horwich farrelly

Stephens v Equity: A new dawn for credit hire in the Post Jackson age?

February, 6, 2015

HF attended the Court of Appeal last week for the hearing of the long awaited second appeal in the case of Stevens v Equity. The judgment was reserved and is likely to be handed down within the next two months. However, there are some early indications that there could potentially be changes on the horizon, with a possibility that the Court may take the opportunity to re-evaluate the best way to go about the increasingly confused task of how to arrive at the basic hire rate (BHR).

The Issues

The judgment of the High Court under appeal ([2014] EWHC 689) was, and still is, of considerable assistance to insurers. If correct, it means that the recoverable rate of hire can be ascertained not by looking at an ‘opaque’ database of rates produced by a CHO, but by simply asking the hypothetical question of what company would the claimant have gone to had he or she hired on a non credit basis. Of course, in most cases this would be the one offering the lowest quote.

The Claimant’s primary submissions in the Court of Appeal were focussed on the apparent inconstancy between the ‘subjective’ approach adopted by the High Court, and the Court of Appeal’s guidance in Bent v Highways [2011] EWCA Civ 1384 that the assessment of the BHR was an ‘objective’ process. It was argued that the claimant’s hypothetical subjective actions were irrelevant, and that once it had been found that the claimant had acted reasonably in hiring from the CHO, mitigation played no further part in the process.

Interestingly, amongst the three judge panel hearing the appeal was Lord Justice Jackson; the Judge responsible for the recent overhauls to the Civil Procedure Rules designed to reduce costs and delay. This may well not have been a coincidence. It quickly became apparent during the course of the appeal that the Court of Appeal were, perhaps it might be fair to say for the first time, fully alive to the disproportionate cost and court time involved in adjudicating credit hire disputes in the County Court; indeed, it was repeatedly made very clear that this was a significant concern.

Whilst the Court of Appeal’s primary task will be to adjudicate on the point directly in issue in the case; namely whether the ‘subjective’ approach adopted by the High Court is compatible with existing authority, it appears that the opportunity might be taken to give general guidance with the intention of removing cost and simplifying the process of arriving at the recoverable rate of hire. The following were all subject to discussion at various points during the course of the appeal:

  • The ‘Stripping Approach’

There appeared to be strong preliminary view from the bench that forcing the CHO to disclose how their charges are made up, so that the costs of the irrecoverable services can be separated from the raw costs of car hire, would be preferable to the status quo. Lord Justice Jackson put it to the Claimant’s Counsel that this may be “a substantial step forward that would reduce the volume of contested litigation”. Not surprisingly, Counsel for the claimant resisted the suggestion that this approach should be taken going forward, arguing that it could in fact cause more contested litigation.

  • Arbitrary discounts

Whilst simply making a percentage reduction to the credit hire rate would appear to be an approach that is not open to the Court of Appeal to adopt, following the earlier decisions of the same court in Burdis v Livsey [2002] EWCA Civ 510 and Bent, it was suggested by LJ Jackson that any unfairness caused by arbitrary reductions may be offset when weighed against the considerable benefits in saving costs.

  • Averages

Averaging is again an approach which would seem, on the face of it, to be ‘off the table’ following the decision in Burdis; in which an average based on the Mainz report was rejected, in favour of an actual figure from a local hire company. However, the Mainz report figure was a nationwide ‘average of averages’. During the course of argument, it was suggested that a “more nuanced” approach based on the average of a range of locally available quotes, may still be open for the Court of Appeal to adopt.

HF Comment

Gary Herring, Associate said: ”Following the somewhat disappointing outcome from the CMA investigation, there are certainly signs of a renewed appetite from the Court of Appeal to have another attempt at simplifying the assessment of the BHR, with a new primary objective of reducing cost and, perhaps, finally forcing credit hire to adapt to the post Jackson age. Whether this will result in a fundamental change to the current method of assessing the BHR very much remains to be seen. The judgment in Stevens will need to be scrutinised carefully once released, and HF will be on hand to assist insurers in pro-actively developing strategy to adapt to any changes brought about by the decision.”

If you would like discuss these matters further please do not hesitate to contact: Max Withington, Head of Credit Hire, on 0161 214 5835 or by e-mail at max.withington@horwichfarrelly.co.uk; or Gary Herring in our Cardiff Office on 02920 109148 or by e-mail at gary.herring@horwichfarrelly.co.uk

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