In a hard blow to CHOs, the Court of Appeal 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).
On 26th February, the court 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.
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.
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.
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.
Following an accident on the 10th February 2011 the claimant hired a vehicle from Accident Exchange to replace his own Audi A4 Sline Tdi incurring hire charges in the sum of £5,764.80. Excess waivers were applied to the tariff to reduce the £1,500 excess on the hire vehicle to nil.
The claimant, although in possession of a fully comprehensive policy of insurance, declined to utilise the same as he did not wish to jeopardise his no-claims discount. Accident Exchange arranged the repair of his vehicle and an invoice in the sum of £3,099.44 was presented.
At the first hearing there were three issues before the judge :
1 Was the claimant impecunious in the sense that to have hired a car directly would have exposed him to a loss or burden which was unreasonable?
2 If not, what was the basic hire rate (BHR) of an equivalent vehicle on the market in the locality where the claimant lived?
3 Was the period of hire reasonable?
Mr Recorder Tolson QC on the 24th May 2013 concluded that the claimant was not impecunious and determined that the BHR was £75.62 per day inclusive of VAT for a period of 19 days (as opposed to the 28 days claimed). This provided a total award of £1,436.78. Costs in the sum of £585 were awarded to the claimant with them also having to pay the defendant’s costs in the sum of £1,240.27.
The reasoning for the judgment was that the claimant’s bank statements demonstrated a positive balance at material times of some thousands of pounds. In respect of the rate, the court was provided with details of four quotes all of which had nil excesses and he took an average.
Finally, as regards the period of hire the claimant’s vehicle was roadworthy but was taken to the garage before work could commence and this represented a failure to mitigate.
First Appeal – High Court Queens Bench Division
The matter came before The Honourable Mr Justice Burnett on 26th February 2014 with the judgment being given on 12th March 2014.
The Appellant argued the following:
1 The judge was bound to conclude on the evidence that the claimant was impecunious and therefore should recover the full amount.
2 If the finding on impecuniosity was sustainable, the judge was wrong to take an average.
3 In any event, the judge was too selective in his chosen figures. The proper approach was to look at the highest rate in the market as per the evidence.
4 The judge was wrong to reduce the period of hire as the initial delay was caused by the car being stripped down.
The respondent counter-argued:
1 The finding in relation to impecuniosity was one open to the judge on the evidence before him.
2 Although it was accepted that the judge should not have averaged the figures, the figure he arrived at was sustainable.
3 The judge was entitled to disallow the period as he did. The evidence as to the lack of activity was unsatisfactory.
The court upheld the decision in relation to impecuniosity. The evidence as to the claimant’s finances was described as “sketchy” and did not appear to reflect the totality of the reality of his financial position. Much emphasis was placed upon the healthy balance in the account at all times.
As regards the rate, the court accepted that assessing it is a hypothetical exercise. This exercise must include the sum that the claimant would have been willing to pay. That was not to say that cheapest would always be the best, there may be all sorts of reasons a person may choose one that is not the cheapest.
Although it was accepted that taking an average was an error, in actual fact that error had not resulted in any detriment to the claimant therefore the rate stood as awarded.
The appeal in respect of the period of hire succeeded. Once the vehicle had been stripped it would have been unreasonable to reassemble it.
The claimant appealed the rate point to the Court of Appeal and it came before Lord Justice Jackson, Lord Justice Kitchin and Lord Justice Floyd on 28th January 2015.
The appeal was dismissed in a judgment handed down on 26th February 2015 and delivered by Lord Justice Kitchin.
The recorder had taken a range of vehicles from the rates report relied upon by the parties that operated in the claimant’s local area and which had a nil excess. These were all national companies, National, Europcar, Thrifty and Alamo. He had been wrong in taking an average, however, in actual fact had he followed the correct approach it would have resulted in a lower award for the claimant.
The appellant had argued that the approach suggested at the first appeal (i.e. a subjective test) was incorrect. It had to be an objective test in order to ascertain what the cost of the irrecoverable additional services were. It cannot depend on what a particular claimant would be prepared to pay.
Additionally it was argued that such an objective test meant that the higher rates in the report could not be ignored. Even though there was an excess that could have been separately insured and that would have increased the daily rate even more. Given that, it was not possible to say that Accident Exchange’s rate even included a cost for additional services.
It was accepted that judges up and down the country are having difficulty in assessing the BHR and although the court had suggested that credit hire companies should disclose the make-up of their rate, it was not a suggestion that Accident Exchange embraced.
The approach as set out in Burdis, namely a standard discount, was also rejected because it is unduly arbitrary.
We are therefore left with the third approach, namely to look at locally available BHR rates for vehicles in the same group as that of the innocent party.
The court must consider the possibility that rates which are higher or closer to the credit hire rate may also reflect market conditions. As such, the lowest rate offered by a mainstream supplier (or if there is no mainstream supplier, a local reputable supplier) is most likely to be the one that accurately reflects the cost of the basic hire of the vehicle.
It was held that to look at the higher rate and say that the defendant has simply failed to discharge the burden would be manifestly unjust particularly when the credit hire company is in the best position to elaborate upon and give disclosure relating to its charging structures.
Melanie Mooney
The service you deliver is integral to the success of your business. With the right technology, we can help you to heighten your customer experience, improve underwriting performance, and streamline processes.