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Credit hire organisation's quest for certainty backfires

“Success comes not from having certainty, but being able to live with uncertainty.” ― Jeffrey Fry

Accident Exchange Ltd (AEL) has lost two significant appeals that will have a huge impact on the credit hire industry. IMcBride v UK Insurance Ltd and Clayton v EUI Ltd, the Court of Appeal confirmed that the approach to calculating the basic hire rate (BHR) as set out in Stevens v Equity (2015) is correct. Further, where alternative BHR evidence does not reflect a hire with a nil excess then the court could still have regard to that evidence.

Gavin Perry, National Head of Credit Hire, looks at the judgment in both appeals which will see credit hire organisations up and down the land bemoaning the fact that the certainty now brought by these two appeals in relation to the assessment of damages for the provision of a replacement vehicle is to their own detriment. Whereas previously insurers had approached cases on a "some you win/some you lose" basis, the outcome should mean more win than lose.

The background

Over two years ago, the Court of Appeal succeeded in stemming the cost of credit hire claims, where the CMA had failed to act. In Stevens v Equity (2015) it was determined that the appropriate hire rate to apply in credit hire claims where the claimant is pecunious, was the lowest basic hire rate. The outcome was a body blow to the credit hire industry, which had, until then, been riding high on the CMA's decision not to interfere with the way that the market functioned, which it almost took as an endorsement of its practices.

In an attempt to reverse the decision in Stevens, AEL appealed to the Court of Appeal in the cases of McBride v UK Insurance Ltd and Clayton v EUI Ltd, submitting that "the long term viability of the credit hire industry was at stake" and sought to argue that Stevens was wrongly decided.

Further, AEL sought to bring certainty in an area where there was still uncertainty – if the credit hire rate allowed for a nil excess and the defendant rates evidence was not comparable with that, what should the court's approach be? AEL's submission was that credit hire should be recoverable in full, which would have undermined the decision in Stevens. 


McBride had hired a Jaguar with a nil excess over a period of 77 days at a total cost of £40,215.11. Both parties produced evidence of the BHR but where the defendant's rate evidence provided for a comparable vehicle, details of the cost of CDW would need to be "confirmed on booking". The claimant's rates evidence included a rate of £225 from three hirers, with a "non-waivable excess" of £2,000.

At first instance, District Judge Brookes discounted the defendant's rates evidence as it was not possible for him to know what the costs of reducing the excess would be and instead turned to the claimant's evidence. Whilst he said that he had heard of some of the car hire companies in the claimant’s BHR evidence, but not all, he was prepared to accept that they were all mainstream suppliers.

In determining the lowest reasonable rate, in accordance with the judgment in Stevens, he said that since the lowest figure of £225 was quoted by three of the companies in the claimant's evidence, it was not a "rogue figure" and must be reasonable. He held that, in accordance with Stevens, the lowest reasonable rate quoted by a mainstream supplier was £225 per day, which became £270 per day with VAT and he awarded the claimant the sum of £19,980. 


In Clayton, the claimant had hired a BMW M3 and a Mercedes E350, at a total cost of £24,823.20, for a period of 52 days. The claimant initially produced rates evidence that was not relevant to the claimant's geographical area and, having chosen not to rely upon that evidence, then sought to rely upon rates evidence relevant for his locality, only to be refused leave to do so.

The defendant's rates evidence also presented difficulties for the Judge, in that the rates surveyor had calculated the cost of hiring over a 28 day period and not the cost of hiring over 7 days and the rates did not properly reflect the fact that the claimant had hired with a nil excess. However, the rates surveyor did give evidence about the cost of purchasing stand-alone excess reimbursement insurance.

District Judge Mitchell at first instance applied his knowledge and experience of credit hire cases, having regard to the paucity of rates evidence before the court. He adopted a Hertz figure for basic hire rates of £10,505.33 and then added a 25% upwards adjustment to reflect the sum payable for excess insurance cover and the differential costs of the rate offered for hiring over a 7 period instead of the rate offered for hiring over a 28 day period.

At the first appeal before HHJ Staite, the Judgment was upheld on the basis that the Judge, with his level of experience and knowledge of credit hire cases, did his best with what he had before him in way of evidence, with HHJ Staite stating that "…if there is some evidence before the court to challenge the credit hire rates claimed by a claimant, the court will make an appropriate adjustment from the pleaded claim to reflect the betterment element of the credit hire agreement".

