Is this the “hammer blow” to the credit hire companies the end of the matter?

Published: 09/04/2015 | News

Karl Stevens v Equity Syndicate Management Limited [2015] EWCA Civ 93; is this the “hammer blow” to the credit hire companies the end of the matter?

This significant appellate decision handed down at the end of February impacts upon the main arguments going to the issue of “rate” in credit hire claims which are routinely heard in the county courts. The last time the Court of Appeal was tasked with dealing with a rates issue was in Darren Bent v Highways and Utilities Construction (No. 2) [2011] EWCA Civ 1384 and therefore this area has remained relatively untouched at appellate level for some time. The decision is unequivocally advantageous to Defendants, or more pertinently, their insurers, hence the “hammer blow” description proffered by one counsel in the case.


Karl Stevens’ Audi A4 was involved in a collision with a vehicle driven by the Defendant’s insured on 10 February 2011. Liability was not in issue and the matter proceeded on quantum alone. The Claimant had entered into an agreement with Accident Exchange Limited whereby he hired a replacement vehicle for a period of 28 days, at a daily rate of £140, plus an additional daily excess waiver charge which brought the £1,500 excess to zero, and windscreen damage cover. The total daily charge was £162.50 plus VAT and the overall cost was £5,764.80.

The First Instance Decision

Unusually for the value of the claim the first instance trial was heard by a Recorder. The only rates evidence before the court consisted of a report produced by Accident Exchange setting out rates varying from £33.83 per day (net of VAT) with a £500 excess, to £136.76 per day (net of VAT) with a £1,000 excess. Recorder Tolson QC found that the applicable rate was the average of four made available by National, Europcar, Thrifty and Alamo which varied from £60 to £66 per day (net of VAT) with a zero excess; he awarded a daily rate of £63.16.

The First Appeal

The first appeal was heard by Burnett J (now LJ). It was accepted that the first instance judge had erred in awarding an average of four rates, which is the Scottish approach. Post Bent, of course, this is no longer good practice. At paragraph 29 of his judgment, Burnett J set out his rationale;

“…the search must be for the figure which the claimant was willing to pay [to use Lord Hoffmann’s formulation] on the basis that he had in fact gone into the ordinary car hire market to find a temporary replacement for his vehicle. In doing that

the evidence of a claimant that he would be disinclined to spend more than necessary on a car would be relevant. There might be evidence of how the claimant has sourced hire cars in different contexts. Some might be fortunate to have access to discounted rates through membership of motoring or professional bodies. As was recognised in Burdis a claimant hiring a vehicle to replace one damaged by a tortfeasor would be under a duty to take reasonable steps to mitigate his loss. That does not mean that a claimant would be expected to telephone every last car hire provider in the locality to seek details of various deals that might be available. But the reality today is that almost anybody seeking to hire a vehicle in any particular locality would be likely to investigate the market by doing a simple comparative search on the internet. The full panoply of different hire rates available to the credit hire industry through specialist websites (and regularly produced in credit hire litigation) would not be available to an ordinary driver, but one way or another it is not difficult for anyone wishing to hire a car to discover the rates offered by the major hire companies. Cheapest is not necessarily best and for all sorts of reasons anyone may reasonably choose to hire from a company that is not the cheapest available.”

Accident Exchange sought to argue that at first instance it had presented evidence of basic hire rates equivalent to its own thereby demonstrating that there were no additional irrecoverable benefits associated with the rate it charged. However in a straightforward approach, Burnett J reminded himself of Lord Hoffmann’s judgment in Dimond v Lovell [2002] 1 AC 384 and in particular the focus on the difference between the charges incurred when hiring on credit, and the charges the ordinary Claimant would be prepared to pay had he hired from the local mainstream market.

In this particular instance, Burnett J held that Karl Stevens would have wanted to hire on a zero excess basis, at as cheap a rate as possible (it is perhaps difficult to countenance a scenario where a claimant would want to do otherwise). With that in mind, it followed that the appropriate rate was slightly lower than the average which had in fact been applied, and therefore the appeal failed.

