Our consideration now turns to the second of the two appeals in the conjoined cases of McBride v UK Insurance and Clayton v EUI Limited [2017] EWCA Civ 144 that of Clayton. The case already has a degree of notoriety, for the intemperate language used by the District Judge sitting at first instance:
20. As appears from the transcript of the proceedings, the judge clearly had a sense of anger and frustration about the fact that, despite having been given ample time following case management directions, the parties had not settled the dispute and about what he saw as inefficiency by the solicitors on both sides. However, his conduct of the hearing was not judicial: he went beyond being robust, and was hectoring and offensive and expressed views about credit hire and the insurance industry generally that he would have been better keeping to himself. Apart from what he said about 7 day rates, which I refer to below, it is not necessary to cite specific instances of what he said. My firm view is that, despite his intemperate comments, he did not show any actual or apparent bias against the claimant or in favour of the defendant. It might be said that he was even-handedly offensive.
Alas, such language is not uncommon to those who fight as foot soldiers in the trenches of credit hire litigation. Many members of the County Court judiciary appear to cast a sceptical eye over large credit hire claims with (at best) drily worded comments made when opening a case.
The particular issues which vexed the Court of Appeal were evidential ones: namely given that credit hire claims are inevitably advanced on the basis of a daily rate of hire, and that basic hire rates can vary according to a daily rate, a 7 day, 14 day or 28 day rate, which of the various rates, should be used for the purposes of comparison? Inevitably the longer the period of basic hire used for comparative purposes, the more likely it is to be discounted heavily in price as a quid pro quo for quantity.
The Court of Appeal again reminded itself of the notional nature of this exercise in “stripping out” the irrecoverable elements of credit hire.
95. As a general proposition, Mr Spearman QC is no doubt right that, so far as possible, there should be certainty in this area of the law and of commercial activity, as in many others. However, one should never lose sight of the fact that the “stripping out” exercise advocated by Dimond v Lovell is necessarily an approximate and artificial one because, by definition, the claimant did not in fact hire a comparable car from a mainstream or reputable local car hire company. He actually hired from the credit hire company, so that inevitably the evidence is sought after the event of what rate of car hire could have been obtained, on the hypothetical basis that he had hired from a car hire company instead.
96. It is also the case that, as Aikens LJ noted in [38] of Pattni/Bent (No. 2), the best evidence of which elements should be stripped out of the credit hire rate as irrecoverable would come from the credit hire companies themselves by producing evidence and disclosure of their charging structures. As Kitchin LJ said in Stevens at [36] they do not do so because of the modest size of the claims (and I would add no doubt for other good reasons such as commercial confidentiality). However, given that the credit hire companies do not produce that best evidence and, even though the burden is on the defendant insurer to demonstrate that the credit hire rate exceeds the basic hire rate and thus includes irrecoverable elements, it seems to me that it would be unjust to insist upon the rigorous and exacting approach to rates evidence in credit hire cases for which Mr Spearman QC contends.
97. Furthermore, even if that rigorous and exacting approach were appropriate, which for the reasons I have just given, I do not think it is, I consider it would not be just to require that approach in the present case, which the judge described at [2] of his judgment as a “dog’s breakfast”, clearly a criticism directed at both parties. One consequence of the inefficiency of which the judge was being critical was that the claimant produced rates evidence for the wrong geographical area and then produced evidence for the right area too late. The claimant did not seek to appeal the judge’s ruling refusing permission to adduce that evidence and there would have been no basis for doing so, but it is faintly ironic that it is only because of that inefficiency on the part of the claimant’s solicitors that the judge had no evidence before him of 7 day rates.
The question arose as to what extent “judicial notice” could be applied to adjust BHR rates for a longer period, to reflect non provided rates of a shorter period. “Judicial notice” it should be observed is a concept which is properly deployed so that a judge can assume facts such as Wednesday follows Tuesday, or summer follows spring and is not meant to be a concept deployed to fill a gap properly occupied by evidence.
