UK: Legal Developments In The Credit Hire Market

When the Court of Appeal gave their judgment in the case of "Clark v Ardington (2002)", did they anticipate that 7 years on the court system would once more become flooded with claims or did they expect their judgment to put a nail in the coffin of credit hire litigation?

Background

The first attack on the credit hire industry took place 15 years ago with the case of Giles v Thompson and the allegation that credit hire agreements were champertous : an argument which failed.

However in Dimond v Lovell (2002) the Law lords denounced that credit hire agreements were regulated agreements and if improperly executed were unenforceable against the hiree and could not therefore be recovered from the defendant.

The final challenge was mounted against the entire scheme, credit hire and repairs in the Clark v Ardington case. The Court of Appeal was clear: the scheme was not a pretence, sloppy enforcement was merely a commercial party choosing not to enforce their strict legal rights.

The remainder of the decision was framed in such a way that challenge to claims for credit hire seemed dead and buried. But with credit hire claims rising in not only cost but volume we take a look at the recent developments, practices and legal challenges facing the credit hire and motor insurance industries.

Enforceability

In the recent reported decision of Company Call Centre Technology Ltd v Sheehan* the appeal judge upheld an earlier decision to dismiss the claim for hire charges on the basis that there was no evidence that the claimant had a liability to pay the hire charges incurred. The claimant's employee had received the hire agreement together with its terms and conditions for signature 4 months after the hire period had ended and the replacement car had been returned.

Thus whilst the Court of Appeal may have firmly put to bed the allegation of pretence and enforceability, it would appear that commercial practice does not override the basic contractual principle that past consideration is not good consideration and the liability to pay hire charges still needs to be established and should not be overlooked, because sloppiness in sending documentation after a hire period has ended is not commercial practice that avoids legal principle.

Need

"The claimant must prove his need to hire a replacement vehicle although the burden will usually be easy to satisfy. Advocates will frequently remind you that the need for a hire car is not self proving" District Judge Paten advises his brethren in the winter edition of the District Judge's Law Bulletin reminding them of Giles v Thompson.

And herein lies the problem in challenging "need for hire". The burden of proof lies squarely with the claimant but is a fairly low threshold. However, perhaps that threshold is about to change.

The interventionist approach (adopted by more pro-active insurers) is widely thought to be changing the tide, raising the evidential bar for claimants who ignore alternatives to credit hire.

Innovative and practical methods are being deployed to provide otherwise "would be credit hirers" with real alternatives to credit hire. Probably the best known and most topical are the TNT drivers offering any Third Party motorist who is unfortunate enough to have an RTA with one of their lorries a free replacement vehicle.

On the face of it a genuine and real alternative, that saves cost and does not inconvenience the accident victim.

The court's approach to "need for hire" in the wake of the TNT Scheme and schemes like them remains to be seen. This type of scheme was considered by the Court of Appeal in May and we currently await its judgement. It presents the Appeal Court with a real opportunity to limit the claimant's damages to the actual cost of the replacement vehicle or possibly wiping out damages completely.

Insurers hope to see this type of scheme offering a genuine alternative to credit hire as a scheme recognised by the courts as an effective way of providing a replacement vehicle without incurring expensive credit hire charges.

Judges may also welcome clarification from the Appeal Court. Only recently before the District Judge sitting in Southampton were questions raised why motor insurers were not in more regular contact with the Third Party motorists to offer alternative schemes to credit hire. Well Judge – they are!

Hopefully both insurers and the judiciary will see more scheme's such as the TNT Scheme being utilised by motor insurers where third party replacement vehicles are provided quickly, cheaply and without inconvenience. Such schemes must then be the way forward and a genuine alternative to credit hire.

Impecuniosity

It is well versed that the reason for credit hire charges being more costly than the local hire rates is the cost of the 'convenience' services provided. According to the judge in Dimond v Lovell 'the law does not entitle the plaintiff to recover damages for additional services provided by the car hire company or for the worry or nuisance caused by the accident'.

However, if a claimant can show he or she is impecunious then they are entitled to recover the higher credit rate as opposed to the local rate. A point raised in the House of Lords case, Lagden v O'Connor. Impecunious signifies an inability to pay car hire charges without making sacrifices the claimant could not reasonably be expected to make.

It is standard practice for some courts to order and defendant lawyers to seek either by a Part 18 request or application for disclosure, details of the claimant's financial means.

Only recently in Southampton County Court, did a claimant struggle to recall what transactions he had made in 2005 which were listed in his current account bank statement. He faced questions about his savings and that of his wife, a named driver on the credit hire agreement. It is an uncomfortable place for a claimant to be.

The judge found that, despite the claimant's decision to change career and his unemployment at the point of the accident, he had the facility to obtain finance without placing an undue burden on his family, rejecting argument that alternative means of funding a replacement car would have been open ended and an unfair risk for the claimant.

Did the Law Lords envisage when raising the phrase 'impecunious' that trials before county court judges would become in the main investigations into the financial accounts of an innocent claimant motorist? Surely not. The issue of what renders someone impecunious in one geographical region may not be sufficient in another. Does it have any bearing whether your accident is in the North or South of the country? What about age? If you are a prudent 40-50 year old who has had a successful career, perhaps mortgage and child free, with little or no debt, then you are less likely to be impecunious than the 23 year old who is just out of university with student debt and a relatively modest income.

Whatever your view, the issue is now common place for lawyers and the respective industries but not for the innocent motorists who find themselves in court.

Period Of Hire And Contribution Claims

Following Clark v Ardington contesting the period of hire can often prove difficult. Mrs Clark's car repairs should have been completed within 5 days but due to factors beyond her control were completed in 10. The Court of Appeal recommended that if delay is caused by a repairing garage a defendant should seek a contribution for the unjustified length of repair.

But despite this recommendation, there remains much debate about whether a defendant can actually seek a contribution from the repairing garage within the ambit of the Civil Liability Contribution Act 1978. There are no reported cases where a defendant has been successful in doing so.

The issue recently came before the Court in Tiller v Green. The credit hire organisation (CHO) refused to compromise the claim for hire charges alleging that the repairing garage was responsible for the period of hire due to delay by failing to accurately estimate for the repairs, omitting areas of damage and quoting for the wrong parts. At trial the repairing garage established that they had followed the correct procedures and that it was the CHO who had failed to authorise the repairs, despite being chased by the garage on several occasions. The court found that once the repairs had been authorised they were carried out correctly and within a reasonable timeframe.

As a result the contribution proceedings were dismissed. The court found that the defendant's insurers were responsible for the hire charges only during the period of repair. The unreasonable delays in authorisation and the hire charges incurred during this period fell at the door of the CHO.

All is therefore not necessarily as it first may seem. Full enquiries and disclosure from the repairing garage made as early as possible, may result in a reduction in hire charges maybe not through contribution proceedings against the repairing garage but via highlighting delay in another quarter. It seems for the moment however that breaking the chain of causation in claims for lengthy hire periods remains difficult.

Conclusion

The challenges to credit hire charges are far from dead and buried. The awaited decision of the Appeal Court on refusal by a claimant of a free replacement vehicle by a defendant may well change the practice of the motor insurance industry in its entirety and place another nail in the coffin in credit hire litigation for now. In a further 15 years time no doubt there will be further challenges or issues which arise and are frequently being argued before the courts.

*The Credit Hire Team at Browne Jacobson acted for the defendant in Company Call Centre Technology Ltd v Sheehan.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.