One of the most important issues in any credit hire case will be rate, and of course the potential difference between the rate claimed and the rate awarded by the Court.

The question for the court will usually be whether the full credit hire rates are awarded, or whether basic hire rates (“BHR”) should be awarded? If basic hire rates are awarded, then the question is: how are those rates arrived at?

This article does not deal with how rates are dealt with in taxi cases (see my article on “Hussain v Eui Ltd”). Nor does it address how a company's loss of use is dealt with (see my article on “Company Loss of Use & Surplus of Vehicles”). I am simply considering hire rates in the case of a private motorist.

Issues to consider:

(1) in what circumstances will the court award credit hire rates?

(2) in what circumstances will a court award a basic hire rate (“BHR”)?

(3) if BHR is awarded, then how will the court determine the rates?

(4) conclusion.

In what circumstances will the court award credit hire rates?

There appear to be two circumstances in which a court will award credit hire rates.

The first one is the most obvious, namely when a court finds on balance that a claimant is impecunious - Lagden v O’Connor [2004] 1 AC 1067. This means in simple terms that a claimant cannot afford to pay upfront for the hire charges. In other words, s/he has no choice but to hire on credit. Any detailed analysis of impecuniosity is outside the scope of this article, though I have dealt with this topic in my article “Impecuniosity & Credit Hire”. This is what I would call a “mainstream exception”.

The second situation is where no BHR evidence is provided to the court. The simple explanation for this is that as there is no evidence of the BHR, this leaves the court with little choice but to award the credit hire rates. I recall I was once doing a case where the credit hire daily rates were £350 plus VAT per day and the claim amounted to a few hundred thousand pounds. The Claimant was “debarred” from asserting impecuniosity as evidence of income had not been provided. Even though the judge reduced the hire period of about two years to two months as the claimant could not show s/he was impecunious (impecuniosity impacts upon period as well as hire rates - Zurich Insurance Plc v Sameer Umerji ([2014] EWCA Civ 357), the court felt compelled to allow the full daily rate. This crucially meant that the Claimant beat the Defendant Part 36 offer - only by a few hundred pounds! No BHR was produced, so the only evidence of rates was the credit hire rates disclosed in the agreements.

I recall another case in which the Claimant could not prove impecuniosity, yet the Defendant had not provided any BHR. The court decided it had no choice but to award the £18,000 hire charges claimed. I suspect that if BHR had been produced, the hire claim would have been reduced to just a few thousand pounds. I would call this an “exception by default” - what is a court expected to do when there is no BHR evidence?

It is arguable that when a defendant does not provide evidence of any BHR, then tactically it is unwise for the claimant to produce any.

There is also sound reasoning provided by the higher courts as to why full credit hire rates may be awarded when no basic hire rates are produced. As was stated by the Court of Appeal in Pattni v First Leicester Buses Ltd ([2011] EWCA Civ 1384, paragraph 30(5)) “...it is for a defendant to demonstrate, by evidence, that there is a difference between the credit hire charge agreed between the claimant and the credit hire company and the BHR” - underline is my emphasis only. So, the defendant needs evidence to show that the credit hire rate is higher than BHR rates. In the absence of any “evidence”, the defendant cannot prove that the credit hire rate is any higher than the basic hire rate.

In what circumstances will a court award a basic hire rate?

Where a claimant cannot prove that s/he is impecunious, then the court will look to any basic hire rates that are provided. The normal position is that a claimant may only be awarded basic hire rates unless s/he can prove that s/he is impecunious.

From my experience there are two scenarios I regularly see at court: firstly those cases where a claimant has failed to comply with a court order to provide financial documents and is therefore debarred from arguing impecuniosity pursuant to that court order. The second situation is where the claimant, notwithstanding the full financial documents being disclosed, is not able to prove at court that s/he is impecunious.

In Dimond v Lovell [1 A.C. 384, 392, HL] it was stated that it was not unreasonable to go to a credit hire company. However, it did not mean that Mrs Dimond could recover the full credit hire amount as the credit hire agreement provided additional services such as not having to pay upfront for hire and being relieved of the “trouble” and “anxiety” of pursuing the claim. How does one estimate the value of these additional benefits that Mrs. Dimond obtains? In Dimond v Lovell it was stated that the best way to do this “seems to me that prima facie their value is represented by the difference between what she was willing to pay 1st Automotive and what she would have been willing to pay an ordinary car hire company for the use of a car.” - p 402. In other words, the difference between credit hire rates and BHR. Though the exercise is purely an objective one with “lowest reasonable rate quoted by a mainstream supplier” for a “...reasonable person in the position of the claimant...” (Stevens v Equity Syndicate Management Limited [2015] EWCA Civ 93 paragraph 39).

