Pursuer: Ms C. Smith Advocate, Thompsons Solicitors

Defender: Marney Advocate, Ledingham Chalmers Solicitors

29 October 2010

[1] The pursuer in this case is thirty seven years old and works as a postman. In around the middle of 2007 he purchased a fourteen year old Toyota Celica motor car at a cost of £1,700, which he described as being in immaculate condition inside and out. On 19 November of that year the vehicle was damaged whilst parked outside his workplace. Enquiries made by the pursuer revealed that it had been struck by a passing refuse collection vehicle owned by the defenders. Although the pursuer made an immediate complaint at the refuse depot near to his workplace it was not until some time later that a witness to the incident was traced and liability was admitted. On 10 March 2008 the defenders' insurers wrote to the pursuer acknowledging liability and asking him to forward two competitive repair estimates.

[2] The pursuer continued to use his motor car daily in the period after the accident, but in light of this correspondence took his vehicle on 19 March to repair premises known as MRM Holdings at Roseburn Street in Edinburgh. Whilst there, and in circumstances which were far from clear in evidence, he was put in touch with a company known as Accident Exchange Limited who provide replacement vehicles, on a credit basis, to individuals whose own vehicles require repair as a consequence of a road accident for which they were not responsible. Such companies are sometimes called credit hire companies or accident hire companies. They provide services over and above those of an ordinary car hire company. One of these is that the customer does not require to pay at the time for the use of the hired car, the expectation being that the costs will be met by the negligent driver's insurers. As a consequence the daily rates for hire which they charge are dearer than those charged by ordinary car hire companies. That same day the pursuer entered into a vehicle rental agreement with Accident Exchange who provided him with a Honda Civic 2 litre VTEC Type R GT motor car with 900 miles on its odometer. Such a vehicle would have had a purchase price of around £18,000 and was described as a sports or sports coupe and the top of the range model. At this time the pursuer's own car, which was an imported vehicle, had a reading of a little over 145,000 kilometres on its odometer. Further general evidence disclosed that vehicles available in the car hire market tend to be no more than around eighteen months old.

[3] The pursuer's vehicle remained at the premises of MRM Holdings and Accident Exchange took over the management of his claim against the defenders' insurers. On around 28 April Accident Exchange informed the pursuer that given the value of his car, repair was considered economically unviable and the defenders' insurers had offered to settle his claim at the sum of £1,400 with salvage being his own responsibility. The pursuer accepted that offer and received a cheque for the agreed sum around 24 May 2008. He returned the hire vehicle to Accident Exchange on 3 or 4 June, whereupon Accident Exchange prepared a statement of charge totalling £12,857.13. In the action as raised the pursuer sought payment of this sum from the defenders, along with payment of two further costs; storage charges claimed by MRM Holdings of £652.13 and an engineer's inspection report at a cost of £58.75. By the date of the proof in September 2010 Accident Exchange had still to make a demand for payment from the pursuer.

[4] The defenders contested the claim on the basis that no car hire had been necessary at all, failing which it was unreasonable to expect the defenders to meet the cost of the particular type of motor car hired. They also contended that the period of hire was unnecessarily long.

[5] The courts are familiar with the nature of the services provided by companies such as Accident Exchange. They have been considered in a number of cases in which the obligations of motor insurers regarding the cost of hire of a replacement vehicle while a damaged car is undergoing repair have been determined. The leading cases are Dimond v Lovell [2002] 1 AC 384 and Lagden v O'Connor [2004] 1 AC 1067. The result is that in most cases where it is reasonable for a motorist to hire a substitute vehicle the claim for damages for loss of the use of the motorist's own car will be limited to the sum required to provide an alternative vehicle, namely the spot rate quoted by hirers in the ordinary car hire market. Different considerations apply when a motorist who has a reasonable need for a replacement vehicle has insufficient funds and as a consequence has no alternative but to use the services of a credit hire company. In the circumstances of the present case it came to be accepted by counsel for the pursuer that he did not fall into this exceptional category and that the proper level of his claim ought to be determined by reference to spot rates. However this concession did not resolve the essential dispute between the parties and it will be necessary to examine the evidence led and the submissions made thereon.

[6] The pursuer gave evidence concerning the circumstances of his car hire and Mr John Kyle, Accident Exchange Branch Manager in Glasgow was also called. Mr Kyle had no personal dealings with the pursuer's hire but his branch supplied the vehicle to Mr Clark and he spoke to the company's practices and to extracts from its electronic records concerning this particular hire, which he had selected for the purpose of the present case.

