Client Alert: Assessing basic hire rate is an objective test

Stevens v Equity - Court of Appeal

In a hard blow to CHOs, the Court of Appeal has today handed down the judgment in Stevens v Equity.

The case concerned how the court should assess the basic hire rate (BHR) and whether it should be a subjective test (as was suggested at the first appeal in the High Court) or whether it should be an objective test (as affirmed by Lord Justice Aikens in Pattni v First Leicester Buses).

The court has today confirmed that it is an objective test and that the claimant may only recover the lowest locally available rate for a vehicle from a mainstream company e.g. National, Europcar, Thrifty etc. or, if there is no mainstream company, from a local reputable supplier.

What does this mean for insurers?

Arguably, defendants are in a better position on rates than they have ever been and it is a decision which will, no doubt, cause real concern to CHOs.

Permission to appeal to the Supreme Court was sought by the appellant’s representatives however permission was refused. It is more likely than not that the application will be renewed directly to the Supreme Court.

Recent decisions from the Court of Appeal have been favourable to defendants with the courts now seeming to focus on what is reasonable rather than recommending convoluted ways to assess these claims.

So where do we go from here?

Subject to any permission being granted to take the matter to the Supreme Court, it is likely that CHOs will less readily concede impecuniosity in cases, as this then gives them an entitlement to recover a credit hire rate providing it is reasonable (Lagden v O’Connor).

In respect of the period of hire (which was not the subject of any appeal to the Court of Appeal), what is interesting from the first appeal is that although the court found that it would have been unreasonable to have reassembled the vehicle once it had been stripped down, there was no finding that the stripping of the vehicle itself was reasonable. We will continue to argue that any competent repairer or engineer can assess a roadworthy vehicle without it needing to be stripped.

Another interesting point from the first appeal is that it was accepted that Accident Exchange had been acting as the claimant’s agents. This is something that is usually forcefully refuted.

Practical Implications

1. When a claimant is not impecunious, that claimant may recover no more than the lowest reasonable rate charged by a mainstream hire company, or if there is no mainstream company, a local reputable provider.
2. We will continue to argue that a roadworthy vehicle should not be stripped down or go into the repairing garage until parts are available and the garage is ready to commence work.
3. The court has focussed on the recoverable rate for the vehicle therefore it seems that excess waivers are to be considered outside of that assessment.
4. It has been reaffirmed that the assessment of stripping out the additional benefits is an objective not a subjective test.
5. CHOs may less readily concede impecuniosity or will push the point in order to avoid having to assess the BHR at all.

See document for the facts of the case.