Tescher v DAML

Credit Hire Organisations (CHOs) will now be paying defendants’ costs when claims featuring credit hire are unsuccessful.

HF, on behalf of Admiral, have been successful in obtaining a non-party costs order against Direct Accident Management Limited in the Court of Appeal. 

This decision by the Court of Appeal builds on previous HF cases of Mee v esure and more recently Murtagh v Kindertons, and marks the end of a legal battle spanning several years.  It’s a win benefiting insurers and their customers with CHOs being required to pay legal fees when claims involving credit hire fail.

Graeme Mulvoy, Partner at HF: “Building upon the previous HF cases of Mee v esure and more recently Murtagh v Kindertons, it is hugely satisfying to secure this victory for Admiral and bring an end to a hard-fought battle spanning a number of years.  It was right for us to leapfrog this case to the Court of Appeal and this decision will hopefully see more discipline from CHOs when pursuing unmeritorious claims given the risks associated with that approach.”

Ryan Lewis, Head of Credit Hire at Admiral: “We welcome the Court of Appeal’s unanimous decision, which supports a fair and balanced approach to credit hire claims.

This outcome reflects years of hard work and strategic collaboration with HF and reinforces our commitment to doing the right thing and delivering for our customers.”

 

Background:

 

The Case

In November 2018, Mr Tescher’s car came into contact with a motorcycle being driven by the Claimant, Mr Quesada. Mr Quesada stated he was unable to afford to pay for a replacement vehicle (known as ‘impecunious’) and therefore signed a credit hire agreement with Direct Accident Management Limited (“DAML”), which ran for 88 days and amounted to c. £20,000. Importantly, the agreement obligated Mr Quesada to bring legal proceedings against Mr Tescher if DAML did not recover their money and that any payment (from Mr Tescher to DAML) was deferred until damages were paid by someone else (i.e. Mr Tescher’s insurer).

EUI Limited (“Admiral”) insured Mr Tescher. As liability was disputed, Admiral refused to make any payments to Mr Quesada or DAML. As a result, Bond Turner issued court proceedings in October 2020 on Mr Quesada’s behalf, for personal injury and credit hire. The latter amounted to 85% of the total being claimed.

In December 2022, the case was dismissed at trial by District Judge Swan who also ordered Mr Quesada to pay Admiral’s legal costs. HF, on behalf of Mr Tescher (and Admiral) applied to join DAML into proceedings as a Non-Party to recover Admiral’s legal costs of around £18,000 (“NPCO”) arguing that that they were the real party to the claim as they stood to benefit the most. The application was dismissed in August 2023.

Usually, an appeal would then be referred to a Circuit Judge, however, HF were granted permission to leapfrog the appeal directly to the Court of Appeal in October 2024, due to the wider importance of the issue and conflicting county court decisions on NPCO.

 

The Appeal

DAML and Bond Turner are part of the Anexo Group, which is listed on the London Stock Exchange.  According to their 2023 statement, they have on average around 10 barristers in court each day representing the group’s clients. The consequence is that county courts are having to grapple with credit hire claims in their thousands every year. In cases where the claim failed, DAML (and other CHOs) mainly escaped cost orders.

In 1994, the well-known House of Lords decision of Giles v Thompson contained a short paragraph on the topic: “If the motorists are found to have been tempted by the hire companies into the unnecessary hiring of substitute vehicles, the claims will fail pro tanto, with consequent orders for costs which will impose a healthy discipline upon the companies.”

Absent that discipline, the Court of Appeal (“CA”) were asked to answer the question of when a credit hire case fails, when and in what circumstances should the CHO be made liable for a defendant’s costs. Due to the nature and volume of disputes at county court level, the CA was asked to provide general guidance on NPCOs, where credit hire features.

The Appeal was due to be heard over one day in May 2025, however that was extended to one and a half days when the appeal of AXA v Spectra (another CHO) was added to the Tescher case due to similar circumstances and issues. In that case, AXA had unsuccessfully applied for a finding of fundamental dishonesty but been successful in their NPCO against Spectra (AXA were awarded 65% of their legal costs). Spectra appealed that decision. His Honour Judge Gargan, hearing the appeal, decided it was best to review the case afresh, after the initial application followed an unconventional path. AXA’s arguments largely followed HF’s case of Murtagh v Kindertons (Landmark Appeal on Non-Party Costs Orders – HF) and despite HHJ Gargan agreeing with the test in Kindertons, he found in favour of Spectra citing that AXA had enjoyed an unexpected windfall when the original claim had been discontinued.

Largely adopting the arguments in Tescher, AXA were granted permission to appeal by Lord Justice Coulson, who conjoined both appeals.

Giving the leading judgment in the CA, Lord Justice Birss adopted a two-step process:

  1. Whether a NPCO of some kind should be made against a CHO where the claim fails
  2. If so, deciding on the amount of costs that CHO should pay

 

Step 1 – Should an NPCO be made?

Yes. It was irrelevant what documents the CHO received during the life of a claim and their connection to the solicitors instructed. It was tacit control which was important. The CA accepted HF’s submissions that the structure of the credit hire agreement is such that, with the deferral of payment and an impecunious claimant, there is an inevitability of litigation against the defendant or their insurers, or settlement with them. The agreement is effective control in practice and that “control is all the more effective for not having to be overtly exercised”.

It was found that in a practical and economic reality, DAML is the real beneficiary of the litigation for the damages in respect of credit hire. It was said that the “fact that payment of the sums obtained in a successful claim to the credit hire company benefits the claimant by extinguishing their debt to that company does not alter this reality”.

 

Step 2 – The amount of costs payable

100%. Where the credit hire claim is usually several times larger than the personal injury claim an order for all the costs of the litigation would be the likely outcome. DAML and Spectra had argued that the test for costs should be on a ‘but for’ basis i.e. costs would have arisen in any event due to the personal injury claim. Birss LJ disagreed, stating that it “follows therefore that in a very real sense the credit hire agreement, for which the credit hire company is responsible, is a fundamental cause of the legal costs incurred by the defendant. That is enough to satisfy the requirement for causation sufficient at the first stage of the exercise. For this reason, I would hold that Turner J was right on causation in Kindertons.”

 

The Decision

It was unanimously agreed that DAML and Spectra should pay 100% of Admiral’s and 65% of AXA’s costs. Birss LJ stated that “absent some reason why not, when a claimant has been ordered to pay the costs and QOCS applies, a non-party cost order against the credit hire company is likely.” He stated that an NPCO will usually be made “absent special circumstances“. It is hard to envisage any reason or special circumstances which would enable CHOs to avoid a cost order.

The judgment can be found here.

Counter Fraud Court of Appeal Credit Hire