[7] At the time of the car hire the pursuer's work shift began at 5am. By his estimate it was a distance of around three miles from his home to his place of work. Other than travelling to work he used his car to go to a gym, to go to where he played football and to visit his girlfriend. The vehicle rental agreement which he signed had a large number of terms and conditions listed on the reverse in very small print. A careful reading of these terms and conditions would make it plain that responsibility for the rental charges lay with the hirer and that the hiring company was extending credit to the hirer for a particular period. It would also make it plain that the hirer was granting to the hiring company the exclusive right to pursue a claim on his behalf for compensation for the cost of hire incurred. Unsurprisingly, Mr Clark did not read any of these terms and conditions. Nor did he have his attention drawn to any of them by Accident Exchange's driver who delivered the vehicle to him and countersigned the agreement.

[8] According to Mr Kyle first contact between his company and a potential customer would normally be by telephone to a member of the company's Birmingham office. The records produced by Mr Kyle contained two entries which bore to record telephone contact with Mr Clark on 19 March 2008. According to Mr Kyle, at this first stage of dealing with a customer his company's representative was obliged to explain the nature of the contract which was being offered by the company and to make it plain that the customer was entering into a credit arrangement. This was a requirement which flowed from the fact that the company was regulated by the Financial Services Authority. No record of any such advice being given was produced in the present case. It was plain that Accident Exchange had arrangements with coachbuilders, such as MRM Holdings, who would refer motorists whose vehicles needed repair to them. In the present case it was not clear whether Mr Clark spoke directly to a representative of Accident Exchange or whether that was done for him.

[9] Mr Kyle's evidence included reference to a document called the ABI General Terms of Agreement between Subscribing Insurers and Credit Hire Organisations. The defenders' insurers were not signatories to this agreement. This document included a section which drew together different types of motor cars available for hire by groupings. The differentiation was between Standard Vehicles, Sports Vehicles, Multi Passenger Vehicles and Four by Four vehicles. Within each group there was further division into bands which bundled together vehicles of the particular type, apparently by reference to general similarity of standard and specification. The result was that a vehicle which fell into the Standard group could be classified anywhere between a band S1 to S7, whilst a vehicle which fell into the Sports group could be classified anywhere between a band SP1 to Sp 13, with a Mini Cooper (1.6) occupying band SP1 and vehicles such as Ferraris, Lamborghinis and Aston Martins occupying band SP13. It was accepted that the groupings listed within this document represented those which the car hire industry in general utilised.

[10] Throughout most of his evidence Mr Kyle adopted the position that a customer of Accident Exchange would be provided with a vehicle which corresponded with the group and band of his own damaged vehicle and that no other criteria would feature in the selection process. This was the reason for the selection of the particular vehicle which had been hired to Mr Clark. Since Mr Clark's car was a Toyota Celica it fell into the Sports grouping and into band SP3. As it happens the Glasgow branch did not have a vehicle of that band available at the time and decided to provide him with a vehicle from the SP4 band at no extra cost. In cross examination however Mr Kyle's attention was drawn to paragraph 4.4 of the General terms Of Agreement which was in the following terms:

"4.4 The CHO will normally provide the customer with an appropriate class of replacement vehicle based on the customer's need. The at fault driver's insurer should be consulted in the event of a dispute about the class of vehicle to which the customer is entitled. Customers may opt for a higher class vehicle than is needed or an extension of the hire period at their own cost."

[11] As I understood him, Mr Kyle's position then was that the Birmingham based representative who had first contact with the customer would make an assessment of the client's need, which would determine the vehicle selected and his Glasgow office would simply be told of the outcome. There was no suggestion in the pursuer's evidence that he was ever party to any such discussion, nor was there any record of any such process of selection in the records produced by Mr Kyle.

[12] Mr Kyle's evidence included an explanation of the sums which Accident Exchange contended the pursuer was responsible for. The hire period was 19 March to 5 June, a total of seventy-nine days charged at £120.56 per day. To this daily figure there fell to be added Collision Damage Waiver of £9.50 per day and an additional driver charge of £7.50 per day, resulting in a fee of £137.56 per day exclusive of V.A.T. The inclusive figure was £161.63 per day, with an additional sum of £75 plus V.A.T. being due for delivery and collection. In addition to the hire charges Accident Exchange had paid an engineer's inspection fee of £58.75 and a storage fee to MRM Holdings of £652.13, which, as Mr Kyle put it, were all rolled up into one recoverable amount. Despite a daily fee being charged for Collision Damage Waiver Mr Clark remained liable for an excess payment of £150 in the event of an accident.

