CREDIT HIRE UPDATE SEMINAR by PAOLA SPROUL
Objective –update on recent decisions on credit hire and implications on practice.
1.Impecuniosity
Why is Impecuniosity important?
Dimond –v-Lovell [2002] 1 AC 384
Lagden-v-O’Connor [2003] UKHL 64.
In Lagden, the House of Lords held that the principle of you take your victim as you find him applied
and an impecunious Pursuer was entitled to recover credit hire charges in full.
What is Impecuniosity?
Recent Decisions
Farquhar Macdonald-v-AXA Corporate Solutions Assurance –Unreported Ordinary CauseElgin Sheriff Court 17 June 2009
The Pursuer’s earnings were modest and covered his expenditure. He had access to credit and had
savings in a bank account earmarked for planned bathroom refurbishment which had not yet taken
place at the time of proof. He was deemed not to be impecunious.
Tkachuk-v-Stevenson Glasgow Sheriff Court 2010 SLT (Sh Ct) 238
A professional Rugby player with a salary of £55,000 and savings of approximately £9,000
earmarked for planned investment in ISA which took place during period of hire was held not to be
impecunious and far removed from Mr Lagden.
Clelland-v-Quinn Direct 22 October 2010
A Pursuer who had a credit card with an available balance of approximately £10,000 was deemed to
fall on the wrong side of the line drawn by Lord Hope in Lagden and was deemed not impecunious.
Derek Wells –v- Stuart’s Coaches—Unreported Small Claims
Lanark Sheriff Court -8 December 2008
Quantum in respect of hire charges disputed. Pursuer claimed to be impecunious. Sheriff Stewart
awarded full recovery of hire charges and expenses. The Sheriff considered the Pursuer to be
impecunious in this case where the client had credit card with an available £15, 000 limit as the Court
accepted the argument that it would have been an unreasonable financial sacrifice for him to utilise
this and incur excessive interest charges.
Onus of Proving Impecuniosity
Is it for the Defender to show that a Pursuer has failed to mitigate their loss?
Jim Walker –v-Chesapeake Glasgow Sheriff Court Sheriff Mitchell 11 October 2010
2. Enforceability
The Cancellation of Contracts Made in a Consumer’s Home or Place of Work etc. Regulations
2008 (“the Regulations”)
What are the Regulations about?
They are designed to ensure that Consumers who are signing contracts at their home or place of
work have been provided with a detachable Cancellation Notice in proper form to advise them of right
to cancel in 7 day period from date of receipt of notice.
The Regulations came into force on 1 October 2008 and will apply to contracts entered into after that.
What Situations will be covered by the Regulations?
A vehicle hire agreement which is delivered to the client and signed at the client’s home or place of
work or the home of another individual during a visit by the trader (that is, a person who is acting in a
commercial or professional capacity).
Lyle -v- UK Insurance Limited Edinburgh Sheriff Court 7 September 2010
Aggouche-v-TNT UK Limited Edmonton County Court 2 March 2011
Held that an acquisition for a dual purpose is not a consumer acquisition. The Claimant’s purpose
in hiring was for part time mini cabbing and was far from negligible and he did not enter into the
hire agreement as consumer.
Practical Implications
Where such a defence is raised, the place and manner in which the vehicle rental agreement was
signed and entered into, the persons present at the time, what documentation was exchanged, and
also the purpose of the hire are all factors will need to be analysed to ascertain the likelihood that the
Regulations do apply to render the contract unenforceable.
Subrogation
Subrogation can be considered in situations where there is a valid insurance indemnity in place to
cover the hire charges and there are unenforceability arguments raised by Defenders in relation to
non-compliance with the Contracts Made in a Consumer’s Home or Place of Work etc. Regulations
2008.
W-v-Veolia Environmental Services Limited. (UK) plc [2011] EWHC 2020
This is an Accident Exchange case on the subrogated loss issue. In short, recovery was sought for
hire charges of £138,000 already paid by AmTrust Europe Limited in respect of the 135 day hire of a
two door Bentley.
There were 2 VRA's entered into, the first being delivered to Claimant at commencement of hire and
the second being posted out to him. The Defendants claimed unenforceabilty in terms of the
Cancellation of Contracts Made in Consumer's Home or Place of Work etc Regulations 2008 in
relation to the first hire agreement. The Claimant disputed and claimed that since the hire charges
had already been paid issues of unenforceability under the Regulations were irrelevant and only
question was whether payment amounted to failure to mitigate. The Claimant also tried to argue that
the Regulations did not apply to the delivery of goods or services which had been pre-arranged over
the telephone where an order has been placed for the supply.The Claimant succeeded on the already
paid argument and was entitled to recover the hire charges in full albeit the Court decided the first
VRA would have been unenforceable due non compliance with the Regulations. The Court accepted
the Claimant's argument that a Pursuer's duty to mitigate his loss does not require him to refuse to
perform the contract entered into with a third party to the detriment of the third party even if it is
certain that the contract is unenforceable.
Even more surprising is the fact that the Claimant an actuary who lived in an exclusive London
borough, had an overdraft of £30,000, savings of £50,000 to £100,000 and two pensions bringing
in an income of £20,000 pa was impecunious. The Court decided he was because he had not
taken a salary for 5yrs, was under financial pressure following a divorce, his credit card would
have not met the £485 per day hire and he needed his limited capital for his old age.
Late Signature Cases
Most vehicle hire agreements are exempt from the Consumer Credit Act 1974 under the
Consumer Credit (Exempt Agreements) Order 1989 section 3(1). Defenders’ arguments regarding
unenforceability as result of late signing have been rejected in the English cases the leading case
being Borley-v-Reed (Winchester County Court 12 December 2005). Also Rasool-v-Maxted
26 April 2006 Luton County Court [2006] CLY 702 and Carson-v Tazaki Foods 25 August
2005 Central London Mercantile Court WL 3464411
3. Rates Evidence
The Pursuer will argue that it is for the Defenders to discharge the evidential burden and prove the
Pursuer failed to mitigate his loss vis a vis the rate of hire.
Spot Hire Rates Evidence Required
The Background
In Burdis-v-Livsey [2002] ECWA Civ 510 the Court of Appeal had to consider how to
quantify the spot rate of hire. At first instance the Judge considered 3 ways of arriving at
the correct measure of damages:1.
2.
3.
Analysing charges made by the credit hire company to uncover which charges related to
irrecoverable additional benefits and which simply related to hiring the car.
Applying an arbitrary reasonable discount to the credit hire charges. The Court of Appeal
also dismissed this approach “we do not believe it appropriate in the absence of
agreement between the parties or without cogent evidence as to what the discount
should be. Further, as the judge pointed out, once the courts start applying a particular
discount the total charge may be increased.”
Considering the actual hire rates locally. This creates its own difficulties such as what
companies to survey and whether to take the highest or the lowest rate. With some
modifications as to the detail, this was the route which was eventually approved.
In this case, the Judge was assisted by expert evidence on rates provided by two experts.
Both had carried out surveys of the rates available in a particular area. The Mainz report in
particular resulted in a band of rates. The Judge concluded that a band was no use. A single
figure was needed. He was also concerned that the survey was a snapshot of rates at the
time of the survey which was January. The actual hire period was in the peak season.
Accordingly the first instance Judge adopted a rough and ready approach of Mainz plus 10%.
The Court of Appeal rejected this approach and held at paragraghs 146-148:146......That cannot be right. A person who needs a car because of the negligence of
another must, subject to mitigating his loss, be entitled to recover the actual cost of
hire not an average derived from the Mainz report. If the principle adopted by the Judge is
correct then it would seem appropriate also to apply that principle to the cost of car repair,
namely a claimant may only recover the average of the charges of the garages. But a person
whose car is damaged should in appropriate circumstances recover the cost to him of repair
and loss of use. His recovery should not be restricted to an average of car repair or hire rates
nor should he be able to recover that average costs if the actual cost is less. We believe that
the solution is to apply normal legal principles.
