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Janine Wolstenholme considers the Court of Appeal's latest decision on credit hire

Date:

28th November 2011

Team:

Civil.

Credit Hire Battleground: Recovering credit hire charges and the appropriate rate

On Thursday, in a welcome judgment for insurers, the Court of Appeal made it clear in two cojoined cases that when seeking to recover credit hire charges, claimants who are not impecunious are required to shop around in order to discharge their duty to take reasonable steps to mitigate their losses.  In discharging this duty claimants are required to properly consider the most appropriate hire period, by reference to the time it will take to repair their vehicle, so as to ensure advantage is taken of available discounts.  The court also confirmed, with regard to other ancillary charges, such as interest, that only losses actually incurred by the claimant are recoverable.

In both cases it was accepted that:

(i) the Claimants were the innocent victims of a tort committed by the Defendant driver;
(ii) neither Claimant was impecunious;
(iii) the vehicles hired were reasonably equivalent replacements.

In the first of the two appeals, Pattni v. First Leicester Buses Ltd (“FLB”), P hired an Audi R8 as a replacement for his Porsche 911 with credit terms, and pursuant to which he was contractually obliged to pay interest on the hire charges from the date the hire ceased until such time that the claim against FLB was concluded.  At first instance the judge determined that hire charges were recoverable at spot hire rates but that interest on the hire (whether claimed as a head of loss or statutory or contractual interest) was not recoverable.

In the second appeal, Darren Bent v. Highways and Utilities Construction Limited and Allianz Insurance, B hired an Aston Martin DB9 with credit terms as a replacement for his Mercedes Benz CLS 63 AMG Coupe.  The issue was the calculation of the spot hire rate.

The key elements of the judgment can be summarised as follows:

1) The term “Spot Hire Rate” is inappropriate outside of the true commercial context and accordingly, in the future the term “Basic Hire Rate (“BHR”) ought to be used, as it more accurately describes the basic measure of damages recoverable in cases where the claimant could have afforded to replace their vehicle without credit.
2) In replacing a prestige vehicle, claimants are entitled to go to small scale prestige hirer;
3) In calculating the appropriate rate it is necessary to determine, objectively, the BHR for the car that was actually hired on credit terms;
4) Whether an individual is impecunious is fact specific in each case and the availability of credit facilities will not be determinative of what the claimant can actually afford;
5) In the absence of any evidence of actual loss, any element of the credit hire charge that can be shown to represent the cost of providing credit facilities to the hirer (including interest) is an additional benefit and therefore not recoverable as part of a claimant’s damages for the loss of the use of his car.

Janine Wolstenholme has a particular interest in claims involving credit hire