[13] In the end of the day two things were clear to me from this evidence. Firstly, the pursuer had no appreciation of the fact that he might bear any liability for the cost of the car hire, and secondly, the vehicle which was hired to him by Accident Exchange was selected upon the basis of a policy which sought to provide customers with replacement vehicles based upon a group classification and nothing else. I had no difficulty in accepting the pursuer's evidence to the effect that he understood he was being provided with a car to use whilst his own was off the road and that the defenders' insurance company would pay the cost of this. Statements from the pursuer's bank accounts at the relevant time were examined in some detail in evidence and it was clear that he was prudent and organised in his financial affairs. I was satisfied that had he appreciated that he bore responsibility for the cost of car hire and that he would have to pay Accident Exchange should the defenders decline to meet these costs, he would have dealt with the matter very differently. As a result of the understanding which he was given Mr Clark gave no consideration at all to the cost of the hire from Accident Exchange, nor to whether he might be better to seek a cheaper hire elsewhere. Nor for that matter did he give any consideration to the appropriateness of the particular type of car which he ought to hire.

[14] The defenders' contention was that if it was reasonable for the pursuer to hire a car at all then it was not reasonable for him to expect them to pay the hire cost of such an expensive motor car as a replacement for his own. He had made no effort to mitigate his loss in these circumstances. Further, the defenders contended that the period of the hire had been unreasonably long due to unexplained delays on the part of Accident Exchange, who had taken on the role of Mr Clark's accident management agents. The defenders led uncontested evidence of the cost of hiring a vehicle in the Standard group band S6 from a variety of well known car hire companies in the Edinburgh area in August 2010. This demonstrated that such a vehicle would be available for an average of around £39 per day inclusive of V.A.T. and collision damage waiver, if taken for a minimum of seven days, with an excess of between nil and £350 being applicable in the event of an accident. Additional driver authority was available for a fee of around £5 per day if desired. Any delivery charge applicable would be no more than a few pounds. That same evidence was to the effect that daily rates have not changed very much in the period since March 2008, but that inflation of around 8.9% ought to taken into account.

[15] Although the pursuer had driven his vehicle for some time after the accident I was satisfied that he would have been wrong to have kept doing so after taking it for examination to MRM Holdings. I accepted his evidence, and that of Mr Kyle, as to what each was told about the nature of the damage to the vehicle. I was satisfied that jagged edges were exposed where the body work had been torn and that there was damage to the area of the fuel filler. I was satisfied that in light of this damage the vehicle was not roadworthy. Accordingly I accepted the submission that it was appropriate for the pursuer to recover any reasonably incurred cost of replacement.

[16] The case as presented on behalf of the pursuer rested on the proposition that he was entitled to the cost of hiring a vehicle from the same group and band as his damaged vehicle fell into using the industry groupings set out in the General Terms of Agreement document. Given the concession regarding the pursuer's financial circumstances counsel submitted that damages should be calculated by reference to the evidence as to spot rates for a vehicle of this type as given by Mr Kyle. Support for counsel's general contention was drawn from what was said by Lord Hope of Craighead at paragraph 27 in the case of Lagden v O'Connor:

"But the principle is that he must take reasonable steps to mitigate his loss. The injured party cannot claim reimbursement for expenditure by way of mitigation that is unreasonable. So the motorist cannot claim for the cost of hiring another vehicle if he had no reason to use a car while his own car was being repaired - if, for example, he was in hospital during the relevant period or out of the country on a package holiday. If it is reasonable for him to hire a substitute, he must minimise his loss by spending no more on the hire than he needs to do in order to obtain a substitute vehicle. If the defendant can show that the cost which was incurred was more than was reasonable - if, for example, a larger or more powerful car was hired although vehicles equivalent to the damaged car were reasonably available at less cost - the amount expended on the hire must be reduced to the amount that would have been needed to hire the equivalent."

