High Court: Defendant must pay credit hire costs even where claimant has contingent liability for them

Credit hire: Judge was wrong on claimant’s impecuniosity

A circuit judge was wrong to deny a claimant recovery of £20,000 in credit hire charges because she had been assured that she would never have to pay any outstanding sums herself, the High Court has ruled.

Mr Justice Turner said he had been told that the issue was at stake in “a number of outstanding cases”.

In Irving v Morgan Sindall Plc [2018] EWHC 1147 (QB), the claimant’s Ford Ka, worth £775, was written off after an accident caused by the defendant.

The claimant hired a replacement vehicle on credit whilst awaiting a cheque from the defendant’s insurer; this took over four months, by which time the hire charges were £20,100. General damages were just £700.

The hire agreement deferred the time when the claimant would have to pay the charges until her claim concluded. However, she remained liable personally to pay off the debt regardless of the outcome.

But in cross-examination before His Honour Judge Saffman in Leeds, the claimant said she had been led to believe that she would not have to pay the charges whatever happened.

HHJ Saffman ruled: “In order for these hire charges to be recoverable from the defendant I have to be satisfied that the claimant is obliged to pay them. But her evidence, her evidence I emphasise, is that she is not and that is the only evidence I have on this issue… As a result I am satisfied that this credit hire charge falls at the first hurdle.”

On appeal, Turner J observed that “the learned judge did not identify the jurisprudential basis upon which he had concluded that the evidence of the claimant had impacted on the terms of the written contract which it appeared to contradict”, but in any case he proceeded on the basis that the claimant’s liability to pay was contingent upon recovering the hire costs.

He found that the case law did not require there to be a personal obligation to repay the costs.

Going back to the “landmark” ruling on credit hire in Giles v Thompson 25 years ago, he cited the then Master of the Rolls, Sir Thomas Bingham, in the Court of Appeal saying that the defendant was not relieved of liability if the claimant’s liability to pay charges to a third party was contingent on his recovery against the defendant.

Turner J said: “It follows that I am satisfied that the judge was wrong to conclude that the assurances given to the claimant, even taken at their highest, were such as to compromise her claim for credit hire charges against the defendant and so the appeal on this ground is allowed.

“I ought, however, to note in passing that the judge at first instance was giving an ex tempore judgment and those appearing before him had not thought fit to burden him with reference to any authority on the point.”

The question also arose whether the claimant was impecunious so as to entitle her to claim in respect of credit hire, rather than the basic hire rate which would have required payment up front.

HHJ Saffman held that the claimant was not impecunious and so the credit hire rate was not recoverable.

She earned a basic £472 per month which could rise to £700 with overtime. She had an ISA savings account containing about £250 and a graduate bank account that was £700 overdrawn at the time. She had a credit card with a limit of £500.

The judge concluded that the claimant could have raised about £900 by depleting those of her accounts which were in credit and spending up to her credit card limit. Thus she would be able to buy a replacement car of the value of that written off.

Turner J said: “What the judge failed to appreciate, however, was that his calculations were based on the assumption that the claimant could be expected to have bought a replacement car immediately after the accident.”

Such an assumption was “untenable” given that the car was only written off a fortnight after the accident and the claimant would have needed a further fortnight to buy a replacement.

“Over this period of four weeks, the claimant would have been entitled, even if pecunious, to have hired a car at the basic hire rate. Such evidence as was before the court revealed that the cost of hiring a replacement vehicle on this basis would have been about £700 over this period.

“Accordingly, when the hire charges and the capital cost of a replacement vehicle are added together, the sum which the claimant would have needed to raise was far in excess of that upon which the judge based his calculations.”

Turner J said he could also not ignore the fact “that by reducing her capital to the bare minimum and increasing her debt, the claimant would have been exposing herself to the risk of a serious financial challenge in the event that even a modest but unexpected financial reverse might have afflicted her before her claim was satisfied. Impecuniosity need not amount to penury”.

He was therefore satisfied that HHJ Saffman, “experienced as he is, was wrong”.

    Readers Comments

  • Eddy J says:

    What an ignorant judge!
    The credit hire firms do not tell people already in vulnerable desperate situation without a car that the hirer themselves will be liable for any irrecoverable costs from third party. The contracts they make people sign have it written somewhere in small print to be signed in an office under pressure.
    Now this poor woman on a basic wage of just £445 a month has to repay £20000! for a basic car she borrowed for a month or a little more?
    A clear example of justice system exploiting the poor and vulnerable. Credit hire companies should never be allowed to charge such huge rates in the first place and make it clear to hirer what type of predicament they are risking themselves for the sake of a car.

    Many people have no idea of the dangerous situations and the loan sharks that lurk to rob people who find themselves in a car accident. This can happen to anyone.

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