If the basic hire rates are to be awarded, then how will the court determine the rates?

In Stevens v Equity Syndicate Management Limited [2015] EWCA Civ 93 paragraph 36, it was stated that “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.”

So, the court is looking at the lowest rate provided by a mainstream supplier if there is no such supplier, then rates from a local reputable supplier. This is from the claimants “geographical area”.

In Bent v (1) Highways & Utilities Construction Ltd (2) Allianz Insurance Plc [2010] EWCA Civ 292 stated (paragraph 9 and 10):

“Clearly evidence of the spot rate a year or so later than the relevant date is likely to throw considerable light on what the spot rate would have been at the time. I would add further that one must not be hypnotised by any supposed need to find an exact spot rate for an almost exactly comparable car. Normally, the replacement need be no more than in the same broad range of quality and nature as the damaged car.”

From my experience, the courts are not really interested in a "counsel of perfection” on the basic hire rates.

This is borne out by the reported cases - Stevens v Equity Syndicate refers to a “reasonable approximation” or “reasonable estimate” and a “degree of imprecision” (para 34) in ascertaining those rates. Those words tend to show that a court is not interested in absolute precision on the BHR.

It should be noted that the court is looking at the best available evidence. In Bent [2010], the BHR evidence was for a year later and therefore this was the best evidence that would have been available to the trial judge. In those circumstances, the Court of Appeal decided it was appropriate to order a retrial in which it would be open to both sides to adduce what evidence they chose about spot rates and equivalent rates. This case then went for a re-trial and was appealed again to the Court of Appeal in 2011 ([2011] EWCA Civ 1384, conjoined with the case of Vasant Pattni v First Leicester Buses Limited) when the Court of Appeal disapproved of the fact that the lower court had used 2009 rates in that re-trial, when 2007 rates were available – para 73. So, if there are only rates for a year or two later, a court may be inclined to use that. However, if there are rates for the relevant year, then a court is far more likely to use those rates.

In Bunting v Zurich [2020] EWHC 1807 (QB) the BHR evidence was challenged on the following basis: (1) the BHR rate was subject to a 30 day maximum hire limit; (2) for the BHR there was no evidence as to deposits payable; (3) for the BHR there was no specific evidence of availability; (4) the BHR experts evidence should not have been accepted as it was in breach of the directions made.

In Bunting v Zurich Pepperall J stated that “Working with comparables and making adjustments is the daily diet of judges...” - paragraph 15. The judge also criticised “nit picking” in the case (paragraph 19). The appeal was rejected.

The reader also needs to take the following into account: if a county court accepts BHR evidence, then often the higher appeal court is merely deciding if the decision is “perverse”, which is not the same as saying that it agrees with the lower court's decision. Therefore, a decision to appeal on rates needs to be considered extremely carefully.

The point that must be understood is that the court is looking at the best evidence it has, not “perfect” evidence.

Whether the court allows a one-day hire rate, seven days hire rate or 28 days hire rate really depends on the circumstances of the case. A longer anticipated repair may justify a 7 day or 28-day BHR. This is a fact sensitive exercise. Again, the court exercises considerable flexibility here. In Clayton v EUI Ltd (which was heard with McBride) the only evidence of basic hire rates related to 28-day hire, even though the claimant argued that a seven-day rate was the more appropriate. The district judge based his assessment on a 28-day basic hire rate increased by 15% for a seven-day rate – this seems rather arbitrary to me. However, the Court of Appeal stated this was justified (para 102 to 107).

From my experience, for BHR to be rejected by a court, there really needs to be a “material flaw” in the rates. A good example would be where hire rates are produced which do not in a young driver's case show BHR for drivers under 25 years of age. In Pattni v First Leicester Buses Ltd ([2011], the Court of Appeal did not entertain BHR from a certain expert stating “However, all the quotations stipulated a minimum age for the driver, the lowest of which was 25. The minimum age for the £375 a day quotation was 30. Mr. Bent was, of course, 23 at the time.” - paragraph 79. Another good example would be when in a taxi driver’s case, the BHR shows only non-plated vehicles. The latter I have seen happen in many cases.

