Credit Hire – Basic Hire Rates17 March 2017
Basic Hire Rates – the full Monty
McBride v UK Insurance Ltd and Clayton v EUI Ltd  EWCA Civ 144
Credit hire companies received a significant blow this week when the Court of Appeal handed down its judgement in the two appeals of McBride v UK Insurance Ltd and Clayton v EUI Ltd  EWCA Civ 144.
The decision of the Court:
- The decision in Karl Stevens v Equity Syndicate Management  EWCA Civ 93 was correct and consistent with the Court’s previous decision in Pattni/Bent (no.2)  EWCA Civ 1384 and Burdis v Livsey  EWCA Civ 510; absent of a claimant being impecunious, the evidence of the lowest basic hire rates will apply.
- Where there is evidence before the Court of basic hire rates for an appropriate vehicle then the Court should not allow a credit hire company to recover its full charges.
- Any nil excess point must be considered separately and should not interfere with the exercise of stripping out the irrecoverable elements and the principle laid down by Dimond v Lovell  1 AC 384.
- Courts should readily admit evidence of off the shelf excess elimination insurance obtained from the internet as the norm. Such evidence should be accepted as evidence to demonstrate the reasonable costs of obtaining a nil excess, provided it is for a comparable car and for the same period actually hired.
- If there is insufficient evidence of suitable excess elimination insurance then the Court is perfectly entitled to make adjustments to the basic hire rates to reflect that position or, if satisfied the credit hire company’s charge for this was reasonable then it may award that reasonable charge and add this to the lowest basic hire rate
- Where there is a deficiency in the basic hire rates due to period, such as only 28 day rates are in evidence and the Court finds a 7 day rate should apply, then in taking a realistic approach the Court may take judicial notice that rates are higher for 7 days and make adjustments to the basic hire rates evidence to reflect that position; Courts should not be confined to a rigorous and exacting approach.
Key Points of Law
Lord Justice Flaux (with whom Sir Timothy Lloyd and Sir Stanley Burton agreed), made it absolutely clear that where there was evidence of a lower basic hire rate for the appropriate vehicle, and the Claimant was not impecunious, then the Court’s primary exercise was to identify and strip out the irrecoverable elements of the credit hire and any point abut nil excesses must not interfere with that exercise, but should be looked at separately.
Accident Exchange Ltd, whom stood behind the Claimants for the purpose of the appeals, argued that its nil excess formed part for overall rate and where the Defendant’s basic hire rate did not provide a nil or modest excess, then the Court should find the Defendant has not sufficiently demonstrated there was an appropriate lower basic hire rate.
However, Flaux LJ firmly dispelled that view stating it sought to erode the principle laid down in Dimond v Lovell  1 AC 384 and would create a further exception to the established principle that only the impecunious claimant may recover the full credit hire rate. He went on to state the Court should ensure the irrecoverable elements of the credit hire are stripped out and it should not allow the excess point to be used “as a smokescreen to enable credit hire companies to recover their charge in full”. What the Court found striking was the fact that Accident Exchange was also the hire company in Stevens and in that appeal it argued the complete opposite and asked for its credit hire rate to be compared to a basic rate from Europcar with a £500 excess and that was on the basis a separate excess elimination insurance could be obtained.
The thrust of the primary challenge against lowest basic hire rates was on the premise that the ratio in Stevens was inconsistent with the previous decisions of the Court of Appeal in Pattni/Bent (no.2) and Burdis v Livsey. However, following a detailed analysis of the authorities Flaux LJ was satisfied that the Court’s decision in Stevens was not only binding on the Court and consistent with its previous decisions, but it was equally consistent with the majority of their Lordships in Dimond v Lovell  1 AC 384. Furthermore, Flaux LJ felt it belied common sense that a reasonable person wishing to hire and faced with a range of rates from reputable car hire companies would normally do anything other than to choose the lowest rate.