147. The fundamental principle is that a person whose car has been damaged is entitled to
compensation for the loss caused. In a case where such loss includes loss of use and
establishes a need for replacement, he is entitled to the cost of hiring a replacement car. He
can go round to the nearest car hire company and his prima facie entitled to recover
the amount charged whether or not the charge is at the top of the range of car hire
rates. However the basic principle is qualified by the duty to take reasonable steps to
mitigate the loss. What is reasonable will depend on the particular circumstances.
148. We do not anticipate that the application of the correct principles will lead to
disproportionate costs in small cases. The claim will be based on evidence as to the rate
charged by a car hire company in the relevant area. Perhaps the rate will be at the top end of
the range of company rates. Thereafter the evidential burden passes to the insurers to show
that it would not have been reasonable to use that particular car hire company and that the
reasonable course would be to use another company which charged a lower rate. What is
reasonable and whether a loss is avoidable are questions of fact, not law, which District and
County Court judges regularly decide. It can arise in many different types of cases, ranging
from damage to chattels to a failure to take action. We do not believe that a decision on such
issues in respect of car hire charges will be anymore difficult that in respect of car repair
charges.”
Based on the guidance in this case, Burdis accordingly suggests that the Defenders have to find
evidence of :-
(1) the range of rates charged by car hire companies in the relevant area at the relevant time;
and
(2) actual availability of suitable vehicles at the relevant time.
The Pursuer will claim that if the Defenders fail to show that the credit hire rate is outwith the market
range then the credit hire rate should be awarded.
Shaun Clark –v- The City of Edinburgh Council [2010] CSOH 144
The Pursuer (not impecunious) hired a Honda Civic 2 litre GT motor car in place of his fourteen year
old Toyota Celica. The Pursuer’s vehicle fell within the Sports grouping band SP 3. He hired from
Accident Exchange a Honda Civic 2 litre VTEC Type GT which falls in the SP 4 group at no extra
cost. The credit hire rate was £120.56 per day (exclusive of VAT) and the hire endured for 79 days.
Lord Turnbull held that when it comes to identifying the broad range of quality and value of the
damaged car, it is necessary to bear in mind its age and value. The particular need which the hirer
has for the vehicle will be a relevant consideration. The Court held that the vehicle hired was far
superior and it was not reasonable to describe a fourteen year old vehicle with a value of a little over
£1,000 as being in the same broad range of quality and nature as the vehicle hired. The Court
accepted the Defenders’ rates evidence in terms of a report by Duncan Saddler which was based on
the hire of a VW Golf 2 litre that is a Group S6 car at £39 per day inc of VAT. The Court also reduced
the period of hire to 50 days due to delays in instructing an engineer’s report and the Pursuer off
hiring.
Alexander Greenlees-v- Allianz Insurance PLC [2011] CSOH 173 18.10.11
The Pursuer (not impecunious) was the owner of a Jaguar Sovereign (Group P8A). He insured the
vehicle through Lawrie Ross on a fully comprehensive like for like basis. He contacted his insurers to
report the collision and they called him in the afternoon to advise they would be delivering a
replacement car for him the same day. He was not aware of Accident Exchange before that time. He
hired a Jaguar XJ 2.7 TDVi Sport at a daily rate of £283.59 per day for 102 days.
The Pursuer’s led evidence of spot hire rates from Kenneth Perry of APU limited (a wholly owned
subsidiary of Accident Exchange) who own and operate a software system called Spot Rate Check to
show spot hire rates for various groups of cars in different areas. Quotes had been obtained from over
55 rental companies since April 2009. The multiple quotes provided from 10 hire companies for a P8
car ranged from a quote of £405 per day with a non waivable excess of £5,000 to £100 for the same
model with non waivable excess of £1,500. It was argued the credit hire rate was less than that
charged by Sports Car hire.
