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Credit hire: back to basics

15 July 13

Aided by a recent sheriff court decision, some accepted thinking is challenged on the obligation to produce a basic hire report

by Michael Callaghan

The very recent decision of Tierney v Tissington, Glasgow Sheriff Court, 19 March 2013 (www.scotcourts.gov.uk/opinions/PD471_12) involved the familiar scenario of a pursuer seeking payment of credit hire charges incurred following a road traffic accident. Sheriff Mackenzie had to consider a motion by the defender to ordain the pursuer to lodge a basic hire report (BHR).

The case brings into focus what I think can be considered a widely held view, which is as follows: if, following a road traffic accident, a pursuer makes a claim for a vehicle hired on credit hire terms, his claim will fail unless he is also able to produce a basic hire report (BHR) demonstrating that the credit hire charges were reasonable in comparison to those rates shown in the BHR, or alternatively prove impecuniosity.

That, as I say, is a commonly held view, and one which does have backing in some sheriff court decisions. For example, in Walker v Chesapeake, Glasgow Sheriff Court, 11 October 2010 (www.scotcourts.gov.uk/opinions/PD218_10.html) Sheriff Mitchell allowed a motion from the defender to ordain the pursuer to aver whether she was impecunious or not, on the grounds “that the pursuer’s claim for hire costs can only be relevant if he was impecunious at the relevant time”. And the case of Gee v AXA Corporate Solutions Assurance, Edinburgh Sheriff Court, 27 August 2012 (www.scotcourts.gov.uk/opinions/SC1101_08.html), Sheriff Principal Stephen concluded that where a pursuer had not established that she was impecunious, and in the absence of there being any findings of basic hire rates, the defender and appellant was entitled to absolvitor.

In my submission, however, this view is not correct.

The case law

The leading authorities in this area are the Dimond v Lovell [2002] 1 AC 384 and Lagden v O’Connor [2004] 1 AC 1067 series of cases. Dimond is cited as the authority for the general principle that such credit hire agreements come with enhanced terms (such as not having to pay up front), and accordingly include a premium which is not going to recoverable from the negligent third party. Lagden is cited as authority for establishing an exception to this, whereby an innocent party who hired a vehicle on credit hire terms but was unable to hire one “up front” owing to lack of financial means (and could therefore be said to be impecunious) may be entitled to recover the credit hire payment in full, regardless of the fact that there was “betterment” (i.e. despite the fact that he had received enhanced benefits as a result of the credit hire).

However, the idea that these cases established that a credit hire contract must, as a matter of law, be regarded as having these inbuilt enhanced terms should be resisted. It may be well known – Sheriff Mackenzie in Tierney refers to it being “notorious” – but evidence, usually in the form of the production of a BHR, must still be led, and in my view, led by the defender.

In Dimond, it is important to note that evidence had been indeed led by the defendants showing what the basic hire rates were, and that they compared favourably with the claimed credit hire rates. And in Lagden Lord Hope states (para 27): "If the defendant can show [my emphasis] that the cost that was incurred was more than was reasonable... the amount expended on the hire must be reduced to the amount that would have been needed to hire the equivalent."

That it is for the defender to produce the necessary evidence was supported in the Outer House by Lord McEwan in Liddle v Brit Insurance [2011] CSOH 145 (31 August 2011) (www.scotcourts.gov.uk/opinions/2011CSOH145.html). And in the English Court of Appeal decision of Pattni v First Leicester Buses [2011] EWCA Civ 1384 Lord Justice Aikens said: “it is for a defendant to demonstrate, by evidence, [my emphasis] that there is a difference between the credit hire charge agreed between the claimant and the credit hire company and the BHR. It is well established… that it is for a defendant to prove [my emphasis] that a claimant has benefited from ‘betterment’”.

Accordingly, in the Gee case, if there was no evidence of basic hire rates established (and so no evidence before the court to show that the claimed credit hire rates were too expensive) then that should have been the defender’s problem, not the pursuer’s. The pursuer should therefore have been entitled to the full credit hire rate, regardless of her failure properly to establish impecuniousity.

Whilst I would accept, at least for the purposes of argument, that when – but only when – it becomes an issue, there is a duty on a pursuer to prove impecuniousity, that point is when a BHR is produced by a defender demonstrating that cheaper basic hire rates were available. Until then it does not matter whether the pursuer is Bill Gates or living in penury. It is only then that the necessity of the pursuer looking to avail himself of the impecuniosity exception laid down in Lagden crystallises.

Challenge

All things being equal (e.g. he is able to prove such matters as the need for hire and that the hire was reasonable, and that the hire contract does not fall foul of, for example, the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2008), an innocent pursuer in a road traffic accident action should be entitled to recover a credit hire claim in full, unless the defender produces evidence of cheaper hire rates available in the form of a BHR. There is no necessity for a pursuer first to prove impecuniosity or provide a BHR himself.

In Tierney Sheriff Mackenzie refused the defender’s motion. He considered that, on “any view”, the pursuer would be entitled to some sort of award, even if this was on a “broad axe” approach. Ultimately however – citing Lord Hope’s judgment in Lagden, and Lord McEwan’s in Liddle, in support – he held that the matter was one for the defender to bring before the court: “the reality and substance of the situation in this case, as indeed in most, is that it is the defender who is challenging as excessive the actual sum expended by the pursuer and… it is for the defender to aver and prove such excess”.

Clearly, I submit that this is correct.

Frequently, pursuers’ agents are being told by insurance companies and their solicitors that a credit hire claim will not be considered unless they are provided with a BHR and/or evidence of impecuniosity. Such demands should be resisted.

Michael Callaghan is an associate with Irwin Mitchell Scotland LLP, Glasgow
 

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