The Court of Appeal has brought much-needed clarity to the question of non-party costs orders against credit hire organisations in cases shielded by QOCS.
On 13 June 2025, the Court of Appeal handed down judgments in the conjoined appeals of Tescher v Direct Accident Management Limited and AXA v Spectra Drive Limited.
Both cases involved personal injury claims and significant claims for hire. Both claims initially failed. However, qualified one-way cost shifting (QOCS) applied and the successful defendants (at first instance) could not recover costs against the claimants.
Both defendants sought non-party costs orders (NPCOs) against the credit hire organisations (CHOs) in each claim.
In Tescher, Direct Accident Management Ltd (“DAML”) was the CHO in a case which the claimant discontinued when faced with the threat of a fundamental dishonesty finding, leaving Admiral (Tescher’s insurers) to seek costs recovery from DAML via a NPCO.
Meanwhile in AXA v Spectra, AXA successfully pursued 65% of its costs against Spectra Drive, the CHO, through a NPCO initially, but that decision was overturned on appeal.
Lord Justice Birss delivered the lead judgment in the conjoined cases adopting a clear two‑step test:
Should a NPCO be imposed on a CHO?
- Yes - the court held that the CHOs held effective control over both claims. The claims were structured to allow them to recover the credit hire charges even if the claim was formally issued in the claimants’ names. The CHOs in each case were the “real beneficiary” of the process and so the obligation to pay costs fell on them, not the impecunious claimant.
What portion of the costs should be awarded?
- It was held that the CHOs must generally bear the full, or a significant share, of costs when a credit hire claim fails. The court declined to accept the CHOs’ arguments for a “but for” analysis, deeming the credit hire contract a fundamental cause of the expense.
- In Tescher, 100% of costs were awarded.
- In AXA v Spectra, Spectra was ordered to pay 65% as per the first instance decision (as the question of what proportion of the costs was payable by the CHO did not form part of the appeal).
Insurance‑Industry Perspective
The ruling confirms that QOCS offers no sanctuary for non party CHOs which will hopefully end the era of CHO impunity in credit hire cases that are successfully defeated.
Moreover, the cases, to all intents and purposes, appear to shift the burden to CHOs to justify why a NPCO should not be made, this may be an uphill battle in many cases.
This decision should also embolden insurers to seek NPCOs in credit hire cases where QOCS do not apply. The court was clear in its message that there can be consequences for CHOs where they hold effective control over such claims and a lack of personal injury claim shouldn’t alter this.
We are aware that an application for permission to appeal is being considered though so watch this space.
