(1) Adrianne Coles (2) Natalie Woodhead and Another v (1) Rosemary Hetherton (2) Mahala Guy and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke,Mr JUSTICE COOKE |
| Judgment Date | 04 October 2012 |
| Neutral Citation | [2012] EWHC 2848 (Comm),[2012] EWHC 1599 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2011 FOLIO 873, 1071, 1072 & 1073 |
| Date | 04 October 2012 |
[2012] EWHC 1599 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building
Fetter Lane, London, EC4A 1NL
The Hon Mr Justice Cooke
Case No: 2011 FOLIO 873, 1071, 1072 & 1073
Mr Christopher Butcher QC and Mr Jonathan Hough (instructed by Herbert Smith LLP) for the RSAI Policyholders
Mr Michael Curtis QC and Mr Justin Davis (instructed by DAC Beachcroft LLP) for the Provident and Allianz Policyholders
Hearing dates: 29 th & 30 th May 2012
Introduction
There are three preliminary questions for the Court to determine in thirteen actions which have been the subject of combined case management orders in this Court because of the issues of principle involved. Each of the managed cases arises out of a minor road traffic accident in which the vehicle of a person insured by Royal & Sun Alliance Insurance plc (RSAI) was damaged by the admitted negligence of a driver insured by either Provident Insurance plc (Provident) or Allianz Insurance plc (Allianz). In each case RSAI indemnified its policy holder by having the vehicle repaired. The claims are therefore subrogated claims brought in the name of the policyholders. Throughout this judgement, I will refer to the RSAI insureds as the claimants, even though some claims in the actions are brought by Provident policyholders seeking declarations as to their liability.
The claimants are insured by RSAI under a variety of policies. However the wording of the policies, although not identical, shares a common feature—an option for reinstatement. Each policy contained the option, where the car was repairable for less than its market value, whereby the policyholder could choose a repairer or elect to use RSAI's system for repairing cars. In each of the managed cases the option exercised was for utilisation of the RSAI system which also entitled the policyholder to the use of a courtesy car, if the policyholder so desired. The RSAI system is the subject of challenge by Provident and Allianz (supported from the sidelines by other Insurers) essentially because, it is said, the system has the effect of inflating claims for repairs which fall to be paid by the insurer of the tortfeasor.
The RSAI Scheme.
RSAI's case is that it engaged MRNM, which is the trading name of RSA Accident Repairs Limited, a member of the RSA Group, to undertake repairs to the claimants' vehicles. MRNM owns and operates 6 repair garages which are staffed by its own employees. These are known as Quality Repair Centres (QRCs) and are located in Birmingham, Bristol, Glasgow, Leeds, Luton and Stockport. RSAI maintains that around 15% of repairs of its policyholders' vehicles take place at QRCs. It is unclear what proportion of the repairs undertaken at QRCs relates to cases where RSAI's own insured was at fault. 2 of the 13 managed cases involve repairs undertaken at QRCs. RSAI says that MRNM subcontracts other repair jobs to independent garages outside of the RSA Group, which then do the repair work. 11 of the 13 managed cases involve repairs undertaken at such independent garages.
RSAI maintains that MRNM undertakes the repairs under the terms of a Services Agreement which lays down rates and charges for repair services. Those rates and charges have been periodically varied under documents called "Retail Adjustment Criteria". Clause 3.1 of the Services Agreement provides that MRNM is required to provide services as detailed in schedule 1. Clause 3.2 permits RSAI to require MRNM to obtain specified products, goods and materials from designated suppliers. Under clause 4.1, MRNM gives a series of warranties, representations and undertakings as to the quality of the repairs to be carried out while clause 4.2 provides that any failure to perform or procure the performance of these services in accordance with the agreement should be remedied as soon as possible, without prejudice to other rights of RSAI. Clause 7 provides that contract charges should be as set out in schedule 3 whilst clause 7.4 requires MRNM to raise invoices in an agreed manner and to provide such information as RSAI reasonably requires to substantiate the charges made. Clause 28 makes it plain that nothing in the agreement is to give rise to any agency between MRNM and RSAI.