The appeals

In McBride the claimant put forward four grounds of appeal which in summary were:

(1) The judge erred in law in applying the test of “the lowest reasonable rate quoted by a mainstream supplier” in accordance with Stevens, as that decision was inconsistent with earlier decisions of the Court of Appeal.

(2) Alternatively, even if it was right to apply Stevens, the judge erred in law in his approach to the BHR because there was no evidence that the three suppliers who were quoted were “mainstream suppliers” (even though it was evidence they had sourced via their sister company APU Limited, and which was also their undoing in Stevens).

(3) In any event, the judge erred in his assessment of the BHR because having said that the defendant’s BHR evidence was to be disregarded because it did not demonstrate the cost of hiring at a nil excess, it was irrational to then rely on the claimant’s BHR evidence which also failed to demonstrate the cost of hiring at a nil excess. He should have concluded that the defendant had not proved that the credit hire rate exceeded the BHR.

(3A) Alternatively, the judge had erred by failing to make a reasonable adjustment to the £225 daily rate to allow for the cost of an excess waiver, so as to facilitate a comparable hire at a nil (alternatively low) excess.

The grounds of appeal in Clayton related to similar issues as in McBride, but reflecting the broad brush assumptions made by the the Judge.

The Court of Appeal dismissed the appeals for the following reasons

Ground 1 in McBride: Was Stevens wrongly decided?

Stevens was correctly decided and was binding on the Court of Appeal. Permission to appeal was granted on the first ground, but the appeal was immediately dismissed. The reason for doing this was to allow a path to appeal to the Supreme Court, should it be thought appropriate.

Ground 2 in McBride: the rate allowed not the rate of a mainstream supplier

On the evidence before him, the judge at first instance was entitled to conclude that each of the companies was a mainstream supplier or, at the very least, a local reputable supplier. This ground of appeal sought to challenge the judge’s findings of fact on a point which was open to him on the evidence and which cannot be disturbed on appeal.

The application for permission to appeal on this ground was refused.

Ground 3 in McBride: the nil excess point

The inability to obtain a rate with a nil excess from a mainstream supplier or reputable local supplier of hire cars should not as a matter of principle lead to the credit hire company recovering the credit hire rate in full, in circumstances where, as in this case:

  • the evidence demonstrates that there is a difference between the credit hire rate before the application of any nil excess; and

  • the basic hire rate without the availability of a nil excess.

That approach would erode Dimond v Lovell (2000) and would in practice lead to a further exception (in addition to the one set out in Clark v Ardington (2002)) to the general principle of "stripping out" laid down in that case. Pursuant to that general principle and cases like McBride, the Court should ensure that the irrecoverable elements of the credit hire (evident from the difference in rates (ignoring the nil excess)) are stripped out. It should not allow the fact that the credit hire company offers a nil excess on prestige vehicles, which other car hire companies are not prepared to offer, to be used as a 'smokescreen' to enable credit hire companies to recover their charges in full.

Another way of addressing the nil excess issue and which the Court considered has the elegance of simplicity, is the approach of treating the availability of a nil excess and the reasonableness of the sum claimed in respect of it, separately from the cost of hiring the car.

The only question for the Court will be how much should be recoverable as the cost of reducing the excess to nil.

Whether it was reasonable to accept the credit hire company’s CDW rate or whether a claimant should have taken out a stand-alone excess reimbursement product will depend upon the facts of the particular case. It should not depend whether or not the judge has heard of the product. On the facts of this case, the only viable nil excess cover on offer was that provided by AEL at £10 per day and it was reasonable for the claimant to take out such cover.

In cases where the mainstream or reputable local car hire companies from which BHR evidence is obtained in any particular case do quote for a nil excess, it should not be necessary to engage in the separate assessment exercise in relation to the nil excess.

The appeal in Clayton

Whilst the conduct of the hearing by the judge was open to criticism, on analysis, the Court of Appeal considered that the adjustments he made in respect of the 7 day rate and the nil excess were justified. The appeal in Clayton was dismissed.

Another case affecting the BHR evidence in credit hire claims

Kansal v Zhang (unreported)
31st January 2017
The County Court at Slough
Before: District Judge Glen

View the judgment >

This was a reserved judgment following the hearing of the claimant's application on 14 December 2016, in a case where we acted for the defendant, and where the claimant (who hired from AEL) sought to vary the standard direction that there be simultaneous exchange of witness statements, so as to provide for sequential exchange, with disclosure of the defendant’s BHR evidence followed by rebuttal evidence from the claimant.

