Court of Appeal reduces credit hire damages.

The Issues:

In these conjoined Appeals challenges were made by the Claimants, Accident Exchange Limited (AEL) to, inter alia,

1. the approach to be adopted in credit hire cases where the basic hire rate (BHR) evidence did not allow for a nil excess,
2. the percentage adjustment figure to allow for the differential between 7 day and 28 day rates where the Defendant had relied upon 28 day hire evidence given anticipated repair times, and
3. a finding that certain providers were mainstream suppliers within the meaning of the established test.
4. is Stevens v Equity good law in so far as it provided that the test was one for “the lowest reasonable rate quoted by a mainstream supplier” to be adopted.

Held:

The appeals in both cases by the Claimant, were dismissed with the Court of Appeal upholding the decision in Stevens v Equity namely that it is correct that the basic hire rate should be calculated by reference to the lowest reasonable rate.

The exception to the rule that the lowest basic hire rate (BHR) is recoverable where a claimant is impecunious, was a narrow one - a credit hire company cannot recover the full rate just because it may not be possible to obtain a basic hire rate with a nil excess.

Instead, reasonable adjustments should be made to the BHR to account for any perceived deficiencies: in Clayton an upwards adjustment of 15% to account for the rates being for 28 days instead of seven, and a 10% upwards adjustment to account for the BHR not including a nil excess, were both upheld as correct. However, even if it is reasonable for the claimant to hire with a nil excess,  a defendant will succeed in demonstrating a difference between the “credit rate” and the BHR solely by comparing the daily rates of hire between the two, irrespective of the excess position.

Comment:

So good news for the insurance companies and not so for the credit hire organisations.

The judgment does provide clarification as to the assessment of the ‘spot’ or ‘basic hire’ rates and Defendants and insurers will now expect the number of contentious credit hire claims to significantly reduce, with the earlier decision in Stevens v Equity being reinforced.

You can see the full Judgment here.

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