Further shots fired in the long-running battle between credit hire companies and insurers…

profile_PI_Frances_Lawley1[1] By Frances Lawley

Sobrany v UAB Transtira [2016] EWCA Civ 28

Credit hire litigation is rife with technical arguments which have been accused of being ‘layers of artificiality’ (by Judge Mackie in W v Veolia Environmental Services (UK) Plc [2011] EWHC 2020 (QB), [2012] 1 All E.R. (Comm) 667).

Claims for credit hire are often defended on the basis of some technical deficiency with the credit hire agreement. This is usually related to consumer credit legislation or the failure to provide a ‘Notice of Right to Cancel’ required by the Cancellation of Contracts Concluded in a Consumers Home or Place of Work Regulations 2008 but can also relate to the claimant’s understanding of the contract of credit hire in circumstances whereby a claimant may have been led to believe that they had been provided with a courtesy car.

The argument is that, if the credit hire contract is not enforceable by the credit hire organisation against the claimant, the claimant has suffered no loss to be compensated by the defendant (or the defendant’s insurer).

A tactic more recently deployed in anticipation of such arguments is to activate a policy of insurance which stands alongside the credit hire agreement and bring the claim as a subrogated claim. Once the insurance has paid out, there is a loss to be compensated. This tactic was seen in the above cited case of Veolia and in the recent decision in Sobrany.

In Veolia, the court noted (obiter) that any subrogated claim was limited to £100,000 as this was the limit on the policy of insurance. In Sobrany, the claimant conceded the limit of £100,000 but further issues arose as a result of the Claimant’s own oral evidence that he had signed not one, but two, policies of insurance. He clearly stated in his evidence that he had entered into one policy at the start of his first period of hire and then, when the hire vehicle was changed just over a week later, he entered into a second policy of insurance.

There was no documentary evidence of any policy of insurance and the Defendant had sought to argue this at trial however, as the point had not been pleaded, the trial judge refused to allow the Defendant to pursue it.

At first instance, the Defendant argued that the first policy of insurance was invalidated once the second policy was signed as a result of the policy exclusions which excluded any claim for which the hirer was insured by another policy of insurance. This argument was accepted and the Claimant was limited to damages of a shade under £9,000.

The Claimant appealed. There were three issues to be determined on appeal:

  1. whether the trial judge was right to allow the Defendant to advance the ‘two policies’ argument (which had not been pleaded) when he had previously refused to allow the Defendant to pursue an argument that there was no insurance policy based on a lack of pleading;
  2. whether the court should accept new evidence from the Claimant which sought to prove that there was in fact only one policy of insurance; and
  3. whether the judge had erred in the conclusion based on the ‘two policies’ argument.

Christopher Clarke LJ, giving the leading judgment of the Court of Appeal, concluded as follows.

On the first point, it was held that the trial judge’s decision to allow the ‘two policies’ argument was appropriate on the basis that:

“there is a difference between allowing a defendant to advance a positive case which is inconsistent with its pleading and allowing it to rely upon the evidence which the claimant has in effect volunteered.“

On the second point, there was no basis for the admission of further evidence which should clearly have been available prior to the trial of the matter.

The appeal therefore continued as an appeal against the trial judge’s decision on the ‘two policies’ argument. On this final point the Claimant was successful. It was held that there was no basis for the finding that the existence of a second policy of insurance with the same insurer invalidated the claim because:

  1. the claim was brought as a subrogated claim under a policy of insurance and there was no reason to limit the Claimant to the lesser of the two;
  2. the subrogated claim should be treated as a claim under both policies;
  3. the operation of the relevant policy exclusion should be confined to cases where a claimant had claimed and been paid under another policy of insurance with another insurer thereby preventing double recovery.

The fact that the case was decided on the basis that there were two insurance policies meant that the Claimant was entitled to recover more than the £100,000 limit as there were two policies each with a limit of £100,000. The concession made by the Claimant at the outset of the trial was therefore nullified as the concession was made on the basis of the pleaded case that there was only one policy of insurance.

Whilst this case may be seen to be confined to its own facts it does show that there are significant arguments to be had even in a subrogated claim and that both parties should ensure that the situation is investigated and pleaded fully prior to trial.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: