Stevens v Equity: [2015] EWCA Civ 92: The Lowest Reasonable Rate - Vaughan Jacob, Lamb Chambers

25/04/15. So. Farewell then, Darren Bent. No longer grabbing national headlines for his Premiership footballing prowess (he is currently on loan to Championship outfit Derby County), citation of Bent’s name in county courts up and down the county is also soon likely to cease. The case of Pattni v First Leicester Buses Limited; Bent v Highways and Utilities Construction Limited [2011] EWCA Civ 1384 was formerly the leading case on the calculation of the basic hire rate (‘BHR’) in credit hire cases. Stevens v Equity is the new leading case in the field and provides fresh guidance on how the BHR of the total charge incurred under a motor vehicle credit hire agreement is to be ascertained.

For the uninitiated, a claimant who is the innocent victim of a road traffic accident is entitled to recover from the defendant the cost of a replacement vehicle hired on credit terms provided that at all times he has acted reasonably. If a claimant could have afforded to hire a replacement vehicle without credit hire terms and by paying in advance the damages recoverable will be limited to the BHR of the vehicle. (‘BHR’).

The case of Bent provided useful guidance on calculating the BHR. At paragraph 73 of Bent Aikens LJ formulated a five-stage test. The relevant questions were: (i) did the claimant need a replacement vehicle at all; if so (ii) was it reasonable, in all the circumstances, to hire the particular type of car actually hired at the rate agreed; if it was, (iii) was the claimant “impecunious”; if not (iv) has the defendant proved a difference between the credit rate actually paid for the car hired and what, in the same broad geographical area, would have been the BHR for the model of car actually hired and if so what is it; if so, (v) what is the difference between the credit hire rate and the BHR?

It was hoped Bent would bring an end to the long-running credit hire battle between claimant credit hire organisations and defendant insurers. However applying the five-stage test in county courts has been difficult in practical terms. The majority of credit hire claims are for relatively small sums. Parties preparing the case for trial endeavor to do so at a proportionate cost and case preparation often suffers. More often than not a “basic hire rate report” is prepared to assist the court which gives a range of higher and lower BHRs. These reports commonly contain mistakes, such as providing rates for a vehicle different to the claimant’s own, or rates in a different geographical location. There was also inconsistency as to which rate a Judge would choose when presented with such a report. Should the BHR be an average of the rates supplied? Should the Judge have regard to the top, middle or bottom of the range? Further, if the top BHR exceeded the credit hire rate had the defendant failed to prove the BHR is less than the claimed credit rate, and therefore receive no discount at all?

Stevens answers these questions. Kitchin LJ, giving the leading Judgment with which Jackson & Floyd LJ agreed, has clarified 2 important points of principle. Firstly, when calculating the BHR the attitude of the driver who is not at fault is irrelevant to the analysis. For example, it may be that a claimant such as Mr Stevens would never have hired a car at all. Instead the analysis is objective and 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 (paragraph 34 of the Judgment).

Secondly, when presented with a range of rates it is the lowest reasonable rate quoted by a mainstream supplier for hire of such a vehicle to a person such as the claimant that is a reasonable approximation of the BHR (paragraph 35 of the Judgment). If there is no mainstream supplier a local reputable supplier may be used.

The Judgment places Defendant insurers on a much stronger footing. Whereas beforehand there was inconsistency in the method used to obtain the BHR the new approach is to pick the lowest reasonable rate of the range provided. This will inevitably lead to lower offers of settlement being put forward by Defendants. It is also likely to shorten hearing times, as cross-examination of a claimant on the basis of what he or she would have done on a subjective basis is now likely to be irrelevant.

It would be premature to suppose that Stevens will bring some finality to the law surrounding the BHR. Credit hire organisations are restless following what they perceive to be an unfair decision. Although permission to appeal the decision to the Supreme Court was refused by the Court of Appeal it will only be a matter of time before another high profile credit hire reaches the higher courts. Credit hire, as Mr Bent will tell you, is a funny old game….

