Select Car Rentals (North West) Ltd v Esure Services Ltd

Hearing dates: 17 th May 2017

Judgment Approved

INTRODUCTION

For a quarter of a century, insurance companies and credit hire organisations have been fighting a forensic war of attrition over an ever broadening front. This appeal marks the most recent skirmish. It is not likely to be the last.

The particular points at issue concern the extent to which credit hire companies are potentially vulnerable to adverse costs orders in litigation to which they are not a party.

BACKGROUND

Rachel Mee and three others brought a claim in respect of injuries and losses alleged to have been sustained in a road traffic accident on 27 April 2013. They contended that the accident was the fault of one Warren Jones who had driven his car into the rear of the vehicle in which they had all been traveling. Mr Jones, as first defendant, played no part in the litigation which followed. However, his insurers, Esure Services Limited ("Esure"), were joined as second defendants and strenuously fought the case alleging that the claims were tainted by fraud.

The trial came before Mr Recorder Grundy on 30 October 2015. Having heard all the evidence over a period of three days he was very sceptical of these claims. He concluded that the claimants had not proved even that they had been involved in the alleged accident at all. He declined, however, to go further and find that the claims were fraudulent and limited himself to the observation that they were "very suspicious". His findings, although perhaps unusual, were ones he was entitled to reach. As Baroness Hale observed in Re B [2009] 1 A.C. 11 at paragraph 32:

"32 In our legal system, if a judge finds it more likely than not that something did take place, then it is treated as having taken place. If he finds it more likely than not that it did not take place, then it is treated as not having taken place. He is not allowed to sit on the fence. He has to find for one side or the other. Sometimes the burden of proof will come to his rescue: the party with the burden of showing that something took place will not have satisfied him that it did. But generally speaking a judge is able to make up his mind where the truth lies without needing to rely upon the burden of proof."

One of the more striking features of the case was that one of the heads of claim was in the sum of £23,456.85 in respect of payments alleged to be due under a credit hire agreement with Select Car Rentals (North West) Limited ("Select") for replacement vehicles in the aftermath of the accident. This is to be contrasted with the pre-accident value of the first claimant's vehicle net of salvage in the sum of £1,710.

Doubtless, the Learned Recorder's suspicions as to the bona fides of the claims as a whole were fuelled, at least in part, by the fact that Miss Mee admitted that, in fact, she had bought a replacement vehicle about nine weeks after the accident and so had no need whatsoever to continue accumulating any further debt under the agreement. It appears that she simply allowed her boyfriend to use the hire cars provided under the agreement which he continued to do until he, in turn, was involved in an accident which thus brought the whole unsatisfactory affair to light.

The learned recorder went on to find that even if he had been satisfied that any injuries had been sustained they would have been very minor and limited in duration.

The claims were thus dismissed, but Esure had won a Pyrrhic victory. Who was going to pay their costs of meeting these dubious claims?

The claimants were, subject to the operation of any exceptions provided for under CPR 44, immune from the enforcement of any adverse costs order by the operation of the Qualified One-way Costs Shifting ("QOCS") regime which applies to personal injury claims and, indeed, they may well have been impecunious in any event.

Thus it was that Esure turned their guns on Select contending that their involvement in the ill-fated claims was sufficiently close to justify the making of a non-party costs order against them. Select resisted this claim but were unsuccessful before Recorder Garside QC who awarded Esure 60% of their costs of defending the main claims against Select. It is against this order that Select now appeals before this court.

THE RULES

Sub-sections 51(2) and (3) of the Senior Courts Act 1981 provide the statutory basis for the making of orders relating to costs. These are sufficiently broadly defined as to encompass the making of costs orders against non-parties:

"(2) Without prejudice to any general power to make rules of court, such rules may make provision for regulating matters relating to the costs of those proceedings…

(3) The court shall have full power to determine by whom and to what extent the costs are to be paid."

CPR 46.2 sets out the relevant procedure:

"46.2 – (1) Where the court is considering whether to exercise its discretion under section 51 of the Senior Courts Act 1981 (costs are in the discretion of the court) to make a costs order in favour of or against a person who is not a party to the proceedings –

a) That person must be added as a party to the proceedings for the purposes of costs only; and

b) He must be given a reasonable opportunity to attend a hearing at which the court will consider the matter further."

It is to be noted that CPR 46.2 says nothing about the nature and content of the discretion which the court is exercising within such proceedings.

CPR Part 44 .16 provides for exemptions to QOCS protection and in so far as is material, provides:

" Exceptions to qualified one-way costs shifting where permission required

44.16 …(2) Orders for costs made against the claimant may be enforced up to the full extent of such orders with the permission of the court, and to the extent that it considers just, where –

(a) the proceedings include a claim which is made for the financial benefit of a person other than the claimant or a dependant within the meaning of section 1(3) of the Fatal Accidents Act 1976 (other than a claim in respect of the gratuitous provision of care, earnings paid by an employer or medical expenses)…

(3) Where paragraph (2)(a) applies, the court may, subject to rule 46.2, make an order for costs against a person, other than the claimant, for whose financial benefit the whole or part of the claim was made."

I note in passing that, strictly speaking, paragraph (3) does not in itself provide a distinct exception to the QOCS regime because the limits set upon enforcement of costs thereunder is confined to claimants as defined under CPR 44.13 and does not include non-parties.

The accompanying Practice Direction CPR 44 PD12 provides:

" Section 2—Qualified One-Way Costs Shifting

12.1 This subsection applies to proceedings to which Section II of Part 44 applies.

12.2 Examples of claims made for the financial benefit of a person other than the claimant or a dependant within the meaning of section 1(3) of the Fatal Accidents Act 1976 within the meaning of rule 44.16(2) are subrogated claims and claims for credit hire…

12.5 The court has power to make an order for costs against a person other than the claimant under section 51(3) of the Senior Courts Act 1981 and rule 46.2. In a case to which rule 44.16(2)(a) applies (claims for the benefit of others)

(a) the court will usually order any person other than the claimant for whose financial benefit such a claim was made to pay all the costs of the proceedings or the costs attributable to the issues to which rule 44.16(2)(a) applies, or may exceptionally make such an order permitting the enforcement of such an order for costs against the claimant;

(b) the court may, as it thinks fair and just, determine the costs attributable to claims for the financial benefit of persons other than the claimant.

12.6 In proceedings to which rule 44.16 applies, the court will normally order the claimant or, as the case may be, the person for whose benefit a claim was made to pay costs notwithstanding that the aggregate amount in money terms of such orders exceeds the aggregate amount in money terms of any orders for damages, interest and costs made in favour of the claimant.

12.7 Assessments of costs may be on a standard or indemnity basis and may be subject to a summary or detailed assessment."

THE CASE LAW

The House of Lords first recognised the existence of a discretion to make an order for costs against a non-party in the case of Aiden Shipping v Interbulk [1986] A.C. 965. Further and detailed guidance on the correct approach to the exercise of such discretion was thereafter set out in the decision of the Court of Appeal in Symphony Group v Hodgson [1994] Q.B. 179.

Over recent years, however, the courts have developed a less prescriptive approach to the exercise of this discretion deploying a more open textured way of dealing with the various relevant factors to be taken into account. Most recently, in Deutsche Bank v Sebastian Holdings [2016] 4 W.L.R. 17 the Court of Appeal distilled from Symphony Group the following broad principles:

"17 A number of points emerge from that case. First, we think it is clear that all three members of the court assumed that the procedure to be adopted for deciding whether a third party should bear all or part of the costs of the litigation should be...