UK: (Re)insurance Weekly Update 23 - 2017

Last Updated: 4 July 2017
Article by Nigel Brook

This week's case law:

Select Car Rentals v Esure Services: Recorder justified in making non-party costs order in favour of insurers against credit hire company/impact of QOCS regime

The claimant alleged that her car had been hit by a car driven by a driver insured by the defendant. Her claim was dismissed at trial, on the ground that it was suspicious. However, the insurers were unable to recover their costs from the claimant because she was 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, she may well have been impecunious in any event).

The claimant had hired a replacement vehicle from a credit hire company ("Select") and the recorder made a non-party costs order against Select. Select then appealed against that decision.

Turner J has now rejected that appeal. He held that:

(1) Although the QOCS regime expressly provides that the court may "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" (CPR r 44.16(3)), that does not create a new (and more relaxed) category of discretion to be exercised by the court, in addition to the existing discretion to make a non-party costs order. The judge noted that "It may well be that, as is often the case, where a credit hire company promotes litigation for its own financial benefit, knowing that the party in whose name the claim is brought will enjoy some level of protection under the QOCS regime or will probably not be able to satisfy any adverse costs order in any event, then this is a factor which the court may take into account when considering whether it is just for the credit hire company to pay costs. It will be noted, however, that even claimants otherwise protected under QOCS are not entirely immune from the enforcement of an order against them under CPR 44.16 even though it will usually be the case that it is the relevant non-party who has sought a financial benefit who will be first in line".

(2) Furthermore, a claim can be made for "the financial benefit" of the non-party even if the original hire agreement was not profitable: "The financial benefit is made out because, however good or bad the original deal, it is to the financial benefit of the credit hire organisation to recover the monies due under the hire agreement through the process of the claimant's litigation. Some money is better than no money".

(3) The recorder had applied the correct test. One factor which he had taken into account was that Select had been in direct email contact with the insurers about the progress of the claim. Turner J held that it did not matter that direct communications between a credit hirer and an insurer is standard practice under the ABI general terms of agreement between subscribing insurers and credit hire organisations: "even if these terms and this practice are to be taken as standard in the industry, this does not provide Select, or for that matter any other credit hire company, immunity from a non-party costs order".

Interactive Technology v Ferster: Whether judge can be shown Part 36 offer when some issues in a case have been decided

CPR r36.16 provides that a Part 36 offer cannot be shown to a judge (and the fact it has been made cannot be disclosed either) "until the case has been decided". However, where "any part of, or issue in, the case has been decided" (which was the case here) and "the Part 36 offer relates only to parts or issues that have been decided" the judge may be told that about that Part 36 and its terms. The judge may also be told about the existence of any other Part 36 offers (ie ones which do not relate solely to the decided issues), but not the terms of those offers (unless certain other conditions are met (and they were not met in this case)).

The Part 36 offers made by the defendants in this case did not relate only to the issues which had been decided. The claimant applied for an order that the defendants pay its costs but the defendants argued that costs should be reserved until the end of the case (when the judge would be shown the terms of all the Part 36 offers).

The judge agreed that costs should be reserved. The defendants could not be criticised for having failed to make a Part 36 offer which related only to the issues which had been decided: "Even where there is a direction which splits the trial between issues of liability and quantum, or in some other way directs the trial of specified issues, it is open to a defendant to make a Part 36 offer which deals with the whole case and to expect the court to take that Part 36 offer into account when the court eventually deals with all of the costs of the action including the costs of the trial on liability, or on specified issues only".

COMMENT: Prior to 6th April 2015, there was some doubt as to whether a judge could be told about a Part 36 offer in a split trial, for example after the issue of liability had been decided. Since that date, the judge can be told about the existence of, and terms of, a Part 36 offer where that offer relates solely to the issue which has been decided. The White Book has queried what would happen where a party makes two or more Part 36 offers, one of which relates to issues which have been decided, and one of which relates to issues still being disputed. It is unclear whether the issue of costs will be reserved (as it was in this case, where the offer did not relate to issues which had been decided), or whether a judge would be inclined to make an immediate costs order at the end of the split trial.

Harrison v University Hospitals: Court of Appeal clarifies certain issues relating to costs budgeting

The Court of Appeal clarified certain issues concerning the relationship between costs budgeting and detailed assessment at the end of a case:

(1) The aims of costs budgeting include a reduction in detailed assessments and so a good reason is needed to depart from the costs budget and this includes a good reason to go below the budgeted amount.

(2) However, there is no need to show a good reason to depart from the amount of costs incurred prior to the budget: such incurred costs were never agreed or "approved" by the Costs Management Order and so they are to be the subject of detailed assessment in the usual way. 

Separately, the Court of Appeal also confirmed that a case is "commenced" for the purpose of the new proportionality rules which came into force on 1 April 2013 (see CPR r44.3(7)(a)) on the date entered by the court on the claim form. Although the rule refers to "cases" commenced before 1 April 2013, that did not mean something different from "proceedings" or "claims".

(Re)insurance Weekly Update 23 - 2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nigel Brook
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