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CHOs dealt legal blow

26 November 2009

The recent County Court decision in Tiller -v- Green (Portsmouth County Court, 17th March 2009 & 5th November 2009) demonstrated a shift in balance of favour towards defendants in cases where Credit Hire Organisations (CHOs) themselves have delayed matters, causing extended repair and hire periods. This decision highlighted the risks to CHOs of making erroneous allegations concerning repair delays and resulted in an indemnity costs order being made against the claimant.

In Tiller, the claimant hired a vehicle from Accident Exchange for a period of 52 days at the full commercial rate. It was evident at the outset that the period of hire was likely to become a disputed issue.

Accident Exchange (acting as the claimants agent) refused to accept any reduction in the hire period and laid the blame for the delay at the door of the repairing garage. In open correspondence the CHO were adamant that they had swiftly authorised repairs and it was the repairing garage who had delayed matters by failing to accurately estimate for the repairs, omitting areas of damage and quoting for the wrong parts. The CHO made it clear that if the defendant wanted to dispute the period of hire they should seek a contribution from the repairing garage within the scope of the Civil Liability Contribution Act 1978 as envisaged by the Court of Appeal in Clark -v Ardington.

In spite of the guidance from the Court of Appeal, it is understandable that many defendants have been reluctant to embark upon third party claims due to the obvious risks faced in respect of costs. In what is understood to be one of the first cases where such a stance has been taken, the defendant made the decision to join the repairing garage to the proceedings as Part 20 defendant.

Despite the factual assertions made by the CHO, at trial the repairing garage were able to establish that they had followed the correct procedures and in fact it was the CHO who had caused the delays by failing to instruct an engineer and authorise the repairs in good time. The Court ruled that once the repairs had been authorised by the CHO they had been carried out correctly and within a reasonable timeframe.

In concluding that the CHO had failed to act "promptly and within a reasonable period of time" in authorising repairs, the period of hire was reduced substantially. In consequence of this decision and a reduction to the rate of hire, the overall charges of £9,303.25 were reduced to £1,790.78, requiring the CHO to repay monies to the defendant. As a result of the findings of fact made, the defendants Part 20 claim against the repairing garage was dismissed.

Although it was not controversial that the claimant would face a liability for the defendants costs, the defendant sought assessment of its own costs on an indemnity basis. Moreover, the defendant considered that the claimant should bear responsibility for the costs of the third party claim against the repairing garage.

In attempting to distance themselves from their earlier assertions as to delay, it was argued on behalf of the CHO that the defendant was the author of its own misfortune as it was the defendant alone who had made the decision to join the repairing garage into the proceedings. Since the defendant had been unsuccessful in relation to the third party claim, it was inferred that the costs liability should remain the responsibility of the defendant and that the claimant should not be penalised, either by an indemnity costs order, or by any liability in costs to the repairing garage.

In deciding what order to make about costs, the trial Judge considered the factors outlined at CPR 44.3(4) and commented that when looking at the question of who had succeeded, it was a case where "the defendant has succeeded in every real respect and the claimant has failed in every real respect". In the circumstances, the Court was prepared to depart from the general rule and ordered that the claimant not only pay the defendants costs on an indemnity basis with indemnity interest but additionally those of the repairing garage. The decision took into account the fact that it was the CHO who laid blame for part of the delay on the repairing garage.

It has to be acknowledged that often the only beneficiary in cases of delayed repairs is the CHO itself. This case is a clear example of the risks to CHOs in terms of both the recovery of hire charges and costs where there has been a failure to properly investigate and consider the reasons behind delay and the implications of that delay, in respect of the validity of the claim for hire being put forward.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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