Whilst the appeal against the Stevens being inconsistent with previous authorities was dismissed, the Court allowed permission to appeal and automatically dismissed it. This was done on the invitation of Benjamin Williams QC for McBride to allow Accident Exchange, if it could, to seek persuade the Supreme Court to grant permission to appeal on this ground. And so the saga may not be over, just yet!
Implications for clients
This further judgment should be welcomed news for those who defend credit hire claims. Not only does this decision finally provide certainty in this area of law, but it should resolve the divergence of judicial opinion as to what evidence is permissible and how to deal with any deficiencies in that evidence. Therefore, going forward, absent of an impecunious claimant then any properly challenged credit hire with basic hire rates evidence for the appropriate vehicle should result in the lowest basic hire rates being awarded and Courts should no longer award the full credit hire rate due to some rigorous and exacting approach.
As a consequence of this judgment it is possible some credit hire companies will look to improve their position by simply increasing and perhaps staging their charges for their excess elimination, i.e. charge (a) will reduce to the excess of say £1,000 to £250 whilst an additional charge (b) will reduce this further to nil. However, the Court of Appeal has made clear that off the shelf insurance products from the internet must now be accepted as the reasonable costs of these products and so this will hopefully go some way to defeat any such change to a credit hire company’s pricing strategy.
Danny Fulton, Head of Credit Hire Strategy
T: 0344 245 5365
Discount Rate Announcement27 February 2017
Discount Rate Reduction – Plus 2.5% to Minus 0.75%
The Lord Chancellor has today (27th February, 2017) announced to the London Stock Exchange that the discount rate last set in 2001 is now being reduced from +2.5% to -0.75%. This downwards movement of a huge 3.25% will become effective on 20 March 2017.
The Lord Chancellor’s announcement states that, having completed the Statutory Consultation, the reasons for the significant reduction are:
- Discount rates should be based on a 3 year average of real returns on Index Linked Gilts
- It is recognised that there are significant implications across the Public and Private Sector. The Government has committed to ensuring that the NHS Litigation Authority has appropriate funding to cover the increased clinical negligence costs (no details are provided but they must run into billions)
- The Government will review the framework under which the discount rate is set and forward a consultation before Easter which will consider:
- Whether the rate in future should be set by an independent body.
- Whether more frequent reviews would improve predictability and certainty for all parties.
- Very importantly whether the methodology which assumes that Claimants only invest in Index Linked Gilts is appropriate for the future i.e. are all Claimants risk averse investors or invest in other investment vehicles where returns are far greater.
- Urgent meetings with the Insurance Industry representatives are being arranged by the Lord Chancellor.
The practical effect is that rather than awards of damages being discounted for accelerated receipt they will now be uplifted for accelerated receipt.
This obviously has a huge impact for the insurance and risk management industry given that returns on premium income also remain so low.
Some future loss claims could double in value and an uncomplicated worked example without other reduction factors is:
- A 40 year old man losing £20k PA until retirement age 65 years would previously have a future loss of £362k (unadjusted working life multiplier of 18.09).
- The multiplier is now 26.5 and the losses are £530k i.e. a 46% increase.
PPOs (Periodical Payment Orders) could become more attractive again now to insurers.
This announcement by the Lord Chancellor will make a very significant difference indeed in respect of future losses for Large Loss claims. Although a Judicial Review may be considered there are urgent strategies that need to be deployed including:
- A review of all reserves where future losses are being claimed to ensure that they are increased where appropriate.
- Where a Claimant has previously made a CPR Part 36 offer to settle then these should be urgently reviewed and accepted in appropriate cases.
- Where a Defendant CPR part 36 offer has previously been made then such offers should be reassessed and increased as appropriate.
- Review strategies for upcoming without prejudice JSMs (Joint Settlement Meetings), mediations or Trials.
- Review and amend Counter Schedule of Loss.
- Consider the benefit of PPOs.
- At present the Ogden Tables do not have a -0.75% column but we have a spreadsheet with appropriate multipliers for this discount rate if required.
- Consider delaying any large lump sum settlement until after the Lord Chancellor has determined the further consultation regarding how Claimants actually invest damages awards?
