Sobrany v Uab Transtira
| Jurisdiction | England & Wales |
| Judge | Lord Justice Christopher Clarke,Lord Justice Lewison,Lord Justice Laws |
| Judgment Date | 28 January 2016 |
| Neutral Citation | [2016] EWCA Civ 28 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2014/1186 and (A) and (B) |
| Date | 28 January 2016 |
[2016] EWCA Civ 28
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE TUNBRIDGE WELLS COUNTY COURT
DISTRICT JUDGE LETHEM
1 TN 00573
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Laws
Lord Justice Lewison
and
Lord Justice Christopher Clarke
Case No: B2/2014/1186 and (A) and (B)
Christopher Butcher QC and Guy Vickers (instructed by True Solicitors LLP) for the Appellant
Steven Turner (instructed by Keoghs LLP) for the Respondent
Hearing date: 17 th December 2015
This is another chapter in the long running saga of disputes between insurers about liability to indemnify claimants in respect of the cost of hiring replacement vehicles whilst their cars are being repaired following a road traffic accident.
The arrangements with which this case is concerned have come into existence because comprehensive insurance policies usually do not cover the cost of hiring a replacement vehicle whilst repairs are carried out. They work like this. A motorist whose car has been damaged by an accident which was entirely the fault of someone else hires a replacement car from a credit hire company. Under the credit hire agreement he agrees to pay hire charges but only at the expiry of a credit period as defined in the agreement. The hire company pursues the driver of the vehicle who was at fault and the innocent motorist accounts to the company for any recovery. Often, as in the present case, the hire agreement is accompanied by an insurance under which the motorist is insured in respect of the hire charges and legal costs. As a result he is not out of pocket; and the hire company pursues the driver who was at fault (in effect his insurers) for damages and costs.
Credit hire arrangements have produced much litigation. The background is set out in the judgment of HH Judge Mackie QC in W v Veolia Environmental Services [2011] EWHC 2020 (QB) as follows:
" 14 As is well known credit hire arrangements have given rise to a lot of litigation. The legal framework is helpfully summarised in the skeleton argument of Mr Butcher QC and Mr Williams for the claimant as follows:
a. In Giles v Thompson [1994] 1 AC 142 (HL) it was held that the claimant who entered into this type of arrangement incurred a loss (namely his liability to the credit hire company) for which he could claim compensation from the at fault defendant notwithstanding that the schemes envisaged that the claimant would not have to pay the credit hire company anything.
b. In Giles v Thompson it was further held that this type of scheme was not champertous or invasive of any requirement of public policy.
c. In Dimond v Lovell [2002] 1AC 384 (HL) it was held that, while the amount of the hire charges was prima facie the loss the claimant had suffered, in the case of credit hire charges would include amounts for benefits additional to the simple hiring of a car.
d. The majority of the House found that the claimant would only be entitled to recover that part of his loss which represented the cost of hiring a substitute car, and this would, ordinarily, be what was established to be 'the equivalent spot rate' for the relevant kind of vehicle.
e. In the same case, it was further added that, if the hire charges were incurred under an 'irredeemably unenforceable' consumer credit agreement, the claimant could not recover them from the defendant as this would offend the rule against double recovery.
f. In Lagden v O'Connor [2004] 1 AC 1067 (HL) the majority of the House of Lords found that, in the case of claimants who were unable to afford to pay hire charges 'up front', they should be able to recover the entire amount of the hire charges in any event.
g. In Bee v Jenson [2007] 4 All ER 791 (CA), it was held that even if a hire agreement did not impose a liability on the claimant to pay the hire charges, he could still be awarded general damages for the loss of use of his car, and that these could be calculated with reference to the reasonable cost of hire in any event."
In Dimond v Lovell the credit hire agreement was unenforceable under the Consumer Credit Act 1974. Since then defendants have also relied on other statutory provisions. Under the Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008 SI 2008/1816 consumers who have made a contract for the supply of goods or services during a visit by a trader to their home or place of work have a right to cancel within a cancellation period. A trader who supplies goods or services is bound to give the consumer a written notice of his right to cancel when the contract is made. In Veolia Judge Mackie held [54] that the failure to give the requisite notice rendered the hiring agreement unenforceable.
