article
Legal developments in the credit hire market
7th May 2009
When the Court of Appeal gave their judgment in the case of Clark v
Ardington (2002), did they anticipate that 7 years on the court
system would once more become flooded with claims or did they
expect their judgment to put a nail in the coffin of credit hire
litigation?
Background
The first attack on the credit hire industry took place 15 years
ago with the case of Giles v Thompson and the allegation that
credit hire agreements were champertous : an argument which
failed.
However in Dimond v Lovell (2002) the Law lords denounced that
credit hire agreements were regulated agreements and if improperly
executed were unenforceable against the hiree and could not
therefore be recovered from the defendant.
The final challenge was mounted against the entire scheme,
credit hire and repairs in the Clark v Ardington case. The Court of
Appeal was clear: the scheme was not a pretence, sloppy enforcement
was merely a commercial party choosing not to enforce their strict
legal rights.
The remainder of the decision was framed in such a way that
challenge to claims for credit hire seemed dead and buried. But
with credit hire claims rising in not only cost but volume we take
a look at the recent developments, practices and legal challenges
facing the credit hire and motor insurance industries.
Enforceability
In the recent reported decision of Company Call Centre
Technology Ltd v Sheehan* the appeal judge upheld an earlier
decision to dismiss the claim for hire charges on the basis that
there was no evidence that the claimant had a liability to pay the
hire charges incurred. The claimant’s employee had received the
hire agreement together with its terms and conditions for signature
4 months after the hire period had ended and the replacement car
had been returned.
Thus whilst the Court of Appeal may have firmly put to bed the
allegation of pretence and enforceability, it would appear that
commercial practice does not override the basic contractual
principle that past consideration is not good consideration and the
liability to pay hire charges still needs to be established and
should not be overlooked, because sloppiness in sending
documentation after a hire period has ended is not commercial
practice that avoids legal principle.
Need
“The claimant must prove his need to hire a replacement vehicle
although the burden will usually be easy to satisfy. Advocates will
frequently remind you that the need for a hire car is not self
proving” District Judge Paten advises his brethren in the winter
edition of the District Judge’s Law Bulletin reminding them of
Giles v Thompson.
And herein lies the problem in challenging “need for hire”. The
burden of proof lies squarely with the claimant but is a fairly low
threshold. However, perhaps that threshold is about to change.
The interventionist approach (adopted by more pro-active
insurers) is widely thought to be changing the tide, raising the
evidential bar for claimants who ignore alternatives to credit
hire.
Innovative and practical methods are being deployed to provide
otherwise “would be credit hirers” with real alternatives to credit
hire. Probably the best known and most topical are the TNT drivers
offering any Third Party motorist who is unfortunate enough to have
an RTA with one of their lorries a free replacement vehicle.
On the face of it a genuine and real alternative, that saves
cost and does not inconvenience the accident victim.
The court’s approach to “need for hire” in the wake of the TNT
Scheme and schemes like them remains to be seen. This type of
scheme was considered by the Court of Appeal in May and we
currently await its judgement. It presents the Appeal Court with a
real opportunity to limit the claimant’s damages to the actual cost
of the replacement vehicle or possibly wiping out damages
completely.
Insurers hope to see this type of scheme offering a genuine
alternative to credit hire as a scheme recognised by the courts as
an effective way of providing a replacement vehicle without
incurring expensive credit hire charges.
Judges may also welcome clarification from the Appeal Court.
Only recently before the District Judge sitting in Southampton were
questions raised why motor insurers were not in more regular
contact with the Third Party motorists to offer alternative schemes
to credit hire. Well Judge – they are!
Hopefully both insurers and the judiciary will see more scheme’s
such as the TNT Scheme being utilised by motor insurers where third
party replacement vehicles are provided quickly, cheaply and
without inconvenience. Such schemes must then be the way forward
and a genuine alternative to credit hire.
