Driving a hard bargain: the ins and outs of hire claims

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Rather than settling down, credit hire claims in many courts all over the country appear to be on the increase.

Certain key issues have been settled in three chapters of litigation to have reached the House of Lords: (a) credit hire agreements are not champertous (Giles v Thompson [1994] 1 AC 142); (b) they are subject to the requirements of the Consumer Credit Act 1974 and may be unenforceable (Dimond v Lovell [2002] 1 AC 384); (c) the additional services provided by credit hire companies (for example, by way of financing the cost of replacement pending resolution of a claim or the cost of fighting the claim itself) at an enhanced rate of hire may be recoverable if the claimant is impecunious but not otherwise (Lagden v O’Connor [2004] 1 AC 1067).

The basic principles governing any claim for credit hire may be summarised in these propositions:

(a) The claimant must prove his need to hire a replacement vehicle, although the burden will usually be easy to satisfy. The need for a hire car is not self-proving (Giles v Thompson [1994] 1 AC 142 per Lord Mustill at 167).

(b) The claimant is entitled to hire an equivalent vehicle (Lagden v O’Connor [2004] AC 1067 per Lord Hope at paragraph 27). The burden of showing a failure to mitigate lies on the defendant. Typically, the defendant will show that the large ‘spot’ hire companies carry the same or an equivalent vehicle within their fleet in such numbers that their availability is not in question. The question of an appropriate and available vehicle becomes more difficult with prestige marques.

In Boardman v Byrne [2008] Lawtel (Walsall CC, 18 April 2008), Mr Boardman owned a Porsche GT3. He claimed that it was a very rare car, which personified a certain image of wealth to the outside world (insert your own view as to the image conjured up). An ‘ordinary’ Porsche 911/966 would not, in his opinion, have been an adequate substitute. His Porsche garage did not have a GT3 and referred him to Accident Exchange Ltd who supplied him with a Mercedes Benz SL55 AMG at £675 per day.

The court found that if Mr Boardman had given the matter any thought – which he didn’t in fact – then he would probably have hired the best available Porsche car and his stance about ‘lesser models’ was unreasonable. He recovered the average ‘spot hire’ rate for a Porsche 911/966 of £253 per day.

(c) Defendants often complain that the repairs to the damaged vehicle have taken too long. It will not be enough for the defendant simply to say that the repair took too long – he must show that the claimant has failed to mitigate, which requires a finding of some conduct on the part of the claimant, or on the part of someone for whom he is in law responsible, or indeed of a third party, which can truly be said to be an independent cause of the loss of his car for that period (Mattocks v Mann [1973] RTR 13 per Lord Justice Beldam, at page 18). The suggested remedy is to seek a contribution from the repairers for any unjustified length of repair – a fertile field for yet more ‘satellite’ litigation.

(d) Where the claimant can prove that he is impecunious then he is entitled to recover the credit hire rate. Impecuniosity means an inability to pay for car hire charges without having to make unreasonable sacrifices. The availability of a credit or debit card may be a relevant factor (Lagden v O’Connor [2004] AC 1067 per Lord Nicholls at paragraph 9 and Lord Hope at paragraph 42).

In Thompson v Vincent Haulage Ltd [2008] Lawtel (Preston CC; John Benson QC; 15 April 2008), the issue of impecuniousity was raised. The claimant was a self-employed electrician. He owned a VW Passat which was used in the course of his work. He hired a replacement vehicle for 72 days at a cost of over £8,000. He had a credit card, which he said he did not use, with a credit limit of £1,000 and savings of £2,000, which he had earmarked for a property purchase in Bulgaria. His accounts indicated a net profit of £13,327 a year. On the facts, he was held not to be impecunious and recovered the ‘spot hire’ rate for an equivalent vehicle.

Wattan Singh v Aqua Descaling Ltd [2008] Lawtel (Walsall CC; Judge Oliver-Jones QC; 12 June 2008) is a cautionary tale. Mr Singh’s minibus was damaged in an accident and he sought to recover hire charges of £39,505 for the hire of a replacement for a period of 218 days.

The minibus was one of six ‘plated’ vehicles which he hired to taxi drivers for about £150-160 a week. By the time of trial, he had sworn three statements and answered 106 questions under part 18 of the Civil Procedure Rules but had never met his solicitor. The judge assessed the average net income derived from the minibus at £35.50 a week as against a credit hire liability of about £1,300.00 a week. Mr Singh was awarded loss of profit for a six-week period (a ‘period reasonably required to achieve a replacement and "restore" the profit’) amounting to £213. The claimant’s costs were limited to those recoverable under the small-claims track.

So-called ‘courtesy’ cars also raise interesting issues. In Rose v The Co-operative Group [2005] Lawtel (Poole CC; Judge Meston QC; 7 February 2005), the claimant’s motor insurance policy entitled him to a ‘courtesy’ car in the event of an accident. The claimant obtained a car from a credit hire company. It was held that he had not failed to mitigate his loss; his entitlement under his insurance policy should not have been taken into account. A number of previous county court decisions have taken a different view (for example Marler v Gibbings [2002] CLY 933). In a similar vein is the case of Whitworths Ltd v Crenoon Ltd [2006] Lawtel (Northampton CC; Judge Mayor QC; 26 April 2006), where the claimant failed to mitigate its loss because (a) the damaged vehicle was subject to a longlease, the terms of which had made available to the claimant a relief car in the event of an accident, but it had not been requested; (b) the employee could have made use of company ‘pool’ cars.

District Judge Pates sits at Crewe County Court

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