horwich farrelly

Ding, ding ‘Ground One’: Insurers land first blow in Credit Hire appeal

February, 24, 2017

The Court of Appeal this week heard the latest battle of the “secular war” between credit hire organisations and insurers, in two long awaited and potentially landmark cases; Clayton v EUI (a case handled by Horwich Farrelly) and McBride v UKI.

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Permission to appeal had previously been granted in McBride (in part) and Clayton at hearings in January 2016. The background of the McBride case and a summary of the permission to appeal hearing is set out here. The three grounds of appeal in McBride were as follows:

  1. The decision in Stevens v Equity – namely that the BHR was to be assessed by reference to the lowest reasonable rate – was wrong and inconsistent with earlier authority such as Clark v Ardington.
  2. The judge was wrong to rely on the evidence adduced by the claimant, as none of the rates were from mainstream suppliers.
  3. In the absence of there being a BHR quote with a zero excess, the defendant has failed to discharge the burden of proving there is a comparable BHR which is less than the credit rate; therefore the judge was wrong to award the BHR and the hire charges should have been awarded in full.

In Clayton, the issues were more succinct. The district judge at first instance had made adjustments of 10% to the defendant’s BHR evidence to account for the fact that the BHR chosen by the court did not have a zero excess liability equivalent to the zero excess liability under the credit hire agreement.

The judge also added a 15% adjustment to account for the fact that he had held it would have been reasonable for the claimant to have hired on a seven day basis (notwithstanding that the vehicle was a vintage Ford Mustang and that repairs in fact took 52 days), whereas the BHR was for 28 day hires.

Accident Exchange Limited (AEL) on behalf of the claimant appealed on the grounds that the adjustments made went further than was permissible, and amounted to nothing more than guesswork with no basis in the evidence.

The Appeal Hearing

The two cases were heard by the Court of Appeal on 22 February 2017.

At the outset, the court gave a clear indication that they would require a significant amount of convincing in relation to AEL’s ground one in McBride. During the course of a number of exchanges with AEL’s counsel, the court appeared to be firmly of the view that the decision in Stevens merely represented a sensible evolution of the law to reflect the modern realities of the internet age, rather than being a departure from existing authority.

Whilst ultimately AEL failed in their attempt to convince the Court of Appeal that Stevens was wrong, they did do enough to persuade it that there was a sufficient degree of tension in the authorities such that permission to appeal should be allowed. Accordingly the court granted permission, but then instantly dismissed the appeal. The reasons for the dismissal will be set out fully in a reserved judgment.

The significance in the granting of permission is that this leaves the door open for to AEL to petition the Supreme Court. Had permission been denied, then there would have been no procedural right to do so. AEL strongly indicated that this was their intention, and that they would be asking the Supreme Court to revisit the question of whether the credit hire rate should be reduced to strip out what are pro tem irrecoverable elements of the charges.

In relation to ground two, it appears that the court were of the view that this was a question of fact for the trial judge and thus not a matter to be revisited by an appeal court. Counsel for the defendant was not required to make submissions in relation to this ground.

Ground three in McBride presented some overlap with the issues in Clayton. However, interestingly there was a significant difference in the way the case was put by the advocates for each of the claimants. Counsel for the claimant in Clayton submitted that unless the defendant adduced BHRs with a zero excess liability to match the zero excess liability under the credit hire agreement, then this meant that the claimant must recover the full credit hire rate as a matter of right; irrespective of whether there was a gross disproportion between the credit rate and BHR. The court (entirely understandably in our view) appeared to be surprised by, and extremely reluctant to accept, this submission.

The judgment was reserved and we expect it to be handed down within approximately four to six weeks.

Implications and Comment

The dismissal of ground one of the McBride appeal represents an extremely significant and welcome victory for insurers. It puts to rest – for now at least – any doubts as to the correctness of the Stevens decision and ensures that the county courts will continue to assess the recoverable rate of hire by reference to the lowest reasonable BHR for the foreseeable future.

It remains to be seen as to whether AEL will go through with their apparent intention to petition the Supreme Court. In the event that they do, the test for obtaining permission should represent a significant hurdle; the Appeal Panel of the Supreme Court would have to be satisfied that the appeal raises an arguable point of law of general public importance. Whilst the case is certainly of considerable importance to the insurance industry, it is questionable as to whether the issues carry sufficient wider importance to the public generally.

The CoA’s reserved judgment will now be eagerly awaited, specifically in relation to Clayton and the McBride ground three ‘excess point’. The decision on this issue has the potential to either significantly increase or significantly reduce the amount of cases to which the Stevens ‘lowest BHR’ rule applies.

In the interim, reliance should continue to be made on the numerous persuasive decisions of the county court following Stevens in which it has been held that a zero excess is not an absolute right; some of which are reviewed in more detail by our credit hire team here.

Whilst judgment is awaited, Horwich Farrelly is in the process of developing strategies in anticipation of a number of possible scenarios, to ensure our clients and strategic partners can maximise the benefits (or mitigate the consequences) of the judgment immediately upon release.

To discuss any of the these issues further please contact

Gary Herring, Associate
02921 676027 | gary.herring@h-f.co.uk

Max Withington, Partner & Head of Credit Hire     
0161 413 1518 | max.withington@h-f.co.uk

Darren Mendel, Partner
03330 881601 | darren.mendel@h-f.co.uk

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