The Defenders led evidence of Thomas Smith, a Claims Assessor with Ravenstone Uk who provide
services to the motor insurance industry. He provided quotes from 3 hire companies for a Jaguar
Sovereign being hired in the Glasgow as at the time of hire of £96, £119 and £170.21 per day, that is
an average of £128.83 per day based on a weekly hire rate divided by seven rather than a daily hire
rate.
Lord Matthews considered the spot hire rates evidence led by both Pursuer and Defender to be
complimentary. He indicated he would do what Lord Turnbull had done in Clark and take a balanced
average approach to working out the average figure for the daily hire which he considered the fairest
way to deal with all the variables. He added all the daily hire quotes produced by both parties, added
VAT and divided them by the number of quotes to arrive at an average daily hire rate of £174.14. He
also reduced the period of hire of 102 days to 43 days and held that delays on the part of Accident
Exchange were delays on the part of the Pursuer for which the Defenders were not responsible.
Bent –v-Highways & Utilities Construction & Allianz [2011] EWCA Civ 1384 24.11.11
Judgments to Date
In February 2007, Darren Bent well known footballer had an accident in his Mercedes AMG CLS 63R
£72,000 sports car. He hired Aston Martin DB7 worth about £105,000 from Accident Exchange at a
cost of approx £64,000. The Defenders claimed the hire car provided was more expensive and
accordingly more costly to hire, and the Pursuer had failed to mitigate his loss as he ought to have
hired from “spot market” which would have been cheaper than hiring on credit.
The judge at first instance Judge Yelton held on 10 July 2009 that the Aston Martin DB 9 was a
reasonable replacement for the damaged Mercedes and that as none of the evidence before him on
spot hire rates dealt with the real issue of the cost of hiring a Mercedes of Mr Bent’s type or an Aston
Martin of the type hired, he concluded the Claimant succeeded in recovering the full amount of the
credit hire charges for the full period of hire of 94 days.
The Respondents appealed and on 24 March 2010 Jacob LJ of Court of Appeal held that the Judge
was mistaken for the following reasons:“ Very often when one is assessing valuation evidence in all sorts of fields one has evidence
of prices of the same or similar things at different rates and has to make appropriate
adjustments. Working with comparables and making adjustments at the daily diet of judges
concerned with valuations in all sorts of fields. Clearly evidence of the so called spot rate a
year or so later than the relevant date is likely to throw considerable light on what the spot
rate would have been at the time.”
“I would add that one must not be hypnotised by any supposed need to find an exact spot rate
for an almost exactly comparable car. Normally the replacement need be no more than in
the same broad range of quality and nature as the damaged car. There may be a
bracket of spot rates for cars rather “better” and rather “worse”. A Judge who
considered that bracket and aimed for some sort of reasonable average would not be
going wrong.”
Re-trial heard before Judge Plumstead in February 2011 and then appealed by Mr Bent
Bent –v-Highways & Utilities Construction & Allianz [2011] EWCA Civ 1384 24.11.11
This Appeal decision now confirms that it is incorrect to base the Spot hire rate (which should now be
replaced with the term Basic Hire Rate “BHR”) on an average cost and the test is whether the credit
hire rate is in the market range. It also confirms that the best evidence is the contemporaneous rates
from the time of the accident. In this case, the rates evidence of Mr Evans of AEL relying on the
database of rates in www.spotratecheck.com was preferred to that of Allianz Insurance who relied
on the evidence of SG Consultancy.
The previous decision of the Court of Appeal from Lord Justice Jacob did not unsettle any of the
earlier established principles on the recovery of hire charges.
The use of some form of averaging to determine the rate of hire charges recoverable in credit hire
claims was wrong; the claimant is entitled to recover the actual cost of hire and not an average cost.
