Comparators considered part 2

The decisions in McBride v UK Insurance and Clayton v EUI Limited [2017] EWCA Civ 144 in a sense represented a Springsteen-esque “last chance suicide drive” by a credit hire company desperate to escape the consequences of the Stevens decision, hence an attempt to persuade the Court of Appeal, that Stevens was wrongly decided as it was inconsistent with the earlier authorities.

That claim failed, as it was almost certain to do: the view of the Court of Appeal was that Stevens represented a necessary updating of the position in the internet age, where with price comparison websites and Google, it was relatively easy to obtain a multitude of quotes from car hire companies and hence justification in taking the lowest quote as representing what was reasonable.

In truth, there perhaps did not need to be a justification. It has never been the case that the courts have assessed the measure of damage based upon the reasonableness of what people have done, but rather judged matters by the reasonableness of what they ought to have done.

That is the essence of a mitigation of loss point.

Self evidently a party will not have taken steps which would have reduced the loss and the question is always objectively what should they have done? In credit hire, for example, many claimants would not in fact have hired a car at all, unless it was provided on credit hire terms.

Although pecunious, they would have coped with their transport needs by using the bus, taxis and lifts from family or friends, rather than spend hundreds of pounds per month on hiring another car. But given that they did hire a car, albeit on credit terms, the exercise of stripping out irrecoverable benefits is an objective one, whereby the rates of comparative unhired, never to be hired cars, are simply an evidential tool to determine what the true reasonable rate is.

In McBride an issue that was at the forefront of the appeal was how the question of an appropriate comparator was to be approached. All credit hire companies will provide a variety of waivers, for which they levy fees, to reduce the insurance excess on a hire car to nil. Conversely the quotations for cars hired as part of the basic hiring rate comparison exercise will often come with a chunky excess, which cannot be reduced to nil using the notional hire company’s own waivers.

The question that then arises is whether to compare a credit hire car with a nil excess and a basic hire car with a £500 excess is to seek to compare apples with oranges, so that as a matter of evidence unless the defendant can demonstrate an appropriate alternative with a nil excess, he will have failed to discharge the evidential burden of proof of a viable alternative rate.

Thus we can see in the first of the appeals, the argument developed in the following way:

68. I agree with Mr Turner that the inability to obtain a nil excess from a mainstream supplier or reputable local supplier of hire cars in circumstances where, as in the present case, the evidence demonstrates that there is a difference between the credit hire rate before the application of any nil excess and the basic hire rate without the availability of a nil excess, which demonstrates that the credit hire rate includes the irrecoverable elements identified in Dimond v Lovell, should not as a matter of principle, lead to the credit hire company recovering the credit hire rate in full. That would erode Dimond v Lovell and would in practice lead to a further exception to the general principle laid down in that case. Pursuant to that general principle, in a case such as the present, the Court should ensure that the irrecoverable elements of the credit hire evident from that difference in rates (ignoring the nil excess) are stripped out. It should not allow the fact that the credit hire company offers a nil excess on prestige vehicles which other car hire companies are not prepared to offer to be used as a smokescreen to enable credit hire companies to recover their charges in full, notwithstanding that a comparison of rates ignoring the nil excess demonstrates that there are such irrecoverable elements.

69. It was no doubt in recognition of the fact that blanket recovery of the full credit hire in all cases where the evidence was that a nil excess could not be obtained from a mainstream or reputable local supplier would provide the credit hire companies with an unwarranted windfall that Mr Williams QC accepted that in cases where the evidence was that the excess could not be reduced to nil but only to some modest amount, it might very well not be reasonable to hire through a credit hire company and, accordingly, the full credit hire rate should not be recoverable.

