Horwich Farrelly secures landmark ruling for esure over recovering costs from a credit hire organisation


Horwich Farrelly says that it has achieved a landmark ruling on behalf of esure, paving the way for insurers to recover costs from credit hire organisations (CHOs).

In the appeal of Rachel Mee and Others v esure Insurance, the High Court handed down a judgment on 19 June which dismissed an appeal by Southport-based Select Car Rentals in which the CHO argued that it was not required to pay 60% of esure’s costs.

As a result, esure now expects to recover costs in excess of £20,000 from Select.

The matter concerned claims made to esure by Rachel Mee and three others following an alleged road traffic collision on 27 April 2013.

Following the incident, Mee hired a vehicle from Select, which she kept for a period of 388 days at a cost of over £23,000. When esure investigated the case it emerged that she had purchased a replacement vehicle nine weeks after the incident, so had no need to continue the hire for as long as she did.

Following a three-day trial in October 2015, Recorder Grundy dismissed all four claims because the claimants failed to prove that they were even involved in the alleged accident. As esure were not able to recover costs from the claimants, the insurer applied for a (non-party) costs order against Select in March 2016. At a hearing on 8 December 2016, Recorder Garside QC ordered Select to pay 60% of the costs to esure, which were estimated at a minimum of £20,000. Select appealed this order, arguing that the case was wrongly broadening the circumstances in which costs may be made against a non-party.

At a High Court hearing on 24 May, Mr Justice Turner rejected Select’s argument citing the observation by the Court of Appeal (in Deutsche Bank v Sebastian Holdings) that “the only immutable principle is that the discretion must be exercised justly”.

In order to have an enforceable costs order, esure relied upon the relevant exception to Qualified One Way Costs Shifting (QOCS), which applies to proceedings that “include a claim which is made for the financial benefit of a person other than the claimant”. The QOCS Practice Direction (PD) states that examples of such claims “are subrogated claims and claims for credit hire”. Select invited Justice Turner to read into the PD so as to provide its meaning as “examples of claims which may be made for the financial benefit of a person” but he declined to do so.

He further disagreed that a defendant has to establish that the CHO made a profit from the litigation, stating “some money is better than no money”.

Justice Turner also rejected arguments that non-party costs orders should only be made in exceptional circumstances or that the non-party must exercise a degree of control over the litigation.

Ronan McCann, a partner at Horwich Farrelly, said: “This decision, which follows a successful trial in a case originally dealt with by our counter fraud team, will impact upon all credit hire claims. It is one of the most significant decisions on credit hire and QOCS to date, and paves the way for defendants to obtain costs orders against credit hire organisations.”

Graham Hughes, chief claims officer at esure, said: ”This is an excellent result for esure and the industry. This ruling indicates CHOs won’t be able to hide behind QOCS and that they will have to give serious consideration to well-judged offers by defendants.”



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Mark Dugdale is the editor of Claims Media. Mark welcomes articles, letters or feedback from readers and can be reached via mark.dugdale@barkerbrooks.co.uk