Defendants in credit

22 May 2015

Credit hire has long been a heated topic demanding air time in Court.  Such claims arise where a driver has a non-fault accident and obtains a replacement vehicle on credit from a credit hire company, and then seeks to recover those credit hire costs from the at-fault party.

Historically arguments have been raised as to need to hire, period of hire and “impecuniosity” (whether someone lacks the financial means to hire on an ordinary basis).  A driver will only be entitled to recover a reasonable market rate of hire if he does have the financial means to hire on an ordinary basis, and any additional costs associated with credit hire will not be recoverable.

Key decisions in the past few years have seen a welcome swing in favour of Defendants and the recent decision of Karl Stevens v Equity Syndicate Management Ltd [2015] EWCA Civ 93 is no exception.  The case was listed as a test case to address the approach to be adopted in determining the appropriate recoverable rate of hire.

Stevens’ car had been in a collision with a car insured by Equity.  Liability was not in dispute.  Stevens hired a car for 28 days on a credit hire basis at an overall cost of £5,764.80.  At first instance the recorder considered rates quoted by four mainstream car hire companies for comparable vehicles, and took an average of those quoted rates.  Stevens appealed, arguing that the decision to award an average was wrong, however the High Court upheld the recorder’s decision on the grounds that the focus ought to be on what a particular Claimant would have been willing to pay if paying for the hire himself.

Stevens submitted a second appeal on the grounds that the subjective approach to the hire rates issue was contrary to a previous decision of the Court of Appeal.

At the second appeal the Court of Appeal agreed that the exercise should remain an objective one “to determine what the basic hire rate would have been for a reasonable person in the position of the claimant to hire a car of the kind actually hired on credit”.

In a damning blow to credit hire companies, the Court held that, in future, Judges looking to identify the basic hire rate should seek out the lowest reasonable rate charged by a mainstream supplier operating in the Claimant’s locality.  Consequently a Court is now at liberty to award less than an average rate, provided that such a rate is supported by evidence.

The key moving forward will be for Defendants to obtain credible evidence as to rates for hire in the Claimant’s geographical area, of the type of car actually hired by the Claimant, and the applicable rate will automatically be the lowest reasonable rate identified.  The result is a no-nonsense and simple method for calculating basic hire rates which will place Defendants in a better position on rates than ever before.



Bethany Blamire