McBride and Clayton: Nil excesses and 7 day versus 28 day rates in Credit Hire cases

On 15th March 2017 the Court of Appeal handed down judgment in the conjoined appeals of McBride v UK and Clayton v EUI, both of which raised issues as to the effect nil excesses provided by credit hire companies.

Key Points

1. Stevens v Equity is good law
2. The absence of a nil excess available in the BHR does not render them void
3. Third party CDW products should be applied, even if the judge had not heard of them, provided they are reasonable
4. A percentage increase approach appears to be acceptable to reflect a nil excess where there is no third party CDW or clear breakdown of the credit hire CDW
5. A percentage increase approach appears to be acceptable to reflect the cost of hiring over a 7-day period if there is no evidence of that cost available

Background

Both McBride and Clayton had hired prestige vehicles at rates of £409 and £355 per day respectively. They had also taken out a CDW, McBride paid £10 per day to reduce the excess from £2,500 to nil and Clayton paid a total of £30 per day to reduce the excess from £3,500 to nil.

Neither claimant was impecunious. They were therefore only entitled to recover basic hire rate. BHR reports produced but none of the rates provided for a nil excess. In fact, the excesses were significant.

In McBride a daily rate of £255 was awarded but it was associated with a non-waivable excess of £2,000. In Clayton only 28 day rates were available. There was also evidence available in those rates as to the third party CDW provider Questor. The Judge applied the 28 day rate of £10,505.33 but applied a 15% increase to reflect the cost had it been a 7 day rate and a further 10% increase to reflect the cost of obtaining a nil excess. He came to such a conclusion despite comparing such an exercise would be akin to sticking seaweed out of the window to see if it was raining.

Appeal

On appeal McBride argued that Stevens v Equity had been wrongly decided as it was inconsistent with previous authorities (Pattni, Bent and Burdis).

He further argued that it was wrong to apply the BHR as it did not have a nil excess. If it was to be applied then an adjustment should be made to the rate to reflect the cost of obtaining a CDW to reduce the excess to nil.

Clayton argued that it was wrong to approach the assessment of rate in percentage terms. If it was to be approached in such a way, the percentage increase should be higher.

Judgment on Stevens

Perhaps unsurprisingly the Court of Appeal found that Stevens had been correctly decided and was binding. LJ Flax held :

“In practical terms, if the defendant can show that a basic hire rate at the top end of the range exceeds the lowest reasonable rate within the range charged by a mainstream supplier or reputable local supplier, then the claimant will not recover more than that lowest reasonable rate, unless he or she can demonstrate that it was appropriate on the facts of the particular case to take some higher rate, which is extremely unlikely ever to be the case.”

Judgement on absence of Nil Excess

The Court went on to dismiss the argument that BHR could not be applied simply because it did not allow for a nil excess. Where there was difference between the credit hire rate without the CDW applied and the basic hire rate without any nil excess then the full credit rate should not be awarded just because a nil excess could not be obtained. That would erode Dimond v Lovell and would in practice lead to a further exception to the general principle laid down in that case.

By the same token, however, it was not unreasonable for a claimant to hire a car on credit if a nil excess was unavailable from mainstream hire companies.

Therefore the correct approach was to treat the CDW separately, as one would collection and delivery, when comparing the credit rate with the BHR. Once the appropriate rate has been determined, the question for the court would then be how much should be recoverable as the cost of purchasing a nil excess.

The choice will usually be between the cost of the credit hire CDW and evidence of the charge by a third party company such as Questor:

“Whether it was reasonable to accept the credit hire company’s rate or a claimant should have taken out such a stand-alone excess elimination insurance will depend upon the facts of the particular case, but it should certainly not depend upon the happenstance of whether the judge has heard of the product”

In McBride the court found that the credit hire CDW charge was reasonable as the third party product would not have covered the hire car due to its value and the duration of hire. A small adjustment to damages was made to reflect the additional cost of CDW at £10/day.

Judgment on Percentage Adjustments

The court went on to find that the percentage adjustments made in Clayton in respect of the 7 day rate and nil excess were justified having taken a realistic approach to the manner in which credit hire cases are handled and tried.

LJ Flax recognised that the exercise of stripping out the additional benefits from the credit rate was an approximate and artificial one. Therefore it would be it would be unjust to insist upon the rigorous and exacting approach to rates evidence in credit hire cases. Where the credit hire rate was considerably in excess of the highest BHR, demonstrating that there were probably irrecoverable elements in the credit hire rate which required stripping out, the judge was entitled to conclude that it was not just or correct in principle for the credit hire to be recoverable in full despite the absence of a nil excess BHR.

Whilst the 10% increase was not interfered with, LJ Flax held:

“Where there is evidence of the availability of an excess elimination insurance as a stand-alone product from Questor or other providers such as Insurance4carhire.com, the Courts should admit and accept such evidence as evidence of the reasonable cost of obtaining a nil excess, provided of course that the quote obtained from such a provider is for a car which is comparable with the one hired from the credit hire company and is for the same period as the period of actual hire from the credit hire company. Certainly the Court should not reject such evidence because the judge or the claimant has not heard of the product,…The admission and acceptance of evidence of these stand-alone products should be the norm.”

Comment

Of course this case will only carry real significance where the hire of a prestige car is found to be reasonable. Mainstream basic hire companies usually offer a nil excess on standard vehicles. So if the case concerned hire of a standard vehicle or it is found that a lesser model of car would have been appropriate then the issue is unlikely to rear its head. LJ Flax stressed that where BHR does quote for a nil excess i t should not be necessary to engage in the separate assessment exercise because any difference between the cost of the nil excess charged by the credit hire company and the rate quoted by the car hire company will be brought into account because only the lowest reasonable basic hire rate (including in such cases the cost of a nil excess) will be recoverable.

This case does provide some difficulty in cases where the CDW is simply stated to be “included in the rate”. In such cases the separation exercise is not so easy. It is perhaps likely that in such cases the separation exercise will be conducted using the cost of basic hire or third party CDW products. We are more likely to see the percentage increase approach in such cases.

Defendants should ensure that evidence of an appropriate third party CDW product is available to the court. Terms and conditions should be checked to ensure it will cover both the type of car hire and for the period of hire. It would also be advisable to ensure that intervention letters (Copley) draw attention to the availability of a CDW.

Claimants should provide their own evidence relating to daily and weekly rates so as to avoid a percentage application. They should also check the terms and conditions of third party products carefully in a bid to have the credit CDW applied. It would be prudent to provide a breakdown of the CDW rate where it is said to be “included in the rate” to ensure that the cost of basic hire or third party CDW products, which are likely to be cheaper, are not used in the separation exercise.

Please contact the clerks should you wish to discuss instructing Lauren.