Douglas Bee v Carl Jenson
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Sir Paul Kennedy,Lord Justice Tuckey |
| Judgment Date | 13 September 2007 |
| Neutral Citation | [2007] EWCA Civ 923 |
| Docket Number | Case No: A3/2007/0122 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 September 2007 |
[2007] EWCA Civ 923
Lord Justice Tuckey
Lord Justice Longmore and
Sir Paul Kennedy
Case No: A3/2007/0122
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
HON MR JUSTICE MORISON
Royal Courts of Justice
Strand, London, WC2A 2LL
Barbara Dohmann Q.C. and Jonathan Hough (instructed by Messrs Badhams Law) for the Appellant
Christopher Butcher Q.C. and Benjamin Williams (instructed by Messrs Burges Salmon LLP) for the Respondent
Hearing dates : 27 th July 2007
Judgement
Introduction
1. This is an appeal about the cost of hire of a replacement car for a period during which a claimant's car is being repaired after the occurrence of an accident for the consequences of which a defendant is legally liable. It is said to raise an important point of principle for both claimants' and defendants' insurers but arises from facts which are extremely commonplace.
The facts
2. On 8 March 2004 Mr Bee, a family man who had retired from his job as an insulator and was aged 71, was sitting in his stationary car on Frederick Way in Grimsby when a car driven by Mr Jenson ran into the back of his car. Mr Jenson has admitted that he was solely responsible for the accident. Mr Bee's rear bumper, hatch tail-gate, rear under-carriage and rear lights were damaged and the car was undriveable. A Grimsby garage owned by Messrs. Wilson & Co. repaired the car, the repairs were finished by 1 April 2004 and Mr Jenson's insurers paid for those repairs.
3. Meanwhile Mr Bee needed a car. He seems in every way to have been a model grandfather. Each weekday he drove his daughters to work and, during term time, he drove his grandchildren to school. Twice a week he drove to Louth to help his elderly step-mother with her shopping and other errands. No doubt he used his car for his personal purposes as well. Wilson & Co. did not (for whatever reason) provide a courtesy car but Section H of Mr Bee's motor insurance policy with Cooperative Insurance Society provided that an insurance company called DAS Legal Expenses Insurance Co. Ltd. ("DAS") would arrange for a hire car to be supplied by a nominated supplier. Mr Bee was able to take advantage of this section of the policy and DAS duly arranged the supply of a hire car from Helphire Group PLC. An agreement was then made dated 12 March 2004 between Helphire (UK) Ltd. and Mr Bee whereby Helphire provided a replacement car and charged DAS the sum of £610.46 being 21 days hire at £24.74 per day together with VAT. DAS originally had an arrangement with a different hire company, but in return for DAS making a new overall agreement with Helphire, Helphire made (1) a contribution to the cost of DAS extricating itself from that previous agreement and (2) a payment to an affiliate of DAS, Counselline Ltd. a company which later, on 31 May 2006, changed its name to DAS Legal Services Ltd. Mr Jenson's insurers now submit that Mr Bee and his insurers, DAS, should give credit for this second payment against their claim for the hire charges of £610.46. The amount of the payment to Counselline is commercially sensitive and it has been decided that DAS will only be ordered to disclose it if they are, in principle, bound to give such credit. Morison J. has held that they are not so bound. Hence this appeal.
4. Mr Jenson and his insurers have always accepted that it was reasonable for Mr Bee to hire a replacement car and that the car which he hired was a reasonable replacement for his own car. It was in issue before the judge whether the actual rate charged by Helphire was a reasonable rate but the judge held that the rate was good value for money compared with other spot rates (para. 15) and there is no appeal against that finding. One might thus expect that such reasonable rate should, at any rate prima facie, be recoverable from the tortfeasor.
