In the back of my cab

I have argued credit hire claims in respect of taxis, or plated private hire vehicles, on many, many occasions over the years both for and against claimants. There is always something new in this subspecies of credit hire claim. For many years, insurers had difficulties getting BHR evidence in order to prima facie establish a rate of hire that was lower than the contractual rate.

As that gap in the armoury was plugged, the growing tendency for drivers to work through Uber, or other similar apps, provided further ammunition to defend claims, as drivers income was routinely recorded, itemised and reduced to easily disclosable digital form, rendering untenable the blurred, soft focus approach to maintaining accounting records, which was habitual in the industry.

Historically, like fish and chip shops, an industry that dealt primarily in cash, the move to cashless payments has further accelerated as a result of the pandemic, creating yet more disclosable bounty, rendering the prospects of a plea of impecuniousity harder to sustain.  Defendants will/should always scrutinise particularly carefully the financial disclosure in such claims, as there are usually plenty of currants in that particular bowl of plum duff.

On the other hand, sometimes points, arise which may be legally dubious, but which reflect a certain curious orthodoxy in credit hire claims. I was reading today, yet another case where at trial, a defendant had established that a credit hire agreement was “unenforceable” (sic) through misrepresentation and defeated the credit hire claim. The counter arguments that a hire agreement subsists unless and until voided by court order, that the claimant had probably affirmed the agreement, and that in any event the claimant would still be liable to make counter restitution seem not to have troubled the court.

In the taxi sphere one of the more novel arguments that I have read recently flows from consideration of the exceptions to the general principle that in a taxi case, the starting point for the measure of loss is not the cost of replacement hire, but a claim for loss of profits. This starting point was established authoritatively, in so far as is it was ever in doubt by the case of Hussain v EUI [2019] EWHC 2647 (QB). In that case it will be remembered at paragraph 16 the court stated that the cost of hire may still be recoverable in certain circumstances, three in number:

16.6 Even where the cost of hire significantly exceeds the avoided loss of profit, the claimant may still succeed in establishing that he or she acted reasonably:
a) First, any business must sometimes provide a service at a loss in order to retain important customers or contracts. For example, a chauffeur might not want to let down a regular client for fear of losing her. Equally, a self-employed taxi driver might risk being dropped by the taxi company that provides him with most of his work. Properly analysed, these are not, however, exceptions to the general rule since in such cases the claimant is really saying that, but for his or her actions in hiring a replacement vehicle, the true loss of profit would not have been limited simply to the pro rata loss calculated on the basis of the period of closure but that future trading would itself have been compromised. Again, claimants are not required to weigh these factors precisely, and a claimant who reasonably incurs what at first might appear to be
disproportionate hire costs in order to avoid a real risk of greater loss, will usually be entitled to recover such hire costs from the tortfeasor.
b) Secondly, many professional drivers use their vehicles for both business and private purposes. Where such a claimant proves that he or she needed a replacement vehicle for private and family use, a claim for reasonable hire charges, even if in excess of the loss of profit that was avoided by hiring the replacement vehicle, will ordinarily be recoverable in the event that a private motorist would have been entitled to recover such costs.
c) Thirdly, it might be reasonable for a professional driver to hire a replacement vehicle even though the cost of doing so was significantly more than the loss of profit because he simply could not afford not to work. The tortfeasor takes his victim as he finds him and impecunious self-employed claimants cannot be expected to be left without any income and forced to look to the state to provide for their families on the basis that they might eventually recover their loss of profit some months or years later.

So far so unexceptional, but I was intrigued to see in the case of Mohammad Khaliq v EUI Limited the suggestion that the second exception means, that instead of recovering the cost of the plated taxi replacement, the claimant gets loss of profits plus the cost of hiring an ordinary unplated vehicle for private use. Thus in that case the District Judge concluded:

10. There is a difference of opinion of the interpretation of that paragraph by counsel on either side. Regrettably I do not concur with Mr Moffatt’s interpretation. It seems to me that what the paragraph means is this; (i) the basic claim is for loss of profit (ii) in the event that an individual such as this claimant requires a vehicle for private and family use, (and nobody denies that he does), then he would be entitled to hire a vehicle (iii) the level of the vehicle which he may hire is limited to that which would be appropriate for a private motorist.

