Injury Law – Credit Hire – an update

01 Feb 2004

By : Jasmine Murphy

The House of Lords delivered judgment on 4th December 2003 in five test cases: Clark v Tull; Dennard v Plant ; Sen v Steelform Engineering Ltd; Lagden v O’Connor; Burdis v Livsey [2003] TLR 5/12/2003. This marked another step forward for Claimants involved in road traffic accidents who use credit hire companies for car hire after the accident.

What did it say?

That if a Claimant can show he was impecunious, or unable to hire a car from an ordinary car hire company, he can recover the full cost of hiring a car through a credit hire scheme.

What has happened to Dimond v Lovell1 . Wasn’t that the House of Lords’ last word?

You will remember that the principle in Dimond v Lovell was that the value of additional benefits resulting to Claimants as a result of using credit hire schemes were held to be irrecoverable.

Instead, their Lordships recommended that spot hire rates should be used. Almost overnight, the issue of credit hire appeared to be dead.

However, the House of Lords has distinguished Dimond v Lovell by upholding the Court of Appeal’s decision in the fourth test case, Lagden v O’Connor.

What were the facts?

Mr Lagden was unemployed, in poor health, had little money, no overdraft facility and could not afford to hire a car after the accident without using a credit hire company. The judge at first instance held that Mr Lagden could recover the reasonable costs of the credit hire scheme, including, as it did, certain sums which would not normally be recoverable. The insurers appealed on the basis that, as in Dimond v Lovell, the part of the credit hire charges which did not equate to cost of repair and car hire had to be stripped out.

What happened next?

The Court of Appeal upheld the Judge’s first instance decision and reinforced the principle that you take your victim as you find him. They reasoned that in light of Mr Lagden’s limited means, there was no reasonable alternative to a credit hire scheme. This was the best way in which he could mitigate his loss. Therefore he was entitled to recover the full cost of the scheme. The House of Lords upheld this decision.

Is there a test for impecuniosity?

Defendants will pounce on Lord Hope of Craighead’s words at paragraph 42 of the judgment

“in practice the dividing line is likely to lie between those who have, and those who do not have, the benefit of a recognised credit or debit card.”

I can see difficulties ahead when applying this test…

So could Lord Scott of Foscote in paragraph 87. He referred to people who keep large quantities of cash in their houses but do not have credit or debit cards who would benefit under this test. On the other hand he described those with bank accounts and overdraft facilities who have no spare cash but the facility to borrow who would not be viewed as impecunious under the test.

But, as almost everyone has credit/debit cards these days, what hope is there for Claimants hoping to benefit from this case?

The Lords only said that it was “likely” that this would be the test in practice. The criterion that must be applied is

“whether he had a choice – whether it would have been open to him to go into the market and hire a car at the ordinary rates from an ordinary car hire company”.

Lord Hope then narrowed this down to the test encapsulated above when he said

“it is reasonably foreseeable that there will be some car owners who will be unable to produce an acceptable credit or debit card and will not have the money in hand to pay for the hire in cash before collection. In their case the cost of paying for the provision of additional services by a credit hire company must be attributed in law not to the choice of the motorist but to the act or omission of the wrongdoer. That is Mr Lagden’s case. In law the money which he spent to obtain the services of the credit hire company is recoverable.”
(paragraphs 35 – 37).

Lord Nicholls of Birkenhead said in paragraph 9 that what is meant by impecunious is

“inability to pay car hire charges without making sacrifices the plaintiff could not reasonably be expected to make.”

o there is still scope for making out a case for impecuniousity even if the Claimant does not fall within the stricter credit/debit card test Lord Hope favoured.

My practice is mainly Claimant based – what steps do I have to take in the light of the judgment when I have a credit hire case?

  • Obtain instructions about your client’s finances: whether they had credit card/debit card/overdraft facilities at the time. A new section in your standard witness questionnaire could be inserted to cover this.
  • If you have a client with a credit card or debit card you still may be able to argue that they are impecunious e.g. if their credit card or overdraft limit was reached at the time.
  • Make sure that if there is going to be a dispute over credit hire in court this information is in your client’s witness statement.

I do Defendant work, what does this judgment mean for me?

  • If you are taking issue with the credit hire rates, challenge the claimant’s financial circumstances at the time of entering into the contract.
  • If the claimant’s solicitor claims that its client was impecunious ask to see the claimant’s statement to that effect.
  • Make sure you ask if the Claimant has credit -by credit or debit card – and that they are required to explain their financial situation in detail.

Where can I find out more?

The Court of Appeal judgment in the five test cases ([2002] 3 WLR 762) is very useful and sets out all the relevant points on credit hire, what is/is not recoverable etc.

The leading judgment of Lord Nicholls is the most digestible.

[1] [2000] 2 WLR 1121


Jasmine Murphy

Call: 2002


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