Some Background
5. Before I record counsel's arguments, it may be helpful to have some legal background. Historically comprehensive motor insurance policies offered cover for damage to an insured's vehicle but did not cover the cost of hiring a replacement for the period of repair. The cost of such hire would of course normally be recoverable from a defendant tortfeasor but a claimant would initially have to meet the cost of hiring a replacement himself and many people involved in accidents did not wish to bear that cost or the risk that that cost would not be recovered in any ensuing litigation. To meet the potential gap in the market accident hire companies have come into existence who offer, for a consideration, to arrange the temporary replacement of a car without immediate cost, trouble or risk to the insured. One of the features of such agreements was that liability to pay the hire charge was postponed until any claim against a defendant was successfully concluded. In many cases claims against tortfeasors to recover sums paid to such companies were for sums higher than spot rates which ordinary hire companies would have been willing to offer for ready money; this was not appreciated by defendants' insurers who tried to find ways to resist payment of such sums charged by the accident hire companies. They first sought to say that the agreements made with the insured persons by the hire companies were champertous. This argument was rejected by the House of Lords in Giles v Thompson [1994] 1 AC 142.
6. The second idea was to challenge the agreements by saying that they were regulated consumer credit agreements which were unenforceable because they did not comply with the requirements of the Consumer Credit Act 1974. On this occasion defendants' insurers won a resounding victory since in Dimond v Lovell [2002] 1 AC 384 the House of Lords held first that such agreements did indeed fall foul of the 1974 Act and were thus unenforceable. That meant that the claimant could not recover any sum payable for car hire. The House held, secondly, that even if the claimant could have recovered he could have recovered no more than the "spot" charge and not the charges made for an agreement that entitled the claimant to more benefit than the cost of hire itself (e.g. by way of financing the cost of replacement pending resolution of a claim or the cost of fighting the claim itself). In a yet further case, in which the arrangement for car hire did not constitute an regulated consumer credit agreement, the House of Lords held that the position was different as to the second holding in Dimond v Lovell, if the claimant was impecunious and could not afford to pay the cost of hire upfront, but could only get a replacement by entering into a more expensive credit agreement, see Lagden v O'Connor [2004] 1 AC 1067.
7. The way in which the problems of the 1974 Act have been avoided in the present case is for the claimants' insurance policy to have a term that a second insurance company would cover legal expenses and arrange the hire of a replacement vehicle (all as a provision of the original insurance to which the 1974 Act would not apply). This is profitable business for which companies experienced in hiring out cars will compete and they will sometimes offer inducements to such insurers to take advantage of their services. Tortfeasors' insurers now seek to say that they should have the benefit of such inducement since if one looks at the overall picture, the inducement should be set off against the individual hire charge which the claimants' insurers have been charged and that the claimants or their insurers can only recover what they must be deemed to have "truly" paid.
The Terms of the Policy
8. The terms of Section H of Mr Bee's policy so far as may be relevant are as follows;—
(a) Under "What is insured", Clause 1 provides;
[DAS] will negotiate to recover the Insured Persons' uninsured losses and costs in respect of an event which causes (i) damage to the Insured Vehicle or personal effects in or on it or (ii) death or injury to the Insured Person.
(b) Clause 2 provides as follows;
[DAS] will pay Vehicle Hire Costs following an accident involving a collision between the Insured Vehicle and another vehicle where
(i) the Insured Vehicle cannot be driven and
(ii) the accident was entirely the fault of an identified driver of another vehicle on which there is a valid motor insurance.
provided that
(i) [DAS accepts] that it is always more likely than not that the Insured Person will recover damages (or other legal remedy) or make a successful defence and
(ii) any legal proceedings will be dealt with by a court or other body to which [DAS agrees]
In the definition section at the start of the CIS policy, the term "Vehicle Hire Costs" is defined as "the cost of hiring a replacement motor car or standard commercial vehicle for one continuous period".
(c) There follows a series of notes including the following;
(6) Where [DAS agrees] to pay Vehicle Hire Costs the Insured Person must
(a) accept [DAS's] choice of vehicle hire company, the type of vehicle and the period of hire
(b) comply with any conditions of the vehicle hire company
(c) Agree to [DAS] attempting to recover Vehicle Hire Costs in the name of the Person and refund to [DAS] any Vehicle hire Costs recovered.
(d) Under "What is Not Insured", the following two exclusions are material;
(b) Legal Costs of Vehicle Hire Costs incurred before [DAS agrees] to pay them
(e) Vehicle hire costs where the Insured Person is claiming against a person who cannot be traced.
The Proceedings
9. So far...
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