Judge Mackie QC has endorsed the County Court decision of Chen Wei v Cambridge Power & Light Ltd, ruling that the failure of Accident Exchange (to advise the hirer of their right to cancel the hire agreement in contravention of Regulation 7 (2) would render a hire agreement unenforceable. Notwithstanding this, as the hire car charges in this case had “already been paid” by the Plaintiff’s indemnity insurers (whose claim agent was also Accident Exchange) the Plaintiff was entitled to recover the entire credit hire charges. The court also held that the Plaintiff was impecunious and awarded the full credit rate of hire, amounting to damages at £138,308.43.
Facts
Following a road traffic accident on 12th December 2008 the Plaintiff’s 21 year old Bentley was damaged and rendered unroadworthy. Liability was not in dispute. While repairs were being carried out to his vehicle he hired, through Accident Exchange, a modern two door Bentley Continental GT Coupe at a cost of £863.68 per day. Despite the absence of serious damage the vehicle took 135 days to repair. The total hire car charges amounted to £138,308.43. The Defendant contended that the Plaintiff had failed to mitigate his loss by not pursuing repairs more vigorously. The court noted that the Defendant’s representatives, during the course of the hire, had been aware of the explanations given for the delay in repairs. The Defendants had never complained about this or did anything about the delay. Duration of hire however was not a central issue in this case. The court noted “the most surprising aspect of this case, that hire charges of over £138K were incurred to provide a vehicle while the claimant’s car, worth about £16K, was being repaired is not part of the dispute.”
Enforceability of Hire Agreement
The hire car had been brought to the Plaintiff’s home where he signed the first hire contract and insurance application brought by the driver. The first hire contract was limited to 85 days. After this time the Plaintiff entered into a second hire agreement with Accident Exchange, this time the contract was posted to his home.
Neither hire contract contained a clause advising the Plaintiff of his right to cancel the contract. The Defendant argued that this contravened Reg 7(2) of The Cancellation of Contracts Made in a Consumer’s Home or Place of Work etc Regulations 2008 and the first agreement was unenforceable. It had been accepted by the Defendant that the second agreement was not bound by these Regulations as it had not been made in his home.
The Plaintiff’s counsel argued that the Plaintiff had waived any rights to claim under the Regulations because he had decided to perform the contract despite the fact that he had not been advised of his right to withdraw. Further, compliance with the 2008 Regulations was collateral to the present case and so irrelevant. It was further argued that the Regulations did not apply to the present situation where a consumer had prearranged the supply of goods/services over the telephone, irrespective of where the contract formally came into existence. These arguments were rejected. The court held that the effect of the 2008 Regulations was that Accident Exchange could not enforce its first hire contract against the Plaintiff. Subject to the “already paid point” (discussed below) a claim for the credit hire charges would fail against the Defendant.
“Already Paid?”
The structure of both hire agreements were in a standard form. Liability for the hire costs were deferred while a claim was pursued through the Defendant’s insurers. These charges and any resulting legal expenses were, in any event, “insured” in case they are not recovered. This insurance policy was underwritten by IGI Insurance (now AmTrust Europe Ltd) and was limited to £100K. Accident Exchange was the appointed claims agent for AmTrust. The schedule of cover recorded the Plaintiff ad being the policy holder; cover was due to expire on “settlement of the Policyholder’s claim or as otherwise set out in the terms and conditions of the Policy.”
The Defendant had raised the issue of enforceability under the 2008 Regulations after proceedings were first issued. It was accepted that, as a tactical measure to “fight fire with fire” , in response Accident Exchange, acting as the claims agent for AmTrust paid themselves the hire charges under the above insurance policy. Despite the Defendant’s objections, the court held that this was a valid insurance policy and that the insurers were entitled to pursue a subrogated claim through the Plaintiff.
The court accepted that the Plaintiff had mitigated his loss by hiring a car, become liable for the charges and then paying them, albeit through his insurance policy. By virtue of this payment the court held that no issue could be raised over the enforceability of the first hire agreement under these Regulations. The court held that the Plaintiff was only entitled to the benefit of £100K, the limit of the insurance indemnity, on this “already paid” point. This however did not effect the outcome as £100K more than covered the first hire account, which was the only one than was unenforceable under the Regulations.
Rate of Hire / Impecuniosity
The Defendant had produced evidence of alternative spot rates. I
The Defendant had raised the issue of enforceability under the 2008 Regulations after proceedings were first issued. It was accepted that, as a tactical measure to “fight fire with fire” ,Accident Exchange, acting as the claims agent for AmTrust paid the hire charges to themselves under the Plaintiff's indemnity insurance policy. Despite the Defendant’s objections, the court held that this was a valid insurance policy and that the insurers were entitled to pursue a subrogated claim through the Plaintiff.
The court accepted that the Plaintiff had mitigated his loss by hiring a car, becoming liable for the charges and then paying them, albeit through his insurance policy. By virtue of this payment the court held that no issue could no longer be raised over the enforceability of the first hire agreement under the 2008 Regulations. Therefore although the agreement would have been unenforceable because the charges were “already paid” by the Plaintiff this argument was now redundant.
The court held that the Plaintiff was only entitled to the benefit of £100K, the limit of the insurance indemnity, on this “already paid” point.
This however did not effect the outcome as £100K more than covered the first hire account, which was the only one than could have been unenforceable under the Regulations.
Rate of Hire / Impecuniosity
The Defendant produced evidence of a spot rate at £485
per day. The Plaintiff contended that the full credit hire
rate should apply because he was impecunious. The court considered whether the Plaintiff had “no choice” but to take the credit hire car because he could not afford to pay the spot rate of £485 per day? The court felt that the burden of proving impecuniosity may rest with the Defendant but held that in practice is was not necessary to determine the matter by reference to burdens of proof. The “credit card test” referred to in Lagden, had to be seen in the context of the relatively small sums in play in other cases rather than the very large sums involved in this case.
The Plaintiff’s finances were “in a bit of a mess”, it was unlikely that he would have hired, with his own resources, a Bentley at £485. He could not have expected to pay the spot rate. Accordingly, the full rate of hire was awarded.
Comment
The courts decision in respect of the 2008 Regulations will be welcomed by the insurance industry. Although we will expect that, where applicable, credit hire companies may instigate the making of payments under an indemnity insurance policy to avoid the agreement being held unenforceable. It is also interesting to note Judge Mackie’s comments that the burden of proving impecuniosity “may rest with the Defendant.”