Karl Stevens (Claimant/Appellant) v Equity Syndicate Management Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Kitchin,Lord Justice Floyd,Lord Justice Jackson |
| Judgment Date | 26 February 2015 |
| Neutral Citation | [2015] EWCA Civ 93 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2014/1166 |
| Date | 26 February 2015 |
[2015] EWCA Civ 93
Lord Justice Jackson
Lord Justice Kitchin
and
Lord Justice Floyd
Case No: B2/2014/1166
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BRISTOL DISTRICT REGISTRY
The Hon Mr Justice Burnett
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Butcher QC and Guy Vickers (instructed by True Solicitors LLP) for the Claimant/Appellant
Steven Turner (instructed by Lyons Davidson) for the Defendant/Respondent
Hearing date: 28 January 2015
Introduction
This is an appeal by the claimant, Mr Stevens, against an order of Burnett J (as he then was) made on 12 March 2014 allowing in part and dismissing in part his appeal against an order of Mr Recorder Tolson QC made on 24 May 2013. The appeal is brought with the permission of Patten LJ granted on 3 July 2014. It raises an important question as to how the basic hire element of the total charge incurred under a motor vehicle credit hire agreement is to be ascertained.
On 10 February 2011 Mr Stevens was driving his Audi A4 S Line Tdi 140 when an insured of the defendant, Equity Syndicate Management Ltd ("ESM"), reversed into him. As Burnett J explained, Mr Stevens had comprehensive insurance but did not wish to jeopardise his own no claims discount by claiming for repairs on his own policy. Accordingly his insurers put him in touch with a credit hire company called Accident Exchange Limited ("AEL") which provided him with two services. First, it hired him a replacement Audi A4 whilst his own vehicle was being repaired. Second, it made arrangements for those repairs and funded the costs of carrying them out pending the recovery of those costs from ESM as the insurer of the driver at fault.
The total hire period was 28 days, running from 24 February 2011 to 23 March 2011. The basic hire rate was £140 per day (exclusive of VAT). But hire at this rate was subject to a £1500 excess. So Mr Stevens agreed to pay an additional charge of £22.50 per day (excluding VAT) to reduce the excess to nil, and a further £3.00 per day (excluding VAT) to reduce his liability for accidental damage to the windscreen, tyres and underbody to nil. The total daily hire rate agreed by Mr Stevens was therefore £165.50 (excluding VAT).
Liability was not in issue and the amount due in respect of the repairs was eventually agreed. These proceedings have therefore been concerned with the extent to which the credit hire charge incurred by Mr Stevens is recoverable from ESM.
The Recorder had to decide three issues: first, was Mr Stevens impecunious such that he would have been unable to hire a replacement vehicle had he not used a credit hire company? Second, if Mr Stevens was not impecunious and could have afforded to hire a replacement vehicle in the normal way, then what sum was attributable to the basic hire rate of the replacement vehicle that Mr Stevens did in fact hire? Third, was the period of hire reasonable?
The Recorder found that Mr Stevens was not impecunious, essentially on the basis of the oral evidence which he gave and his bank statements which showed that at all relevant times his account had a significant positive balance. In deciding the second issue, the Recorder took an average of the rates quoted by four mainstream vehicle hire companies for vehicles in the relevant group and in this way arrived at a basic hire rate of £63.02 (excluding VAT). Finally, he found that the reasonable period of hire was 19 days, having disallowed nine days because the damaged vehicle was taken to the garage for repair on 24 February, but the repair work did not in fact begin until 4 March.
Mr Stevens appealed against the Recorder's findings on each of these three issues. Burnett J upheld the Recorder's finding on impecuniosity and there is no further appeal against that decision. However, he reversed the Recorder's finding as to the reasonable period of hire, finding that the car had been stripped almost immediately after its delivery to the garage so that the spare parts necessary for its repair could be identified, and that although these parts were ordered straight away, they did not arrive until nine days later. It would not have been reasonable to reassemble the car so as to allow Mr Stevens to drive it until the parts arrived and so the basic hire rate for the whole 28 day period was properly recoverable. There has been no appeal by ESM on this issue.