70. That concession suggests one of the ways in which the anomaly of the credit hire companies recovering the credit hire rate in full even where there is evidence that it includes irrecoverable elements, merely because the car hire companies will not provide a nil excess, might be addressed. However, it seems to me that there are two potential problems with approaching the nil excess issue on the basis that there will be cases where it is not reasonable to hire from a credit hire company. The first problem would be where to draw the line. Mr Williams QC accepted that if the excess available from the car hire company was modest, then it might be possible to say that it was not reasonable to insist upon hiring on credit hire with a nil excess. However, in the case of prestige car hire such as the present case, even the reduction to a modest excess in Mr Williams QC’s terms may not be possible precisely because where someone is hiring a valuable high performance vehicle, the car hire companies want the hirer to “have some skin in the game” as Mr Jonathan Hough QC put it for the defendant in Clayton. Even in such cases, it remains the position that the credit hire rate includes irrecoverable elements which should be stripped out.

71. The second problem is that the suggestion that, in certain cases, because of this nil excess issue, it may not be reasonable to hire on credit hire with a nil excess does seem to me to run contrary to the conclusion of the House of Lords in Dimond v Lovell that it is reasonable for a claimant who loses the use of his or her car as a consequence of an accident for which the defendant is to blame to hire a car from a credit hire company. It also runs contrary to the conclusion of Morison J that it is reasonable for a claimant to reduce the excess on a hire car to nil for the reasons he gave in Bee v Jenson, with which I agree. In my judgment, it is simply not principled to conclude that it is unreasonable to hire a car from a credit hire company with a nil excess, merely because mainstream car hire companies will not provide a nil excess.

72. Another way of addressing the nil excess issue which I consider is far more principled and which has the elegance of simplicity is the approach which Mr Turner advocated, of treating the availability of a nil excess and the reasonableness of the sum claimed in respect of it separately from the comparison between what might be described as the “default” credit hire rate with, in this case, the £2,500 excess and the basic hire rate with a similar excess. It may not be entirely apt to describe it as an optional extra in the same way as collection and delivery, but however it is categorised, it seems to me that the approach of treating it separately is the correct one, in cases where the terms of hire available from car hire companies do not include a nil excess.

73. Mr Williams QC submitted that this approach was not open to the Court because the nil excess is treated as part of the terms of hire and is thus part of the comparable BHR. He referred the Court to [27] and [29] of the judgment of Kitchin LJ in Stevens and [100] to [103] of the judgment of Aikens LJ in Dickinson. He submitted that, absent any evidence of an available nil excess, the defendant had simply failed to make an appropriate comparison with the credit hire rate and should fail on the burden of proof.

74. I cannot accept that submission. Whilst a number of cases proceed on the assumption that the cost of nil excess forms part of the credit hire rate and of the comparable basic hire rate, none of those cases has had to grapple with the specific problem which faces the Court in the present case. It certainly could not be said that any case had determined that, as a matter of law, the nil excess has to be regarded as part of either the credit hire rate or the basic hire rate for the purposes of the comparison exercise.

75. It is striking that, in Stevens, AEL itself was contending for a comparison between the credit hire rate and the hire rate quoted by Europcar with a £500 excess on the basis that that excess could be insured separately (presumably with Questor or or a similar specialist provider) and the combined figure would demonstrate that the credit hire rate did not include irrecoverable benefits: see the argument of Mr Butcher QC recorded in [29] of the judgment of Kitchin LJ. This demonstrates, as I see it, that the nil excess can be treated separately and that, where it suits them, credit hire companies are content to do so.

76. Accordingly, in my judgment, where a nil excess is not available from car hire companies, the correct approach is to treat the nil excess separately from the comparison exercise between the default credit hire rate and the basic hire rate with an excess. It will almost invariably be the case that it was reasonable for the claimant to seek a nil excess for the reasons given in Bee v Jenson and, on that hypothesis, the only question for the Court will be how much should be recoverable as the cost of purchasing a nil excess.

