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18-05-2018

Credit Hire - The ongoing war of attrition between the credit hire companies and motor insurers continues

Keeping you up to date with the latest news in the world of Corporate Claims

There was a new decision this week to add to the list of cases involving credit hire, in the High Court appeal of Irvin v Morgan Sindall PLC.

On appeal it was decided that it was sufficient for credit hire to be a contingent liability (i.e. the claimant would not have to pay it if she lost). Further that the claimant having just enough in savings to replace her vehicle and to pay for an initial hire period would have left the claimant in a difficult financial position, and accordingly held that the claimant was impecunious.

Liability had been admitted for causing the accident and the issues in the case were restricted to credit hire. The claimant claimed the sum of £20,109 in respect of credit hire, and the pre-accident value of her vehicle was £750.

Mr Justice Turner on appeal had to decide two central issues:

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. What degree of financial difficulty does a claimant have to be facing to satisfy the test of impecuniosity?

On the first question, the claimant in cross examination stated that she did not expect to (and could not) pay the credit hire charges claimed. The claimant thought that as the accident was not her fault the charges would be paid by the third party insurer.

As a general principle it is true that a claimant’s claim for special damages can only succeed to the extent of losses they have actually sustained and liabilities that have been incurred. In the present case the Judge concluded that based on a number of case authorities that such a liability could be contingent, and in this case it was contingent upon the claim succeeding against the defendant, as opposed to a free gift.

In terms of the impecuniosity argument, Mr Justice Turner referred to the test derived from the case of Lagden v O’Connor (2004). Ms Irvin was employed on a modest wage of about £500 per month, with savings of about £250 and a credit card limit of £500. At the first instance, the Judge came to the conclusion that the claimant could have raised about £900 by depleting her finance resources to replace her vehicle which had a value of about £750.

The first instance Judge had erred in his decision in failing to take into account that the claimant’s vehicle was not written off for a period of two weeks, and therefore an initial period of vehicle hire was required in addition to the vehicle replacement cost. When taking into account the need for vehicle hire the claimant’s finances would have been stretched to the limit, to the extent that if any further financial challenges arose the claimant would be in financial difficulties. In the circumstances, the claimant could not be expected to put herself in such a precarious financial position to avoid hiring a vehicle on credit.

The fact that the claimant has no obligation to meet the costs of the credit hire herself (regardless of whether she wins or loses) will not prevent her recovering them. Any impecuniosity arguments that require a claimant of limited means to substantially exhaust those means to replace her vehicle, will not succeed.

This case was heard some 25 years after Giles v Thompson. The Judge described the litigation over that 25 years as a “war of attrition” between credit hire companies and insurers. It is not a war that the insurers are winning and the court’s view seems to be that innocent motorists should have the benefit of credit hire.

So, where does this leave the defendants in such claims?

Do not rely on technical legal arguments, admit liability quickly and paying the PAV as early as possible remains the only sensible strategy.

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