This approach had been widely adopted by AEL, following their change in tack post Stevens (and now McBride) where their own BHR evidence prepared by APU Ltd was used against them, and the first instance decision of Gonzalez v Dignity Funeral Services (2016) was relied upon in support of their application.

District Judge Glen concluded that the application should be dismissed, stating that he did "not consider that as a general rule a claimant in a case of this kind should be entitled to the advantage of sequential exchange of evidence of fact".

He did however comment that some changes to the standard form of order used in credit hire cases should be made, in particular:

(i)         In small claims track cases of this kind, factual evidence should be exchanged in accordance with a timetable set from the date of the order rather than 14 days before the hearing as is usually the case. This will enable a claimant in those rare cases when it is necessary to seek permission to adduce evidence in rebuttal time to make an application well in advance of the final hearing.

(ii)        defendants ought to be required to produce the full terms and conditions relating to any hire rate that they seek to rely upon and to ensure that both a daily and a weekly rate is quoted in order to ensure that a fair comparison can be made.

The resulting Order required the claimant to provide disclosure of Impecuniosity documents if impecuniosity was alleged. Then, if the claimant does not allege impecuniosity or is debarred from doing so, each party has permission to rely on a short survey of ‘spot’ hire rates in the claimant’s locality. Thereafter, if the claimant wishes to adduce further evidence to rebut that relied upon by the defendant, an application must be made.

We suggest, any attempt by AEL (or other CHO's) to seek sequential exchange of evidence in the way suggested in Kansal and Gonzalez should be opposed, and 'Kansal directions' should be sought, so that the defendant will have the benefit of knowing what the claimant's case is more than 14 days before the final hearing. In AEL's case, they know via APU Ltd what the BHR rate should and they should provide their own evidence if their client is not impecunious – though providing their own evidence in this way hasn't served them well in Stevens and McBride.

Likely next steps

  • We would expect AEL to seek permission to appeal to the Supreme Court – after all, what have they got to lose?

  • CHOs are likely to now increase the charge for their CDW on those vehicles where it is difficult to find BHR rates where there is a nil excess or standalone products i.e. very high value vehicles, taxis, some vans and motorbikes

  • Will any proposal to tackle the cost of credit hire by the government in the second part of their consultation response now be rendered redundant?

  • Ironically the judgment comes as many Insurers focus is on the escalation of repair cost claims, and the challenge of how to tackle those claims cost effectively

What does this mean for Insurers?

  • Stevens v Equity remains good law – the lowest BHR is recoverable where the claimant is pecunious

  • Hire and CDW are, in effect now to be treated as two heads of claim – the defendant may prove the lowest BHR for the provision of the car, but in the absence of a nil excess from the BHR provider, the Court will allow either the costs of a standalone excess reimbursement product or the CHO's cost of excess reduction – evidence relied upon for settling the claim must reflect that

  • It is worthwhile reviewing cases to ensure that an evidential approach is being taken which is in step with that

  • In anticipation of this outcome, we have for some time adduced BHR evidence which provided excess reduction via the BHR provider and a standalone product and clearly that must now be standard practice. BHR evidence that we now commission will also include (where relevant) an extra table utilising the CHO's own CDW charge

  • Insurers who use on line products can continue as normal and where there is no nil excess rate available, and add the cost of a standalone product where applicable, or the CHO charge. Those who do internet prints can do the same. It should be easier to make a well judged pre proceedings offer.

  • Remember if the case is in the Portal, to upload all the evidence at Stage 2, with your reasoning, per the Court of Appeal decision in Phillips v Willis (2016)

  • Oppose any requests by claimants to adduce sequential rebuttal evidence

“If it is true that we need a degree of certainty to get by, it is also true that too much of the stuff can be lethal.” (Terry Eagleton, The Meaning of Life) and that may prove to be true for some CHOs!

You can read more about the outcome of this case in Spencer Turner's article, 'Should there be sequential or simultaneous disclosure in credit hire claims?'


For further information please contact Gavin Perry, Partner and Head of Credit Hire on +44 (0)151 907 3493 or at gavin.perry@dwf.law

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.