Credit Hire: Enforceability and Irving

Where the cost of credit hire is claimed as part of a road traffic claim issues of enforceability are invariably considered by the Court and the Defendant. The matter usually arises after cross-examination of a Claimant who gives evidence that they were told that some other party would pay any such costs before signing the hire contract. Claimants often give simultaneous evidence that they would not have signed the hire contract if they had known they might be liable for any hire charges and that they are wholly unable to pay any such charges if asked. This is despite the fact that the Claimant has bought the claim and pleaded credit hire charges as a head of loss.

This article discusses the May 2018 appeal case of Miss Katherine Ann Irving v Morgan Sindall Plc [2018] EWHC 1147 (QB) which is one of the current authorities on enforceability and which should be considered if it seems that enforceability is going to be raised as an issue at trial. It is one of those authorities a credit hire practitioner should always have to hand.

In Irving the Claimant’s vehicle was assessed as a total loss following a road traffic accident which also caused her a 4-week personal injury. During the period the Claimant was without a vehicle she hired a vehicle using three separate credit hire schemes for a total period 132 days and for a total hire cost of £20,109.60. Cross-examination led to the following questions and answers which are cited in full at paragraph 8 of the judgment:

“Q. What about payment? What did you understand you were liable for in terms of payment in this agreement?

A. I believed at the time that of course there would of course be like charges but those charges would be recovered from the third party insurer with like the accident not being my fault.

Q. So, when you signed this agreement, was it your understanding that the charges would be covered by the third party insurer?

A. Yes

Q. Were you told that by this credit hire company when you signed the agreements?

A. I was, yes…

Q. Now, you say you were told that the charges would be covered by the third party insurer and that may be the case. What would you do, however, if the court were to say well, those charges aren’t going to be paid by the third party insurer? Would you be able to pay the charges yourself?

A. Absolutely not.

Q. Absolutely not. The total charges finished, it went on for quite a significant period of time, didn’t it? The total charges come to over £20,000. Yes? There’s no prospect of you being able to pay that, is there?

A. No, but I thought that obviously, I wouldn’t be in a hire car for that long, I felt because he’d admitted liability, it was a minor accident, it was a minor injury, I thought when I got my cheque for my car within, I don’t know, a few weeks and I would be able to purchase my own and then everyone’s sorted. At the most, honestly, I thought it would be like two months. Maybe that sounds a bit naïve but I’d never been in a road accident before and I thought because he’d admitted liability, I didn’t know I would be in a hire vehicle for 132 days.

Q. Yes. So, if this court today were to say the defendant’s insurance company is not liable to pay those charges, you would be presented with that bill for £20,000. You wouldn’t be able to pay that, would you?

A. Absolutely not.

Q. Absolutely not. So, you say that you were told that the charges would be covered by the insurer. Were you also told that if the claims didn’t succeed against the insurer, those charges would be written off?

A. I was always told that it was a no win, no fee. That, I didn’t honestly, I don’t remember being told what would happen if I didn’t win, what would happen with the charges to be honest.

Q. You mention no win, no fee. Are you saying the hire company mentioned the no win, no fee arrangement?

A. It was the lawyers, Armstrong’s Solicitors, who said that”.

At first instance HHJ Saffman concluded that the Claimant was not obliged to pay the hire charges as a result of the evidence given above, that hers was the only evidence on the point and that the claim for credit hire, therefore, ‘falls at the first hurdle’ as the Court must be satisfied that the Claimant is obliged to pay hire charges in order for them to be recoverable.

On appeal before Mr Justice Turner in the High Court the question of whether the hire charges could be recovered was considered. The Court found that the liability for the hire charges was contingent upon the Claimant successfully recovering damages for the same, and it follows that the Claimant would not have to personally pay if no damages were recovered. but Mr Justice Turner found that the contingent nature of the liability did not mean that damages were not recoverable.

Mr Justice Turner also dealt with the question of impecuniosity and noted that ‘impecuniosity need not amount to penury’. Whilst the Claimant in this case could have raised capital to finance some part of the hire, she could not have done so without exposing herself to serious financial risk. She might for example have increased her credit card limit or sought out loans but in Mr Justice Turner’s view this was not sufficient to ‘bring the claimant outside the parameters of impecuniosity’.

Whilst the case is limited by its facts Irving defines the scope of enforceability arguments where a liability is contingent upon recovery based upon the evidence. Defendants need to note the evidence given by the Claimant as to what they were told prior to entering into the credit hire agreement and should note that enforceability arguments are unlikely to be effective where a contingent liability exists.