Lord Justice Aikens stated that he did not believe Lord Justice Jacob had intended to suggest that
'some sort of reasonable average' of a bracket of spot-rates for cars better or worse than actually
hired on credit terms would produce the BHR to which a claimant was entitled; such an approach
would be inconsistent with the Court of Appeals' earlier statement in Burdis v Livsey [2003] QB
36;
• There was no doubt that Mr Bent was entitled to recover the appropriate charges for hiring
an Aston Martin DB9 which was a reasonable replacement for his damaged Mercedes
AMG;
• The valid test to determine the recoverability of the hire charges in these cases remains
whether the credit hire rate was within the market bracket. Lord Justice Aikens said that "so
long as it was reasonable to hire that car and the credit hire rate is reasonable, then the court
has to calculate the BHR on the basis that the claimant notionally went round to an equivalent
non-credit car hire company. If there is a difference between the two rates, the claimant will
recover the BHR that the non-credit car hire company would have charged even if the BHR
that the car hire company would have charged was at the top end of the range..."
• The best evidence of rates in these circumstances are contemporaneous rates from the
time of the accident as supplied by Mr Evans of Accident Exchange in this case. Mr Bent
hired a replacement car in 2007 and Lord Justice Aikens held that Her Honour Judge
Plumstead had erred in concentrating on 2009 figures for the hire of a car when 2007 figures
were available. Mr Evans relied on the database of rates in www.spotratecheck.com which
holds over 1 million historic spot hire rates covering the period 2006 to date. Allianz Insurance
relied upon the evidence of SG Consultancy who supplied details of a few mystery shop
telephone calls four years after Mr Bent's accident.
• It was right to consider whether in this case the appropriate comparable BHR was a 28 day
hire rate rather than seven day rate.
4. The Period of Hire
The case of Amanda Allardice-v-Direct Line Insurance Plc Paisley Sheriff Court August 2010
involved a hire period of 91 days. Liability was disputed and the Pursuer’s car which was deemed undriveable, was inspected and deemed beyond economic repair. The problem rendering it un-driveable
was later fixed at no cost by a friend. Sheriff Hammond deemed the period of hire to be unreasonable
and awarded the Pursuer hire charges for the period of 35 days. The Sheriff followed the reasoning of
Sheriff Ross in Whitehead-v- Johnston 2006 Rep LR 25 in applying a test of proportionality as
between the damage, cost of repair and period of hire.
In Clelland-v-Quinn Direct Arbroath Sheriff Court 22 October 2010 the Pursuer opted to send his
expensive sports car to a specialist paint shop in England to be re-sprayed. The Defenders argued
the period of hire of 41 days was excessive claiming the Pursuer’s vehicle could have been partially
re-sprayed at a local garage in a fraction of the time. Sheriff Stein held that the Defenders had failed
to show that the Pursuer had acted unreasonably and the time taken for repainting/repair was
reasonable in the circumstances.
In Coxson-v-Fife Council Kirkcaldy Sheriff Court 4 July 2011 Unreported the Pursuer was
seeking hire charges for a 21 day hire period whilst her vehicle was being repaired. The Defenders
argued that the repairs could have been done in 2 days. The Sheriff held that in such cases, the onus
is on the Defenders. Delays are foreseeable and Defenders have to show delays which are inordinate
or unforeseeable and which amount to a novus actus interveniens to break the chain of causation and
justify a reduction in the period of hire.
5. Offer of Hire from Defenders’ Insurance Company
Sayce –v-TNT (UK) Ltd [2011] EWCA Civ 1583 (19 December 2011).
This case deals with the situation where a Pursuer is offered a free replacement vehicle by the
Defenders (known in credit hire speak as "Intervention.")
Before this Court of Appeal decision, the issue of a Defenders' offer of a free replacement vehicle
had already been dealt with at length and decided in an earlier Court of Appeal decision in the case of
Copley-v-Lawn [2009] EWCA Civ 580.
In the case of Sayce –v-TNT the Claimant appealed a decision by Judge Harris to the effect that Ms
Sayce had acted unreasonably in failing to accept TNT’s offer which precluded her from recovering
hire charges from TNT. Sayce was also appealed on the ground that Judge Harris had failed to follow
the decision in Copley-v-Lawn which it was claimed was binding on him.
