PI Brief Update

A Logical Approach to BHR - Jamie Whaling, Browne Jacobson LLP

03/03/15. The Court of Appeal has handed down a significant judgment in a test case on basic hire rate (BHR) evidence. The decision in Stevens v Equity SyndicateManagement Limited, which is set to clarify the view adopted by lower courts, is likely to be seen as a decisive, if not quite fatal, blow to credit hire organisations.

The judgment, given by Kitchin LJ, and approved by Floyd and Jackson LLJ, states that a pecunious claimant can no longer expect to recover more than the lowest reasonable rate charged by one of the mainstream hire companies (such as Enterprise, Europcar, Thrifty etc.) who operate in the claimant’s geographical locality. If these organisations do not have depots in the locality then the rate available from a reputable car hirer will be substituted.

The decision (which Accident Exchange unsurprisingly sought to appeal, an appeal which was refused although a petition to the Supreme Court is being drafted), means that the claimant is now likely to recover a lower than even the average of local basic hire rates.

The facts of the case will appear familiar to those who have credit hire experience. The claimant had a non-fault accident and hired from Accident Exchange. The hire invoice, including waivers was £5,764.80 (£198.60 a day including VAT). At the hearing the only available BHR evidence was the voluminous report provided by APU (a subsidiary company of Accident Exchange). Included within the report was evidence that a replacement vehicle was available from a number of high street suppliers with a zero excess ranging from £60 - £66 a day excluding VAT.

The claimant, in evidence, stated that he would not have hired had it been up to him but thought that his obligations under his insurance meant he had to hire a replacement. It was the claimant’s evidence that he would have utilised a courtesy vehicle from a repairing garage if the choice had been his.

The Judge at first instance decided that the claimant was not impecunious and then, and somewhat surprisingly, encouraged by counsel for the defendant decided to find the rate of hire at the average of the high street suppliers. The claimant appealed the decision. Both parties agreed that the decision to use an average hire rate was incorrect.

One of the surprising arguments put forward by Accident Exchange, in the initial appeal, was that a basic hire vehicle which included a high non-waivable excess comparable rate should be included when assessing the hire rates; a position which from the writer’s experience is not the usual approach taken by Accident. AE’s stance has been only vehicles with a nil-excess should be comparable to credit hire vehicles. This was rejected and the court focussed on Lord Hoffman’s approach in Dimond v Lovell that the benefits included within the credit hire charges need to be stripped out and the actual rate of hire is only recoverable.

At the initial appeal Burnett J (now LJ) suggested that the recoverable figure should be the figure the claimant would be prepared to pay to hire a replacement vehicle on the open market. This appears to change the approach to hire charges from an objective to a subjective approach. Although Burnett J confirmed that the deputy district judge had been wrong in his approach, using an average of the basic hire rates available, he actually lowered the amount he believed the claimant would have wanted to pay for the replacement hire.

Accident Exchange appealed this decision on the grounds that a subjective approach went against the settled case law, especially the decision of the Court of Appeal in Pattni v First Leicester Buses Ltd which stated that the use of basic hire rates was an objective exercise.

Accident Exchange continued with their arguments that where basic hire rates are shown at a similar rate to those charged by the credit hire organisation then the credit hire rates should be awarded. Kitchin LJ gave a fully reasoned judgment reviewing the relevant case law and providing a full analysis of the stripping out the additional benefits; he dismissed AE’s argument as ‘manifestly unjust’ as the credit hire organisation was in a position to disclose the information on their charging structures, but as most claims fell into the fast track they were not required to do so.

Kitchin LJ confirmed that at the initial appeal Burnett J had erred when he suggested that the approach to take was that which a claimant would be willing to take, however he approved the overall decision that Burnett came to. He reaffirmed the correct approach as being that of an objective approach to stripping out the additional benefits conferred on a pecunious claimant when entering into a credit hire agreement. He stated that ‘The search must rather be for the lowest reasonable rate quoted by a mainstream supplier for the basic hire of a vehicle of the kind in issue to a reasonable person in the position of the claimant. This, it seems to me, is a proportionate way to arrive at a reasonable approximation to the BHR.’

In the last few years we have begun to see, perhaps more commercially reasonable decisions taken by the Court of Appeal in credit hire litigation. The decisions in Singh v Yaqubi which dealt with need; Opoku v Tintas on the period of hire; Umeji v Zurich dealing with the issue of impecuniosity; and now Stevens v Equity on the rate of hire; suggest that the courts are taking a more robust approach to this area and the days where the court saw this as the big bad insurance company against the innocent individual claimant are long gone.

Basic hire rate evidence and strong directions are likely to be more and more crucial when dealing with this decision although there is still the potential for further satellite litigation in regards to the claimant’s geographical area. Is this a 10 mile radius of the claimant’s address? What about claimant’s who live in more rural areas, 20 miles? 50 miles? At this point we don’t know and what is the lowest reasonable rate? Will this mean that an exact like for like vehicle is required as the vehicle hired or the claimant’s own vehicle? Does the vehicle need to be supplied with a zero excess or will an excess similar to the claimant’s own insurance excess be reasonable?

At this time we cannot be sure how the lower courts will interpret the minutiae of this decision but on the face of it defendants are in a potentially stronger position in regards to credit hire than they have been before.

Jamie Whaling
Defendant Personal Injury Solicitor at Browne Jacobson LLP

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