98. I also agree with Mr Hough QC that the claimant’s case on appeal does involve double standards. Given that it was the claimant’s counsel who invited the judge to take judicial notice or make use of judicial knowledge of the fact that 7 day rates are higher than 28 day rates, which the judge said at [14] of his judgment that he had done, there is an obvious inconsistency, as I see it, in the claimant criticising the judge for then using that judicial notice or knowledge to adjust the 28 day rate upwards.
99. Logically, if, as the claimant contends, the judge should not have made the 15% adjustment because there was no evidence of 7 day rates to support it, there would have been much to be said for the judge using the rates he did have in evidence, the 28 day rates, and taking those as a reasonable approximation of the basic hire rate forthe purposes of the Dimond v Lovell exercise, applying the sanguine approach of Jacob LJ in Bent (No. 1). There was no cross-appeal by the defendant on that basis, so that that is not a live point before this Court, but the point does highlight the inconsistency in the claimant’s argument.
In this case the Court of Appeal sanctioned the use of an “uplift” to reflect the fact that 28 day rates would be less than 7 day rates. This raises the intriguing possibility of a tariff approach now being deployed in credit hire cases, to fill the “evidential gap” left by the inadequacies of basic hire rates reports. It also removes an argument from claimants that such inadequacies should result in the court concluding there is no evidence of an alternative rate before the court because, eg the defendant has only supplied 28 day rates for a claimant who hired a car in total for 27 days.
100. It seems to me that, taking a realistic approach to the manner in which these credit hire cases are handled and tried, the judge was entitled to make the 15% adjustment. He had, as he said at the hearing, twenty years’ experience of credit hire cases and will have seen many instances of the differences between 7 day, 14 day and 28 day rates in the cases he has tried. That was precisely the matter of which the claimant was inviting him to take judicial notice. He will also have been well aware of Pattni/Bent (No. 2), which counsel for the claimant cited to him in her submissions and also of the 12% discount of the 7 day rate to reflect the 28 day rate which the judge at first instance applied, albeit after counsel for the claimant had indicated he would accept a discount of 10-12%, and which was accepted as correct by the Court of Appeal (see [90] of the judgment of Aikens LJ). Mr Hough QC accepted that the judge in the present case could not treat that 12% figure as evidence in this case, but submitted, it seems to me correctly, that it would have been a “sense check” for him as to whether the 15% uplift was reasonable.
101. Mr Spearman QC can, of course, make great forensic play of the point made by the judge both in argument and in the judgment about guesswork, but in my judgment, if the judge had not made all those comments but had just made the adjustment to reflect the higher rate a car hire company would charge for a 7 day rate rather than a 28 day rate, of which the claimant had asked him to take judicial notice, drawing on his own considerable experience of credit hire cases, he could not have been criticised. It seems to me that, despite his colourful comments about guesswork, in arriving at the 15% upward adjustment, he must in reality have been drawing on his considerable experience of such cases and the judicial knowledge to which he had referred in the previous paragraph of his judgment that you pay more for a 7 day hire than for a long term hire. Accordingly, whilst the judge can be legitimately criticised for his conduct of the hearing, I do not consider that he can be criticised for making the 15% adjustment which he did.
The Court of Appeal also moved swiftly to “nix” arguments over the availability of stand alone insurance products to reduce an excess to “nil”. Again, in a move which cuts against the logic of Lagden the fact that an individual claimant might be wholly ignorant of such products and their availability was of no significance: the test is objective and focussed on “stripping out” irrecoverable benefits.
