The wall

Sometimes in credit hire litigation a new and interesting point is raised, or a new riff upon an old melody. But some points just come round and round, like a needle stuck in a groove in an old style 45.

One such point is the argument that a claimant’s liability to pay her credit hire charges can be vitiated by misrepresentations made to her by agents of the credit hire company. The usual patter is that she is being given a “free car”, or that she will “never have to pay the charges” at the time she makes the credit hire agreement.

Notwithstanding this gross simplification of the true contractual position, she signs the agreement, doesn’t bother to read the witness statement which touches lightly upon the making of the credit hire agreement, and then confesses all, under a terrier-like cross examination by junior counsel, bent on extracting a confession. Such zeal is usually misplaced however.

The starting point is that a person who signs a written agreement is bound by the terms of that agreement, whether she understands it or not, or whether she even reads it or not. This is the “signature rule” and is a legal principle of very long standing traceable at least to L’Estrange v F Graucob [1934] 2 KB 394. 

It also trite law that a misrepresentation about the terms of a contract does not make that contract void, but rather voidable. However a misrepresentee does not have an absolute right to rescission of the contact: a court order is required. The right to rescind can be lost: through effluxion of time, or affirmation or a number of other ways.

As Dyson LJ (as he then was) noted in Islington London Borough Council v Uckac [2006] EWCA Civ 340

15. A contract may be voidable inter alia for misrepresentation. A contract which is voidable exists until and unless it is set aside by an order of rescission made by the court at the instance of a party seeking to terminate it or bring it to an end. A representee who has been induced by misrepresentation, whether fraudulent, negligent or innocent, to enter into a contract with the representor has, on discovery of the true facts, a right of election: he may affirm or disaffirm the contract: Halsbury’s Laws of England , 4th ed, vol 31 (2003 reissue), para 784. If the representee affirms the contract, then he loses his right to rescind and the contract continues to have full force and effect. If he disaffirms and seeks to bring the contract to an end, the court may make an order of rescission, but in some circumstances will refuse to do so. If the contract is rescinded, then the contract is avoided ab initio: it is treated as if it never had effect. But that is not to say that, until it is rescinded, it does not have effect. None of this is controversial law. But it needs to be emphasised, because it is important to have in mind the fundamental difference between contracts which are void and those which are voidable.

(emphasis added)

It therefore follows that the credit hire agreement stands, unless and until proceedings are taken by the claimant against the credit hire company to rescind the agreement. The credit hire company will not be a party to the proceedings before the court  and so can not be bound by the findings made by the court nor would they even be admissible in evidence in any proceedings between the claimant and the credit hire company: see the Secretary of State for Trade and Industry v Bairstow [2003] 3 WLR 841 which upheld the rule in Hollington v F.Hewthorn & Co.Ltd [1943] KB 587

Moreover, the argument that failure to understand a credit hire agreement, or that the effect of the agreement may be vitiated through misrepresentation or nullified through the creation of a collateral contract has been consistently rejected by the appellate courts in a series of cases.

In Clark v Ardington and other appeals [2003] Q.B. 36 the Court of Appeal observed:

These conclusions make it unnecessary to consider various alternative ways in which Mr Milligan put this part of Helphire’s case. They mean also that we allow the appeal in Dennard v Plant . In Clark v Ardington Electrical Services however there is the further point about intention to create legal relations. Although she signed the Helphire agreements and received the policy schedule Mrs Clark was unaware of what she had signed, believing that the hire car had been provided as a courtesy car by her motor insurers. She made the claim on the policy by signing the letter from the solicitors “so as to have nothing further to worry about”. We think these facts demonstrate that Mrs Clark did sign up to the scheme. The fact that she did not understand that this is what she had done because she did not read the documents she signed is not to the point. Looking at the matter objectively we think there can be no doubt that there was a mutual intention to create legal relations in Mrs Clark’s case. It follows that we allow the appeal in her case as well.

In Bee v Jenson [2007] EWCA Civ 923where 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.

Most recently in the case of Irving v Morgan Sindall PLC [2018] EWHC 1147 (QB) Mr Justice Turner found on the particular issue of whether assurances provided by a credit hire company to a claimant that she will never have to pay the outstanding sums out of her own pocket, that such assurances did not detract from a claimant’s contingent liability at all at paragraph 25:

It follows that I am satisfied that the judge was wrong to conclude that the assurances given to the claimant, even taken at their highest, were such as to compromise her claim for credit hire charges against the defendant and so the appeal on this ground is allowed. I ought, however, to note in passing that the judge at first instance was giving an ex tempore judgment and those appearing before him had not thought fit to burden him with reference to any authority on the point.

But many credit hire cases are decided on the small claims track.

If this point is taken and succeeds at first instance, is there any point in mounting an appeal, where the “no costs” rule, largely applies, meaning the costs of the appeal may consume the damages that might be awarded on appeal?

Normally, per rule 27.14 CPR the only recoverable costs are court fees and transcript fees. But the court may order costs under rule 27.14 CPR where unreasonable conduct can be demonstrated.

Defendants are usually an insurance company or indemnified by insurers. The insurers are professional litigants. They will be represented by highly experienced solicitors who know or must be taken to know the law. Yet sometimes the relevant authorities are not brought to the court’s attention. Why this may be, I do not know. But the court’s attention should be brought to the authorities, such as Clark, or Bee, or Irving. A failure to do so might be considered unreasonable conduct. An application for the costs of the appeal might be made accordingly.


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