First Central Management Limited v On Hire Limited

Non-party costs order win for Keoghs on appeal

In another welcome decision which further entrenches the principle of non-party costs orders made against credit hire organisations, HHJ Roberts firmly rejects On Hire’s arguments on appeal that they were not a “real party” to the litigation and that the claim was not made for their financial benefit.

Facts and Background

Following an accident on 16 November 2017, the claimant entered into a credit hire agreement with On Hire Limited and incurred a total sum for hire charges of £10,782.72. Proceedings were issued by Winn Solicitors on behalf of the claimant to recover the credit hire charges, along with claims for personal injury, physiotherapy, vehicle damage and delivery and collection.

The defendant, represented by Keoghs, disputed both liability for the accident and quantum.

Upon striking out the claim, the court made an order for the claimant to pay the defendant’s costs. Those costs would ordinarily be prevented from being enforced against the claimant by operation of the Qualified One Way Costs Shifting (QOCS) provisions.

Keoghs lodged an application on behalf of First Central to join On Hire and for them to pay the costs of the proceedings, in accordance with the QOCS exceptions which permit a costs order to be made against a non-party for whose financial benefit the proceedings were brought. The application cited, amongst other things, the common ownership of On Hire and Winn Solicitors, the terms and conditions of hire which granted On Hire authority to handle the claim, and the factors that enabled them to exert influence over the proceedings. It was argued that On Hire was the real party to the litigation and stood to derive a clear financial benefit from it.

At first instance, District Judge Lightman agreed. He found that the proceedings were brought for the financial benefit of On Hire, that they 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.

Grounds of Appeal

On Hire instructed leading counsel and appealed on a number of grounds. The main points made by them on appeal can be briefly summarised as follows:

• The District Judge was wrong to find that the claim for car hire charges was brought for the financial benefit of a person other than the claimant. The hire claim was, in fact, brought for the benefit of the claimant, who needed to hire a replacement car after the accident and had to bring the claim to repay his debt for the costs of it.
• The statement in the CPR practice direction which gives credit hire as an example of a claim brought in the financial interest of a non-party is wrong, and contrary to binding authority which establishes that a claimant retains a liability under the hire agreement which is discharged via the proceeds of the litigation.
• The decision of the High Court in Mee v Jones (more commonly cited as Select Car Rentals v Esure Services) was wrongly decided without reference to the relevant authorities.
• On Hire was not a “real party” and the finding that they controlled the litigation was contrary to both the evidence and the procedural history of the underlying litigation.
• The District Judge was wrong to find that On Hire caused the defendant to incur any costs, and there was no proper basis for him to have inferred that the claim would have settled had there not been a hire claim. The defendant made no offers to settle any of the heads of claim and given the dispute on liability would always have incurred the vast majority of its costs in any event.

Judgment on Appeal

His Honour Judge Roberts roundly rejected each of the arguments put forward by On Hire and dismissed the appeal on all of the grounds.

Significantly, HHJ Roberts refused permission to appeal on grounds one to four, meaning that he took the view that there was no real prospect of On Hire being able to argue that the District Judge was wrong in coming to the conclusion that the claim was brought for the financial benefit or On Hire, or that On Hire was not a “real party” to the litigation.

65. 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.
66. I reject Mr Williams’ submission that Mee v Jones was a per incuriam decision. It is correct that in Mee v Jones, the three leading credit hire cases were not cited. I find these cases do not detract from the fact that a hire claim may be for the ultimate financial benefit of a person other than the Claimant and therefore a non-party costs order may be appropriate.

In relation to grounds of appeal on the ‘causation’ points, HHJ Roberts found as follows:

101. I find that the District Judge was entitled in this case to find in his judgment at paragraph 61 that but for the hire claim, it is more likely than not that the case would have settled. This was an inference that the District Judge was entitled to make and was similar to the inferences made by the Court of Appeal in Myatt and the Privy Council in Dymocks (supra). The District Judge was entitled to find, as he did at paragraphs 61 and 63, that the Respondent had proved causation.
102. I conclude that it was well within the District Judge’s discretion to infer that the Respondent had proved that the Appellant’s particular conduct as a real party had caused the incurring of costs and to assess those costs at 60%. I therefore find that Grounds Five and Six of the Notice of Appeal are not made out and I dismiss them.

Accordingly, the order that On Hire pay 60% of First Central’s costs of the underlying litigation was upheld. In addition, they were ordered to pay First Central’s costs of the non-party costs order application in the further sum of £15,500.

Keoghs Comment

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.

The wording of practice direction 44 could not be any clearer and more specific, that claims for credit hire are an example of a claim brought for the financial benefit of another. Further, the High Court reiterated unambiguously in Mee v Jones that in a conventional credit hire case, the claim for the hire charges will be made for the financial benefit of the credit hire organisation, and that in this regard the practice direction “amounts to little more than a statement of the obvious”.

Whilst 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.

The judgment of HHJ Roberts is, therefore, welcome recognition of this reality, particularly in relation to the ‘financial benefit’ and ‘real party’ points, and it is hoped that it will serve to discourage further satellite litigation on these issues going forward.