Keoghs and DLG win first known ‘clause 17’ case following Supreme Court judgment
Armstead v RSA was heralded by the credit hire industry as a landmark in February 2024, after the Supreme Court held that contractual liability purportedly incurred by a customer to a CHO – namely daily hire charges for the period the hire vehicle was off the road due to the negligence of another – was recoverable in full.
The reality of the decision always appeared some way short of the headlines, given that the Supreme Court made clear that a contractual liability incurred by the hirer could only be recoverable if it was a reasonable pre-estimate of the loss suffered by the CHO – albeit with the burden of proving that it was not, being firmly on the defendant.
Given that the CHO involved in Armstead – Auxillis Services Limited (ASL) – was part of a large publicly listed entity with a vast fleet, it may have appeared that the loss of a vehicle in the event of an accident would have had no actual impact on revenue at all, given that the fleet would very likely have ample capacity to absorb any loss without any impact on service delivery.
However, and crucially to the reasoning of the Supreme Court in allowing recovery of the full claim, this was not a point that was ever pleaded or evidenced by the defendant in Armstead.
The first known case to come before the court on the issue following the Supreme Court judgment is Woodrow v Rimmer.
Mr Woodrow, represented by Principia Law, sought to recover a contractual liability allegedly owned to ASL of £8,451.30.
Unlike in Armstead, Keoghs on behalf of the defendant specifically pleaded that the sum claimed under clause 17 was not in any way reflective of the loss suffered by ASL upon being deprived of the vehicle.
This was then extensively evidenced by material which showed:
Against that background, we argued that ASL’s entire business model is built on having the capacity and the scale to meet customers’ mobility needs at short notice. Therefore, it was inconceivable that the loss of the vehicle would have led to them having to turn away prospective customers, or otherwise suffer any lost revenue. As such, the damages recoverable should be limited, at best, to £326.34 for interest and depreciation in accordance with Beechwood Birmingham v Hoyer Group.
Despite a court order inviting them to do so, ASL and the claimant declined to serve a Reply to the Defence. Nor, despite repeated requests, did they adduce any evidence to show that they suffered any quantifiable financial loss.
Interestingly, Mr Woodrow gave evidence at trial that he had never received the purported demand for payment. He accepted that had he done so, he would have enquired as to how the charges had been calculated. Neither was he even aware of Principia Law, despite the firm being on the court record ostensibly as acting for him, let alone that it was part of the same corporate group as ASL.
The court expressed significant concerns as to several aspects of the claim, including the failure to provide the claimant with the demand, the lack of any understanding of Mr Woodrow as to what the litigation in his name was about, as well as the complete failure to provide any evidence to substantiate the alleged loss against the background of the evidence relied upon by the defendant.
Accordingly, the claim was dismissed in its entirety.
While a County Court decision, the Woodrow case highlights that Armstead is certainly not the be-all and end-all in relation to contractual liability claims. On the contrary, in the case of very large CHOs with extensive fleets, there is a strong argument to be made that provided the correct points are properly pleaded and evidenced, the contractual rate of hire should never be recoverable at all.
The silence from ASL in response to the evidence adduced on behalf of the defendant, in our view speaks volumes, particularly when combined with the fact that the individual claimant was entirely unaware of key aspects of ‘his’ claim. If this conduct is repeated across wider volumes of claims and persists despite the outcome in Woodrow, then we ultimately expect that arguments for unreasonable costs, or non-party costs orders, will quickly become very persuasive indeed.
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