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Farrell v Birmingham City Council, Court of Appeal, 17 June 2009

23 June 2009
The issues

Costs – credit hire company – liability of accident management company – the costs of claim fraudulently brought by First and Second Claimants.

The facts

On the 21st January 2005 the Claimants alleged that they had been struck from behind by a vehicle driven by an employee of Birmingham City Council. The Claimant’s vehicle was parked at the time and in it was the First Claimant, Mr Farrell, and allegedly, the Second Claimant, Mr Short. Both claimed whiplash and the First Claimant claimed for the value of his Audi motorcar, which was damaged beyond economic repair. On the same day, the First Claimant entered into a credit hire agreement with Direct Accident Management Services Ltd (DAMS). A week later, an ATE Legal Expenses insurance policy with IGI Insurance was entered into. In February 2005 Birmingham City Council paid the pre-accident value of the Audi to the First Claimant’s solicitors and the First Claimant’s hiring of a replacement vehicle from DAMS came to an end on the 7th February 2005. On the 15th March 2005 each Claimant was examined by Dr Dakin who produced medical reports. In April 2005, proceedings were issued on behalf of the First and Second Claimants.

In September 2006, Birmingham City Council sought to amend its defence to the claim to allege fraud on the part of the Claimants. The matter went to Trial in February 2008 and on the first day of the Trial and before the Hearing was began, the Claimants discontinued their claims. The Court ordered that the First and Second Claimants should pay to the First Defendant its costs of the action and the Claimants were ordered to pay £10,000.00 on account of the First Defendant’s costs by the 18th February 2008. Those costs were never paid.

In March 2003, DAMS was added as the Second Defendant on the Application of Birmingham City Council. The Authority sought an Order under Section 51 of the Supreme Court Act 1981 to the effect that DAMS should pay the costs for which the Claimants were liable. The Judge found that DAMS was the instigator of the litigation. It had control of proceedings and stood to benefit from the outcome. The Judge took the view that this was a suitable case for his discretion to be exercised in favour of Birmingham City Council and accordingly a Costs Order was made against the Second Defendant to the effect that they should bear 80% of Birmingham City Council’s costs.

DAMS appealed.

The decision

The Judge’s conclusion that DAMS had been the instigator of the litigation was justified on the facts. So also was the Judge’s conclusion that it had been in control of the litigation. Although it had not funded it, it had not needed to because of the existence of the Conditional Fee Agreements. Moreover, it had hired the car to the Claimants and that act had been the essential catalyst to the litigation. DAMS considered that the solicitors or the after the event insurers ought to have contributed, it would have been open to them to have brought them into proceedings by means of a Part 20 claim. There was no reason why the Authority should have done so. The Judge could, on the facts, have awarded 100% of the costs. The actual award was well within the range permissible.

Appeal dismissed.

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