As for the basic hire rate, Burnett J upheld the decision of the Recorder, but he did so on a basis which Mr Stevens contends is clearly flawed and which would, if uncorrected, have a significant impact on credit hire litigation in the county courts. It is this aspect of the decision of Burnett J which has given rise to this appeal.
General principles
The principles to be applied in determining the basis upon which a claimant can recover damages in respect of his vehicle hire costs when he is the innocent victim of a road traffic accident and has hired a replacement vehicle on credit hire terms have been considered in a number of decisions including, most notably, Giles v Thompson [1994] 1 AC 142, Dimond v Lovell [2002] 1 AC 384, Burdis v Livsey [2002] EWCA Civ 510, [2003] QB 36, Lagden v O'Connor [2001] UKHL 64, [2004] 1 AC 1067 and Pattni v First Leicester Buses Ltd; Bent v Highways and Utilities Construction Ltd and anor [2011] EWCA Civ 1384, [2012] Lloyd's Rep IR 577.
In Pattni, Aikens LJ (with whom Moore-Bick and Pill LJJ agreed) reviewed the earlier authorities and helpfully summarised in a series of propositions the approach to be adopted in such cases. As he explained and so far as relevant to this appeal, the loss of the use of a vehicle as result of the negligence of another driver is a loss for which, in appropriate circumstances, the innocent party can recover damages. It is the duty of the innocent party to mitigate his loss, and if the loss of the use of the vehicle can be mitigated by the hire of a replacement vehicle, the cost of that replacement vehicle will be the measure of damages recoverable for the loss he has sustained.
Further, such an innocent party who hires a replacement vehicle on credit hire terms suffers a loss which is also recoverable as damages provided always that he has acted reasonably. Nevertheless, and even if he has acted reasonably, the innocent party may not be able to recover the full amount of the credit hire rate that he has agreed to pay to the credit hire company. It all depends upon his financial circumstances. If he could have afforded to hire a replacement vehicle in the normal way, that is to say without credit hire terms and by paying in advance, then the damages recoverable will be that sum which is attributable to the basic hire rate (or BHR) of the replacement vehicle. If, on the other hand, he is impecunious and could not have afforded to hire a replacement vehicle by paying in advance then, prima facie, he is entitled to recover the whole of the credit hire rate he has paid, provided it was a reasonable rate to pay in all the circumstances.
The reason why an innocent party who can afford to hire a replacement vehicle in the normal way is not able to recover the full credit hire rate from the negligent driver was explored by the House of Lords (albeit obiter) in Dimond. In that case Mrs Dimond's vehicle was damaged as a result of the negligence of another driver. Thereafter she acted reasonably in accepting the services offered by a credit hire company called 1 st Automotive even though the local BHR (referred to as the "spot rate") for hiring a vehicle similar to her own was a good deal less than the credit hire rate she agreed.
Lord Hoffmann (with whom Lord Browne-Wilkinson agreed) explained (at 401D – 402F) that in these circumstances it could not be said that Mrs Dimond had failed to take reasonable steps to mitigate her damage. But that did not necessarily mean that she could recover the full amount charged by 1 st Automotive. Under her credit hire contract she had obtained not just the use of the vehicle but additional benefits as well. For example she had been relieved both of the need to lay out the money to pay for the vehicle and of the trouble and anxiety of pursing the claim herself. These were additional benefits the costs of which were not recoverable and had to be brought into account in the calculation of damages. It had been established by the decision of the House of Lords in British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 that where a person whose contract has been broken has taken a reasonable and prudent course naturally arising out of the circumstances in which he has been placed by the breach it is necessary, in assessing his loss, to look at any additional benefits he has obtained and so to "balance the loss and gain". In this regard there could be no difference between contract and tort.
That left the question, crucial to the present appeal, as to how the additional benefits were to be ascertained and their value determined. Lord Hoffmann expressed the view that, prima facie, the value was represented by the difference between what Mrs Dimond was willing to pay 1 st Automotive and what she would have been willing to pay an ordinary hire company for the use of a vehicle. As he said at 402F – 403H:
"How does one calculate the additional benefits that Mrs Dimond received by choosing the 1st Automotive...
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