Impecuniosity
It is well versed that the reason for credit hire charges being
more costly than the local hire rates is the cost of the
‘convenience’ services provided. According to the judge in Dimond v
Lovell ‘the law does not entitle the plaintiff to recover damages
for additional services provided by the car hire company or for the
worry or nuisance caused by the accident’.
However, if a claimant can show he or she is impecunious then
they are entitled to recover the higher credit rate as opposed to
the local rate. A point raised in the House of Lords case, Lagden v
O’Connor. Impecunious signifies an inability to pay car hire
charges without making sacrifices the claimant could not reasonably
be expected to make.
It is standard practice for some courts to order and defendant
lawyers to seek either by a Part 18 request or application for
disclosure, details of the claimant’s financial means.
Only recently in Southampton County Court, did a claimant
struggle to recall what transactions he had made in 2005 which were
listed in his current account bank statement. He faced questions
about his savings and that of his wife, a named driver on the
credit hire agreement. It is an uncomfortable place for a claimant
to be.
The judge found that, despite the claimant’s decision to change
career and his unemployment at the point of the accident, he had
the facility to obtain finance without placing an undue burden on
his family, rejecting argument that alternative means of funding a
replacement car would have been open ended and an unfair risk for
the claimant.
Did the Law Lords envisage when raising the phrase ‘impecunious’
that trials before county court judges would become in the main
investigations into the financial accounts of an innocent claimant
motorist? Surely not. The issue of what renders someone impecunious
in one geographical region may not be sufficient in another. Does
it have any bearing whether your accident is in the North or South
of the country? What about age? If you are a prudent 40-50 year old
who has had a successful career, perhaps mortgage and child free,
with little or no debt, then you are less likely to be impecunious
than the 23 year old who is just out of university with student
debt and a relatively modest income.
Whatever your view, the issue is now common place for lawyers
and the respective industries but not for the innocent motorists
who find themselves in court.
Period of hire and contribution claims
Following Clark v Ardington contesting the period of hire can
often prove difficult. Mrs Clark's car repairs should have been
completed within 5 days but due to factors beyond her control were
completed in 10. The Court of Appeal recommended that if delay is
caused by a repairing garage a defendant should seek a contribution
for the unjustified length of repair.
But despite this recommendation, there remains much debate about
whether a defendant can actually seek a contribution from the
repairing garage within the ambit of the Civil Liability
Contribution Act 1978. There are no reported cases where a
defendant has been successful in doing so.
The issue recently came before the Court in Tiller v Green . The
credit hire organisation (CHO) refused to compromise the claim for
hire charges alleging that the repairing garage was responsible for
the period of hire due to delay by failing to accurately estimate
for the repairs, omitting areas of damage and quoting for the wrong
parts. At trial the repairing garage established that they had
followed the correct procedures and that it was the CHO who had
failed to authorise the repairs, despite being chased by the garage
on several occasions. The court found that once the repairs had
been authorised they were carried out correctly and within a
reasonable timeframe.
As a result the contribution proceedings were dismissed. The
court found that the defendant’s insurers were responsible for the
hire charges only during the period of repair. The unreasonable
delays in authorisation and the hire charges incurred during this
period fell at the door of the CHO.
All is therefore not necessarily as it first may seem. Full
enquiries and disclosure from the repairing garage made as early as
possible, may result in a reduction in hire charges maybe not
through contribution proceedings against the repairing garage but
via highlighting delay in another quarter. It seems for the moment
however that breaking the chain of causation in claims for lengthy
hire periods remains difficult.
Conclusion
The challenges to credit hire charges are far from dead and
buried. The awaited decision of the Appeal Court on refusal by a
claimant of a free replacement vehicle by a defendant may well
change the practice of the motor insurance industry in its entirety
and place another nail in the coffin in credit hire litigation for
now. In a further 15 years time no doubt there will be further
challenges or issues which arise and are frequently being argued
before the courts.
*The Credit Hire Team at Browne Jacobson acted for the defendant
in Company Call Centre Technology Ltd v Sheehan.
save to PDF