Recent Credit Hire Ruling

Anyone in the motor industry will be familiar with the role credit hire and accident management companies play in the repair of accident damaged vehicles. They are a major driver of work. What you may not realise is that litigation linked to these companies is also a major driver of litigation in the Courts.

For those of you who are not familiar, in the event of a road traffic accident, credit hire and accident management companies step in to fund repairs  on behalf of a non-fault party. These repairs are undertaken on a credit basis with the costs recovered from the at fault party; through court if necessary. This benefits the non-fault party as there is no claim on their insurance, their insurer avoids the cost of the insurance claim, the credit hire and accident management companies make a profit on the repairs, as well as hiring of replacement vehicles etc…and finally lawyers make a profit on the costs should the matter proceed to court.

The problem is that the credit hire and accident management companies only recover their outlay in the event of a successful legal case, which incentivise them to argue cases to court. However, as any litigation is brought in the name of the non-fault party, the credit hire and accident management companies are insulated from any legal costs to the other side as these generally fall to their clients if they are liable.

The combination of profit and avoidance of loss has the potential to drive bad behaviour both when offering credit initially, as well as a tendency to argue marginal cases with little risk of consequence… that is until now.

In a judgment that is likely to  turn the credit hire and accident management companies  sector upside down, the Court of Appeal in the case of Tescher v Direct Accident Management Ltd [2025] EWCA Civ 733 has made a non-party costs order resulting in the credit hire and accident management companies being held liable for the costs of failed litigation.

The facts

The case is in fact 2 cases joined (Tescher v Direct Accident Management Limited and AXA v Spectra) and brought at the same time to enable to the court to consider various scenarios and to make a precedent ruling to guide the lower courts.

As with most road traffic accident claims, an accident occurred between the claimant and the defendant. When the case was not settled pre-litigation, a claim for personal injury and credit hire was made to court. In both cases, the claims failed, and the claimant was ordered to pay the defendants costs. In one of the cases the court then made a non-party costs order against the credit hire and accident management company, in the other it did not, and both cases were appealed.

On appeal, it was held that the credit hire and accident management companies can be held liable for any costs, but only very specific situations where they exercise substantially control over the litigation and/or benefit from it.

Going forward, where litigation is the only realistic mechanism by which the credit hire and accident management companies repairs and any vehicle hire will be paid, if the case fails then credit hire and accident management companies should assume that they will be liable for the defendant’s costs.

In Conclusion

We would expect this judgement to be appealed, so watch this space.

Unless, or until it is, this case is binding on all lower courts and is likely to have a significant impact on the credit hire and accident management sector. Credit hire and accident management companies only recover their funds where a case is successful. Even without this judgment we regularly see such companies fail where they fail to balance the risk of non-recovery in their portfolio. A liability for costs will only exacerbate this. 

It is inevitable that some companies will have an unsustainable costs burden. If we are lucky, credit hire and accident management companies will re-assess their exposure to adverse costs and manage it according. It should be expected that some companies will get this wrong. Expect an increased risk of company failure.

We would advise any member who contracts with credit hire and accident management companies to review their agreement to see whether any debts owed are secured or unsecured debts. Unless stated otherwise members should assume that any debts due to them are unsecured and that there is a significant risk of non-payment in the event of the failure of any credit hire and accident management company concerned. Care should be taken to ensure any debts due are paid within the agreed timeframes and a large outstanding balance that would threaten the members own business if unpaid is not allowed to accrue. As always, this advice is general in nature and will need to be tailored to any one particular situation. As a MILS member you have access to the MILS Legal advice line, as well as a number of industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.