoined appeals arose from road-traffic claims involving personal injury and substantial credit hire charges. The claims failed or were discontinued, and costs orders were made against the claimants, but QOCS prevented ordinary enforcement. The defendants therefore sought non-party costs orders against the credit hire companies.

In the DAML appeal, District Judge Jeffs refused the application. In the Spectra appeal, Deputy District Judge Carson ordered Spectra to pay 65% of the defendant’s costs, but His Honour Judge Gargan overturned that order and refused non-party costs relief. The defendants appealed, while Spectra challenged the findings that it was the principal beneficiary and a cause of the litigation. The central issue was when, and to what extent, a failed credit hire claim justifies a non-party costs order.

Birss LJ gave the leading judgment. Nicola Davies LJ and Coulson LJ agreed. Both appeals were allowed.

1. Applicable framework. QOCS applies because the proceedings included personal injury claims. A credit hire claim is made for the financial benefit of a person other than the claimant and therefore falls within r 44.16(2)(a) of the Civil Procedure Rules 1998. Rule 44.16(3), read with s 51 of the Senior Courts Act 1981, permits a non-party costs order, but the discretion remains one to be exercised justly. Practice Direction 44, paragraphs 12.5 and 12.6, indicates that an order against the beneficiary will usually be made, while removal of the claimant’s QOCS protection is exceptional.
2. Jurisdictional stage. In a Lagden-based claim, the credit hire company defers payment until the damages claim is concluded. Coupled with alleged impecuniosity, that arrangement makes litigation or settlement practically inevitable. It therefore supplies a sufficient causative link between the credit hire company’s arrangements and the defendant’s costs. A strict but-for inquiry into whether the credit hire claim caused additional costs is unnecessary at this stage. The same arrangements give the company effective, though not absolute, control. The identity of the solicitor and the absence of day-to-day control are not decisive.
3. Real beneficiary and amount. The practical and economic reality is that the credit hire company is the real beneficiary of the litigation concerning the hire charges. The claimant’s genuine benefit from the vehicle, and the claimant’s legal liability for the hire debt, do not alter that conclusion. The court should then determine the amount of costs justly. Possible approaches include awarding all costs, apportioning costs, or awarding additional costs attributable to the credit hire claim. Where the hire claim is several times larger than the personal injury claim, all costs will ordinarily be appropriate absent a special feature.
4. Applications. DAML was the real beneficiary and had sufficient causative and effective control. It was ordered to pay all the defendant’s costs. Spectra’s respondent’s notice was dismissed, and the 65% order made by the deputy district judge was restored. The fact that the discontinued claim might have succeeded did not justify a different result under r 38.6 of the Civil Procedure Rules 1998. The analogy with lawyers acting under conditional fee agreements was rejected.

• Court of Appeal (Civil Division) allowed both appeals, ordered DAML to pay all the defendant’s costs, dismissed Spectra’s Respondent’s Notice, and restored the order requiring Spectra to pay 65% of the defendant’s costs.
• County Court at Leeds His Honour Judge Gargan overturned the deputy district judge’s non-party costs order against Spectra and refused the application.
• County Court at Wakefield Deputy District Judge Carson had ordered Spectra to pay 65% of the defendant’s costs.
• County Court at Clerkenwell and Shoreditch District Judge Jeffs refused the application for a non-party costs order against DAML after the claim had been dismissed.