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The tale of the third party costs order and the Credit Hire Organisation: Foxcroft v (1) Flaherty and (2) Tesco Underwriting Ltd

The tale of the third party costs order and the Credit Hire Organisation: Foxcroft v (1) Flaherty and (2) Tesco Underwriting Limited Nicola Twine, acting for the insurer, successfully obtains a costs order against Accident Exchange.

Nicola Twine, acting for the insurer, successfully obtains a costs order against Accident Exchange.

In the age of suspicious claims, exaggeration and fraud, where costs are being squeezed and cut, and where litigation is not always driven for the benefit of the party claiming, it is all the more important that costs orders are obtained from the appropriate party wherever possible.

The court’s discretion as to costs is wide. Unusual orders and orders against third parties are within its ambit. Section 51(1) of the Senior Courts Act 1981 gives the court discretion to make orders for the costs of and incidental to all proceedings. Section 51(3) of the Act gives the Court full power to determine by and to what extent costs are to be paid.

This case illustrates, if just to do so, a court may exercise it’s discretion in making an order against a third party and that in more cases it may be appropriate to consider making an application against non parties.

The Claim

C alleged that he was involved in a road traffic accident on 22 August 2011 with a vehicle driven by the First Defendant and insured by the Second Defendant. The First Defendant took no part in proceedings. Liability and quantum were hotly disputed.

The Claimant claimed for personal injury, loss of earnings, and credit hire charges in the sum of £31,819.95, incurred through Accident Exchange as the credit hire company. However, during the course of proceeding he abandoned the personal elements of his claim, pursuing at trial only the claims for credit hire and vehicle damage.

At the time of the alleged accident C claimed to have had 3 passengers in his vehicle. All passengers had intimated claims. Despite this not one of the passengers actually issued proceedings or was a witness on behalf of C.

The Second Defendant maintained that if collision occurred it was staged. Fraud was pleaded on the basis of numerous inconsistencies in the evidence and the engineering evidence which had been obtained, and which suggested that the collision could not have occurred as alleged.

The trial took place at Bradford County Court in December 2015. Relevant to costs, during the course of cross examination, C made a number of admissions and comments that were potentially damaging to the credit hire organisation (‘CHO’). Most significantly that:

  • The CHO pestered him to bring a claim for personal injury;
  • The CHO provided him with a vehicle of greater specification than he needed;
  • The CHO dealt with everything;
  • But for the CHO he would not have pursued or maintained any claim;
  • Solicitors initially instructed advised him to accept a ‘drop hands offer’, which he wanted to, but the CHO would not permit him to accept it and insisted he proceed to trial, thereafter instructing alternative solicitors to take over the claim;
  • The CHO for a second time transferred the claim to alternative solicitors when C had no complaint with those acting;
  • He considered the hire charges to be astronomical.

Judgment was delivered on 19 January 2015. Whilst fraud was not established HHJ Davey QC dismissed the claim accepting that the Claimant had not proven his case.

Costs Liability

At the conclusion of the claim application was successfully made to the trial judge to join Accident Exchange as a party to the proceedings for the purposes of considering making a costs order against them, pursuant to section 51 of the Senior Courts Act 1981. It was submitted that it was start from the evidence and chronology that the CHO had sought to pursue and maximise the claim for its own benefit at all times, that it was the driving force behind the litigation, and the principal interested party.

The matter was listed for further hearing to consider the appropriate costs orders to be made.

The claimant and the CHO contended that an issue based costs order was appropriate given that fraud had not been found. They contended that the costs in relation to the fraud allegations should be disallowed entirely and that the Claimant’s costs in relation to the fraud aspect of the claim should be paid by the Second Defendant.

At the costs hearing on 27 April 2016 HHJ Davey ordered that 90% of the Second Defendant’s costs up to and including trial would be recoverable. He accepted that there was some merit in the contention that it was appropriate there be cost consequences for the unsuccessful fraud allegation on the facts of the case. He had previously been critical of the social media evidence relied on that had not progressed the Defence. He accepted though that the bulk of work undertaken would have been required even if the Defence had been a simple ‘putting to proof’. He rejected any suggestion that any costs should be paid to the Claimant and did not criticise the Second Defendant for actually pleading fraud.

The Claimant was insured and submitted that there was no need for any third party costs order as costs due to the Defendant could be recovered in the usual way.

It was contended on behalf of the Second Defendant that the application was not being made because there was concern about recoverability but that it was considered the appropriate party should bear the liability for paying costs. It was recognised that costs orders against third parties were unusual but contended that it was entirely appropriate on the evidence and that the case was a category of case which warranted such an order.

The CHO, which had prepared a statement for the liability trial, did not rely on any evidence to dispute the submissions that it had maintained and controlled the litigation or to otherwise take issue with the Claimant’s comments that were relied on in support of the application.

During the course of the costs hearing representative for the CHO submitted that a s.51 order was not necessary but conceded application was not opposed. Consequently, Accident Exchange were ordered to pay 90% of the Second Defendant insurer’s costs up to and including trial and 100% of the insurer’s costs thereafter, to be subject to detailed assessment if not agreed.

Comment

The case pre-dated the QOCS regime and the provisions set out in CPR 44.16(2) and (3) under which the court have power to make costs orders against a party other than a claimant where a claim was brought for the benefit of that party. Credit hire cases are listed in PD 44.12.2 as an example of the type of claim to which the QOCS exception could be applied.

CHO and other non-parties who ultimately control, influence, or benefit from litigation to which they are not a party should take heed. In the recent case of Deutsche Bank AG v Sebastian Holdings Inc & Anor [20160 EWCA Civ 23 the Court of Appeal dismissed an appeal against an order that a director should be liable for costs where he was found to have controlled and funded litigation. Both cases serve as useful indicators that courts are receptive to third party costs order applications and that they should be more widely considered.

Nicola Twine drafted the Defence and acted on behalf of the Second Defendant insurer for the proceedings.

Please follow this link to visit Nicola's profle.

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