Court upholds non-party costs order against credit hire organisation

Company “voluntarily assumed the risk” that claimants would turn out to be dishonest

The High Court has upheld a non-party costs order (NPCO) made against a credit hire company where its client failed to pay costs ordered after being found fundamentally dishonest.

Mr Justice Turner described the case as “yet another chapter in the continuing war of forensic attrition between motor insurers and credit hire companies”.

Kindertons Ltd v Murtagh & Anor [2024] EWHC 471 (KB) followed a minor collision in 2019, where there was “gentle contact” with the car belonging to the claimant, Serhat Ibrahim. He then entered into a credit hire agreement and a credit agreement (for repair, recovery and storage) with Kindertons.

Mr Ibrahaim and his wife, who was said to have been a passenger, brought proceedings limited in value to £20,000, around £16,700 of which arose under the agreements. Almost all the rest was for the personal injury claims.

At the fast-track trial in August 2020, the recorder held that the damages claimed in respect of the repairs and hire charges had not been caused in the accident, and that Mrs Ibrahim had not even been in the car at the time. Both she and her husband had been fundamentally dishonest in saying she was.

They were ordered to pay the defendant £12,000 in costs but, Turner J said, “promptly disappeared from forensic view leaving the costs bill unpaid”. The defendant’s insurer, Esure, then applied for the NPCO against Kindertons.

Mr Recorder Galagher ruled that the claim included a claim which was made for the financial benefit of Kindertons and awarded Esure 80% of its costs.

Turner J rejected the appeal, which was advanced on multiple grounds, including that the judge was wrong to conclude that Kindertons had a financial benefit in the litigation such as to found an NPCO.

Kindertons had “a very strong financial stake in the litigation”, he said, and any benefit to Mr Ibrahim in pursuing the claim for hire charges was “all but illusory”.

He dismissed too the argument that there was no proper basis for the finding that Kindertons controlled the litigation.

Turner J said: “There is a danger that the concept of ‘control’ is wrongly treated as if it were a traffic light, governing access to the exercise of court’s discretion to make a non-party costs order, which is showing either red or green.

“Control is almost invariably a matter of degree. As a concept, it is relevant to the extent that, in any given case, the greater the level of control exercised by the non-party the more likely it will be that the court will exercise its discretion in favour of making a NPCO…

“On the facts of this case, there was a high degree of control. The contractual terms identified above tied Mr Ibrahim into bringing a claim and continuing it at the risk of incurring serious financial consequences in the event that he were to fail to comply. It matters little, if anything, that such consequences were not, in the event, visited upon Mr Ibrahim. It is the threat and not the execution of repercussions which forms the usual basis for control.”

The judge noted that Kindertons had told Mr Ibrahaim not to engage with Esure when it offered a courtesy car. “I am satisfied that any engagement with Esure risked compromising the interests of Kindertons who thus wished to choreograph the progress of the litigation to preclude this.”

Turner J disagreed that the recorder wrongly failed to consider causation. “In my view, on the circumstances of this case and without seeking to lay down any general rule relating to the appropriateness of NPCOs against credit hire companies, I am satisfied that the recorder was right to conclude that it was just to make the order and he was not obliged to make any specific finding in respect of ‘but for’ causation before so doing.

“In particular, Kindertons was exercising a degree of control over the most valuable of Mr Ibrahim’s claims on the basis of instructions from [claim handler] Rachel, the specific intention of which was to neuter any attempts by Esure to limit its exposure to the hire claim which had the potential to reduce Kindertons’ profits.

“In my view it was neither fair nor just that it should be permitted to do this without exposing itself to the potential consequences of a NPCO.”

The fact that Mr and Mrs Ibrahim were found to have been dishonest did not make it unjust to make the NPCO against Kindertons, he continued.

“On the contrary, Kindertons voluntarily assumed the risk that Mr and Mrs Ibrahim would turn out to be dishonest. As Miss Murtagh’s road traffic insurers, Esure had no say in the matter. The level of scrutiny which would be applied to any aspect of the claim which it was seeking to adopt was a matter for Kindertons.

“Little in the way of scrutiny is discernible from the transcript of the conversation between Mr Ibrahim and Rachel. Of course, it may well be that the cost of exercising higher levels of scrutiny would be disproportionate to the money thereby saved but this is a commercial decision the consequences of which must be borne by Kindertons.”

Turner J added that, on the facts of this case, he too would have made an NPCO.

Graeme Mulvoy, a partner at HF, who acted for Esure, said: “This is a significant win for insurers. For a while, CHOs [credit hire organisations] have been arguing that a test laid down by the Supreme Court (XYZ v Travelers Insurance Co Ltd [2019] 1 WLR. 6075) was one that lower courts should adopt. Mr Justice Turner has brought an end to this debate, commenting that Lord Briggs was not intending to lay down any general guidance on all NPCO applications.

“It is further pleasing that Mr Justice Turner agreed with us that if CHOs voluntarily assume risk (in this case claimants being dishonest), they cannot then hide behind that to escape any consequences.

“By the very nature of their business models, CHOs should know that they are at risk of NPCO applications – not that any warning is needed, but it’s expressly stated in the Civil Procedure Rules. It is our intention to continue to recover our client’s costs from CHOs on all appropriate cases.”

Robert Marven KC and Henry King (instructed by Canford Law) for the appellant. Stephen Bailey (instructed by Horwich Farrelly) for the respondents.

Exclusive Access

Members only article

This article is exclusively for ACL members. Please log in to proceed, or click the button below to fill out an application from and become a part of our professional community.

Post details

Post type
Published date
13 Mar 2024

Fill this form out to be notified when booking goes live.

Your Full Name
This field is for validation purposes and should be left unchanged.