Schedule 1 itself (headed "Services") contains a series of service standards which are required to be met by repairers in MRNM's Priority Repair Network (PRN repairers). There is a requirement to provide a delivery/collection service, if sought, and an obligation to provide estimates of repair work in a particular format (the Audatex form) and the requirement to provide courtesy cars where the customer requires it.
Schedule 3 provides for labour and other charges to follow a set formula, (revised in various amendments to the Services Agreement) which allows for MRNM to make a profit over and above the charges paid by it to PRN repairers. The amounts charged by MRNM are designed not to exceed that which would be payable by an individual who went out into the market to get the repairs done, whilst RSAI/MRNM is able to negotiate substantial discounts with its PRN repairers by reason of its bargaining power and the volume of work that it can supply to them. MRNM charged the same rates when the work was done by its QRCs, though documentation shows the QRCs providing lower figures to MRNM. It is said by RSAI that the QRCs, as a separate division of MRNM invoice the procuring division of MRNM at the lower rate, whilst the procuring division charge the commercial cost to RSAI.
QRCs and PRNs are utilised by RSAI according to the geographical convenience or other preference of the policyholder. Where neither a QRC nor a PRN is used, RSAI will engage a non-recommended garage (NRG) outside the terms of the system on a one-off basis, usually or perhaps only where the option is exercised by the policyholder to utilise that other garage.
Schedule 3, in the form which applied to most of the managed cases, provided for labour to be charged according to agreed hourly rates and on three different scales. The standard hourly rate was £29.50 with parts and paint charged at normal prices. Under the New Repairer Costs Model (NRCM) the hourly rate was £39.50 but with a discount on parts and paints, said to be between about 15% and 40%. A rate of £49.50 per hour was used for high value prestige vehicles.
In cases where the net invoice total exceeded £300.00 and the labour involved in the repair exceeded 4 hours, the Schedule provided for additional charges to be made for "Sundry Services" provided. The Sundry Services charge was a flat rate charge which RSAI and MRNM agreed to cover a range of services for which repairers could charge retail customers on an individual service basis. RSAI's case is that some of the services were provided in all cases though other services might not be, depending upon the particular nature of the work involved. The flat rate charge, whatever the services provided under this head, amounted to three times the hourly labour rate utilised. In addition the provision of a courtesy car to the customer was subject to a charge of £11 per day and where the customer's vehicle or a courtesy car had been delivered and/or collected, a charge of £110 could be added.
On RSAI's case, MRNM was engaged to repair or procure repairs and subcontracted the repair obligations to PRN repairers or NRG repairers where its QRCs did not do the work. Bordereaux moved from the garage to MRNM and from MRNM to RSAI, with its mark up, and payment proceeded down the chain in the same fashion. The bordereaux contained very limited information about the repair work done. In consequence, when RSAI presented a claim to the insurance company of a tortfeasor, a Breakdown of Invoice Charges (BIC) was put forward as the basis of claim. This set out the figures payable by RSAI to MRNM which, in most cases, exceeded the sums paid by MRNM to a subcontractor, as the rates agreed with PRN repairers were, on RSAI's evidence, lower than those which could have been obtained by any individual obtaining repairs from the same garage because of the discount which MRNM could obtain from the garage by reason of its bargaining power and the bulk volume of work produced to the garage by it. RSAI maintains that the figures charged by MRNM to it were no more than any individual policyholder would have had to pay a garage and in most cases were somewhat less. Provident and Allianz calculate that the overall effect of the interposition of MRNM between RSAI and the repairing garage was to increase the cost of the work done by approximately 25% on bills which, in the managed cases, were generally of the order of hundreds, rather than thousands of pounds. RSAI says that the charging scheme is the same whether or not the RSAI policyholder is at fault or a claim is presented to the insurers of another driver.
RSAI's case is that the claim presented on the BIC properly represents the loss sustained by the policyholder which he or she is entitled to claim from the tortfeasor insured by Provident or Allianz, as the case may be, because it reflects what the policyholder would have to pay individually for such repairs. It accepts that it is a question of fact in each case whether the amount claimed does or does not exceed the reasonable cost of repairs to the claimant but is confident that the sums claimed do not exceed that reasonable cost because the scale of rates agreed with MRNM produces total costs for repairs which are at, or lower than, what the insured motorist...
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