Another old chestnut that arises from time to time, are credit hire claims involving taxis or private hire vehicles. A useful addition to the case law is the recent decision of Hussain v EUI [2019] EWHC 2647 (QB) which provides some guidance on the quantification of claims for credit hire charges in such instances and in particular to what extent the true measure of loss should be a claim for loss of profits as against a usually significantly more expensive claim for the cost of hire.
Interestingly, the judgment does not deal with all of the case law on when the cost of hire may be recovered in respect of profit earning chattels: in particular the observations in the case of Beechwood Birmingham Ltd v Hoyer Group UK Ltd [2010] EWCA Civ 647 where cost of hire was discussed in the context of the hire of replacement ships:
45. Thus the net result of the shipping cases can be stated as follows. Where a substitute vessel is hired in to fulfil the role of the damaged vessel, the costs of hiring in are recoverable. Where the claimant’s fleet is sufficient to provide a standby, then an award may be made based upon the expenses of keeping that standby, which means not only the expenses of daily upkeep but something representing the amount of capital employed in having another ship available. Where there is no substitute ship hired and no standby ship kept available the damages awarded are generally to be calculated on the basis of interest on the capital value of the damaged ship at the time of the collision.
46. Accordingly, as it seems to me, Lord Scott’s dictum (in Lagden v O’Connor [2004] 1 AC 1067 , para 76) in which he referred to The Susquehanna [1926] AC 655 as justifying his observation that, for loss of use *1691 of a damaged motor vehicle, the fair approach to quantum is to award a sum based upon the spot rate hire charge for a comparable vehicle, requires to be read in and limited to the context in which it was uttered, namely that of a private motorist claiming in respect of a substitute vehicle hired by him during the period of repair.
47. That said, in my view, the common law principles which have been developed and elaborated in cases of collisions at sea are in appropriate cases applicable to corporate claims for loss of use in respect of motor vehicles damaged in collisions on land.
What the decision of Pepperall J does do, is point to the need to provide good quality evidence through disclosure and relevant witness evidence, to show why a taxi driver earning less than £10,000 per annum might reasonably hire a replacement vehicle, even though the daily cost of hire might dwarf any claim for loss of profits.
As he noted:
16. In my judgment, the following principles apply to claims for financial losses suffered by self-employed drivers when their vehicles are off the road pending repair or replacement:
16.1 The starting point is that the professional driver’s vehicle is a profit-earning chattel and that the true loss is the loss of profit suffered while the damaged vehicle is reasonably off the road pending its repair or replacement: Commissioners for Executing the Office of Lord High Admiral of the United Kingdom v. Owners of the Steamship Valeria [1922] 2 A.C. 242; Clerk & Lindsell on Torts (22nd Ed), para. 28-121.
16.2 Of course, a claimant might choose instead to hire a replacement vehicle in order to be able to continue trading. Properly analysed, this is a claim for expenditure incurred in mitigation of the primary loss: Lagden v. O’Connor, at [27]; Umerji v. Khan [2014] EWCA Civ 357, [2014] R.T.R. 23, at [37]. Like any other expense incurred in a reasonable attempt to mitigate a claimant’s loss, such hire costs are prima facie recoverable. Where, for example, the claimant successfully mitigates his or her loss by hiring a replacement vehicle at a cost lower than the hypothetical loss of profit, the court will award the lower hire charges.
16.3 A claimant cannot recover any additional loss suffered by reason of a failure to take reasonable steps to mitigate his or her loss: British Westinghouse Electric & Manufacturing Co. Ltd v. Underground Electric Railways Co. of London Ltd [1912] A.C. 673, at 689; Dunkirk Colliery Co. v. Lever (1878) 9 Ch. D. 20, at page 25.
16.4 Claimants cannot, however, be expected to weigh precisely their losses. In Banco de Portugal v. Waterlow & Sons Ltd [1932] A.C. 452, Lord Macmillan observed at page 506:
“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures. merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”
“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures. merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”
16.5 Accordingly:
a) where a claimant acts reasonably in hiring a replacement vehicle at about the same cost as the avoided loss of profit, the court will not count the pennies and hold the claimant to the hypothetical loss of profit if it turns out to be a little lower; but
b) where the cost of hire significantly exceeds the avoided loss of profit, the court will ordinarily limit damages to the lost profit.
He then went on to state:
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.
It may be that 16(a) encapsulates the Beechwood approach: it also might be that the High Court judge is re-categorising the concept of need as simply an instance of reasonableness when considering mitigation of loss. It perhaps doesn’t really matter, as the judgment is principally important because it establishes that most owner/drivers of taxis, without savings or access to credit, will succeed in recovering the cost of hire from the replacement provider, assuming they have the financial documents and put forward a comprehensive witness statement, dealing with the issues noted above.