Credit Hire Basics

Many road traffic accidents result in claims for credit hire, and many personal injury solicitors end up dealing with them. However, this is a complex area of law, with some quite unique rules, and there are many pitfalls for those new to the work. This article is aimed at those who are dealing with a credit hire case for the first time, or who have not been involved since before the major recent decisions.

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.

Adv Crim - Initial Hearing at the Magistrates

Defendants aged 18+ charged with criminal offences will make their first appearance at the Magistrates (hence forth shall be referred to as the Mags...bcoz im cool like that).

Any Defendant charged with an indictable only offence ill immediately send the case to the Crown Court under s51 of the Crime and Disorder Act 1998. But all summary only and either way offences will be dealt with by the mags.

Once charged the defendant will either be refused bail or granted bail in which case the Defendant will attend court to answer his bail.

Depending on the case complexity and the Defendants likely plea the Defendants 1st appearance will either be an Early First Hearing (EFH) or an Early Administrative Hearing (EAH).

Early First Hearing: Used when the Defendant is going to enter a ‘simple guilty plea’ admitting all the elements of the offence.

Summary Offences – Defendant will appear before a full bench of 3 mags. The charges will be read out to the D & he enters a plea. CPS will state facts of the case & Defence solicitor will give a plea in mitigation. Mags will either sentence straight away or adjourn if they want a pre-sentence report from the probation service. If adjourned bail will be dealt with.

Either way Offences – Same as above, except once a plea has been entered into the mags will decide if they have sufficient powers to deal with it or pass it to the Crown Court for sentencing depending on the seriousness of the case. Mags will either sentence straight away or adjourn if they want a pre-sentence report from the probation service. If adjourned bail will be dealt with.

Early Administrative Hearing: Is essentially an admin hearing. Mags will check Defendant has legal representation or to obtain public funding. Or will be adjourned to allow defence to asses the strength of the case & the plea the Defendant should enter. Will need disclosure of the prosecutions case. Usually dealt by a bench of 3 mags but can sometimes be dealt with by a Clerk or Legal Advisor, unless the prosecution object to the Defendant being granted bail.

Prior to the next hearing the Defence should: at their first appearance before the mags, few will enter a plea just yet and will usually be adjourned for them to take advice from their solicitor.

The Defence Should:

1.      Obtain funding from the LSC.

2.      Take a statement from the client.

3.      Obtain details of the prosecutions case from CPS.

4.      Advise client on the strength of their case & his plea.

5.      If its an either way offence; inform client of the possibility of it being sent to the Crown Court and its pros & cons of each court.

 

Next hearing: entering a plea – At this point the court would expect the Defendant is in a position to enter his plea.

Summary offence – if entering a guilty plea, the mags will either sentence the Defendant straight away or adjourn for a pre-sentence report. If the Defendant pleads NOT guilty they will fix a date for his trail and issue case management directions. Mags will also deal with bail.

Either way offences – if however the Defendant enters a guilty plea or a not guilty plea. The Mags will have to decide if their powers are sufficient to sentence (if guilty) or to be tried (if not guilty). Or if they should issue to the Crown Court. This is known as the Plea before Venue & Mode of Trial Procedure.

 

Plea before Venue Hearing Procedure

1.      The charges will be read out to the D.

2.      The clerk will then ask the D to enter a plea. And if guilty he will be treated as if he he’d pleaded guilty before the mags who will then either sentence him or commit him to the Crown Court for sentencing.

3.      If the Defendant pleads guilty, the CPS will outline the facts of the case including previous convictions. Defence will give a plea in mitigation. At which point mags will determine if their sentencing powers are sufficient (anything from 6 months for an e/w and 12 months for a Defendant found guilty of 2 count of an either way offence). Depending on the seriousness of the office, with reference to Magistrates Sentencing Guidelines & any aggravating/mitigating factors.

4.      If mags powers are insufficient they will commit to the Crown for sentencing pursuant to the Power of Criminal Courts (sentencing) Act 2000, s3. The procedural rule which must be complied with when Defendant is committed to the Crown Court for sentence are set out in Part 43 of the Criminal Procedural Rules 05.

5.      Id the Defendant refuses to enter a pea or enters a not guilty plea we will advance to the ‘Mode of Trial’.

 

Mode of Trial

Mags will decide whether offence is suitable for summary or committal to Crown based on Prosecution and defence making representations. They must consider:

a)     The nature of the offence.

b)     Circumstances making the offence of the a serious character.

c)      Mags punishment powers are adequate for the offence.

d)     Any other circumstances why it should be tried at one venue or another.

 

Defendant will be informed he has the right to elect a venue if he so chooses, if he elects by summary, they will fix a trial date and issue case management directions. If the Defendant elects trial by Crown Court the case will be adjourned for a committal hearing.