77. Given the availability of stand-alone products which offer the elimination of the insurance excess on a hired car for a relatively modest daily rate, provided by companies such as Questor and, it may well be that in a particular case the Court may decide that it was not reasonable to purchase the nil excess offered by the credit hire company at a much higher rate (in the present case AEL’s cost was £10 a day plus VAT against the £3.99 a day (inclusive of VAT) offered by This is particularly so because the terms and conditions and the rates for these products are readily available over the internet. Whether it was reasonable to accept the credit hire company’s rate or a claimant should have taken out such a stand-alone excess elimination insurance will depend upon the facts of the particular case, but it should certainly not depend upon the happenstance of whether the judge has heard of the product, as appears to have been the case in Clayton. I return to this issue in the context of the appeal in Clayton below.

78. On the basis of the evidence in McBride, I do not consider that the defendant would have been able to establish that the product offered by was an appropriate alternative to AEL in respect of the nil excess in the present case. The terms and conditions for the product which the defendant’s insurers produced themselves, which are closest in time to the actual period of hire, indicate that vehicles valued at over £50,000 would not be insured. Even allowing for the fact that the car hired by the claimant had a value when new of about £70,000 which would have reduced as it was 14-20 months old at the time of the hire, its value was still greater than £50,000. Furthermore, the terms and conditions suggest that the maximum hire period was 62 days. It was incumbent on the defendant to produce evidence from that it would have insured a Jaguar XK valued at around £60,000-£65,000 for a period of 72 days in November 2012 and it has simply not done so. Accordingly, on the facts of this case, the only viable nil excess cover on offer was that provided by AEL at £10 per day and it was reasonable for the claimant to take out such cover.

79. I should add that, in cases where the mainstream or reputable local car hire companies in relation to which BHR evidence is obtained in any particular case do quote for a nil excess, it should not be necessary to engage in the separate assessment exercise in relation to the nil excess which I have described. This is because any difference between the cost of the nil excess charged by the credit hire company and the rate quoted by the car hire company will be brought into account because only the lowest reasonable basic hire rate (including in such cases the cost of a nil excess) will be recoverable, on the assumption that the defendant has demonstrated that this is less than the charges of the credit hire company.

80. I was not impressed by Mr Turner’s submission that the appeal on this point should be dismissed because the claimant’s counsel failed to pursue the point with sufficient vigour or to seek clarification after delivery of the judgment. The fact remains that the judge erroneously failed to address the nil excess point in his judgment when he came to choose the claimant’s £225 daily rate as the comparator because he overlooked that all three of those rates included a £2,000 excess. In the circumstances, he should have made an appropriate adjustment to reflect the cost of excess elimination included in what AEL offered.

81. In the circumstances, whilst the appeal on ground 3 is dismissed because it was not appropriate or just for AEL to recover the full credit hire rate merely because the comparable basic hire rates did not include nil excess, I consider the appeal on ground 3A should be allowed, and an appropriate reasonable upwards adjustment of the damages recoverable to reflect the cost of the nil excess would be £10 per day plus VAT.

These passages are interesting, as within them the Court of Appeal has refused to treat the “nil” excess of a credit hire car as part of a package of terms and conditions, which falls to be considered against the package of terms and conditions pertaining to a basic hire car. Instead it has treated the nil excess, almost as a separate head of loss.

The conceptual difficulty is readily apparent. When someone mitigates their loss they do not do so by obtaining another car: they do so by making a contract to obtain another car. A fair comparison would require all the terms and conditions to be considered in  the round to determine whether there is a congruity in the terms.

Conversely it might be said that given that this exercise is a notional one anyway, concerning hypothetical unhired cars, primacy should be given to the need to strip out the irrecoverable elements per Dimond in order to arrive at the proper measure of loss.

Logically such an analysis sits uneasily with the majority decision in Lagden which grounded the impecuniousity principle in the particular, subjective circumstances of a claimant and what he or she could reasonably be expected to do in the aftermath of a car accident. It might be thought such a claimant would almost inevitably elect for a nil excess option when selecting a reasonable contract of hire to mitigate their loss.

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