Vaughan Jacob
Lamb Chambers

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Part 36, Costs Offers and the New Rules - Matthew Hoe, Jaggards & Taylor Rose Law

22/04/15. Is it a square peg for a round hole? Part 36 was conceived primarily as a tool for damages offers. Recent cases have clarified how Part 36 operates in costs negotiations and detailed assessment proceedings, where it has been more widely used since CPR 47.20 (introduced as part of the Jackson reforms on 1 April 2013) adapted Part 36 for the purposes of costs cases.

Plus, CPR 47.20 has now been amended to interlock with the new Part 36. Will that have any further consequences?

Part 36 and provisional assessments

The way that Part 36 interacts with a provisional assessment depends on the view you take of provisional assessments. CPR 47.20 is express about detailed assessment hearings but does not specifically say how things work in the context of provisional assessment. If provisional assessment is viewed as a ‘dry run’, then a Part 36 offer should still be open after the provisional assessment. If provisional assessment is thought of as early disposal, then the offers should be off the table automatically. The notes in The White Book 2015 tend to support the former, describing provisional assessment as a platform for further review. The rules themselves support the latter view. CPR 47.15(10) creates a high threshold of 20% to recover costs of an oral hearing, listed when a challenge to a provisional assessment is filed within a 21 day window. There is little incentive for the victor on provisional assessment to negotiate further. In most cases, the victor will sit pretty on the win. If the victor has beaten his own Part 36 offer made ahead of the provisional assessment, can the loser accept it afterwards?

The decision of His Honour Judge Seys Llewellyn QC in Shepherd v Hughes (County Court at Mold, 28 January 2015, unreported) suggests not. He accepted the argument that the Part 36 offer was no longer open for acceptance.

In that case, the defendant had made a Part 36 costs offer of £16,800 before serving points of dispute. The case proceeded to provisional assessment, and the bill was assessed in a lesser sum. The claimant did not seek an oral hearing to challenge the assessment, but instead tried to accept the defendant’s offer after receiving the result. The claimant’s argument was that a Part 36 offer could be accepted at any time unless withdrawn, and the provisional assessment did not take the offer off the table. The defendant said the claimant was up to mischief and refused to agree that the Part 36 offer was open for acceptance. The claimant applied for a declaration that it had been accepted and that the defendant needed to pay the difference between the assessed sum and the offer.

The defendant argued that in the cases to which it applies, provisional assessment and the possible oral hearing under CPR 47.15 stands in place of a detailed assessment hearing under CPR 47.14. A request for a detailed assessment hearing under CPR 47.14(1) results in a provisional assessment in appropriate cases. The rules must be read in light of that modification of procedure.

At the time, CPR 36.5(9) provided:

Unless the parties agree, a Part 36 offer may not be accepted after the end of the trial but before judgment is handed down.

CPR 47.20(4) provides:

The provisions of Part 36 apply to the costs of detailed assessment proceedings with the following modifications…

(b) ‘trial’ refers to ‘detailed assessment hearing’;

(c) in rule 36.9(5), at the end insert ‘or, where the Part 36 offer is made in respect of the detailed assessment proceedings, after the commencement of the detailed assessment hearing.’;

So once a detailed assessment hearing has started, a Part 36 offer cannot be accepted. Judge Seys Llewellyn accepted that where a provisional assessment stands in place of a detailed assessment hearing, the rules should be read accordingly.

The rules have now changed. CPR 47.20(4)(c) now provides: ‘a detailed assessment hearing is “in progress” from the time when it starts until the bill of costs has been assessed or agreed’. CPR 36.11(3)(d) provides that the court’s permission is required to accept a Part 36 offer where a trial (for which we still read ‘detailed assessment hearing’) is in progress. The rules still do not specifically refer to provisional assessment in this context, but if the same construction is applied it can be seen that a party could now apply to accept an opponent’s Part 36 offer which that opponent had beaten at provisional assessment. The court would not doubt find such an application unattractive, but there may be rare circumstances in which it would succeed.

