horwich farrelly

High Court allows recovery of credit hire charges where claimant told she would not have to pay

May, 16, 2018


Following an accident in which the defendant admitted liability, Ms Irving’s Ford Ka was assessed as a total loss with a pre-accident value of £775.  She had been referred to Direct Accident Management Limited who provided her with a replacement vehicle for 132 days under three separate credit hire agreements, the total costs of which eventually totalled £20,109.60.


The case (Irving v Morgan Sindell PLC) proceeded to trial before His Honour Judge Saffman on 25 September 2017.  The hire period was in dispute; in particular in relation to whether the claimant could have afforded to replace her vehicle from her own funds sooner.  The evidence before the court was that the claimant had £250 in an ISA, £500 available on a credit card and usually a balance of around £250 in her bank account.

The claimant was found not to be impecunious in so far as it related to the vehicle damage of £775. HHJ Saffman held that the claimant could have raised approximately £900 by utilising her credit card and the funds available in her accounts. The judge also stated that the claimant could have raised further funds by either extending her credit card limit, or approaching friends and family.

The defendant had also put the claimant to proof as to the enforceability of the credit hire agreement.  The claimant was cross examined as to her understanding of her liability under that agreement.  Some of the most important parts of the claimant’s oral evidence on this issue were as follows:

  • She knew there were charges for the hire, but believed they would be recovered from the at fault driver’s insurer
  • She never thought she would ever have to pay the charges herself
  • In the event that the charges were not recovered from the insurer, then she would “absolutely not” have the funds to pay it
  • Armstrongs told her that it was “no win no fee” and that if the case was lost, there would be nothing for her to pay

HHJ Saffman’s judgment on the enforceability issue was very short. She stated as follows:

“In order for these hire charges to be recoverable from the defendant I have to be satisfied that the claimant is obliged to pay them. But her evidence, her evidence I emphasise, is that she is not and that is the only evidence I have on this issue… As a result I am satisfied that this credit hire charge falls at the first hurdle…”

The hire claim was therefore dismissed.

The Appeal

The claimant appealed to the High Court. The two issues identified by Mr Justice Turner to be resolved in the appeal were as follows:

  1. Can a claimant recover credit hire charges against a defendant even when she has been assured by the credit hire company that she will never have to pay the outstanding sums out of her own pocket?
  2. How badly off does a claimant have to be to satisfy the test of impecuniosity?

Importantly, the appeal proceeded on the basis that the claimant retained a liability for hire charges under the agreement, regardless of the assurance made by the hire company.  There had never been any suggestion that the claimant had been told the vehicle was completely “free” or that a liability did not exist at all.  The only evidence before HHJ Saffman was that the claimant had a liability, but due to what she had been told by the hire company, the liability was contingent upon her recovering the charges from the defendant.

In view of that very important distinction, and upon review of the relevant authorities, Mr Justice Turner took the view that there was no suggestion of double recovery on the facts of this appeal.  In other words, there could not have been any suggestion that the claimant could have kept the money had she recovered the hire charges from the defendant, on the basis that she was not liable to pay it to the hire company.  Rather, the claimant would only not be liable to pay the hire company in the event that she did not recover anything from the defendant.

The appeal was therefore allowed on the enforceability point.

The appeal was also allowed on the impecuniosity point.  On the primary finding that the claimant had funds available to her to meet the vehicle damage payment from her own funds, Mr Justice Turner took the view that the hire charges ought to have been taken into consideration as well.  So the test of whether the claimant was impecunious should not have been judged on whether she could have afforded the £775 vehicle damage, but on whether she could have afforded £775 plus the costs of hire at basic hire rates for the approximate four week period it would have taken to replace the car.

On the secondary finding that the claimant could in any event have sourced further funds by increasing a credit limit or borrowing from friends, unsurprisingly Mr Justice Turner held that HHJ Saffman was wrong on this point; stating that this would have exposed the claimant to serious financial risk, and that “impecuniosity need not amount to penury”.


This judgment appears, on the face of it, to be something of a blow to defendants given that a considerable amount of success is currently achieved in County Courts in arguing that hire charges should not be recovered in the circumstances where claimants are told they will not have to pay.  Indeed, the credit hire industry is such that the majority of claimants, like this one, neither know nor care what the charges are since the entire premise of the model is that somebody else will be paying.

However, in light of the specific evidence as to what was said to the claimant in this case, in reality the effect of the judgment is relatively confined to its own facts.  It is well known and long established that the reason a court will not award hire charges to a claimant on the grounds of unenforceability of a hire agreement is due to the rules prohibiting double recovery; This means that if a claimant has had the use of a hire vehicle which he does not have to pay the hire company for because the agreement between them is unenforceable, then the court will not order the defendant to pay the claimant any hire charges, as to do so would mean that the claimant has, in effect, received two lots of compensation for the same loss.

As Mr Justice Turner identified, there was never any question of double recovery in this case.  This decision therefore does not affect the common circumstances where a claimant is told that the hire vehicle is free or that there is not in fact any liability at all.  In these circumstances it is, in our view, clearly still open to defendants to argue that the hire agreement is voidable due to misrepresentation.  The case of Kadir v Thompson should be relied upon to support that the agreement is void where there is a misrepresentation that the vehicle is free and where as a result, the claimant does not consider themselves bound.

The impecuniosity decision is also at first glance unhelpful to defendants, although again the wider effect is probably fairly limited; and indeed part of the decision could even in fact be said to assist.  In particular, it should be noted that Mr Justice Turner did not criticise the finding of HHJ Saffman that the claimant should have utilised the funds available on her credit card and in her savings account, as it is often argued by claimants that there is no obligation to do. Rather the reason for the decision on impecuniosity was merely that the funds raised would not have been enough to cover the vehicle damage payment and a short period of hire at the basic hire rate.  Therefore there appears to have been an approval, implicitly at least, of the approach that a claimant should in principle be expected to utilise credit card and savings funds where available.

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