If the hiring agreement is unenforceable it could be said that the hirer has suffered no loss. He has obtained the use of a car for which he does not have to pay. To give him damages for services which he has received but for which he has not had to pay would mean that he recovered damages for a loss for which he had already been compensated by the provision of a free car – a form of double recovery. This impediment to recovery has been avoided when insurance is in place and the hire charges have been paid by the insurer. Payment by the insurers is treated as payment by the claimant, and the insurers will have the right to pursue by way of subrogation, and in the name of the insured, any claim for damages which its insured has in respect of the indemnified loss. So there can be no question of double recovery: Arab Bank plc v John D Wood (Commercial) Ltd [2000] 1 WLR 857 para [95] and [101]. The claimant is not regarded as having failed to mitigate his loss if he pays for a car which has been provided to him even if it is likely that he would not have to pay if he took the matter to court: Veolia at [39].
In Veolia the car was a 21 year old Bentley. The credit hire arrangements were made with Accident Exchange Ltd ("Accident Exchange"). The total hire fees were in excess of £ 138,000. The limit of indemnity under the policy was, as here, £ 100,000. The claimant was held entitled to recover £ 100,000.
At para [40] Judge Mackie said this:
" There are layers of artificiality in the arguments of each side. The defendant's reliance upon the Regulations arises not from a new and unexpected concern for the rights of consumers but from a search for weapons in a continuing battle with those behind the claimant. The decision by insurers to pay immediately after the issue of Regulations was raised in the litigation was similarly tactical and part of what Mr Butcher describes as "meeting fire with fire". These considerations and the motives behind them do not in themselves invalidate the points taken or transactions entered into. But there is a limit. I have concluded that the arrangements between W and AEL involved genuine contracts of insurance (and in evidence he so regarded them). But insurers paid more than £138,000 under a policy whose limit was £100,000. It is true, as Mr Butcher submits, that parties to a contract can vary their arrangements. However insurers were under no contractual liability to pay out more than £100,000. Insurers are understandably cautious about paying any claims given their duties to shareholders and their responsibilities to other payers of premiums. Cheerful, prompt and knowing overpayment of claims by insurers is unheard of it, at least in this Court. It would be extraordinary for insurers to pay out almost 40% more than the limit under the policy except in unusual ex gratia circumstances which certainly do not apply here. While recognising that the transactions in this case amount to a valid contract of insurance I will not treat anything above £100,000 as being a good faith payment of a claim made under the policy. Apart from that I accept the Claimant's case on this point. (In practice this does not affect the overall result because the entire £100,000 can be allocated to the first hire agreement given the position on the second one—see Para 55 below)."
The last sentence refers to the fact that there were two hire agreements and only the second one was affected by the Regulations.
The facts
On 25 September 2009 Mr James Sobrany was driving his recently acquired Bentley Continental along the M 25 when a Mercedes lorry belonging to UAB Transtira and driven by its employee changed from the nearside to the middle lane and drove into the nearside of his vehicle. Mr Sobrany was in no way to blame.
The Bentley was badly damaged. Mr Sobrany wanted to hire a replacement until his car was repaired. For that purpose he took advantage of the services provided by Accident Exchange. He hired a replacement vehicle from them on credit hire terms by virtue of which he had to pay somewhat more than he would have had to do if he paid the hire as it accrued due, but did not have to pay until the expiry of the credit period as defined in the applicable terms. He also took advantage of the free insurance offered. That insured him in respect of legal expenses and replacement vehicle charges. There was a limit of £ 100,000. The insurer was IGI Insurance Company Limited which with effect from 1 July 2015 changed its name to AmTrust Europe Ltd ("AmTrust"). Accident Exchange acted as claims agent and cover holder for AmTrust.
The insurance
The terms of the insurance included the following:
" 1. Definitions
Accident Exchange's Charges– the amounts incurred by the Insured in connection with Accident Exchange Limited's credit services (including vehicle hire charges owed to Accident Exchange Limited and any repair costs paid for on behalf of the Insured by Accident Exchange Limited) following an Insured Incident.
…
Insured Incident– a road traffic accident … and...
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