The recent case of Karl Stevens v Equity Syndicate Management Limited, [2015] EWCA Civ 93 focused on how hire rates should be determined in credit hire cases. The decision that the hire rate to apply is the lowest reasonable rate is a significant victory for insurers.

The key points arising from the decision are:

  • The Basic Credit Hire Rate should be the lowest reasonable rate of the mainstream suppliers.
  • The reasonableness test will allow courts discretion when considering a range of credit hire quotes.
  • It is determined on an objective basis using standard, mainstream quotes as the default.
  • If there are any relevant factors which would have a bearing on the hire quotes then they should be fully detailed by the claimant; such as: the claimant’s age when they hired the replacement vehicle; any history of motoring offences; or having had motor insurance refused or cancelled.
  • Given the difficulty in hiring precisely like for like vehicles, General Terms of Agreement rates may be a useful guide to reasonable rates.

Karl Stevens v Equity Syndicate Management Limited [2015] EWCA Civ 93

The judgment

The Credit Hire Organisation (CHO) argued that the highest figure in a range of hire rates should be looked at first and if that rate is the same as, or higher than the claimed credit hire rate then the claimed rate should be treated as the applicable basic hire rate (BHR).

For example, if credit hire quotes obtained by the parties are between £20 and £60 per day and £50 was the credit hire rate claimed, then £50 per day should be applied as the basic hire rate for the period of hire.

The court did not agree. The court determined that a judge faced with a range of hire rates should try to identify the range of hire rates in the claimant’s geographical area for the type of car hired by the claimant. If that exercise yields a single rate then that rate is likely to be a reasonable approximation of the BHR. If, on the other hand, it yields a range of rates then a reasonable estimate of the BHR may be obtained by identifying the lowest reasonable rate quoted by a mainstream supplier or, if there is no mainstream supplier, by a local reputable supplier.

Objective test

The court also provided clarification that the BHR should be determined on an objective basis and any factors that shed light on the position of the credit hirer should be fully detailed in the particulars of claim. For example, if the claimant was aged 24 or under, or had previous motoring convictions, making it more costly to hire a vehicle, then the defender should be given fair notice of that.

Impact on existing/future claims

The wide variety of vehicles now in the marketplace make it difficult to get quotes for hiring exactly the same type of vehicle and CHOs may use this to argue in favour of higher quotes, which would add uncertainty. Adopting an objective approach, as generally encouraged by the court here, would suggest that using the GTA groupings is a possible solution.

The ’lowest reasonable rate’ finding has been grabbing the headlines, but it is the objective test approach to the BHR that has the potential to resolve disputes involving waivers or extra costs and the reasonableness of them. CHOs should provide clarity on why any extra costs apply to a hire (for example a hirer under 24 years of age), allowing defenders the opportunity to consider the reasonableness of the costs. Overall, this case helps clarify the BHR although the wider impact of the decision, and the subtleties of the objective test, will take time to develop.