By Jemma Lewis
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Published 07 October 2024
At first appearance, the claim of Lopo v Khan appeared pretty straightforward. According to the claimant, she had been riding her motorcycle along a main road when the defendant pulled out of a minor road, hitting her, causing injury and damage to her motorcycle.
However, the defendant was adamant that they were not at fault for what they considered to have been a very minor contact between the two vehicles, which had not caused damage to either vehicle.
Further investigations made by the defendant's insurers, AXA, highlighted concerns about exaggeration and causation. On litigation, AXA instructed DAC Beachcroft to represent Mr. Khan, with the conduct of the claim resting with Cheryl McDermont in our Motor Fraud Team.
The claimant sought compensation for personal injury, vehicle damage, credit hire, storage, recovery and miscellaneous expenses. The pre-accident value of the motorcycle of £1494 was dwarfed by the claimed hire charges of £18,567.96.
The defendant filed a robust defence, denying liability and quantum. The claimant was invited to discontinue her claim prior to the hearing, but this was rejected.
Hearing
The initial trial at the Reading County Court went part-heard, but at the final hearing the claim was dismissed and the claimant was ordered to repay an interim payment of £1,449.
It was established that the claimant had hired a succession of different vehicles from ‘McAms’, a trading division of Direct Accident Management Limited ("DAML"), part of Anexo Group PLC, and had entered into 3 separate hire agreements, incurring £18,567.96 of credit hire charges.
Given the claimant's apparent impecuniosity, the fact that the hire charges represented almost 75% of the maximum stated value of the claim and other matters that had been identified, the defendant's representatives concluded that DAML was sufficiently involved in the claim for it to be appropriate for an order for costs to be sought against them.
Non-Party Costs Application
An application was therefore made for DAML to be joined into the proceedings in respect of costs and for an order that DAML pay the defendant's costs of defending the action.
This was not the first time that such an application had been made against DAML. In the county court case of Pereira and others v Direct Accident Management Limited (2024), DAML was ordered to pay the defendant's costs in respect of four claims where hire charges had been sought. In his judgement allowing the applications and making costs orders against DAML, his Honour Judge Saunders made the following findings:
- The initiation and prosecution of the case are directly linked to the hire of a vehicle on credit hire terms.
- The funding of the hire of the car by the credit hire company was an "essential catalyst" for the claim.
- The credit hire company is the real instigator of the proceedings, as often impecunious, a claimant will simply not consider or launch such a claim without the credit hire company's assistance.
- The credit hire company is, therefore, the "real party."
- While in an individual claim instructions may come from the claimant, there must be some semblance of control established by the credit hire company that is set up by the business model.
- The terms and conditions of hire are strict, meaning that the claimant is obliged to pursue a claim for credit hire charges or face adverse financial consequences.
- There is no requirement to prove that the existence of the credit hire claim caused all of the costs incurred.
- “It cannot be avoided that the respondent conducts its business (and operates its business model) knowing full well that it charges much higher rates of hire (than say the usual hire spot rates) and does so, intending to make substantial profit.”
- “It must follow, therefore, that [DAML] should bear the risk – and that is an order for costs against them. To do otherwise would be unjust in this overall scenario.”
This decision was not appealed.
Outcome
In Lopo v Khan, DAML, rather than taking the matter to a full hearing after the initial hearing had been adjourned, chose to settle and agreed to pay the defendant's costs in the sum of £9,000.
Obviously the defendant is not privy to the reasoning of DAML's decision to settle the claim against it for costs, but there certainly seems to be a greater propensity for the courts to grant non-party costs orders against those whom are considered to be the significant movers in the bringing of proceedings (for example, the cases of Kindertons Limited v (1) Georgina Murtagh (2) Esure Services Limited [2024] EWHC 471 (KB) and Ionut Georgian Meirosu (1) ERS Claims Limited (2) Crystal Car Hire Limited (Third Party) (County Court, Brentford).
It may be the case that there is a greater degree of acceptance on the part of non-parties that costs orders are likely to be made against them and that it is therefore better to seek to compromise such applications than to fight, lose and end up paying a significantly higher level of costs.
Comments
Jemma Lewis, Partner at DACB, commented:
"It is important that we continue to maintain and develop robust strategies against non-parties who drive the litigation and increase costs unnecessarily. This result is significant as DAML accepted that they would have to pay the defendant's costs before they were ordered to do so, the case resulted in a £71,436.52 saving and a cost recovery of £9,000.00."
