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Complete Contradiction

31/03/2016

Sobrany v UAB Transtira

Court of Appeal, January 2016

Melanie Mooney discusses an unusual case where the claimant’s oral evidence completely contradicted the pleaded case.

The Court of Appeal handed down its judgment in this unusual case which raised the interesting situation where the claimant’s oral evidence contradicted entirely the pleaded case leaving the defendant in the completely unexpected position of having to change argument.

Here we examine the facts and pertinent questions as to where we go from here.

Key issues raised

This was a claim for credit hire charges of circa £140,000. During investigation of the claim, it transpired that the claimant was in fact out of the country for much of the hire period on business, but remained in hire the whole time.

The need to hire and the period of hire were therefore in dispute, as was the rate of hire.

However, the hire agreements did not have the requisite notice of the right to cancel as required by the Cancellation of Contracts Made in a Consumer’s Home or Place of Work etc. Regulations 2008. This arguably meant that the agreements were unenforceable as against the claimant and therefore were not recoverable from the defendant.

Disclosure of evidence was sought within the proceedings; however, it was not forthcoming.

In accordance with the decision in Walker v Veolia Environmental Services 2001 EWHC 2020 (QB), if the hire charges had been paid and were therefore subrogated losses, the lack of a notice of the right to cancel became irrelevant.

Two payments were made under the terms of a legal expense policy. In accordance with the indemnity limit under that policy (£100,000), it was argued that at most, that was the limit of recovery.

The claimant’s pleaded case, including a statement and Part 18 responses, were that there was only one policy and it was accepted that recovery was limited to £100,000.

The matter proceeded to trial with all the above issues in dispute.

Mr Sobrany, however, was most clear and unequivocal in his oral evidence that there was more than one policy, and he had made sure of the same because of his concern that he did not want to run any risk of being left with a financial liability for the hire charges.

Counsel for the defendant was therefore left in the unexpected position of having to amend his submissions in light of the revelation. He asked the judge to make a finding that there were two policies of insurance, and as there was a clause in the policy to the effect that it would not respond if there was indemnity elsewhere, the judge held that the first hire invoice of approximately £9,000 was all that was recoverable.

The CEO of the hire company, at appeal, sought to adduce evidence that there was indeed only ever one policy of insurance, as that was its standard practice. Additionally, notices of the right to cancel were then supplied. Permission to rely upon this evidence was refused. It was, however, questioned why those documents were not disclosed earlier, as their disclosure would have negated the whole need to use insurance to pay the hire charges.

The point for the respondents here was not necessarily the discrete point, but the fact that the oral evidence completely contradicted the pleaded case and documents apparently approved by the claimant which contained a statement of truth. How can it be right that the case is thrown into disarray at that late stage, when clarification had previously been sought on this issue?

The Court of Appeal seemed to suggest that a more appropriate course of action for counsel to seek would be to request an adjournment, and it is perhaps unfortunate this did not occur however, that is with the benefit of hindsight.

We were duly instructed to proceed with the appeal and, of course, we now have the judgment which found for the appellant. Once the Judge had made a finding of fact that there were in fact two policies of insurance, the claimant had two indemnities of £100,000 on each policy. The claimant therefore recovered just over £100k following a reduction in the hire period at first instance which was not disturbed on appeal.

What are the common issues in relation to credit hire arrangements and did the judgment help to clarify these?

Credit hire is an adversarial and complex head of claim, often with many issues which are required to be determined by the court.

Common issues arising in each case are:

  • The need to hire at all
  • The need to hire the vehicle which was hired
  • The period of hire – whether it is reasonable
  • Whether the claimant is impecunious
  • What is the recoverable rate

It is rare that a credit hire claim will proceed to trial with only one of the above issues requiring judicial determination.

This was a discrete case with a very discrete issue, i.e. what happens if the oral evidence contradicts the pleaded case? The only clarity given by this case is that an adjournment should be considered.

What should practitioners do when confronted by an argument of two policies when only one has been referred to in the pleadings. Is there anything that a claimant in such circumstances could do differently?

As the regulations concerned have now been superceded, it is unlikely that the question of the number of policies and indemnity thereunder will arise again. However, if a practitioner is ever faced with a sudden change in evidence, it is important to take stock, consider your position and the impact that the change has on the case, and whether it is appropriate and prudent to seek an adjournment.

What are the remaining grey areas?

Firstly, how the recoverable rate of hire is to be assessed by the court in the circumstances that the claimant either does not allege to be impecunious or is debarred from alleging it or is found not to be.

Additionally, what impecuniosity and how it is to be assessed really remains an issue for all parties.

Neither of these issues were relevant to this appeal, but remain contentious at county court level.

What should insurers take from the case?

As mentioned above, this was such a discrete and unusual situation that there are no lessons from the respondent’s / defendant’s perspective.

From the claimant’s perspective, the lesson from the original hearing would be to ensure that a proper briefing has taken place.

What are the trends in this area?

As mentioned above, there are usually several issues that are disputed between the parties in credit hire claims. More often than not, applications need to be made to force a response to a request for further information and specific disclosure.

Predictions for the future

The recoverable rate of hire will remain the hot topic this coming year, with the permission applications and appeal hearings in McBride v UK Insurance and Clayton v EUI Ltd awaiting a listing date. The commonality of these two cases is that the Court of Appeal felt it may be useful for them to provide guidance upon whether the defendant, in order to discharge the burden of proving there is a difference between the credit rate and the basic hire rate (BHR), must provide alternative rates which have a nil excess/deposit. As a request for expedition in McBride was refused, we may be waiting some time for this.

Author

Melanie Mooney

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