11. There is not a choice simply because he is a taxi driver. He can choose to hire a taxi instead of hiring a similar vehicle for private use. He is entitled only to hire a vehicle suitable for his private needs. The Claimant would technically have had an additional claim over and above that for loss of profit, but he has not pursued such a claim.

I have not seen this argument adopted in any other case, but then I only see a small cross section of cases. It does seem to me that the argument may struggle for a number of reasons. First, the starting point for the quantification of loss in a claim for damage to a purely profit earning chattel is the claim for a loss of profits. But credit hire claimants will spend more, hiring a replacement vehicle in mitigation of the loss, than the amount of the loss. But as a matter of law, such a claimant may recover the costs of mitigation per the second rule of mitigation: McGregor on Damages at paragraph 9-103:

Moreover, the corollary goes further and allows recovery for losses and expenses reasonably incurred in mitigation even though the resulting damage is in the event greater than it would have been had the mitigating steps not been taken. This general principle may be said to be akin to, and even a part of, the rule, met with in remoteness of damage, that a claimant’s intervening act reasonably taken to safeguard their interests, whether taken in the “agony of the moment” or not, does not relieve the defendant of liability for the resulting loss. This further dimension of the corollary indeed represents the second of the three rules of mitigation as put forward in this text. It should be noted that in applying to the rules, which he quoted, his analysis of mitigation in terms of causation Robert Goff J in Koch Marine Inc v D’Amica Società di Navigatione, The Elena d’Amico applied the analysis to the second rule as much as to the other two, and it is considered that this is of no greater use as an exclusive test here than it was found to be in relation to the central first rule. The test for recovery incorporates causation simply by asking whether the act or omission which caused the increased loss was a reasonable step for the claimant to take.

(emphasis added)

Secondly paragraph 16 of Hussain is clear that it is giving in context three examples in the context of a damaged taxi, where the second law of mitigation will apply so that the actual cost of the mitigation measures is recoverable. Hence the opening sentence of paragraph 16 which is concerned with the reasonableness of the actions of a claimant. Thus paragraph 16.6(b) read in this context is an example of when the court will allow the cost of the hire actually incurred to be recoverable, and this sum is in place of, rather than in addition to, the claim for loss of profits which has been avoided.

Thirdly there is no support in the wording of paragraph 16.6(b) that in the scenario where a claim is brought in respect of a chattel that was used both for profit earning and social and domestic purposes, there is some formula that the measure of damages awarded is loss of profits+BHR for a private vehicle. Those words are simply absent. And for good reason, as the paragraph was formulated in the context of the recovery of costs actually incurred, by way of mitigation in place, of potential lost profits, whose loss has been avoided. The paragraph is not concerned so much with measure of the initial loss, but rather recovery of the cost of mitigation.

Fourthly, the wording “in the event that a private motorist would have been entitled to recover such costs” directs the court’s attention not to applying a formula of loss of profits+basic hire rates, but rather to recovering in place of the loss of profit, the reasonable hire charges that a private motorist would be able to recover. This means that they would be the reasonable rates for an equivalent car hired in place of the destroyed chattel. The court must then consider (i) what would be an equivalent car and (ii) what would be a reasonable rate.

As ever credit hire cases remain the gift that never stops giving: even points apparently settled, can have new and surprising twists to them.

One thought on “In the back of my cab

  1. Andrew, if we disregard the District Judges suggestion that loss of profit is recoverable in addition to BHR, is it your opinion that, in the case of a Claimant who utilised his vehicle for taxi + SDP, the correct measure of loss is still mainstream basic hire rates that an ordinary private motorist would have hypothetically availed themselves of (Avis, Budget, Europcar, Sixt, et al), as opposed to taxi basic hire rates (Cabmate, Otto Car, Solis Cars, et al)?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.