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Credit hire: Pattni v First Leicester Buses Limited; Bent v Highways and Utilities Construction and another [2011] EWCA 1384

On 24 November 2011 the Court of Appeal handed down judgment in the above conjoined appeals. Both appeals concerned the amounts recoverable by a claimant who is the innocent victim of an RTA and who could have afforded to hire a replacement car without credit terms.

Lord Justice Aikens gave the leading judgment and provides a useful summary of the principles involved in determining the basic hire rate at paragraphs [29]-[41]. The judgment has further clarified issues relating to interest on credit hire charges and how to claim the ‘spot hire’ rate.

No interest on credit hire charges

Mr Pattni claimed for interest on credit hire charges for the period between the end of the hire of the replacement car and the date when the claim against the defendant driver was finalised, pursuant to the terms of his credit hire contract. The claim for interest was denied at first instance and on first appeal, where Swift J held the claimant had suffered no loss in relation to interest for which he required to be compensated.

The Claimant submitted three arguments as to why interest on the credit hire charges was recoverable:

  • The Agreement in this particular case specifically provided for it.
  • The loss of interest was damage suffered as a consequence of the defendant’s tort. If the Claimant had hired a car in the usual way he would have lost the use of his money thereby paid away. The judge should have awarded both the basic hire rate and interest on that sum.
  • The Claimant was entitled to statutory interest pursuant to s69 CCA 1984 to reflect the loss of use of funds that the Claimant would have incurred if he hired a replacement car on a standard basis.

The appeal was dismissed. In response to the first argument, any element in the credit hire charge that represents the cost of providing credit facilities to the hirer is not recoverable as part of a claimant’s damages for loss of use of his car. Interest is to be regarded as an ‘additional benefit,’ specifically the benefit of delayed payment of the credit hire charges until the clam against the other driver had been finalised. Following Dimond v Lovell this additional benefit is not recoverable by a hirer who is not impecunious.

In response to the second and third arguments, a claimant can claim interest if he has proved that he has suffered loss of money by reason of the defendant’s tort, subject to remoteness and a failure to mitigate. In this particular case Mr Pattni had not incurred any financial cost at all up to the date of trial and he had not had to pay out any interest. For a claim for interest on this basis to succeed actual proof is required.

Basic Hire Rate evidence

The long running Bent saga was appealed on the basis that the ‘spot rate’ had been miscalculated. The appeal sought to clarify what method of calculating the spot hire rate should be used.

The Court of Appeal firstly eradicated the vague term “spot hire” rate. Instead the term “Basic Hire Rate’ (BHR) more accurately describes the basic measure of damages recoverable in cases where the claimant could afford to have hired a car by paying in advance.

The approach to calculating the BHR is as follows:

  • The starting point is to ask whether the claimant needed to hire a credit hire vehicle at all?
  • If they did, was the claimant impecunious? An impecunious claimant is entitled to recover the whole of the credit hire rate paid, provided that it was otherwise a reasonable rate to pay.
  • If not, has the defendant proved a difference between the credit hire rate actually paid for the car hired and what, in the same broad geographical area, would have been the BHR for the model of car actually hired?
  • If there is a such a difference, the claimant can only recover the BHR.

In Bent the assessment of the basic hire rate was flawed and the appeal was allowed. The trend to assess the BHR at the higher end of average has been stopped. Now the task of the judge is to assess the BHR in respect of the vehicle hired instead of the higher end of a range of average BHRs for similar vehicles.

Vaughan Jacob / 1st Dec 2011


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