The  Court of Appeal has delivered its judgment addressing a critical question in road traffic accident (RTA) litigation: when should credit hire companies bear the costs of failed claims?

 In Tescher v Direct Accident Management Ltd & AXA Insurance UK PLC v Spectra Drive Ltd [2025] EWCA Civ the Court provides definitive guidance on non-party costs orders against credit hire organisations where Qualified One-Way Costs Shifting (QOCS) protects impecunious claimants.

Background

The consolidated appeals arose from two County Court cases where:

DAML Case: Claimant’s RTA claim (including £19,633 credit hire charges) failed at trial. DAML (credit hirer) avoided a costs order.

Spectra Case – reported on by Denovo previously where the Claimant discontinued her claim after AXA alleged fundamental dishonesty regarding hire duration. Spectra was ordered to pay 65% of costs by the DDJ, but this was overturned on appeal.

The Defendants appealed, arguing credit hire companies should bear costs when claims fail, given QOCS shields claimants.

Lord Justice Birss’s leading judgment brings together the  authorities of Giles v Thompson, Lagden v O’Connor, Farrell v Birmingham, Dymocks v Todd with the QOCS regime (CPR r.44.16) to establish a structured approach summarised below:

1. Jurisdiction Engagement (Stage One)

Economic Reality Test: Credit hire companies are the "real party in all but name" for hire claims. Their commercial model (deferred payment contingent on litigation/settlement) makes them the primary beneficiary.

Causation: Litigation is an "inevitable consequence" of credit hire agreements for impecunious claimants. A strict "but for" test is rejected; structural causation suffices.

Control: Tacit control arises from contractual terms tying payment to claim pursuit. Overt control (e.g., appointing solicitors) is unnecessary.

CPR r.44.16(2)(a): Credit hire claims are inherently "made for the financial benefit" of the hire company.

2. Costs Quantum (Stage Two)

Courts may order:

  1. Full costs (where hire charges dwarf PI claims);
  2. Apportioned costs (by claim value/complexity); or
  3. Costs attributable solely to the hire claim.

PD 44, para 12.5: Reinforces that non-party payment is "usual" where r.44.16(2)(a) applies.

3. Distinguishing Features

No Analogy with CFAs: Unlike no-win-no-fee lawyers, credit hire companies generate the claim’s financial core and exercise inherent control.

Impecuniosity Central: The analysis applies where claimants cannot realistically pay hire charges absent litigation.

"Good Fortune" Irrelevant: A defendant’s avoidance of liability via discontinuance (as in Spectra) does not negate the hire company’s costs liability.

Application to the Appeals

DAML Case: DJ Jeffs erred in refusing costs. DAML was the real beneficiary of the £19k hire claim (85% of special damages). Order: DAML to pay 100% of defendant’s costs.

Spectra Case: HHJ Gargan wrongly prioritised AXA’s "good fortune" in avoiding trial. The DDJ’s original 65% costs order against Spectra was restored.

Guidance

Birss LJ endorsed a two-stage test for future cases:

Stage 1 (Jurisdiction):

  • Is the hire company the "real beneficiary" of the hire claim?
  • Did the agreement make litigation inevitable? (If yes, non-party costs are likely).

Stage 2 (Quantum):

  • Assess costs proportionality (claim values, conduct, complexity).
  • Large hire claims relative to PI will usually justify full costs.

Outcome/Conclusion

The judgment restores "Healthy Discipline" (per Giles v Thompson) by ensuring credit hire companies share litigation risk and clarifies QOCS boundaries: Non-parties profiting from claims cannot hide behind claimant QOCS protection, ensuring credit hire companies bear the costs of failed claims they commercially drive.

The  Court of Appeal has delivered its judgment addressing a critical question in road traffic accident (RTA) litigation: when should credit hire companies bear the costs of failed claims?

 In Tescher v Direct Accident Management Ltd & AXA Insurance UK PLC v Spectra Drive Ltd [2025] EWCA Civ the Court provides definitive guidance on non-party costs orders against credit hire organisations where Qualified One-Way Costs Shifting (QOCS) protects impecunious claimants.

Background

The consolidated appeals arose from two County Court cases where:

DAML Case: Claimant’s RTA claim (including £19,633 credit hire charges) failed at trial. DAML (credit hirer) avoided a costs order.

Spectra Case – reported on by Denovo previously where the Claimant discontinued her claim after AXA alleged fundamental dishonesty regarding hire duration. Spectra was ordered to pay 65% of costs by the DDJ, but this was overturned on appeal.

The Defendants appealed, arguing credit hire companies should bear costs when claims fail, given QOCS shields claimants.

Lord Justice Birss’s leading judgment brings together the  authorities of Giles v Thompson, Lagden v O’Connor, Farrell v Birmingham, Dymocks v Todd with the QOCS regime (CPR r.44.16) to establish a structured approach summarised below:

1. Jurisdiction Engagement (Stage One)

Economic Reality Test: Credit hire companies are the "real party in all but name" for hire claims. Their commercial model (deferred payment contingent on litigation/settlement) makes them the primary beneficiary.

Causation: Litigation is an "inevitable consequence" of credit hire agreements for impecunious claimants. A strict "but for" test is rejected; structural causation suffices.

Control: Tacit control arises from contractual terms tying payment to claim pursuit. Overt control (e.g., appointing solicitors) is unnecessary.

CPR r.44.16(2)(a): Credit hire claims are inherently "made for the financial benefit" of the hire company.

2. Costs Quantum (Stage Two)

Courts may order:

  1. Full costs (where hire charges dwarf PI claims);
  2. Apportioned costs (by claim value/complexity); or
  3. Costs attributable solely to the hire claim.

PD 44, para 12.5: Reinforces that non-party payment is "usual" where r.44.16(2)(a) applies.

3. Distinguishing Features

No Analogy with CFAs: Unlike no-win-no-fee lawyers, credit hire companies generate the claim’s financial core and exercise inherent control.

Impecuniosity Central: The analysis applies where claimants cannot realistically pay hire charges absent litigation.

"Good Fortune" Irrelevant: A defendant’s avoidance of liability via discontinuance (as in Spectra) does not negate the hire company’s costs liability.

Application to the Appeals

DAML Case: DJ Jeffs erred in refusing costs. DAML was the real beneficiary of the £19k hire claim (85% of special damages). Order: DAML to pay 100% of defendant’s costs.

Spectra Case: HHJ Gargan wrongly prioritised AXA’s "good fortune" in avoiding trial. The DDJ’s original 65% costs order against Spectra was restored.

Guidance

Birss LJ endorsed a two-stage test for future cases:

Stage 1 (Jurisdiction):

  • Is the hire company the "real beneficiary" of the hire claim?
  • Did the agreement make litigation inevitable? (If yes, non-party costs are likely).

Stage 2 (Quantum):

  • Assess costs proportionality (claim values, conduct, complexity).
  • Large hire claims relative to PI will usually justify full costs.

Outcome/Conclusion

The judgment restores "Healthy Discipline" (per Giles v Thompson) by ensuring credit hire companies share litigation risk and clarifies QOCS boundaries: Non-parties profiting from claims cannot hide behind claimant QOCS protection, ensuring credit hire companies bear the costs of failed claims they commercially drive.