Taxis, taxi drivers and credit hire claims

How quickly the weeks fly by. Since my return from a brief break in late May, there seems to have been very little time to update this blog, as the cases have come thick and fast. So after a two month hiatus, in terms of posts it is time to consider claims brought by taxi drivers, which involve a claim for a replacement taxi, hired on a credit hire basis.

Taxis can be owned by owner-drivers, or be the subject of hiring or leasing arrangements from their true owners by self employed drivers, who stand as contractual bailees to the bailor, the true owner. The differing nature of these ownerships in turn can reflect heavily on the quantum of loss.

In the case of a small business running a fleet of taxis, which are hired out to self employed drivers, it is likely that the true owner will have available other taxis and what he has lost by reason of his own vehicle being off the road are the profits that he would have enjoyed through renting out to the self employed driver.

In those circumstances the case of Beechwood Birmingham v Hoyer Group UK Limited [2011] QB 357 is of application. In that case the Court of Appeal found for a defendant by stating that in a case which concerned recovery for corporate financial loss (or indeed any business which was engaged in hiring out vehicles for profit such as a sole trader or partnership) general damages were in principle recoverable for loss of use but should reflect such sum as reasonably compensated for the nature and extent of the financial loss suffered as a result of the neutering of the damage assets employed in the business and the redeployment of any other such asset and that in the circumstances of that case it was appropriate to base any award in respect of damages for loss of use not on the cost of outside hire but on the interest on capital employed and any depreciation sustained over the period of repair allowed in respect of the vehicle of the type damaged in the accident. In other words something close to a “loss of profit”.

So if the owner is in the business of hiring out taxi cars for profit he would be likely to recover in respect of any claim no more than the loss of profit that he sustains in accordance with the principle established by the Court of Appeal and which reflects the practice of the County Court in such cases as Singh v Aqua Descaling Limited (HH Judge Oliver-Jones QC 29th January 2008) where it emerged at trial that the claimant was in fact in the business of “plant hire”, renting out vehicles which are simply licensed and insured and maintained by him to be used as taxis by others working on their own behalf.

Although that case precedes by some years the Beechwood Birmingham case it is consistent with it. In the Singh case the claimant owned no fewer than six vehicles. Judge Oliver Jones QC made it plain in paragraph 9.2 of his judgment that the case before him was different from that of the average taxi driver where a taxi owner/driver was likely to be entitled to recover hire charges as opposed merely to loss of profits because he would need to use the hired car for his own private or family purposes as well as needing to drive a car to secure his income which would be likely to fluctuate depending upon demand.

This represents a sensible line of distinction: an owner driver, will use his vehicle both to earn profits, but also for his own social, domestic and pleasure purposes, matters which peculiarly require the replacement of the damaged or destroyed vehicle.

The further case of Ali v Spirit Motor Transport Limited (HH Judge Saffman 24th January 2014) can also be explained in this fashion in that the judge made an error of law in that he combined a claim for loss of profits with a claim for general damages for loss of use. That case was appealed to the Court of Appeal and when permission to appeal was granted the defendant’s insurance company “threw in their hand” and settled the case.

However, the above analysis, assumes that the claim is brought by the true owner of the taxi who has in fact hired a replacement taxi on a credit hire basis. What if the replacement vehicle was actually hired by the self employed driver? Or even if the credit hire agreements are made with the true owner, but the claim, is in fact, brought by the self employed taxi driver, suing as contractual bailee? An interesting question arises then as to the measure of loss.

I now turn to consider the measure of loss the bailee might claim. It follows that when analysing the claim potentially to be brought by the bailee in possession it must be taken as the starting point, that his claim is a claim for general damages for his loss of use of the car. According to the case of Bee v Jenson [2007] EWCA Civ 923  his measure of loss is the market value of the hire charges of the car which was hired to replace the damaged vehicle.

The reason is because of the comments of the Court of Appeal in the case of Bee v Jenson [2007] EWCA Civ 923 where Longmore LJ noted this at paragraph 15:

It is, in any event, necessary to say that it does not follow from the fact that Mr Bee was not liable for the hire charges of the replacement car, that he cannot recover damages for the deprivation of his use of his car. It may be a question of what the appropriate amount of such damages will be but, if he has in fact reasonably made arrangements for a hire car, there is no reason why he should not recover the cost of hire, whether or not he has rendered himself liable for the hire charges and whether or not the actual cost has been paid by him or somebody else such as an insurer (or indeed any other third party). In so doing he may in legal jargon be recovering general damages rather than special damages but there is no significance in that.

