Credit Hire: the scales tip further in insurers’ favour

In the most recent clash between insurers and the credit hire industry, McBride v UK Insurance Limited and Clayton v EUI Limited [2017] EWCA Civ 144, the Court of Appeal has approved its previous decision in Stevens v Equity Syndicate Management Limited [2015] EWCA Civ 93, and has set down a number of important points of principle which may well substantially reduce the arguments available to Claimants in credit hire disputes. Most significantly, the assessment of the cost of obtaining a nil excess has been detached from the consideration of the appropriate basic hire rate. In addition, the practice of uplifting a hire rate to account for the well-known difference between a 7 day and a 28 day hire rate has been approved.



For a fuller summary of the law relating to credit hire disputes and an analysis of the case of Stevens, see my previous article on the subject:/news/latest-news/2015/march/basic-hire-rates-march-2015/.

In both McBride and Clayton, the Claimant hired appropriate replacements for high-end vehicles on credit terms for a substantial period of time. They both paid extra to reduce the excess under the hire agreement to zero. Neither party was impecunious and therefore the issues for the judge at each trial revolved around the correct approach to each party’s basic hire rate (“BHR”) evidence.

In McBride, the Defendant was not able to produce any BHR evidence offering a nil excess. The District Judge therefore relied entirely on the Claimant’s figures and, applying the test outlined in Stevens, allowed the rate of £225, being the lowest reasonable figure from a mainstream car hire company, but made no adjustment to reflect the fact that this quotation included an excess of £2,000.

In Clayton, with the Claimant’s BHR evidence disallowed for having been produced only on the day of trial, the Defendant’s evidence quoted all figures as 28 day hire rates, with no evidence of the 7 day rate. The District Judge dealt with the nil excess question by allowing a 10% uplift on the BHR he alighted upon, and applied a further 15% uplift to reflect his finding that the Claimant expected the repairs to be done quickly, and therefore would have hired on the basis of a 7 day rate. This approach was approved on appeal to HHJ Staite.

The respective Claimants appealed on a number of grounds, arguing (i) that Stevens had been wrongly decided as it was inconsistent with previous authority; (ii) that where a Defendant’s evidence provided no details as to the cost of hiring with a nil excess, the burden of proof to demonstrate that the credit hire rate exceeded the BHR had not been satisfied, and that the credit hire rate should therefore be allowed in full; (iii) that the percentage increase approach of the judge in reflecting the difference between 7 and 28 day rates was unprincipled and incorrect.


The Court of Appeal’s judgment

Flaux LJ delivered the unanimous judgment of the court. The challenge to the “lowest reasonable rate quoted by a mainstream supplier” test for the BHR in Stevens was dealt with quickly. Although permission to appeal was granted, so that the point could be taken to the Supreme Court if so advised, the court considered that there was no inconsistency with previous authority. The principle in Stevens was entirely appropriate, given the ease with which hire rates can be compared using the internet, as held at paragraph 53 of the judgment.

The Court of Appeal held that, as a matter of principle, the Claimant should not recover the full credit hire rate, simply because no comparable BHR was provided with a nil excess. To do so “would erode Dimond v Lovell and would in practice lead to a further exception to the general principle laid down in that case” (Flaux LJ at [68]).

It was further held, by reference to the case of Bee v Jenson [2006] EWHC 3359 (Comm), that it would almost invariably be reasonable for a Claimant to seek a nil excess, but that, where a nil excess is not available in the evidence before the court, this should be treated separately from the comparison of credit hire rate and BHR, and an additional amount should be allowed to reflect this. In McBride, the failure by the trial judge to deal with the nil rate was reflected by increasing the award by £10 per day plus VAT, which was the additional amount charged by the credit hire company, Accident Exchange Limited. In Clayton, the court considered that the 10% adjustment made by the judge closely reflected the cost of excess reduction offered by the credit hire company, and approved the application of the judge’s considerable experience of such cases in making such an adjustment. The court also approved, obiter, the consideration of often substantially cheaper stand-alone excess elimination products, such as those offered by Questor and, where these were available for the type of vehicle hired and for the same period.

In relation to the 15% increase applied in Clayton to reflect the difference between a 7 and 28 day rate, the court rejected the Claimant’s criticism of the approach taken by the judge. It considered that an unduly rigorous and exacting approach would not be appropriate in a case reliant on the approximate and artificial exercise of stripping out irrecoverable benefits from the credit hire rate. Again, it was held that the judge was entitled to make the adjustment based on his 20 years’ experience, during which he would have seen many examples of the difference between 7 and 28 day rates, and in light of the paucity of the evidence before him. The appeal was therefore dismissed.



Although this decision is favourable to insurers, as it reduces substantially the scope of challenge to BHR evidence, it is important to bear in mind that the separation exercise advocated by the Court of Appeal will only be relevant where BHR evidence does not quote for a nil excess. It should not be necessary where the nil excess is quoted, per Flaux LJ at [79].

Notwithstanding this, Defendants would now be well advised to include in their BHR evidence appropriate quotations for stand-alone excess elimination products. Claimants wishing to avoid the uncertainty of a percentage increase or reduction to reflect the difference between 7 and 28 day rates should ensure that their evidence covers both.

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