Credit Hire Simplified?

PI_John_Morris_Collins By John Collins

In cases where the hirer of a car on credit terms is not impecunious, we thought we knew where we stood after Dimond v Lovell [2001] 1AC 384. The Claimant was entitled to recover the ‘spot rate’ or, as the Court of Appeal in Pattni v First Leicester Buses Ltd [2012] RTR 17 insisted, ‘basic hire rate’ or BHR.  In Burdis v Livsey [2003] QB 36, three possible ways of calculating the basic hire rate were considered and indeed that consideration was repeated by Aikens LJ in Pattni.  Both the Court of Appeal in Burdis and the Court of Appeal in Pattni rejected the mode of calculation of applying a reasonable discount to the credit hire rate charged.  That left two methods of calculation. The first, which was not favoured by the Court of Appeal in Burdis, was to break down the charge made by the credit hire company and remove the additional elements from the claim in respect of credit, claim handling and delivery &c.  The Court of Appeal in Burdis thought that the cost of working all that out might well be disproportionate. The court in Pattni, however, considered that where the actual credit hire company which had hired the replacement car to the Claimant, disclosed the BHR for that type of car in that area at that time, that might well be the best mode of calculation.

Otherwise, both courts favoured the third method, which involves the Defendant – for the burden, one must emphasise, is always on the Defendant in relation to issues of mitigation of damage – producing evidence of the BHR charged by other car hire companies in the area for the type of car actually hired or of a type essentially similar.

In practice, where the Defendant seriously challenges the cost of hiring incurred by the Claimant, evidence is adduced of the rates of charges at the material time of a variety of hire companies in the particular area. Those rates tend to make confusion worse confounded because each hiring company tends to have different terms of hire and those different terms of hire inevitably affect the rate of hire. So the judge does his best to work out a fair figure. The principle which has been applied is that which was stated in Burdis and approved in Pattni: “The Claimant can go round to the nearest hire company and is prima facie entitled to recover the amount charged whether or not the charge is at the top of the range of car hire rates. However, the basic principle is qualified by the duty to take reasonable steps to mitigate the loss. What is reasonable will depend on the particular circumstances”.

Now we have Stephens v Equity Syndicate Management Ltd [2015] EWCA Civ 93.  Kitchin L J there emphasised that it was the duty of the innocent party to mitigate his loss. He went on to identify the duty of the judge, which was to try to identify the rate or rates for the hire, in the Claimant’s geographical area, of the type of car actually hired by the Claimant on credit hire terms. There is of course no problem if the exercise yields a single rate, but, as I have just pointed out, that is not the norm. Where there is a range of rates, then asserts Kitchin L J, a reasonable estimate of the BHR is to be obtained by ‘identifying the lowest reasonable rate quoted by a mainstream supplier or, if there is no mainstream supplier, by a local reputable supplier’.

So now we know – or do we?  On the face of it, all the judge has to do now, when faced with a number of different figures, is to take the lowest, so there is a greater simplification of the calculation.

Quite apart from the fact that it appears to me that this is a departure from the far more evenly balanced judgment of the Court of Appeal in Burdis, what is the court to do if the Claimant says ‘I would not touch that company with a bargepole. They cheated my brother-in-law over a Volvo and I would not go near them if you paid me’?  Let us assume that the Defendant is made aware of the Claimant’s objections: is he then to adduce evidence that the particular company has a perfectly satisfactory reputation locally?  And if the lowest figure is quoted by a backstreet company as to whose reputation no one says an adverse word, but of whom the Claimant could not reasonably have been aware, is the Claimant to be bound by the rate of that company?

With the greatest respect to the Court of Appeal, their latest approach is potentially absurd.  It cannot be right that if X hires a replacement car not on credit, but paying a reasonable sum for the hire, X is entitled to recover the actual cost of hire – as undoubtedly he would be, whereas a person who – as he is entitled to do – hires a vehicle on credit, can only recover the cost of the lowest rate quoted by a supplier.  Nor is the suggested method one which will help in every case.  It may help in the cases of those who live in substantial urban areas where there are many competing hire companies, but what of the person out at Ugglebarnby, who may in practice have only one supplier willing to provide him with a vehicle at short notice?

In my opinion, the judge will still have to face the obligation of looking at all the figures provided and assessing what would be the fair and reasonable rate of the BHR in the particular case which is before him or her.

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One comment

  1. […] Collins looked at credit hire in Credit Hire Simplified? (May […]

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