He went on at paragraph 16 to note:

This approach is not novel and ought not to be controversial. It was expounded in The Mediana [1900] AC 113, 117 in the famous extract from the speech of Lord Halsbury relating to his chair;

“Supposing a person took away a chair out of my room and kept it for twelve months, could anybody say you had a right to diminish the damages by showing I did not usually sit in that chair, or that there were plenty of other chairs in the room? The proposition so nakedly stated appears to me to be absurd what an arbitrator or jury very often do is to take a perfectly artificial hypothesis and say “well if you wanted a chair, what would you have to give for it for the period”; and in that way they come to a rough sort of conclusion as to what damages ought to be paid for the unjust and unlawful withdrawal of it from the owner. Here, as I say, the broad principle seems to me to be quite independent of the particular use the plaintiffs were going to make of the thing that was taken, except when you are endeavouring to establish the specific loss of profit, or of something that you would otherwise have got which the law recognises as special damages. In that case you must show it and by precise evidence. But when we are speaking of general damages no such principle applies at all, and the jury might give whatever they thought would be the proper equivalent for the unlawful withdrawal of the subject matter then in question.”

I do not consider that Lord Halsbury’s description of an arbitrator’s or jury’s hypothesis as “perfectly artificial” indicates any reservation as to the correctness of that hypothesis. On the contrary the whole tenor of the above passage is that he would endorse it in an appropriate case.

The correct analysis in Longmore LJ’s view was set out from paragraphs 18 to 23:

Once the question whether Mr Bee was personally liable for the hire charges is put on one side, the only question is whether Mr Bee can recover from Mr Jenson what is accepted to be a reasonable hire charge reasonably incurred or whether Mr Jenson is entitled to submit that he is only liable for the true cost to Mr Bee’s insurers

Mr Bee’s primary loss was, doubtless, the cost of repair to his damaged car. As to that there is no issue because that is a cost which Mr Jenson has paid. But there is also the fact that Mr Bee needed the use of a car for the period of repair. He is, therefore, entitled in principle to damages for loss of use of his car for that period. As Lord Hobhouse of Woodborough put the matter in Dimond v Lovell [2002] 1 AC 384,406B−F:−

“Mrs. Dimond was at the time of the accident the owner and the person in possession of her car. It was damaged. Its value was reduced. This can be expressed as a capital account loss. This loss can be measured as being the cost of making good the damage plus the value of the loss of its use for [the period of repair]× Each case depends on its own facts, but loss of use of the chattel in question is, in principle, a loss for which compensation should be paid.”

In Lagden v O’Connor [2003] UKHL 64, [2004] AC 1067 Lord Scott of Foscote considered it useful to return to first principles and, in so doing said (in para. 78) that a claim for the cost of having a replacement vehicle could be regarded as either a claim for general damages in relation to which “a fair approach to quantum would be to award a sum based upon the spot hire charge for a comparable vehicle” (para. 76) or a “special damages claim based upon the cost of hire” (para.77). The fact that the claim can be framed as a claim for either general damages based on the spot hire charge for a comparable vehicle or special damages based on the cost of hire echoes The Mediana and shows that it is not a prerequisite of a claimant’s claim that the claimant should himself have incurred the liability to pay the hire charges. If it is reasonable to have a replacement, the reasonable cost of that replacement will, therefore, normally be recoverable. Although Lord Scott dissented in the result, there is no reason to suppose that his analysis of principle was incorrect.

As Lord Mustill pointed out in Giles v Thompson [1994] 1 AC 142 at 167 a claimant’s loss is not self−proving. But if (as here) a claimant needs a car while his own car is being repaired and that is due to negligence of the defendant and the cost of hiring such a car is reasonably incurred, there is, in my judgment, no reason why the tortfeasor should not pay the reasonable cost of that hire. It would not follow that a claimant who never hired a replacement car (e.g. because he was out of the countr at the time or already had a spare) would be entitled to the cost of so doing. His damage would, no doubt, have to be assessed on some other basis, see e.g. the observations of Beldam LJ in Alexander v Rolls Royce Ltd. [1996] RTR 95. But that is not this case.

One may further observe that if a claimant has the use of a hire car but does not have to pay for it, it may be difficult to say that he can recover special damages at all. It may be that he can only recover general damages. That does not, however, mean that such general damages should not be assessed by reference to the reasonable cost of hire. In this case where Mr Bee did actually make use of a hire car, there is every reason why his general damages should be assessed by reference to what Lord Scott referred to as the spot hire charge for a comparable vehicle.

That is particularly so where the only reason why Mr Bee has not himself paid for the use of the hire car is that he has paid a premium to his insurers to cover precisely the events that have happened viz. that his own car has been negligently damaged and that he needs to have his car repaired and to hire another car while such repair is being effected. The fact that he is insured should be irrelevant to his claim. His insurance may have the effect that, because he has not himself paid any hire charges, he is entitled to recover “general damages” rather than any amount he has himself paid out. But the tortfeasor is always protected by the requirement that the claimant can recover no more than the reasonable cost of hiring the necessary replacement.

The  argument could then be made, that as the contractual bailee, the self employed taxi driver used the vehicle for domestic purposes, not just business purposes (assuming he did) that the damaged or destroyed car, is not purely a business chattel and the true measure of loss should reflect the cost of an outside hire, necessary to mitigate the inconvenience of being without a car.

3 comments

  1. Hi – In rta claims, taxi drivers usually rent their taxi.

    if they are not the true owners, how do they then claim the Repair Costs?

  2. Does anyone know the case law in which a Taxi Driver needed a replacement vehicle in a specific colour, to match the fleet colour??

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