Adv Crim - Statutes to remember

PACE
S18 – Police Power to search premises of a person arrested for an indictable offence.
S24 – Constable may arrest without warrant anyone he reasonably suspects about to commit an offence/ is in the act of committing an offence or has committed an offence.
S30 – Suspect to be taken to the police station as soon as practicable, any delay to be recorded on the custody record.
S32 – Police Power to enter & search premises where suspect was at time of arrest.
S37 – Detention authorised by custody officer.
S56 – Suspect has right to have someone informed of their arrest.
S58 – Suspect entitled to legal advice.
S76 – Challenging admissibility o a confession
I. Confession fabricated or mistaken.
II. Confessed but made for other reasons than guilt.
S78 – Fairness of admitting confession evidence. Exclusion of unfair evidence.
S82 – Defines a confession.


CJA
Part 11 - Adducing evidence of Def bad character.
S98 - Defines bad character
S101 - Admissibility of a defendants bad character & Gateways.
S114 - Admissibility of hearsay evidence.
S116 - Admissibility of hearsay evidence of unavailable witness.
S117 - Admissibility of hearsay evidence of Business documents.
S121 - Safety valve: multiple hearsay evidence.


CJPOA
S34 - Effect of accused remaining silent when Q (adverse Inference).
S35 - The D as a witness chooses not to give evidence or remains silent, maybe make it possible for courts to draw adverse inference.
S36 - Adverse Inference failing to account for objects found on person.

Exchanging Contracts

A binding contract comes into existence on exchange of contracts, after which neither party can withdraw incurring the liability for breach. Therefore necessary to check all o/s queries have been dealt with before exchanging (‘the point of no return’) .
The actual time when a contract comes into being depends on the method used to effect exchange.

Authority to exchange: Once a solicitor has his clients authority to exchange he may then do so choosing which ever method he deems appropriate. Exchanging without clients authority can lead to the solicitor being liable to the client in negligence.

Exchange usually initiated by the buyer indicating the buyer is ready to commit himself. Where the purchase of one property is dependant on the sale of another the solicitor must ensure that exchange of contracts and completion are synced in order to avoid leaving the client with two houses or none at all.

Telephone exchange

• Most common method of exchange.
• The quickest way of securing an exchange of contract.
• Contract in effect as soon as solicitors agree that exchange has taken place.
• After the telephone call, a physical exchange of documents occurs through the post.
• HOWEVER if one party decides to withdraw, it’s all too easy for them to deny the contents of the phone call. Without which no contract can exist.
• To avoid any problems must agree prior to exchange to adopt The Law Society formulae. And an accurate attending note recording the telephone conversation must be made as soon as possible:
• Formula A: Used where one solicitor already holds both parts of the contract before exchange.
• Formula B: this is used where at time of exchange each party’s solicitor is still in possession of his own clients signed contract.
• Formula C: designed to be used in a chain transaction.

Personal exchange

• Rarely used.
• The solicitor for each party meets usually at the sellers office to exchange.
• Contract exists from the moment of exchange.
• Although not practical as solicitor office may be physically at great distance from each other.
• Has benefit of seeing the others contract before exchange and can therefore be checked to make sure they’re identical.

Postal exchange

• Exchange takes place once seller solicitor receives signed contract and deposit. After which he sense the clients signed contract.
• Exchange deemed to have taken affect once seller posts his clients signed contract (Adams v Lindsell (1818)).
• However a postal exchange is not recommended where a chain of transactions take place. Due to the possibility of contract may get lost in the mail.

Document exchange (DX)

• Most solicitors belong to a document exchange (private postal system).
• Postal rules do NOT apply to DX. And unless contract states otherwise, the contract comes into existence when the seller’s part of the contract is received by the buyer.
• The contract is made when the last copy of the contract is deposited at the document exchange.

Fax exchange

• Standard Conditions does not permit fax to be used as a valid method of service of a document.
• An exchange by fax is not a valid exchange of contracts under s2 LPA (Misc Provisions) Act 1989.

Email

• At the moment contracts for sale of land must be in writing so cannot be entered into electronically via email or via the internet.
• However government proposals for electronic conveyancing would allow contracts to be made electronically. Under which there would be only one copy of the contract which would be stored and ‘signed’ electronically.

BLP - Partnership Liabilities

A partner who acting within the authority granted to him (s5 PA1890):

• Will bind his fellow partners and
• Make any debts so incurred by him partnership rather than personal debts (thus also binding the other partners).

In contract if a partner acts outside his authority then any debts will be his alone.