The facts of the Sayce case were as follows:-
Ms Sayce was involved in a road traffic accident, involving a TNT driver. At the time of the accident
the TNT driver provided Ms Sayce with a card which said "If you require a hire car whilst your vehicle
is undergoing repairs call us and we will provide you with a hire vehicle the same or equal to yours,
free of charge.” It also advised Ms Sayce that she should show the card to her insurers so that they
would be made aware of the offer and advise her.
Ms Sayce decided not to accept the offer and hired her own vehicle through a credit hire company
and incurred hire charges of almost £3,500. Had she accepted TNT’s offer of hire the cost would only
have been £14 per day, or £868 in total.
Judge Harris had concluded that Ms Sayce had not acted reasonably in failing to accept TNT ’s offer
and should not be entitled to recover the hire charges as damages from TNT . He also declined to
follow the decision in Copley. His decision was appealed by Ms Sayce to the Court of Appeal.
The Court of Appeal allowed Ms Sayce’s appeal and held that Judge Harris was not entitled to
disregard the decision of the Court of Appeal in Copley-v-Lawn.
The principles laid down by the Court of Appeal in Copley-v-Lawn can be summarised as follows:·
It is not unreasonable for a Pursuer to reject or ignore an offer from Defenders which does not
make it clear the cost of hire to the Pursuer to make a realistic comparison with the cost which he is
incurring or about to incur.
·
if a Pursuer does unreasonably reject or ignore a Defenders' offer of a replacement vehicle the
Pursuer is entitled to recover at least the cost which the Defender can show he would reasonably
have incurred; he does not forfeit his damages claim altogether.
·
the general rule that the Pursuer can recover spot or market rates for his loss of use claim is
upheld, unless and to the extent that the Defenders can show that on the facts of the particular case a
car could have been provided even more cheaply than that on spot or market rate.
6. NEED
Need for a Hire Car
The threshold for need is low.
In Giles –v- Thompson 1994 AC 142
Lord Mustill gave useful guidance regarding proof of need of a hire car in the first place.
At pages 18-19 he stated:-
“In the Devlin –v- Baslington appeal it has been questioned whether, even if all the issues of
Law are decided in favour of the motorist, there is sufficient proof that the motorists acted
reasonably in hiring a replacement vehicle to justify an award in full of the companies hire
charges – or indeed it would seem any award at all. The question is before the house
because the county Judge held:-
“As a matter of principle…if you deprive me of an article of use to me you have no complaint
whatever if I hire another to replace it… if I car simply for my own pleasure, I regard it, in
principal, [as] wrong that I should be required before being able to hire a car and charge it to
the wrong doer to prove that I need it as opposed to merely desire the use of it.”
Whilst I have sympathy with this new I think it too broad. The need for a car is not self
proving. The motorist may have been in hospital through the accident for longer than his
vehicle was off the road; or he may have been planning to go abroad leaving his van behind;
and so on…
Thus although I agree with the judgements of the Court of Appeal that it is not hard to infer
that a motorist who incurs the considerable expense of running a private car does so because
he has a need for it and has a need to replace it if, as a result of a wrongful Act, it is put out of
commission, there remains ample scope for the Defendant in an individual case to displace
the inference which may otherwise arise.”
Need recently challenged in case of:Singh-v-Yaqubi [2013] EWCA Civ 23 .
Mr Singh (the Appellant) was a partner in a property development business. One of 7 vehicles owned
by the partnership was damaged in a collision. He hired a Bentley then a Rolls Royce at the daily rate
of approx. £2,000.from Accident Exchange and sought recovery of the hire charges of £92k incurred.
The Judge at first instance had found in favour of Mr Singh on liability but dismissed his case for the
hire charges based on a failure to prove need.
At Appeal, it was held that the Judge was entitled to find that need had not been established and the
Appeal was dismissed.
There is a useful commentary on the shifting of the burden of proof regarding need at paras 24 to 29
in this case where there were six other vehicles.
CONCLUSION
Credit hire litigation is bound to continue to raise many interesting legal issues in months to come
as the leading English authorities referred to above are tested in the Scottish courts.
ANY QUESTIONS?