Credit hire case sets fraud claim precedent

Farrell and Short v Birmingham City Council and Direct Accident Management Services Ltd (Birmingham County Court - 1 October 2008)

The two claimants alleged that they had been involved in a collision with a bin lorry driven by one of the first defendant's employees, in which the first claimant's car was written off. On the same day, the first claimant hired a car on credit from Direct Accident Management Services. DAMS immediately arranged for its regular solicitors to recover from the first defendant the cost of hire, pre-accident value of the first claimant's vehicle and very minor personal injury damages for both claimants.

The first defendant paid the PAV of the car within two months. Subsequently, information came to light that strongly suggested there had been no accident and the claim was entirely false. Three years later, on the first day of trial, the claimants, now faced with detailed allegations of fraud, discontinued and a costs order was made against them in the first defendant's favour. Their ATE insurers did not pay out for the first defendant's costs (relying on the claimants' fraud). The largest head of loss claimed in the action had been DAMS' car hire charges. The first defendant made an application for costs to be paid by a "non-party", ie DAMS.

After a fully contested hearing at which a representative of DAMS gave evidence about its working practices, the judge held DAMS liable to pay most of the first defendant's costs (80%). This was on the basis that DAMS had been instigator and potential beneficiary of the litigation and had also controlled it to some extent.

DAMS had been funded by securing a referral to solicitors who it knew acted on a Conditional Fee Agreement and to whom it regularly referred such claims.