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Insurers win the latest round in credit hire match

The insurers have won the most recent bout in what has been an ongoing slugfest between them and credit hire organisations (CHOs) for more than 20 years. The Court of Appeal has given guidance about calculating the basic hire rate (BHR) which favours the Insurers.

The detailed Court of Appeal Judgment in Dimond v Lovell [2002] 1 AC 384 and House of Lords sequel Lagden v O’Connor [2003] UKHL 64 comprehensively identified the issues and gave guidance as to how they were to be tackled in the lower courts. However Insurers and CHOs have been trading punches ever since.

The Insurers failed to land the killer blow that would have knocked out credit hire for good in 2009.  In Copley v Lawn [2009] EWCA Civ 580 the Court of Appeal found that failure to accept a defendant’s offer of a “free car” was not failure to mitigate. The Insurers appeared to be on the ropes when the Supreme Court refused them permission to appeal. 

However, since then the Insurers have come back with a pretty damaging double combination of blows focusing on impecuniosity and rate.  The jab in Umerji v (1) Khan (2) Zurich [2014] EWCA Civ 357 reminded claimants that it was their burden to plead and prove impecuniosity.  Further the Court of Appeal considered the reasonableness of the claimant’s actions in getting repairs carried out once the car had been inspected and the extent to which impecuniosity went to duration of hire as well as rate.

The Insurers then followed up Umerji with a right hook in the recent case of Stevens v Equity Syndicate Management Ltd [2015] EWCA Civ 93 dealing with how the BHR for the pecunious claimant is to be calculated. The facts and salient points are best set out in the briefing note from Counsel for the Appellant, Steven Turner, which has been made available on his chambers website and has been circulated to the judiciary.

Recognising that judges and practitioners are experiencing practical difficulties in calculating the BHR of any credit hire rate, the Court of Appeal gave a reminder of the long-running match since Giles v Thompson [1994] 1 AC 142.

Highlights of the judgment are:

  • An average of hire rates should not be used [40]
  • Neither should the highest of the range of hire rates be taken to compare to the credit hire rate [36]
  • Instead a judge faced with a range of hire rates should try to identify the rate or rates for the hire, in the claimant’s geographical area, of the type of car actually hired by the claimant on credit hire terms. If that exercise yields a single rate then that rate is likely to be a reasonable approximation for the BHR. If, on the other hand, it yields a range of rates then a reasonable estimate of the BHR may be obtained by identifying the lowest reasonable rate quoted by a mainstream supplier or, if there is no mainstream supplier, by a local reputable supplier. [36]
  • What the claimant says he would or would not have done is not important.  This is an objective exercise and the evidence of the claimant about what he would have done had he gone into the market to hire a vehicle on standard hire terms is likely to be of little assistance to the judge seeking to carry it out. [39]

The practical consequence of this judgment is that there is no end in sight for extensive credit hire rate surveys and evidence to fuel arguments about available rates. 

The commercial consequence of this judgement is likely to be a succession of body blows from Insurers in ongoing credit hire cases as offers are made at the lowest hire rate.  At the time of writing it is unknown whether the claimant is just knocked down and will be granted permission to appeal from the Supreme Court (the Court of Appeal having refused permission) or knocked out.