Tescher VS DAMS: A Landmark Decision
Chris Dibb
|14 July 2025
The recent Court of Appeal decision in the rolled-up case of Tescher v Direct Accident Management Ltd has quite rightly been lauded as a significant victory for the defendant side in the perpetual battle of credit hire.
I have read various reports in which the decision been extolled as “landmark” and “transformative”, but the question the industry will now be asking itself is whether such descriptions are hyperbolic or reflective of real incoming change.
No doubt, there is now a greater risk to CHOs in litigating cases and gone is the assumption that they have essentially a free hit when it comes to issuing proceedings. This would apply particularly to those cases where the prospects of success may be best described as questionable, but which are issued in the hope that the costs to the defendant insurer of litigating a case to trial will result in an offer followed by settlement with a costs entitlement.
Here the Court of Appeal considered appeals from two cases where the lower courts had grappled with the issue of non-party costs orders (NPCO) against the CHOs; Direct Accident Management Limited in the case of Tescher where an a NPCO was refused, and Axa v Spectra, where the DDJ at first instance had made a NPCO for 65% of the defendant’s costs (which was overturned on the first appeal).
In Tescher, the credit hire claimed was in the region of £20,000 and the claim defeated on liability at trial. In AxA around £16,000 was claimed before the action was subsequently discontinued. Both amounts no doubt huge sums to a claimant expected to pay the money back in the event of an unsuccessful case, but not unusually high amounts in the world of credit hire.
Interestingly, it was acknowledged in the judgment that where a claimant is alleged to be impecunious the CHO cannot expect to recover the credit hire charges from the claimant on any realistic commercial basis, which is perhaps reflective of the increase in the value of credit hire claims generally over recent years in particular. The only realistic way in which the CHO will recovery the hire charges is through litigation (including settlement).
The judgment, handed down by Lord Justice Birss, is unambiguous in answering the crucial question of who therefore has effective control of and who is the real beneficiary of the litigation:
(74) “As a matter of reality – practical and economic – it is the credit hire company which is the real beneficiary of the litigation for the damages in respect of charges for credit hire. The fact that payment of the sums obtained in a successful claim to the credit hire company benefits the claimant by extinguishing their debt to that company does not alter this reality.”
In addition, it was found that whilst a claimant who brings a claim for injury may be protected by the provisions of Qualified One-Way Costs Shifting (QOCS), such a shield is not available to CHOs and that the QOCS provisions were not in place to protect commercial entitles for whose benefit claims were brought.
Following this judgment, it could now be argued that in cases where a claimant has been ordered to pay costs and QOCS applies, that the burden switches to the CHO to provide some reason why the court should not make such an order, with Birss LJ saying that in such circumstances the making of a NPCO would be “likely”. In future, it may be that the making of a NPCO in failed credit hire cases will become the norm rather than an exception.
In a further blow to CHOs, when the claim for credit hire outstrips the claim the PI claim the court should not normally make a percentage deduction to reflect the different elements of the claim:
(77) “When the credit hire claim is several times larger than the PI claim (as in both DAML and Spectra) an order for all the costs of the litigation would be likely, absent some special feature.”
In such circumstances, I would imagine that even the most creative CHOs would be at pains to produce a judicious argument as to special features.
It should be made clear that the court did not allege any wrong-doing on behalf of either CHO and although the claimant had discontinued in AxA once allegations of fundamental dishonesty were made, the court ultimately rejected that argument at first instance. Birss LJ confirming:
(75) “It also bears spelling out that nothing in the analysis I have undertaken involves saying anything which is done is improper or unlawful.”
The court was clear that this decision does not just apply to those firms who have links between the solicitors and the CHO and that such evidence need not be provided when deciding on a NPCO.
It is perhaps also noteworthy though that Birss LJ, more than once, referred to Lord Mustill’s phrase in Giles v Thompson of a “healthy discipline” when it comes to the costs risks of litigation. One might reasonably assume that this judgment may cause CHOs to reflect on the nature of the cases they chose to litigate.
Credit hire claims currently take up a significant proportion of court time with Bond Turner’s own material stating that in 2023 they alone had on average 10 barristers in court each day representing their group’s clients.
From a defendant perspective, one might realistically hope that this judgment may reduce the volume of credit hire traffic passing through the courts, although those on the other side will no doubt repeat well-rehearsed arguments that insurers’ failures to make reasonable offers is the main reason why so many credit hire cases litigate and will complain about diminished access to justice.
Although the true answer probably lies somewhere in the in-between, there is no doubt that this judgment is significant and does raise the risk level for CHOs. It may be that they chose to “pass-on” that risk via ever higher rates, and according to one report DAML are seeking permission to appeal to the Supreme Court.
It with worth also bearing in mind that percentage wise only a small number of credit hire claims proceed to trial on the higher tracks and most that do are subject to fixed costs and so the risk to the CHOs in reality may not be as stark are one might think at first blush. With that in mind, the jury is still out as to whether this decision may prove to be quite as transformative in terms of changing behaviours as many initially perceive. Watch this space.
