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Vasant Pattni v First Leicester Buses Limited, Darren Bent v Highways and Utilities Construction and Allianz Insurance, Court of Appeal, 24 November 2011

6 January 2012
The issues

A person who hired a replacement car on credit hire following a road traffic accident could not recover interest on the hire charges for the period from the end of the hire to the date when his claim was settled. The Court of Appeal summarised the principles to be applied in determining the basic hire rate recoverable by a claimant who could have afforded to hire a replacement car without credit terms.

The facts

This matter regards two appeals in respect of credit hire vehicles.

(i) The case of Pattni v First Leicester Buses Ltd concerned interest on credit hire. His Honour Judge O’Rorke in the first instance accepted the claimant’s need for a replacement vehicle, accepted his need for an expensive model of substitute car but reduced the number of days hire that the claimant was entitled to from 40 days to 29 days in the sum of £10,744.50. In regards to interest on this sum for the period between the end of the hire of the car and the date that the judge gave judgment, pursuant to the terms of the credit hire contract the Judge rejected that claim.

The claimant appealed and in a reserved judgment Swift J considered three ways in which counsel for the claimant argued that Mr Pattni was entitled to interest namely:

  1. In accordance with contractual obligations imposed upon him by his credit hire agreement with Swift; though it was conceded that the claimant would only be entitled to interest on the hire charges actually awarded by HHJ O’Rorke, not the full credit hire charge agreed under the credit hire agreement
  2. That the judge should have increased the damages represented by the daily basic hire rate to reflect the fact that if the claimant had actually paid out the hire charge in advance he would have been kept out of his money for some period. The claimant must be entitled to a sum of interest as damages for the loss of his money
  3. The judge should have awarded statutory interest on the principal sum of car hire found recoverable, pursuant to section 69 of the County Courts Act 1984.

(ii) Darren Bent v Highways and Utilities Construction Limited and Allianz Insurance focused on what spot hire rate was relevant to be used as there were three aspects of Her Honour Judge Plumstead’s judgment under appeal, first her calculations of the basic hire rate (spot hire rate); secondly whether the car should have been hired on a seven day basis or a 28 day basis and thirdly if the latter what discount to the seven day rate should be applied.

In regards to the basic hire rate the aim of the judge’s fact finding exercise is to ascertain the basic hire rate for the model of car that the claimant hired and to do so on an objective basis, Dimond v Lovell.

Legal Background
Three House of Lords and one Court of Appeal decision have established certain principles concerning:

  • the basis on which a claimant can recover damages for car hire costs when he is the innocent victim of an road traffic accident and he has hired a replacement car on credit hire terms
  • what sums can be recovered as damages or otherwise.

The authorities of Giles v Thompson, Dimond v Lovell, Burdis v Livsey and Lagden v O’Connor have all been concerned with cases where the claimant was a non fault car driver who had entered into a credit hire agreement with a credit hire company for a replacement car and that agreement provided that the hirer will not have to pay the hire charges until the successful recovery of a claim for damages against the negligent driver.

The principles established by these decisions are:

  1. the loss of use of the vehicle as a result of the car being damaged by the negligence of another driver is a loss for which the innocent claimant can recover damages. The claimant has a duty to mitigate their loss therefore if the loss of use of a vehicle can be mitigated or avoided by the hire of a replacement vehicle, the cost of that replacement vehicle will be the measure of damages recoverable for the loss of use of the vehicle.
  2. A claimant who hires a vehicle on credit terms as a replacement vehicle suffers a loss which is recoverable as damages, even though, by the terms of the credit hire agreement, the hirer is not liable to pay the hire until there has been a judgment in the hirer’s favour against the negligent driver. If a claimant has had the use of a replacement car and he has had to pay for it, then the claim may more aptly be characterised as one for special damages.
  3. The injured party cannot claim reimbursement for expenditure that is unreasonable. If the defendant can show that the cost that was incurred was more than was reasonable, either by proving that the claimant had no use for a replacement car in part or at all, or because the car hired was bigger or better than was reasonable in the circumstances, the amount expended on the hire must be reduced to the amount that would have been needed to hire the equivalent to the damaged car. Giles v Thompson, “The need for a replacement car is not selfproving”.
  4. Even if it was reasonable for the innocent claimant to hire a replacement vehicle on credit hire terms, the measure of damages recoverable will not necessarily be the amount of the credit hire that the claimant agrees to pay the credit hire company. This is dependent on the financial circumstances of the claimant. If the claimant could afford to hire a replacement car in the normal way, the damages recoverable for loss of use of the damaged car will be that sum which is attributable to the basic hire rate (BHR) of the replacement car.
  5. The difference between the BHR and the credit hire rate takes account of the additional services that a credit hire company provides to the hirer, in regards to providing credit, handling the claim and affecting the recovery from the negligent driver, taking the risk of not recovering from the latter and an element of profit.
    It is for a defendant to demonstrate, by evidence, that there is a difference between the credit hire charge agreed between the claimant and the credit hire company and the BHR.
  6. If the claimant is ‘impecunious’ then, on the assumption it is reasonable for him to hire a replacement car and it was a reasonable type of car that he hired, he is said to have had ‘no choice’ but to hire on credit terms. In Lagden v O’Connor the suggested rule of thumb test on whether a claimant hirer is ‘impecunious’ might be whether he has the use of a recognised credit or debit card.
  7. If the credit hire agreement provides that the hire will not be due and payable until judgment has been obtained against the negligent driver and there are no express terms in the hire agreement about the payment of interest on the hire charges then interest should not be awarded, at least under the terms of section 35A of the Senior Courts Act 1981 or section 69 of the County Courts Act 1984. This is because the hirer has not been “kept out of his money”; he was not contractually obliged to pay the hire charges to the credit hire company whilst the claim against the negligent driver was being assessed and litigated. No hire charges were then owed to the credit hire company.
  8. In the judgment of the Court of Appeal in Burdis v Livsey, the court considered the method by which judges could calculate the BHR. The court canvassed three possible methods. The first was to breakdown the charge made by credit hire companies so as to enable the additional elements (for credit, claim handling etc) to be stripped out. That method was rejected because it was said it would entail detailed disclosure and analysis which would be cumbersome in small cases and the costs would be disproportionate to the sums claimed in most of this type of case.

The second possible method canvassed was to apply a ‘reasonable discount’ to the credit hire rate charged. That was rejected as being too arbitrary.

The third possible method and the one preferred by this court in Burdis is to look at “actual locally available figures”. Once the court has concluded that it was reasonable for the claimant to hire the type of car that he did, then the task of the court is to find what constitutes the BHR for the particular type of car actually hired.

The decision
  1. Swift J rejected all three arguments. In respect to the first argument the claimant had suffered no loss in relation to interest for which he required to be compensated. Turning to the second argument the claimant had failed to prove any loss of interest which would sound in damages and in regards to the third argument there was no evidence that the claimant or his insurers had suffered any loss, the judge was entitled to exercise his discretion under section 69 of the County Courts Act 1984 as he did and so dismissed the appeal.
  2. It was held that the judge erred in concentrating on the 2009 figures when 2007 figures were available and that the judge erred because she based her conclusion on the basic hire rate at which Mr Bent could have obtained a substitute car had he made enquiries as to non-credit car hire, rather than ascertaining what the ‘objective’ basic hire rate was for the Aston Martin DB9. It was found that Highways and Allianz failed to prove that the BHR for the Aston Martin DB9 was less than the credit hire rate of £573.28 per day plus VAT.

    It was held that Mr Bent is entitled to recover the cost of hiring the Aston Martin DB9 at the rate actually charged at £573.28 plus VAT. A discount rate of 12%, which was applied in respect of fact thatthe Aston Martin DB9 should have been hired on a 28 day basis, was correct so the figure for calculating the loss of use claim would be £504.48 plus VAT. As there is no challenge to the period of hire of 94 days, the total sum recoverable will be £47,421.12 plus VAT at 17.5%, which produces a figure of £55,719.81. An interim payment of £38,618.76 had already been made, this means that Mr Bent was entitled to recover a balance of £17,103.05.

    B’s appeal allowed in part. Whether any sum for statutory interest is recoverable on the total sum recoverable at £55,719.81 was not debated at the hearing of the appeal and as such if necessary the parties will have to submit further written submission on the point.

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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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