Hiring vehicles – Caselaw update

08 April 2024

Hire – Recent Case Law

Below is a roundup of some recent cases concerning hiring vehicles.

Armstead v Royal and Sun Alliance Insurance Company Limited [2024] 2 W.L.R. 632

In this case the Appellant had initially been involved in a collision. As a result, they decided to hire a car from a hire company (“H”) for the interim period. The hire agreement was made on H’s standards terms and included an obligation if the hire car was damaged for any reason and became unavailable for hire, the appellant would have to pay an amount equal to the daily rental rate for up to 30 days in respect of damages for loss of use.

During the period of hire, the Appellant was involved in an accident with a negligent driver. This rendered the hire car out of service for a period of 12 days. H subsequently made a demand requesting the 12 days loss of use from the Appellant for the total sum of £1,560.00.

The Appellant brought a claim against the negligent driver’s insurers (Royal and Sun Alliance Insurance Co Limited) under the European Communities (Rights against Insures) Regulations 2002 seeking damages for (i) cost of the repairs and (ii) the sum claimed by H for the loss of use.

Court of Appeal Decision

Initially, this argument was rejected by the Court of Appeal on the basis that the clause was a form of irrecoverable pure economic loss, and that the loss was too remote to be recoverable because the sum was not a reasonable estimate of the hirer’s likely loss of revenue whilst the car was in repair.

Supreme Court Decision

This decision was appealed to the Supreme Court who subsequently allowed the appeal.

The Supreme Court found that the Appellant’s liability to pay the sum was a factual consequence of physical damage to the car in their possession and therefore the loss in question was not pure economic loss. This meant that just because the physical damage to property arose under a contract, this did not act as a barrier to recover the loss provided it was consequential on the physical damage caused to property. The Supreme Court also clarified that a claimant, in the tort of negligence, can recover damages arising from any contractual liability that the Claimant owes to a third party when it is incurred as a result of a wrongful act by the Defendant.

Kindertons Ltd v Murtagh [2024] EWHC 471 (KB)

Another case of interest is Kindertons Ltd v Murtagh [2024] EWHC 471 (KB).

In 2019, the Claimant had been involved in a minor collision through the negligent driving of the another. Within 2 days of the accident a representative of Kindertons (a credit hire organisation) contacted the Claimant to provide him with a replacement hire vehicle. As such the Claimant entered into this agreement at a cost of £345.00 a day. During a call, Kindertons discouraged the Claimant engaging in any calls with the Defendant’s insurer, Esure, in case they offered to provide any replacement vehicles.

Esure refused to pay the claim and so the Claimant issued court proceedings amounting to approximately £20,000.00 of which £17,000.00 was for credit hire and repairs.

In August 2020 Mr Recorder Berkley KC dismissed the claim and found the Claimant to have been fundamentally dishonest. After absent payments from the Claimant to Esure for the cost of around £12,000.00, Esure applied for a Non-Party Order Cost (“NPCO”) against Kindertons.

The NPCO claim

In March 2023, following review of the circumstances of the case, Mr Recorder Gallagher decided it was just in all circumstances for Kindertons to pay 80% of Esure’s costs. This was appealed by Kindertons on the basis that:

1. The recorder had wrongly concluded it had a financial benefit in the litigation;
2. They were wrongly found to have controlled the litigation;
3. The Recorder failed to consider causation;
4. The Recorder failed to consider that Esure had not given notice it would apply for a NPCO; and
5. The Recorder failed to address whether it was just to make an order for an NCPO where the claim had been dismissed due to the Claimant’s dishonesty.

Decision of the High Court

This appeal was dismissed.

Financial Interest

On 5 March 2024, Mr Justice Turner found that in relation to the first basis of appeal, the purpose of Kindertons providing credit hire facilities was to make commercial profit out of a client’s legal claim. Kindertons had a very strong financial stake in the litigation and any benefit to the Claimant in pursuing the claim for hire charges had been illusory.

Level of control exercised

Further the court held that the greater the level of control exercised by a non-party i.e. Kindertons, the more likely the court would be to make an NPCO. It was found that the Appellant had a high degree of control. This was due to the fact that the contractual terms had led the Claimant into bringing the claim and continuing it at a risk of incurring serious financial consequences for failure to comply. Further, two days after the accident the appellant had encouraged the Claimant to hire a car at no cost to him and directed him not to communicate with Esure should they provide any alternative.

Therefore, it was held that the appellant had exercised a degree of control over the claimants claim by issuing instructions that were intended to prevent any attempt by Esure to limit its exposure to the hire claim. It was unfair to allow the appellant to do so without exposing it to the potential consequences of an NCPO.

Please contact our insurance litigation team here if you would like further information.