In the recent decision in the case of Smith v AXA Insurance UK PlC & Spectra Drive Limited, HHJ Mark Gargan overturned the decision of Deputy District Judge Carson by which a non-party costs order had been made against Spectra Dive Limited (Spectra), a credit hire company.

The decision in this case arose from an unusual set of circumstances which are ones not likely to be encountered. As such, it should not be considered to have wide implications and it most certainly should not deter, in appropriate cases, applications for non-party costs orders.

Background

The claimant brought a claim for hire charges of £11,809.94 after her vehicle was damaged in an accident. There was a dispute between the parties as to who had put the claimant in touch with who and the links between various organisations and the solicitors instructed in relation to the claimant’s personal injury claim.

The proceedings

A claim which included both the claimant’s personal injuries and the hire charges was issued and the defendant filed a defence requiring the claimant to prove her personal injuries and putting all aspects of the credit hire claim in issue, including the need for a replacement vehicle.

The defendant made a Part 36 offer in respect only of the claimant’s personal injuries. The defendant’s solicitors subsequently wrote to the claimant’s solicitors stating that the claimant had insured another vehicle and had not, therefore, required a hire vehicle. On that basis, the claimant was invited to discontinue her claim or face a plea for fundamental dishonesty.

The claimant discontinued her claim, subsequently stating that she had done so on the advice of her solicitors that she risked going to prison.

The defendant applied for an order setting aside the claimant’s QOCS protection on the basis that she had been fundamentally dishonest, and for a non-party costs order against Spectra.

Costs at first instance

In short, the Deputy District Judge rejected the allegations of fundamental dishonesty, finding that while the claimant had insured a car after 10 days, it was not available to her until she had received the benefit of the total loss claim and she had, therefore, used the hire car for the relevant period. At a later hearing, the District Judge found that Spectra was a real party to the claim and had intermeddled in it and, therefore, ordered Spectra to pay 65% of the costs of the claim. Spectra appealed.

The appeal

On appeal, the judge concluded that it was likely that Spectra would be the principal beneficiary of the proceedings. This was not, in itself, sufficient for the making of a non-party costs order. The vehicle claims and the personal injury claim had been joint causes for the litigation and an underlying cause of the proceedings had been, from an early stage, the need to establish the quantum of the vehicle claims. Consequently, Spectra was a cause of the increased costs that were incurred but in light of the finding that the claimant had not been fundamentally dishonest, the claim would, in part at least, have succeeded had it proceeded to trial. Accordingly, had the claimant not discontinued her claim, the defendant would have had to bear its own costs and the claimant’s.

The judge said that Spectra had played no part in the funding of the proceedings, had no retainer with the solicitors and did not have any day-to-day control over the progress of the litigation.

The unsuccessful allegations of fundamental dishonesty against the claimant were an unusual factor and the defendant had been fortunate in not having to satisfy a reasonable credit hire claim and pay the costs. The judge noted that there was little guidance as to the approach that should be taken by the court in a “bog standard” credit hire case. The authorities indicated that an order should only be made where it was just to do so. The circumstances of this case were such that a non-party costs order against Spectra would be unjust.

Conclusions

The facts of this case were unusual, not least that had the claimant not discontinued her proceedings, she would, in the judge's view, have succeeded in her claim. It is, therefore, easy to see why the judge came to the conclusion that the defendant had been fortunate and that it would be unjust in the circumstances for a non-party costs order to be made against Spectra.

For these reasons, it is important not to read too much into the decision to allow Spectra’s appeal. While, technically speaking, the case sets no judicial precedent, a case with identical features would be likely to generate a similar result, the chances of such an unusual set of facts being replicated are extremely unlikely.

Defendants should not feel that this decision puts any barrier in the way of seeking non-party costs orders in appropriate cases. It merely reminds all parties that where it would be unjust to make such an order, then it will not be made.

For more information or advice, please contact one of our experts in our Vehicle Hire and Damage Team.