The courts have similarly approached the issue of “nil excess” and not sought to “nit-pick” here as well. Credit hire companies can offer a “nil excess” on the payment of a daily charge. Sometimes the BHR does not have a provision to reduce the excess to nil or the excess provision is not comparable to the excess on credit hire. In those circumstances will a court award the credit hire because the BHR are not satisfactory? The answer to that is a firm no.

In McBride v UK Insurance Ltd 2017] EWCA Civ 144, the Court of Appeal took the view that where there was a credit hire nil excess but a nil excess was not available for BHR: “...the correct approach was to treat the credit hire nil excess separately from the comparison of the credit hire rate with an insurance excess, and the basic hire rate with a similar excess. Almost invariably, it would be reasonable for the claimant to seek a nil excess.” - paragraph 76. The Court of Appeal stated that “...on that hypothesis, the only question for the Court will be how much should be recoverable as the cost of purchasing a nil excess.” - paragraph 76.

In other words, one deals with the excess separately from the hire. The Court of Appeal referred to options of how the court could deal with such a scenario. They referred to “standalone” products “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.” - paragraph 105. The Court of Appeal stated that “It may well be that in a particular case, the Court may decide that it was not reasonable to purchase the nil excess offered by the credit hire company at a much higher rate (in the present case AEL’s cost was £10 a day plus VAT against the £3.99 a day (inclusive of VAT) offered by Insurance4carhire.com).” - para 77. In other words, if a comparable stand-alone product is cheaper than for the credit hire excess, then the stand-alone product may be preferable.

In McBride, the District Judge allowed a further 10% to reflect the cost of a nil excess. The Court of Appeal contemplated that the District Judge could instead have added on the £17.50 excess from the credit hire company rates to the BHR but noted the 10% additional on hire charges amounted to £17 per day and did not overturn the judge's decision. In Clayton v EUI Ltd (which was heard with McBride) two of the three hire companies would not provide a nil excess. There was a third company which provided a nil excess - without going into the detail of that, it could be considered that there was a material flaw in the terms and conditions. Whilst the District Judge rejected the evidence of the stand-alone product from Questor because he had not heard of it, the Court of Appeal disapproved of this approach and endorsed using standalone products for excess (para 105).

So, where the BHR do not provide for a nil excess, or the terms and conditions relating to a the BHR excess are not satisfactory (in my view there would have to be a material flaw for the latter) the court can:

(1) rely upon a standalone product for the nil excess or

(2) rely upon the CHO’s own daily charge for the nil excess to be added on to the BHR.

Conclusions

(1) the general position is that a claimant can recover BHR, not credit hire;

(2) where a claimant can prove s/he is impecunious, the court is likely to award the credit hire rates – what I would term to be the “mainstream exception”;

(3) where there is no evidence of BHR, then even if the claimant is not impecunious then s/he is likely to get the credit hire rates by “default” - what I would term as a “exception by default”. There is also some sound reasoning provided by the courts, namely that the defendant has to prove that there is a difference between the credit hire rates and the BHR – in the absence of BHR evidence, the difference cannot be proved;

(4) if a claimant cannot prove impecuniosity or does not assert it, then if available the court will look to the BHR;

(5) the court will look at the lowest rate provided by a mainstream supplier or a reputable local supplier in the Claimants geographical area;

(6) a court will look to do its best to arrive at a BHR. The court will not “nit-pick” in arriving at BHR;

(7) Whether the court allows a one-day hire rate, seven day hire rate or 28 days hire rate really depends on the circumstances of the case. A longer anticipated repair may justify a 7 day or 28-day BHR;

(8) in my view there really needs to be material flaw in the BHR for a court to dismiss them, for example having BHR for drivers only over the age of 25 years, when the driver is a young driver;

(9) where the BHR do not have nil excess facility or there is a material flaw in them, then the court will not allow the full credit hire rate on that basis. Instead, it will treat the excess issue separately to the comparison of the credit hire rates and the basic hire rates;

(10) the court can in circumstances outlined in (9) add on to the BHR the credit hire companies' daily rate for nil excess or if one is available a stand-alone product daily rate for the excess – the one which the court selects will depend on the circumstances of the case.

It is hoped that this article provides clarification on this important topic.

Please note this article does not constitute legal advice for any specific case or cases. No reliance should be placed upon this article.

© Mohammed Azeem Ali 2024                                                                       August 2024