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Hurricane Stevens – the immediate aftermath, future and on the horizon

19/10/2015

Whilst at least two commentators have heralded their views on Stevens v Equity Syndicate Management Limited with “Now the dust has settled…”, looking back it is clear to see that we were only ever in the eye of the storm. Almost immediately, and predictably, following the decision, there were comments from the CHO fraternity to the effect that the Stevens decision lacked rigour and was just simply wrong. Indeed, the latter was evidenced in as many words in the claimant’s grounds of appeal in the case of McBride v UK Insurance.

McBride was determined within 10 days following the publication of the Court of Appeal’s judgment in Stevens. It was clear that with the Stevens result a quick return to the Court of Appeal was being sought. It is a matter of conjecture as to why the direct route to the Supreme Court was not taken, but we suspect this was to avoid a court which may have had no appetite to overturn the recent guidance.

We are aware of three cases where permission to appeal was sought by AEL post Stevens: McBride v UKI; Valli v Ussen; Clayton v EUI Limited. Keoghs represented the defendant in the first two of those cases. All three had permission to appeal refused on the same day (4th June 2015); the paper orders only being received on the 23rd June 2015. Interestingly the Lord Justice who refused the decisions in which we were involved was Lord Justice Kitchin who of course delivered the judgment in Stevens.

Due to a change in the rules surrounding appeals, Keoghs entered a respondent’s statement to the appeal notice. This highlighted that Stevens was always a test case on rate and we are pleased that it appeared to meet with the court’s approval, being referred to by Lord Justice Kitchin in one of his reasons for refusing the appeal.

The order reads as follows:

An appeal would not have a real prospect of success and there is no other compelling reason for an appeal to be heard. As for the grounds of appeal:

1. There is no inconsistency between the decision of this court in the Stevens case and the earlier decisions of this court in the Bent and the Burdis cases.

2. The District Judge considered the evidence before him and identified the lowest reasonable rate charged by a reputable supplier, mainstream or local. He made no error in so doing.

3. As the respondent says, it would have been open to the District Judge to consider adding the cost of an excess reduction product to the basic hire rate of £270 (including VAT) had that course been urged upon him.

Although an oral hearing has been requested (and is listed for January 2016) at the moment this leaves CHOs with a 3:1 loss ratio. The ‘1’ being Cheung v UKI - as Cheung is not being appealed by either party, they will retain only the scant comfort of a first instance, non-binding decision.

However the dust storm shows no sign of abating. The recent appeal of Lawson v Mullen, heard by His Honour Judge Freedman (Designated Civil Judge for Newcastle) provides a different twist on the “nil excess” in that the court found that it was unreasonable for the claimant to incur significant cost to waive what was a modest excess but this decision leaves the argument open for the shorter, high value hire or those with high excesses (which may be an issue with the lowest rates). Our recent experience in that area was that the district judges were implementing the Lawson reasoning, even before it was officially handed down. It remains to be seen whether the decision will be challenged to the Court of Appeal, or whether it will remain as persuasive.

This decision ties in well with another Keoghs case, Massey v UK Insurance from July 2014, another “nil excess” appeal which was dismissed at Leeds County Court, in favour of the defendant. Following this case we formulated a different approach to assessment of rate, focusing on the objectivity upon assessment. Additionally, we are now working with leading counsel to further develop this strategic argument.

On the horizon scan is the second appeal of Thwaites v Aviva, another case that was handled by Keoghs, and case where CHOs have unsuccessfully appealed the first instance decision. This case involves subrogated hire and the arrangements and rates surrounding the same. The Court of Appeal will hear this on either the 7th or 8th April 2016.

It is clear that the second half of this decade’s credit hire litigation is going to be as fast paced as the first and we look forward to making our contribution to what we believe will be an increasingly positive outlook for insurers.

Author

Mark Sanderson

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