Credit Hire - Karl Stevens v Equity Syndicate Management Limited (Court of Appeal)

  • Legal Development 26 February 2015 26 February 2015
  • UK & Europe

Court of Appeal determines how to calculate the basic hire rate under credit hire agreement for a replacement car

Credit Hire - Karl Stevens v Equity Syndicate Management Limited (Court of Appeal)

The claimant’s car was damaged by a negligent driver insured by the defendant. The claimant’s insurers put him in touch with a credit hire company which hired him a replacement car and carried out the repairs on his own car. The issue in this case was the extent to which the credit hire charge incurred by the claimant is recoverable from the defendant.

This is an issue which the courts have tackled in a number of recent cases. Those earlier cases have established the following principles:

  1.  An innocent party must mitigate his loss eg by hiring a replacement vehicle;
  2. He will be able to recover the cost of a replacement vehicle as damages;
  3. In general, he can recover the cost or hiring the replacement vehicle on credit hire terms;
  4. However, if his financial circumstances are such that he did not need to use credit, his damages will be only the basic hire rate of the vehicle;
  5. If he is impecunious though, he will be able to recover the whole of the credit hire rate (provided it was a reasonable rate to pay in all the circumstances).

In this case, the claimant could have afforded to hire a replacement car without the need to use credit. The issue was therefore how to calculate the basic hire rate. That can be a difficult exercise for the courts because credit hire companies routinely provide additional services (such as conducting a claim on the injured party’s behalf) which are irrecoverable as costs but difficult to quantify. Accordingly, the Court of Appeal held that the lowest reasonable rate quoted by a mainstream supplier for the hire of a vehicle of the kind actually hired by the claimant to a person such as the claimant will be a reasonable approximation of the basic hire rate: “It follows that a judge faced with a range of hire rates should try to identify the rate or rates for the hire, in the claimant’s geographical area, of the type of car actually hired by the claimant on credit hire terms. If that exercise yields a single rate then that rate is likely to be a reasonable approximation for the BHR [basic hire rate]. 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”.


  • This Judgment follows several recent decisions which have improved the prospects of those defending credit hire claims

  • It can be said without exaggeration that this judgment is a hammer blow to credit hire companies, who can now expect to recover no more than the lowest reasonable rate charged by one of the main hire companies operating in the particular geographical area. Indeed, the recoverable rate may now be lower than the average of local market rates

  • The common theme running through this and other recent cases is that of reasonableness. Judges have been afforded the opportunity to move away from a technical method of calculation to a more pragmatic approach which reflects the reality of what is being claimed. It is to be hoped that the Supreme Court allow this to continue


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