Liability of partners for partnership debts

Each partner is both jointly and severally liable to outsiders for any act or omission committed by any of the partners/employees in carrying on the partnership (s9-12 PA 1890). A third party has the option to sue:

1. The partnership (meaning each partner is liable).
2. All the partners in their own names.
3. Any one or more of the partners in their own name.

For the full amount of his loss, depending on which the 3^rd party believes to be the most successful course of action. Allowing the 3^rd party to cherry pick the most affluent or easily accessible partner and pursue him.

Liability of new and retiring partners

Under s17(1) of PA 1890: “A person who is admitted as a partner into an existing firm does not thereby become liable to the creditors of the firm for anything done before he became a partner.” Unless the new partner enters into an agreement to that effect.

Under s17(2) “A partner who retires from a firm does not thereby cease to be liable for partnership debts or obligations incurred before his retirement.”

Unless

17 (3) “A retiring partner may be discharged from any existing liabilities by an agreement to that effect between himself and the members of the firm and the creditors”.

A retiring partner could also request his fellow partners (and creditor if possible) indemnify him against any historic debts unsettled at the date of his retirement. However whether or not such an indemnity is granted and the terms it sets out will depend on the strength of the outgoing partners bargaining position.

ALTHOUGH a partner has no liability for debts incurred after he ceases to be a partner (s17(2) PA 1890) this can be overturned. And thus he must be careful that they do not:

• Allow themselves to be held out (s14 PA) as still being a partner or
• Permit 3^rd parties to continue in the belief they are still partners (s36 PA).

This can be done by ensuring his name is removed from all partnerships documents. As well as under s36 PA give notice both generally to the world at large through an advertisement in the Gazette. Allowing a retiring partner to escape liability for future debts. And if possible under s36 (1) write to the firms actual clients notifying them of his retirement.

BLP - Partnership

Intro

Partnerships are created by two or more people “carrying on business in common with a view to profit” (s1 PA 1890). They do not necessarily need written agreement between partners for it to exist. In the absence of an agreement they are governed by PA 1890.

No registration is required. Altho do have to inform HMRC within 3 months of commencing business. Lack of registration and limited regulation mean Partnerships can keep internal affairs private and in theory is cheaper to run.

They are however taxed as self-employed people therefore have to pay income tax.

Legal Status of Partnership

All partners share in responsibility for debts and obligation of the partnership. Their liability is joint and several (any partner of the business can be called upon by a creditor to settle a debt. Which can ultimately leading to partner becoming bankrupt).

It is the partners themselves who are the business and it is they who are and who will be responsible personally for what is done in the name of the Partnership. Thus no protection is offered to partners from 3^rd parties. Therefore no need for a 3^rd party to request a personal guarantee when lending/ offering credit to a partnership. The partners are already personally liable for all partnership liabilities.

Partnership Agreement

Is whatever the partners agree between themselves therefore can be oral or in writing express or implied. A Partnership exists as long as:

• Existence of a contractual intention and
• A relationship capable of satisfying required of s1 PA based on intent.

Partners are also free to agree any restrictions they like between themselves within their agreement and thereby bind themselves contractually even if such agreement curtails the rights given to them under PA 1890. However what they can’t do is restrict the protection given to third parties under PA 1890.

Under s19 PA 1890 partners are free to vary the terms of the agreement if they so choose. But only if all the partners unanimously agree to its amendments.

No matter what form the Partnership Agreement takes it’s always a private document and may be kept confidential between partners. It does not appear on any public register unlike those of a limited company and no third party has the right to demand to see it.

BLP - Entering into contracts, agreements and arrangements

It is common for directors to have the authority to enter a wide range of contracts. Such authority comes from Table A art 70:

70 … the business of the company shall be managed by the directors who may exercise all of the powers of the company.

Therefore subject to CA 06, the companies own Memorandum & Articles directors can make a decision without requiring member approval.

HOWEVER under s190 CA 06, a director or a person connected with a director buying or selling an asset for/from the company and that asset is “a substantial non-cash asset” will require approval by the members by ordinary resolution. Either before the contract is entered into or entered into subject to members consent.

Test for a substantial non-cash asset (s191)

• An asset worth less than £5,000 is never substantial.
• An asset worth in excess of £100,000 always will be substantial.
• An asset worth between £5000 - £100,000 will be substantial, if it exceeds 10% of the company’s asset value (or net asset value).

A connected person with a director of a company is (s252-253 CA 06):

• A member of the directors family.
• A corporate body he’s connected to.
• Child of director
• Parents

Therefore before directors can purchase an asset under art 70, which is a substantial non-cash asset, they must first obtain the consent of the members consent by ordinary resolution or at least make it a condition of the contract that approval being obtained from members.

OTHERWISE the transaction is generally voidable at the Company’s request whilst those “liable” must account for any gain and indemnify the Company in respect of any related loss (s195 CA 06).