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