NB: The Scottish Government are also looking at Discount Rate and when they make an announcement a further Legal Update will be provided.
Anthony Baker, Partner
DDI: 0344 245 4202
M: 07811 545 32
R “HSE” v University of Northumbria at Newcastle26 January 2017
R “HSE” v University of Northumbria at Newcastle
(Newcastle Crown Court: HHJ Bindloss)
25 January 2017
Peter James, Partner at Plexus Law represented Northumbria University in a Health and Safety prosecution after two students overdosed on caffeine during experiment.
The University was charged with and pleaded guilty to an offence pursuant to Section 3(1) of the 1974 Health and Safety at Work etc. Act.
A practical exercise was being undertaken to assess the effects of caffeine on the body during strenuous exercise. This practical had taken place once a year since 2009 without incident.
Two students volunteered to take the caffeine in a soluble form and undertake the exercise. The students had received a lecture, which identified the risk of caffeine overdose prior to the exercise
When they attended the lab, a laboratory practical guide was provided which identified the amount of caffeine to be ingested should equal 4mg per kilo of body mass. To assist the second year students, 2 technicians attended the practical session, one educated to degree level.
Instead of calculating 4mgs x 76.6 (one of the students weight) giving 306.4mgs (0.306 of a gram), the calculation was undertaken as .4g x 76.6 giving 30.68gs and weighed out on the scales in grams. A similar mathematical error was made in calculating the amount of caffeine to be ingested by the other student. While the risk had been identified and all previous calculations undertaken correctly, the practical guide did not spell out the exact calculation required, the maximum dose or any inbuilt checks. There was therefore a risk of miscalculation.
Counsel for the HSE submitted that a £3.6 million starting point based on the University being a “very large “organisation and with a “high” culpability, “level A” harm and “high” category 1 “likelihood” of harm.
Following submissions from Peter Smith of Deans Court Chambers instructed on behalf of the University, the learned Judge found the University could not be classed as a very large organisation although its income significantly exceeded £50 Million. Further, that although finding “high” culpability and level A harm, accepted that the “likelihood” of the harm occurring was “medium”.
In the result, the learned Judge arrived at a starting point of £900,000 (range £550,000 to 2,900,000) reducing it to £600,000 given the University’s charitable status, public benefit and mitigation. A further reduction was made for a guilty plea and a £400,000 fine was imposed.
The HSE’s own expert Dr Poole no doubt influenced the issue on the “likelihood” of harm expressing part of his opinion thus:
“If the students and supervising technicians have a GCSE qualification in mathematics, they should be able to do this calculation as it required no more than simple multiplication. I am surprised that neither the students nor the technicians could do this calculation without the need for additional training”.
The “likelihood” of harm was argued as low on the University’s behalf.
Stewart v Kelly (2016)31 October 2016
QBD (Blake J) 31/10/2016
Civil Evidence: Personal Injury – Damages
Case Management Directions: Delay: Measure of damages: Pre-trial evidence: Road traffic accidents: Video evidence
A claimant in a personal injury case had had no principled reason to object to the admission of video surveillance evidence served by the defendant as part of a dispute over damages. The court permitted the evidence to be adduced, and the loss of the trial date caused by the claimant’s objection would not count against the defendant.
The defendant in a personal injury claim following a road traffic accident applied for permission to adduce further surveillance evidence of the claimant.
The defendant had admitted liability for the accident, but damages were disputed. The claimant alleged that he had suffered neck and back pain. Between 2013 and 2015 the defendant had commissioned video surveillance of the claimant in order to gauge the extent of his injuries. A trial date had been fixed for November 2016. In accordance with a master’s directions, the claimant served a final witness statement in May 2016, which set out further particulars about his pain and his inability to do housework, bathe his children, and wash his car. The defendant then commissioned further surveillance. In August 2016 it served seven hours of unedited surveillance footage on the claimant, along with witness statements from the takers of the footage, and invited him to agree to its introduction and assessment by an expert. The claimant declined and objected to the evidence being adduced. The defendant submitted the instant application. It was agreed that the footage was authentic, had not been unlawfully obtained, and was on its face relevant to the issues at trial.