10% extra

At the time of writing, judgment is awaited from Slade J on appeal in Cashman v Mid Essex Health Services NHS Trust on the principle of whether the 10% additional amount for a claimant beating a Part 36 offer should ordinarily apply in detailed assessment proceedings. The lower court had not allowed it because the claimant’s bill had been reduced by a substantial sum. Even though judgment is reserved, commentators have reported that the judge has made it clear already that if the 10% is allowed, it will belong to the claimant. The solicitors will not be able to use it to make up any shortfall in recovery of costs. That indication appears to be absolutely right based on the wording of the rules.

So far in low value detailed assessments that have been through provisional assessments, I have encountered a handful of cases in which a receiving party has beaten his Part 36 costs offer. In most of those, the court has allowed the 10% extra. An important principle is at stake for paying parties.

If the 10% extra were allowed, then some interesting points arise. I do not know whether these points have been argued in Cashman. The first is that the additional 10% would surely be income for the claimant, and would therefore be taxable. The second is whether it should be set off against payments outstanding to CRU. These could be administrative annoyances.

A tension may develop between solicitor and client. The client may want to make a Part 36 costs offer for the chance of getting a 10% windfall, and may want to make that offer lower than the solicitor would like. That may depend on the client’s arrangements about paying any shortfall. The solicitor may be less keen to make a Part 36 costs offer or less keen to apply for the extra 10% because there is no real benefit to him.

The judgment is awaited with interest.

Resolving fixed costs disputes under Part 36

The last case is not directly about Part 36 costs offers but rather clarifying the costs consequences under Part 36.

CPR 36.10A before April 2015 dealt with acceptance of Part 36 offer for damages in claims to which CPR 45 Section IIIA applies. CPR 36.10A(2) appears to provide for a deemed order for the appropriate fixed costs. Its wording is similar to the wording under the old CPR 36.10(1) which did create a deemed order, albeit on the standard basis, as confirmed by CPR 44.9.

In Aalbregt v AXA, the district judge in the County Court at Birkenhead decided that the appropriate way to resolve a dispute about the appropriate fixed costs in such a case was by application under CPR 36.11(5)(b) rather than seeking a provisional assessment. He concluded that there should be neither a summary or detailed assessment, and Part 36 provided its own framework for resolving a question about the costs that would follow.

As a result the County Court at Birkenhead is no longer accepting requests for provisional assessment in similar cases and is rejecting applications and fees, and giving directions for the way forward. The time to appeal in Aalbregt has been extended though and it may well yet be subject to appeal. It is evident other County Court hearing centres do not take the same approach. CPR 36.14(5)(b) is enacted in the same terms as the prior rules, so there is no change here that will shed any further light.

Cases

The new Part 36 has not been drawn with detailed assessment proceedings particularly in mind and there is no further guidance in the new rule for the handful of issues that have been encountered. The cases are filling in the gaps.

Matthew Hoe
Jaggards & Taylor Rose Law

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A Change to the Law of Causation in Asbestos-Related Lung Cancer Cases: Heneghan (Deceased) v Manchester Dry Docks & Others [2014] EWHC 4190 - Kate Boakes, 12 King's Bench Walk

20/04/15. Lung cancer has several possible causes, including exposure to asbestos dust. Medical science cannot prove whether a particular case of lung cancer was caused by asbestos exposure rather than, say, smoking. Nor can it prove that it was caused by asbestos from a particular source where there have been multiple sources. These factors rule out the strict application of the conventional ‘but for’ test to asbestos-related lung cancer.

Further, it is an indivisible disease. A person either has lung cancer or they do not, and there is no relationship between the dose of asbestos dust and the severity of the disease. Bonnington v Wardlaw [1956] AC 613 and the material contribution test therefore do not apply.

Although it was open to the Supreme Court to do so, it resisted extending the application of Fairchild v Glenhaven Funeral Services [2003] 1 AC 32 beyond mesothelioma. Accordingly, establishing material contribution to risk could not prove causation in a lung cancer case.

So, how did a claimant succeed in a lung cancer case before Heneghan? They did so by a relaxation of the ‘but for’ test, whereby the test was said to be satisfied if defendant had exposed a claimant to asbestos and in so doing more than doubled their risk of contracting lung cancer. For an example of the application of this relaxed test, see Shortell v BICAL Construction Ltd (QBD 16.05.2008, unreported)...

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