102. Turning to the 10% adjustment he made in relation to the nil excess, it emerges from the transcript of the hearing that the judge’s various comments about guesswork were made in the context of the 7 day/28 day rate point, rather than in the context of the nil excess. In relation to the latter point, once he had rejected the evidence of the quotation from Questor Insurance, the judge only had basic hire rates from mainstream car hire companies which would not provide a nil excess, no doubt because these were prestigious cars (apart from Europcar (whose excess reduction was subject to significant exclusions) and Thrifty, whose car, the BMW 330, was not as prestigious as the cars the claimant hired from AEL). Against that background, the claimant was contending that there was no proper comparable to the credit hire rate, so that the credit hire rate should be recoverable in full. In circumstances where it was apparent that the AEL daily rental charge of £355 was considerably in excess of the highest basic hire rate in the range (Hertz at £168.35, which the judge took, this case having been decided before Stevens), demonstrating that there were probably irrecoverable elements in the credit hire rate which required stripping out, the judge was entitled to conclude that it was not just or correct in principle for the credit hire to be recoverable in full, for the reasons I have given in relation to the McBride appeal.
103. If the judge had engaged in the separate assessment of the reasonableness of taking out a nil excess with a credit hire company which I have said should take place in cases such as the present where the car hire companies from which basic hire rates have been obtained do not offer a nil excess, he would (on the basis that he had rejected the Questor evidence) have had evidence of: (i) the £12 per day charge by Thrifty to reduce a £750 excess to zero, albeit for a car which was not as prestigious as the ones he hired from AEL and on terms where the CDW could be withdrawn at the discretion of the car hire company; (ii) the £14 per day charged by Europcar to reduce its excess from £1,250 to zero (albeit subject to significant exclusions); and (ii) the £17.50 per day charged by AEL to reduce a £1,750 excess to zero. In those circumstances, he might well have concluded that the latter was reasonable and awarded it. As it is, the figure he took of 10%, equivalent to about £17 per day, was closely parallel to the AEL rate.
104. Mr Spearman QC submitted that it was not appropriate to make a comparison with the AEL rate which was part of a package or to say that it represented what a hypothetical claimant would do, given that it could not be bought separately. However it seems to me that, given that the exercise is a hypothetical and objective one designed to ascertain what if any elements of the charges of the credit hire company are irrecoverable, it is permissible to have regard to the charge by the credit hire company for a nil excess as evidence of the cost of a nil excess. Depending on the other evidence, it may transpire that the credit company’s charge for a nil excess is a reasonable one and thus recoverable in full.
105. In that context, I should add that, although Mr Hough QC quite rightly accepted in the present case that he could not rely on the evidence of the quotation from Questor Insurance, I consider that where there is evidence of the availability of an excess elimination insurance as a stand-alone product from Questor or other providers such as Insurance4carhire.com, the Courts should admit and accept such evidence as evidence of the reasonable cost of obtaining a nil excess, provided of course that the quote obtained from such a provider is for a car which is comparable with the one hired from the credit hire company and is for the same period as the period of actual hire from the credit hire company. Certainly the Court should not reject such evidence because the judge or the claimant has not heard of the product, as the district judge did here. The exercise is an objective one and such evidence should be admissible irrespective of the subjective knowledge or lack of it of the Court or the claimant. Information about the availability of such products can, in any event, be readily accessed on the internet. It is apparent that, whilst some judges in the County Courts have not been admitting such evidence, others have: see the findings of the judge in one of the cases appealed in Dickinson v Tesco [2013] EWCA Civ 36; [2013] RTR 27 referred to at [26] of the judgment of Aikens LJ. The admission and acceptance of evidence of these stand-alone products should be the norm.
106. In the circumstances, although, as I have said, the conduct of the hearing by the judge in the present case is open to criticism, on analysis, I consider that the adjustments he made in respect of the 7 day rate and the nil excess are justified. It follows that the appeal in Clayton must be dismissed.
Thus in Clayton the analysis that a “nil” excess is not a variable which goes to whether a car hired on BHR terms is an appropriate comparator but rather a separate element of loss reaches its apogee. Even if the defendant does not put forward evidence of a standalone insurance product, it can point to the CDW charge levied by the credit hire company itself, as evidence of the cost of reducing the excess on a BHR car to “nil”.