By Simon Ross
As Flax LJ neatly states at the beginning of his leading unanimous Judgment, “These two appeals are the latest round in the long-running battle between the motor insurance market and the credit hire companies”.
Both appeals concerned the question of the correct approach to the assessment of damages in respect of a pecunious claimant.
In McBride the claimant hired a Jaguar XK 5.0l on credit from Accident Exchange Limited (“AEL”) as replacement for his damaged Jaguar XJ Supersport V8 5.0l vehicle over a period of 77 days for a total charge of £40,215.11 inclusive of VAT. The trial Judge awarded damages calculated on the basis of an assessed basic hire rate (“BHR”) at the lowest rate of £225 plus VAT per day despite that being the rate offered by companies (Coretec Cars, Dream Car Hire and Premiere Velocity) that imposed a non-waivable excess of £2,000.
The grounds of appeal in essence were as follows:
- That the Judge had erred in applying the approach in Stevens v Equity Syndicate Management  EWCA Civ 93 of “the lowest reasonable rate quoted by a mainstream supplier” because that case was wrongly decided due to being inconsistent with previous authorities;
- That even if Stevens applied then it was wrong to apply a BHR of £225 plus VAT per day because there was no evidence that the companies offering that rate were “mainstream suppliers”;
- That, having accepted that it was reasonable to hire with a nil excess, since the Defendant’s rates evidence did not include suppliers offering a nil excess the credit hire rate should have been awarded;
- That there should have been some reasonable adjustment of the BHR to allow for the cost of an excess waiver.
STEVENS NOT OVERTURNED
In relation to the first ground, the Court of Appeal agreed to grant permission, but then dismissed the appeal on the basis that it considered the decision in Stevens to be correct. However, that approach was adopted only so as to leave the door open for AEL to seek permission to take the argument to the Supreme Court, if that were considered sensible.
The second ground was rejected on the basis that it sought to challenge a finding of fact. The finding that the companies concerned were ‘mainstream suppliers’ or alternatively ‘local reputable suppliers’ was open to the trial judge on the available evidence.
IS A NIL EXCESS REQUIRED?
With regard to the question of the relevance of finding a hire company that offered a nil excess, the answer was to be found by going back to basic principles. The purpose of the exercise of assessing a BHR is to strip out the cost of additional benefits that are included within the credit hire rate and that is the approach that must be taken unless a claimant is impecunious.
Flax LJ observed as follows (at paragraph 68),
“I agree with Mr Turner that the inability to obtain a nil excess from a mainstream supplier or reputable local supplier of hire cars in circumstances where, as in the present case, the evidence demonstrates that there is a difference between the credit hire rate before the application of any nil excess and the basic hire rate without the availability of a nil excess, which demonstrates that the credit hire rate includes the irrecoverable elements identified in Dimond v Lovell, should not as a matter of principle, lead to the credit hire company recovering the credit hire rate in full. That would erode Dimond v Lovell and would in practice lead to a further exception to the general principle laid down in that case…
It should not allow the fact that the credit hire company offers a nil excess on prestige vehicles which other car hire companies are not prepared to offer to be used as a smokescreen to enable credit hire companies to recover their charges in full, notwithstanding that a comparison of rates ignoring the nil excess demonstrates that there are such irrecoverable elements”.
AWARD THE EXCESS WAIVER SEPARATELY
The principled way to address the question of a nil excess was to assess the BHR on the basis of the lowest rate ignoring the level of excess on those vehicles and then to look at the excess issue separately.
Flax LJ explained this in the following way (at paragraph 76),
“Accordingly, in my judgment, where a nil excess is not available from car hire companies, the correct approach is to treat the nil excess separately from the comparison exercise between the default credit hire rate and the basic hire rate with an excess. It will almost invariably be the case that it was reasonable for the claimant to seek a nil excess for the reasons given in Bee v Jenson and, on that hypothesis, the only question for the Court will be how much should be recoverable as the cost of purchasing a nil excess”.
Consequently, ground three failed, but ground four was allowed.
If the hire companies identified within the BHR evidence offered a nil excess then that would make the exercise of determining an appropriate figure for excess waiver redundant. However, if an excess waiver sum is to be awarded the Court of Appeal made it plain that would be a question of fact to be determined on the basis of evidence of available insurance products.
In Clayton the claimant hired a series of vehicles from AEL as replacements for his 1973 Ford Mustang. The total hire charges incurred were £24,823.20 inclusive of VAT. Both parties had served BHR evidence, but due to a postcode error the claimant’s evidence related to York rather than Colchester and the trial judge (DJ Mitchell) declined to grant relief from sanction to permit reliance on geographically relevant evidence that had been served out of time.
The defendant’s rates evidence was based upon 28 day hire periods, but the claimant’s evidence had been that he hoped that the repairs would take about a week. On that basis, it was argued that the 28 day rates were not able to be relied upon. In addition, the hire companies identified with the lowest rates did not offer a nil excess, albeit there was evidence that Questor Insurance would offer an inexpensive stand alone product which could be found by looking on the internet.
DJ Mitchell awarded damages to the claimant based on the defendant’s 28 day rate, but then adjusted it upwards by 15% to reflect the fact that a 7 day rate would cost more per day. Also, a 10% upward adjustment was made to cover the cost of excess waiver. On appeal to HHJ Staite, the District Judge’s decision was upheld notwithstanding arguments concerning bias and guesswork (which I will not discuss in detail here).
The Court of Appeal revisited those arguments, but ultimately determined that although there was evidence that the Judge had made intemperate comments there was no evidence of actual or apparent bias.
The key question was whether the Judge’s approach of making a “reasonable approximation” on the evidence available was wrong or unfair and it was held not to be.
Flax LJ stated (at paragraph 95) that,
“one should never lose sight of the fact that the “stripping out” exercise advocated by Dimond v Lovell is necessarily an approximate and artificial one because, by definition, the claimant did not in fact hire a comparable car from a mainstream or reputable local car hire company. He actually hired from the credit hire company, so that inevitably the evidence is sought after the event of what rate of car hire could have been obtained, on the hypothetical basis that he had hired from a car hire company instead”.
The adjustments made by the Judge doing the best that he could on the evidence were not to be criticised. Nor would it have been appropriate for the Judge to simply award the credit hire in full because of an absence of direct evidence of a 7 day rate or an excess waiver product for the vehicles hired.
HOW TO ASSESS THE COST OF EXCESS WAIVER
As to the question of excess waiver insurance, the following general guidance was given (at paragraph 105),
“I consider that where there is evidence of the availability of an excess elimination insurance as a stand-alone product from Questor or other providers such as Insurance4carhire.com, the Courts should admit and accept such evidence as evidence of the reasonable cost of obtaining a nil excess, provided of course that the quote obtained from such a provider is for a car which is comparable with the one hired from the credit hire company and is for the same period as the period of actual hire from the credit hire company. Certainly the Court should not reject such evidence because the judge or the claimant has not heard of the product, as the district judge did here. The exercise is an objective one and such evidence should be admissible irrespective of the subjective knowledge or lack of it of the Court or the claimant. Information about the availability of such products can, in any event, be readily accessed on the internet… The availability and acceptance of evidence of these stand-alone products should be the norm”.
It remains to be seen whether AEL will attempt to overturn Stevens in the Supreme Court, but in the meantime, one expects credit hire cases to continue to be fought with more arguments now focusing on whether specific hire companies are “mainstream suppliers” or “reputable local suppliers” and also over excess waiver products and whether they would cover the particular claimant and/or vehicle(s) actually hired.
The decision itself is available to view at: http://www.bailii.org/ew/cases/EWCA/Civ/2017/144.html