Costs News

22 July 2021
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Credit hire company fails in bid to overturn non-party costs order

A circuit judge has rejected a credit hire organisation’s (CHO) argument that it was not the real party to litigation to recover its fee and instead upheld a decision to make a non-party costs order against it.

Gary Herring, the partner at Keoghs who acted for the defendant in First Central Management Limited v On Hire Limited, said he hoped the decision would prevent further satellite litigation on the issue.

Following an accident in 2017, the claimant entered into a credit hire agreement with On Hire Ltd – part of the Winn Group – incurred total hire charges of £10,800. Winn Solicitors, also part of the group, issued proceedings on behalf of the claimant to recover the credit hire charges, along with various other claims.

The defendant disputed both liability for the accident and quantum, and the claim was struck out with costs. Keoghs applied to join On Hire and seeks the costs from it in accordance with the qualified one-way costs shifting exception which permits a costs order to be made against a non-party for whose financial benefit the proceedings were brought.

According to Mr Herring, District Judge Lightman agreed, finding that the proceedings were brought for the financial benefit of On Hire, that it exerted a degree of control over the proceedings and that the costs would not have been incurred but for the existence of the hire claim. Accordingly, On Hire was ordered to pay 60% of First Central’s costs.

On Hire appealed on a number of grounds. His Honour Judge Roberts refused permission to appeal on two grounds which argued that On Hire was not the real party to the litigation, and went on to reject the appeal in relation to the other grounds, which included arguing that the CPR and authorities were wrong to identify credit hire as an example of a claim brought in the financial interest of a non-party.

He held: “In my judgment, the district judge was correct to find that the claim for hire charges was brought for the financial benefit of a person other than the claimant, namely the appellant.

“The fact that a credit hire claim can only succeed if there is a valid and enforceable contract entered into between the claimant and the credit hire [company] does not obviate the fact that a hire claim may be for the ultimate financial benefit of a person other than the claimant, namely the hire company.”

HHJ Roberts considered that the district judge was entitled to find that but, for the hire claim, it was more likely than not that the case would have settled and thus infer that On Hire’s conduct had caused costs to be incurred.

He also ordered On Hire to pay First Central’s £15,500 costs of the non-party costs order application.

Mr Herring said: “Although most credit hire organisations ordinarily meet their customer’s liability for costs which arise by way of an order made during proceedings, it is perhaps surprising that some continue to resist, particularly in circumstances where the claimant has protection from enforcement of a costs order under the QOCS provisions…

“While financial benefit alone is not sufficient in itself for the court to make an order for costs against a non-party, it might be said to be something of a surprise that highly technical points are still being taken in an attempt to argue that, in essence, both the practice direction and the High Court are wrong and that the financial benefit is not with the CHO but with the claimant.

“Further, it surely stands to reason that, ordinarily, a CHO will be the ‘real party’ to the litigation or at least have a sufficient connection to it so as to warrant the making of a non-party costs order.

“This is particularly the case against the background of modern credit hire litigation, where ‘one-stop shops’ are prevalent which collectively derive revenue from the fruits of litigation, not only in respect of the hire charges recovered as damages, but also by way of the legal costs generated in the process.”

Mr Herring described HHJ Roberts’ ruling as “welcome recognition of this reality” that would hopefully serve “to discourage further satellite litigation on these issues”.


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