Most credit hire law comes from two cases: Clark v. Ardington [2002] EWCA Civ 510 and Lagden v. O’Connor [2003] UKHL 64, to which frequent reference will be made.
Validity of agreements
The first and most important point decided in Clark was that a credit hire agreement could be valid, enforceable and exempt from the Consumer Credit Act. If a credit hire agreement complies with the Consumer Credit (Exempt Agreements) Order 1989, then it is likely to be valid. This will be the case if:
1. It requires the debt to be paid in not more than four instalments in less than twelve months from the date of the agreement.
Most challenges to the validity of credit hire agreements are generally unsuccessful, provided the agreements comply with the requirements laid down in Clark.
Duration of hire
The law on this point was set out at paragraphs 115 to 121 of Clark. For the hire period to be reduced, the court should consider whether there was a failure to mitigate on the part of the Claimant, which could be said to be an independent cause of the loss of use of the Claimant’s own vehicle for that period. In particular, if the Claimant acted reasonably in placing his vehicle with a reputable garage, and that garage delayed carrying out the repairs, then the Defendant remains liable for the full period -- but can seek a contribution from the garage.
When the vehicle is repairable, delays generally come in three types: delay in starting repairs, delay in carrying out repairs, and delay in returning the hire vehicle when repairs are complete. A delay in starting repairs may or may not be the fault of the Claimant (or his insurance company). But if the Claimant’s insurer delayed instructing an engineer to inspect the vehicle, or delayed authorising repairs, that period is unlikely to be awarded. On the other hand, if the Defendant’s insurance company was dealing with repairs, the period is likely to be recoverable.
Delay in the course of repairs is very likely to be recoverable, subject perhaps to a contribution from the garage. Most garages are reputable and most people simply leave the garage to get on with it, although some difficulty can arise if the Claimant did not chivvy or chase the garage. In most cases, delays in this period are recoverable.
Delay following completion of repairs is difficult to justify beyond (in some cases) a few days. Most of the time there is no reason a Claimant could not pick up his vehicle straight away, and any delay is likely to be his own fault – or sometimes an administrative error by the hire company. On the other hand, a Claimant who was unable to pick up his vehicle straight away for a specific, good reason – such as being away on business in the hire vehicle – is likely to succeed.
When the Claimant’s vehicle is written off, other complexities arise. If the Claimant did not have comprehensive insurance, then he would have to buy another vehicle himself – possibly with money provided by the Defendant’s insurer. In these circumstances a sort of impecuniosity is relevant, although not in the same way as referred to in Lagden (discussed below).
If the Claimant could afford to buy a new vehicle straight away, then a hire period longer than a few weeks is unlikely to be justified. With an inexpensive vehicle, most claimants would be able to afford a loan to buy a replacement. If the vehicle is more expensive, then this becomes less feasible – but someone who owns a more expensive vehicle is likely to have more money available to buy a new one.
If the Defendant’s insurer delayed payment of the pre-accident value, this can sometimes justify longer claims. However, the courts are generally sympathetic to the argument that the Claimant should have bought a replacement himself, especially if the delays are lengthy.
Hire rate and impecuniosity
In Clark, the Court of Appeal set out that the Claimant must adduce evidence of the rate charged by a car hire company. The burden of proof then passes to the Defendant to show that the Claimant could reasonably have used a different, cheaper hire company. The burden is normally discharged by way of a report on ‘spot hire’ rates: evidence (whether lay or expert) of a survey of the rates charged by local hire firms for an equivalent vehicle. Because these firms do not provide credit hire, they are generally cheaper.
Once the Defendant has discharged this burden, the Claimant must then show that he had no choice but to use credit hire (‘Need’). If so, he can still recover the full credit hire rate. This is the effect of Lagden. Normally, the Claimant had no other choice if he was impecunious: that is, he could not afford to pay spot hire charges up front.
There was no single test laid down for impecuniosity in Lagden. Lord Nicholls suggested (at paragraph 9) that it was a question of priorities: if the Claimant could not pay hire charges without making sacrifices he could not reasonably be expected to make. Lord Hope said (paragraph 36) that an impecunious Claimant could not pay the spot hire charges without exposing himself or his family to a loss or burden which is unreasonable. He also said (paragraph 42) that the dividing line was likely to fall between those who did and did not have a credit or debit card. With respect to the latter, the courts normally consider whether the Claimant had sufficient funds available through his credit or debit card as well.
Impecuniosity nearly always comes down to a question of fact for the trial judge. Each case is decided on its own merits.