The claimant submitted that there had been principled reasons for objecting to the evidence, namely that the application should have been made sooner, that it had not been prefigured in the case management directions, that it had not been necessary or appropriate for the defendant to wait until the claimant’s final witness statement to respond with further evidence, and that serving the evidence in August had been too late to save the trial date given the lines of enquiry required to respond to it.
HELD: The central issue was whether the claimant had had a good reason in principle to object to the admission of the surveillance evidence when it was served in August. The applicable principles regarding Plexus Law is a trading name of Plexus Law Limited, a limited company incorporated in England & Wales. Reg No: 09641584. Registered office: Joseph’s Well, Hanover Walk, Leeds, LS3 1AB. Plexus Law Limited is authorised and regulated by the SRA (SRA No. 626521). Lists of Directors and non-directors who are designated ‘partner’ or ‘director’ are available at the registered office. Plexus Law Limited is a Multi-national practice regulated by The Law Society of Scotland (LS No.51119) whose professional rules can be accessed at www.lawscot.org.uk/rules-and-guidance.) ambush and the entitlement to wait until a claimant had “nailed his colours to the mast” were those set out in Hayden v Maidstone and Tunbridge Wells NHS Trust  EWHC 1121 (QB),  3 Costs L.R. 547, Hayden applied. The issue was when the claimant had “nailed his colours to the mast”: the court agreed with the defendant that it had been in the final witness statement, which set out with particularity his social functioning, including his ability to do tasks with his house, his car and his children. A significant factor to consider was when it had been reasonable for the defendant to commission the further evidence: it had to allow sufficient time for the claimant to be able to respond. Applying the Hayden principles, the court was satisfied that: the claimant had “nailed his colours to the mast” in the final witness statement; the defendant had had a duty to act quickly in deciding to commission further surveillance evidence; the addition of the July surveillance material had not been a tactic aimed at disguising previous delay, as it had been reasonable to update the older video evidence; the delay between receiving the evidence in July and serving it on the claimant in August had had no material impact on the claimant’s capacity to respond within the three-month pre-trial period. There had been no ambush or undue delay. A three-month period for responding to the evidence and having it evaluated by a medical expert was not unduly restrictive or inappropriate in the circumstances. There had been no good objection in principle to the admissibility of the evidence and the claimant should have worked promptly to agree new directions to enable the trial date to be kept. The mechanics of amending the costs budget were consequential to the issue of principle, and not an issue of principle in itself. There had been no culpable delay on the defendant’s part in pursuing the instant application. The trial date could no longer be met, but that was the result of the claimant having objected without a principled reason. The delay in the timetable would not count against the defendant.
Lorien Helm, Partner
For the claimant: Colin Mendoza
For the defendant: James Pretsell
Capita (Banstead 2011) Ltd and another v RFIB Group Ltd  EWCA Civ 13107 January 2016
Plexus Law, instructing Adam Tolley QC, successfully acted for Capita in an appeal against the first instance / decision of Mr Justice Popplewell,  EWHC 3977 (Comm). In a judgment handed down on 21 December 2015, the Court of Appeal held by a majority that pension consultants did not owe a continuing duty to correct previous acts of negligence in relation to ineffective revisions to a pension scheme.
In a decision likely to be of general interest to professional negligence practitioners, Lord Justice Longmore and Mr Justice Henderson held that the decision of the Court of Appeal in Bell v Peter Browne & Co  2 QB 495 was to be followed in preference to the decision of the High Court in Midland Bank Trust Co v Hett Stubbs & Kemp  Ch 384. The Court ruled that the obtaining and receiving of advice after a negligent mistake has been made does not give rise to an obligation to correct the mistake or to a fresh cause of action every day after the mistake has been made.
As a result, under a contractual indemnity in a share purchase agreement, Capita will be entitled to recover from RFIB Group a larger proportion of a settlement of a professional negligence claim.