esure secures landmark High Court ruling paving the way for insurers to recover costs from credit hire operators

Esure-High-Court-Ruling

Costs in excess of £20,000 to be recovered by esure following today’s High Court ruling

Horwich Farrelly, has achieved a landmark ruling on behalf of esure, in the appeal of Rachel Mee and Others v esure Insurance Ltd, paving the way for insurers to recover costs from credit hire organisations (CHOs).

The High Court judgment, handed down earlier today, dismissed an appeal by Southport-based Select Car Rentals (North West) Ltd that the CHO was 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 Miss Rachel Mee and three others following an alleged road traffic collision on 27 April 2013. Following the incident, Miss Mee hired a vehicle from Select, which she kept for a period of 388 days at a total cost of £23,456.85. However, 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 beyond this point. 

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. He declined to find that the claims were fraudulent although he made the observation that they were "very suspicious".

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 24th May 2017, 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 stating:

"The fact that any given credit hire organisation’s connection with a claim is no greater than is commonly the case does not, without more, provide it with an automatic immunity from a non-party costs order. There is no room for the argument that it is a prerequisite to the making of such an order that such involvement be exceptional."

Ronan McCann, Partner at Horwich Farrelly, commented “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 added ”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."