[17] Counsel's contention was that the use of the word "equivalent" was crucial in this context and that since it was not possible to hire a fourteen year old car the pursuer was entitled to the cost of hiring an equivalent vehicle in type to that of his own. The best assessment of what that would be was the grouping relied upon by the car hire industry itself. She also referred me to the unreported case of Archant Ltd v First Eastern Counties, decided in the County Court at Norwich on 28 August 2008. In that case the claimant, who owned a BMW 320 Estate car, sought the cost of hire of a BMW 5 series whilst his own vehicle was being repaired. The judge expressed the view that the general rule in terms of damages was that the claimant should be restored to the position that he would have been in had the accident not happened. Accordingly he held that the claimant was not obliged to drive a vehicle which was considerably more modest than the one which was damaged and that the vehicle hired, whilst not exactly the same as the one which had been damaged, was a reasonable replacement. Counsel also relied on what had been said in the High Court in England in the case of Darren Bent v Highways and Utilities Construction Ltd [2010] EWCA Civ 292. In that case, which concerned damage to a Mercedes sports car with a value in excess of £70,000, the defendants accepted that they were responsible for the cost of a broadly equivalent car to that damaged, but contested responsibility for the hire cost of an Aston Martin car with a value in the region of £105,000. The merits of the case were not decided by the High Court as it was agreed that the judge at first instance had erred about spot rates and that the case ought to be remitted to him to hear fresh evidence on that point. However counsel for the pursuer founded on what was said by Lord Justice Jacob at paragraph 10 as follows:

"10 I would add further that one must not be hypnotised by any supposed need to find an exact spot rate for an almost exactly comparable car. Normally, the replacement need be no more than in the same broad range of quality and nature as the damaged car. There may be a bracket of spot rates for cars rather "better" and rather "worse". A judge who considered that bracket and aimed for some sort of reasonable average would not be going wrong."

[18] Accordingly, in the submission of counsel for the pursuer, looking to what had been said in each of these cases it could be seen that the pursuer had acted reasonably in hiring the particular motor vehicle which he had and the defenders ought to bear responsibility for the cost thereof.

[19] I did not accept these submissions. As counsel for the defenders submitted, it was plain that the pursuer had given no thought to the question of whether he had a duty to mitigate his loss by selection of one type of car over another. Nor did I accept that the vehicle which was provided to him by Accident Exchange ought to be seen as an equivalent to his own damaged car or that it fell into the same broad range of quality and nature as the damaged car. No difference was created by the fact that the hire was charged as a category SP3 vehicle. The process of identifying a suitable replacement by reference only to the make and model of the damaged car, taking no account of its age or value, was, in the circumstances of the present case, unrealistic and did not result in the provision of like for like. When it comes to considering how to identify the broad range of quality and nature into which a damaged car falls it will, in my view, be necessary to bear in mind its age and value. Although in most cases it will not be possible to hire an older vehicle some form of comparative exercise will still be necessary to identify a suitable category of replacement. It seems to me that the particular need which the hirer has for a car will be a relevant consideration at this stage. In addition some consideration might be given to factors such as style, purpose for which the vehicle is designed, power, comfort, specification, features, perhaps the target market and general driving pleasure. It is well known that significant changes have been introduced to many areas of the automotive industry over the years resulting in vehicles now being available with much greater levels of sophistication in terms of engine performance, internal comfort and additional facilities than was previously the case. In any event evidence to this general effect was given by the defenders' witness Mr Saddler. For these reasons I did not accept that it was reasonable to describe a fourteen year old vehicle with a value of a little over £1,000 as being in the same broad range of quality and nature as the vehicle hired. The result was that the pursuer was provided with a vehicle which was far superior in every sense to his own, an assessment which reflects a fair analysis of the pursuer's own evidence on the point. Unfortunately for him, that benefit was not provided free of charge.

[20] The defenders' contention was that the pursuer ought reasonably to have been able to hire a suitable replacement vehicle at a much lower daily rate than that claimed for. Their contention was that a vehicle which fell into Standard group band 6 would have been entirely adequate. This group covers vehicles such as a Vauxhall Vectra 2 Litre, a Ford Mondeo 2 Litre, a Peugeot 407 2 Litre, a Honda Civic 2.21 Sport, a VW Golf 2 Litre and others. The hire costings led in evidence by the defenders were based on the hire of VW Golf 2 Litre. To my mind this approach was correct. A new, or almost new, vehicle in this group could not be described as considerably more modest that the pursuer's own. A fair assessment would easily, if not generously, categorise such a vehicle as falling within the same broad range of quality and nature as the pursuer's damaged car. Accordingly I considered the appropriate spot rate to be £39 per day inclusive of V.A.T. Since this was an average of the rates available I did not further reduce this figure to take account of inflation. I did not consider that it was appropriate to allow the pursuer the further daily extra cost of an additional driver. His evidence was that when he took out his own insurance policy he put the name of a friend on the policy as a device to enable him to acquire cheaper insurance than he otherwise would. There was no evidence to suggest that this friend ever drove the pursuer's own vehicle or the hired car.

