Introduction
The Court of Appeal’s decision in Tescher v Direct Accident Management Ltd [2025] EWCA Civ 733 has significant implications for both defendants and credit hire organisations, particularly in the context of Qualified One-Way Costs Shifting (QOCS).
This judgment clarifies the circumstances under which a non-party costs order (NPCO) can be made against a credit hire company when a claim fails and the claimant is impecunious.
Background
The case arose from a road traffic accident claim in which the claimant sought damages, the majority of which related to credit hire charges. The claim was ultimately dismissed, and the defendant applied for a non-party costs order against the credit hire company, Direct Accident Management Ltd (DAML).
The central issue was whether DAML, as a non-party, could be held liable for the defendant’s costs despite the protection afforded to the claimant under QOCS.
The Court’s findings
The Court of Appeal held that DAML was the 'real party' to the litigation. It found that:
- The credit hire company had a direct financial interest in the outcome of the claim.
- The litigation was the only realistic route for DAML to recover its charges.
- DAML’s involvement went beyond that of a passive funder - it had a vested interest in the proceedings and stood to benefit directly from a successful outcome.
As a result, the Court concluded that a non-party costs order was appropriate. In one instance, the Court awarded 100% of the defendant’s costs against DAML; in another, 65%, reflecting the extent of the hire charges in the overall claim.
Implications for credit hire and QOCS
This ruling is a pivotal development in the evolving landscape of QOCS and credit hire litigation. It confirms that QOCS does not shield non-parties who are the real beneficiaries of the litigation. Where a claimant is impecunious and the claim fails, defendants now have a viable route to recover costs from the credit hire company.
The decision also reinforces the principle that the courts will look beyond the formal parties to litigation and examine the substance of who is driving and funding the claim.
What this means for clients
For insurers and defendants, this judgment provides a powerful tool to challenge speculative or inflated credit hire claims. It introduces a layer of accountability for credit hire companies and may deter aggressive litigation strategies where the claimant has little to lose.
Clients should be aware that:
- Where credit hire charges dominate a claim, and the claimant is impecunious, a non-party costs order is now a realistic and enforceable option.
- Early identification of the credit hire company’s involvement and financial interest is key to a successful NPCO application.
Conclusion
Tescher v Direct Accident Management Ltd is a landmark decision that reshapes the cost consequences of failed credit hire claims. It empowers defendants to pursue recovery from those who stand to benefit most from litigation, even if they are not named parties.
For clients and practitioners alike, it underscores the importance of strategic cost planning and robust evidence gathering from the outset.
If you need any guidance or advice please contact one of our experts.
