Non-party costs orders and credit hire disputes

In Kindertons Ltd v (1) Georgina Murtagh (2) Esure Services Ltd [2024] EWHC 471 (KB), Turner J considered a challenge to a non-party costs order (NPCO). The trial judge found that the damages claimed by the claimant in her personal injury matter had not been caused in the accident and that the claimant and her husband were fundamentally dishonest. The claimant disappeared leaving the costs order unpaid. The insurer successfully applied for an NPCO against the credit hire company.

On appeal to the High Court, the appellant challenged the NPCO arguing that: (i) it did not benefit from the claim; (ii) it did not have the power to control the litigation; and (iii) the respondent could not prove that the appellant had caused costs to be incurred. Turner J dismissed the appeal and noted that, in common with credit hire companies generally, the whole purpose of the appellant providing credit hire facilities was to make a commercial profit out of the client’s legal claim, and the provision of such facilities was capable of providing a fair and useful mitigation of the difficulties which would be faced by claimants unable to afford to pay the lower Basic Rate Hire up front (Amjad v UK Insurance Ltd [2023] EWHC 2832 (KB)). He also found that the appellants stood to gain substantially from the claim brought in the name of the claimant and, therefore, had a very strong financial stake in the litigation. The appellant also had a high degree of control over the litigation (Deutsche Bank AG v Sebastian Holdings [2016] 4 WLR 17).

Turner J rejected the appellant’s argument that it was necessary for the respondents to prove the causation of costs on a ‘but for’ basis, which was no longer a necessary pre-condition to an order for costs against a non-party (see Total Spares v Antares [2006] EWHC 1537 (Ch); Turvill v Bird [2016] EWCA Civ 703). The appellant relied heavily on the Supreme Court’s decision in XYZ v Travellers Insurance Co Ltd [2019] 1 W.L.R. 6075 in which Lord Briggs considered the relevance of causation in a claim for an NPCO against liability insurers. Turner J noted that Lord Briggs’ comments demonstrated that he was careful to circumscribe the scope of his observations in the following terms:

‘30. It is not the purpose of this judgment comprehensively to reassess those generally applicable principles. It may be (and I am reluctantly prepared to assume but without deciding) that they really are limited, as the Court of Appeal thought in the present case, to the twin considerations of exceptionality and justice. The same general conclusion is to be found in the Deutsche Bank case. That said, I share all Lord Reed DPSC’s concerns as to the lack of content, principle or precision in the concept of exceptionality as a useful test. Rather, this is an occasion to consider, in more granular detail, the principles which ought to apply to that distinct part of the broad spectrum of non-parties occupied by liability insurers. While doing so it will be appropriate to make some brief observations about the impact of those general principles in the liability insurance context, and in particular about the role played by the presence or absence of a causative link between the conduct of the non-party relied upon and the costs which the applicants incurred which they seek to recover against the non-party under section 51.’

Turner J explained that Lord Briggs ‘was not intending to lay down any general guidance on causation applicable to all NPCO applications’. Turner J distinguished the decision in XYZ on the grounds that it concerned liability insurance, where the insurer is typically ‘an involuntary rather than voluntary funder of litigation’ and that it concerned ‘intermeddling’, rather than the ‘real party’ test that applied in Kindertons.

The decision serves as a helpful reminder of the principles governing NPCOs and the relevant factors which the courts will consider in credit hire disputes. Ultimately, it will be a question of discretion which must be exercised justly. As the Court of Appeal put it in Deutsche Bank AG, ‘the only immutable principle [when considering an application for an NPCO] is that the discretion must be exercised justly… since the decision involves an exercise of discretion, limited assistance is likely to be gained from the citation of other decisions at first instance in which judges have or have not granted an order of this kind’.

Masood Ahmed is an associate professor of law at the University of Leicester and a member of the Law Society’s Dispute Resolution Committee. Lal Akhter is director of Docket Live and an unregistered barrister