[21] I was also satisfied that the defenders were correct to submit that the period of hire claimed for was unreasonably long. Despite arranging for the hired vehicle to be delivered to the pursuer on 19 March, Accident Exchange did not instruct an engineer's report until 25 March. The faxed instruction requested that an inspection be carried out the following day and that a summary report be provided by 10am that day. It contained a further instruction that in the event of the vehicle being deemed beyond economic repair the engineer should telephone a member of the "on hires team" on a given telephone number. These requests were no doubt made in recognition of a need to proceed expeditiously if car hire was ongoing and was to be the subject of a claim against the defenders' insurers. Despite the terms of these instructions no communication was received by Accident Exchange from the engineers instructed until 17 April. Although there were records of some attempts to contact the engineers no good explanation was provided for this passage of a period of twenty nine days from the commencement of the hire until notification to Accident Exchange that the pursuer's vehicle was beyond economical repair. As Mr Kyle candidly accepted, had it been his own car that was in a garage and had he been paying for car hire on a daily basis he would have made sure that he received the relevant information within a matter of a very few days. In my judgement a period of one week would have been entirely reasonable for the process of instruction and receipt of this report.

[22] A further thirty six days elapsed between the receipt of the report and the forwarding of a cheque in payment by Accident Exchange to the pursuer on 23 May. Counsel for the defenders' contention was that the date which was important was the date by which the motorist ought to have known that his vehicle was beyond economical repair, since that was the point at which he needed to make further choices. His contention was that from around that point on it was no longer reasonable to expect the negligent party to bear the cost of replacement hire. In my view this was too narrow an approach. Whilst it was correct to say that such knowledge ought to focus the innocent party's mind on what his options were, it seemed to me that it was reasonable for him to retain the hired vehicle until he received settlement, since that was the method by which he was returned to his pre-accident position.

[23] Although the period of thirty-six days between receipt of the report and forwarding of the settlement cheque was a lengthy one, there were delays at this stage which neither the pursuer nor Accident Exchange could be held accountable for. Accordingly I considered that it was reasonable for the pursuer to have a replacement vehicle during this whole period.

[24] There was in fact no record within the documentation spoken to by Mr Kyle to identify when Accident Exchange received a cheque in settlement from the defenders' insurers. The only record was of them having sent the cheque by mail to the pursuer on 23 May. Despite doing so no attempt was made to contact the pursuer to arrange for return of the hired vehicle until four days later on 27 May. A number of attempts to contact the pursuer were necessary before he was spoken to and agreed to return the vehicle on 31 May. In the event he did not do so until 3 June, with the result that a further eleven days hire charges were accumulated between the latest date when Accident Exchange could have received payment and the hire period ended. There was no explanation available for the lapse of this period of time. Mr Kyle's evidence was that it was normal to allow a period of seven days between receipt of payment and return of the vehicle to allow the customer to make new arrangements. Accordingly I would consider it unreasonable for the pursuer to seek to recover the cost of hire for any more than this length of time.

[25] In total therefore I would allow the pursuer the cost of fifty days hire at the spot rate of £39 per day, giving a total of £1,950. There was no basis for holding that the defenders were liable to reimburse the cost of the engineer's report or the storage charge paid by Accident Exchange to MRH Holdings. There was no evidence of any contract between the pursuer and Accident Exchange other than in relation to car hire, the pursuer did not instruct the report and there was no evidence of any agreement between him and MRM Holdings regarding storage. Accordingly I could not be satisfied that the pursuer had an obligation to account for these charges which he could in turn seek recompense from the defenders for.

[26] For these reasons I will grant decree in favour of the pursuer against the defender in the sum of £1,950 with interest thereon at the rate of eight per cent per annum from 30 September 2010 until payment. In light of the particular decision which I have arrived at I will reserve the question of expenses and allow parties to initiate any procedure which appears to them to be necessary.