11 July 2018

Many of us who deal with credit hire litigation on a daily basis often wonder what the hirer is told about their contractual liabilities by the credit hire / accident management company at the point of signing the credit hire agreement. Is the hirer made fully aware of his or her potential liability to repay the credit hire charges in full under certain circumstances? Or are they assured by representatives of the hirer that they will not be liable for the credit hire charges, despite signing clear contractual terms to the contrary? Certainly, when the hirer has been cross-examined on this point at proof or trial in the English and Scottish courts, the evidence provided by the hirer has been revealing.

There have been cases in Scotland where the hirer’s evidence has been that they were not aware of any liability to pay any of the credit hire charges and that there was no evidence that the credit hire company had any intention whatsoever to compel them to do so (see Brown v Axa 2013 G.W.D. 27-548). Similarly, the county courts in England have recently grappled with the contractual ramifications of a representative of a credit hire company providing oral assurances that the hirer will not be liable under any circumstances. This amounted to a fraudulent misrepresentation on the part of the credit hire company, rendering the contract voidable (see Kadir v Thompson, London County Court 2016).

The recent English Court of Appeal decision in Irving v Morgan Sindall PLC [2018] EWHC 1147 (QB) deals with a related but slightly different scenario. In Irving, the claimant had an accident in which her car was written off. Liability was admitted by the defendant. Whilst awaiting a cheque for the pre-accident value of her vehicle the claimant hired a replacement vehicle on credit terms. The defendant’s insurers failed to make payment promptly. The claimant remained in hire for over four months, incurring hire charges of £20,109.60. The pre-accident value of her vehicle was £775.

Under the hire agreement, payment of the credit hire charges were deferred. However the agreement preserved the claimant’s liability to pay the charges regardless of the outcome of the claim. At trial, the claimant gave evidence that she (1) thought the charges would be recovered from the third party insurer; (2) she would not have been able to pay the charges; and (3) she was told that if she lost there would be no fees to pay.

The claimant was given oral assurances by employees of the credit hire company at the point of signing the credit hire agreement. The judge dismissed the claim at first instance on the basis that the claimant’s own evidence was that there was no obligation on her to pay the credit hire charges.

The claimant successfully appealed. The Court of Appeal held that the credit hire charges amounted to ‘contingent debt’. The claimant’s liability to pay the hire charges was contingent upon her recovering damages from the defendant. So, if the claimant failed to recover the charges, she would have no personal liability to pay them. The case law did however suggest that a contingent debt was properly recoverable.

The above cases confirm that, for defenders dealing with credit hire litigation, it is almost always worth exploring the hirer’s understanding of their liabilities at the point of signing the hire agreement. Hirers may have little or no understanding of their contractual liabilities to repay the credit hire charges under certain circumstances and / or they have been given assurances by the hire company that they will not be required to pay. This can have important ramifications in terms of the hire agreements enforceability. Correspondingly, the credit hire company may struggle to recover their charges where there is no evidence they intended to enforce the contract against the hirer.

It should also be borne in mind that, in Irving, the decision was based upon an evidential finding that the claimant was assured that she only had a contingent liability to pay the hire charges if they were recovered from the defendant. This can be distinguished from circumstances where there has been a fraudulent misrepresentation by the credit hire company such as in Kadir or Brown.

Contact: Angus Gillies, Associate agi@bto.co.uk T: 0141 221 8012