CHO Comment: Axa v Spectra

Commenting on the recent Court of Appeal case (Axa v Spectra), which found that credit hire organisations may be responsible for the costs of unsuccessful litigation, Anthony Hughes, Chair and CEO of the Credit Hire Organisation (CHO) the trade body for credit hire companies, said: “While defendant firms will, inevitably, seek to paint the decision as significant, I think some perspective is helpful.

The number of credit hire cases ending up at trial before the court is vanishingly small, perhaps 1-2% of the total number of claims each year, the vast majority settle in the normal claims process or with negotiation after proceedings are issued. If we then factor in that most credit hire cases are allocated to the small claims track so there are no costs between the parties (without unreasonable behaviour) and, moreover, since October 2023 it is probable that 100% of remaining cases will now fall within the Fixed Recoverable Costs regime, I am just not convinced that this result is seismic in its impact.

Furthermore, a CHC has to lose at trial before this even becomes an option for defendants – and that is not a common occurrence. In summary, therefore, we should not read too much into this decision.

Most CHCs operate protocol arrangements with insurer partners, either under the auspices of the GTA (a voluntary agreement designed to reduce frictional costs), or with their own bilateral agreements. These arrangements are predicated on reducing litigation. Cases that end in court are always outliers. In our constructive discussions with insurer partners to revise the GTA, we will be piloting alternative dispute resolution as a means of further reducing the need for court proceedings. The rationale behind ADR is to avoid litigation and the cost associated with it. Any commentators who think this decision could derail this work has, in my view, misunderstood the mechanism proposed and/or overstated the impact of the CoA decision.