The Second Appeal

This was heard by Jackson LJ, Kitchin LJ and Floyd LJ, with the unanimous judgment delivered by Kitchin LJ. Accident Exchange raised the following points on appeal;

  • The subjective approach adopted by Burnett J was wrong and ran contrary to Pattini v First Leicester Buses Ltd [2011] EWCA Civ 1384, in which an objective approach had been applied.
  • There was too much focus on Lord Hoffman’s reasoning in Dimond, and not enough attention paid to the supervening decision of Bent (and indeed Burdis v Livsey [2002] EWCA Civ 510)
  • In circumstances where some of the basic hire rates put in evidence by the Claimant were higher than the credit hire rate actually incurred, Burnett J had been wrong to conclude that the credit hire rate included irrecoverable additional benefits.

The Court of Appeal held that Burnett J had erred in his decision, on the basis that he had applied a subjective rather than an objective approach. The decision therefore represents a distinct emphasis upon an objective approach, in a move away from the subjective approach which has routinely been adopted in cross examination and submissions. However the appeal was dismissed on the basis that if the correct approach had in fact been adopted, a lower figure would have been awarded.

In a resounding success for the insurance industry it was held that it would be ‘manifestly unjust’ to look at only the highest rate within the range of basic hire rates presented in evidence, and proceed to award the credit hire rate if it was lower than the highest basic hire rate. The court went further; the correct approach was to identify the lowest reasonable rate charged by a mainstream supplier operating in the Claimant’s locality.

Paragraphs 34 to 36 are key: [34] … I do not understand Lord Hoffman to have been saying that it was necessary to consider what Mrs Dimond would herself have been prepared to pay. The attitude of the driver who is not at fault must be irrelevant to the analysis. For example, it may be that, as in the present case, the person would never have hired at all. The analysis it, as Aikens LJ said in Pattni, an objective one and it is to determine what the BHR would have been for a reasonable person in the position of the claimant to hire a car of the kind actually hired on credit.

[35] Here I think one finds the answer to the questions I have posed. The rates quoted by companies for the basic hire of a vehicle of the kind actually hired by the claimant on credit hire terms may vary. No doubt some are offered on very favourable terms. So also those at the top of the range may reflect particular market conditions which allow some companies to charge more than others. But it seems to me reasonable to suppose that the lowest reasonable rate quoted by a mainstream supplier for the hire of such a vehicle to a person such as the claimant is a reasonable approximation to the BHR. This is likely to be a fair market rate for the basic hire of a vehicle of that kind without any of the additional services provided to the claimant under the terms of the credit hire agreement.

[36] It follows that a judge faced with a range of hire rates should 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. If that exercise yields a single rate then that rate is likely to be a reasonable approximation for the BHR. If, on the other hand, it yields a range of rates then a reasonable estimate of the BHR may 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

Taken with the Bent decision, the correct approach is now threefold; first the court must look to rates available within the Claimant’s locality, second it must address the question of what comparable vehicles were actually available to the Claimant, and third it must then identify the lowest reasonable rate for such a vehicle. If the local search revealed one single rate, then that rate was likely to be a reasonable indication of the basic hire rate. If it revealed a variety of rates, the lowest reasonable rate provided by a mainstream supplier or, in the absence of a mainstream supplier, by a local reputable supplier, was likely to be the best indication of the basic hire rate.

More so than ever, therefore, it will be important for Defendants to put in evidence a comprehensive report with the appropriate range of available vehicles and rates, focused as specifically as possible upon the location of and availability to the particular Claimant. It is difficult to see how, where such evidence “beats” the credit hire rate, the Defendant will fail to discharge the burden of proof.

However, this may not be the end of the matter. Accident Exchange applied unsuccessfully for leave to appeal to the Supreme Court on the slightly surprising basis that a claimant who hires on credit ought to be entitled to the additional benefits which are provided within the rate charged. Given that this is ground which has been thoroughly covered in authorities which are now over ten years old and widely considered as trite law, it will be interesting to see whether Accident Exchange renew their application for leave to appeal. There is perhaps more mileage in their alternative argument that according to the Stevens rationale, the situation will arise where recoverable rates are lower than those agreed under the ABI GTA. A renewed application for leave to appeal is surely inevitable. In the meantime, we can perhaps at least take comfort in the simplicity of the approach in Stevens, which at things stand, is good law.