Credit hire claims and the period of hire

Insurers operating in the motor vehicle sphere in Victoria would be well acquainted with the issues associated with third party recovery agents and credit hire claims.

Despite the prevalence of issues associated with third party recovery agents in Victoria, the majority of reported cases in this area come from England (Lagden v O’Connor [2004] 1 AC 1067; Dimond v Lovell [2000] 2 All ER 897; Burdis v Livesey [2003] QB 36) and to a lesser extent from New South Wales (Anthanasopoulos v Mosely (2001) 52 NSWLR 262, Stocovaz v Fung [2007] NSWCA 199). The focus in these cases has been largely on two issues:

  • whether the cost of repairs to the third party vehicle is within market range;
  • whether the daily rate for the provision of a hire car should be reduced to an equivalent market rate.

An issue not extensively covered is the period of time for which a third party is entitled to the use of a hire vehicle.

In Opoku v Tintas [2013] All ER (D) 81 (Tintas), the third party’s vehicle was damaged in a collision for which the insured Defendant was found to be at fault. The cost of repairs to the third party’s vehicle were assessed at £3,435.92, however, the insurer did not pay to the third party this sum and the third party vehicle was not repaired until approximately twenty-one months after the collision. The third party used the services of a credit hire operator and used a hire vehicle for a period of almost two years at a total claimed cost of £130,000.00.

The matter was dealt with by the English County Court and ultimately came to the English Court of Appeal. The County Court found that the third party was impecunious and therefore entitled to the full daily rate charged by the credit hire operator in accordance with previous authority; however, the County Court found the third party was not entitled to the full period claimed for use of the hire car. The financial circumstances of the third party had been put into evidence and were examined closely. The ability of the third party to save small amounts and/or to seek an increase in a credit limit on a credit card had to be considered as against the third party’s significant debt owed to the credit hire operator (the County Court acknowledged that in all probability the credit hire operator would not have enforced these charges against the third party, but nonetheless a liability to pay the charges had arisen).

The County Court found that the third party’s conduct in incurring the significant debt was unreasonable and that the third party had therefore failed to mitigate his loss. Ultimately, the period of hire car allowed was reduced to eight months, this being the time at which the Defendant’s insurer assessed the cost of repairs to the third party vehicle.

The main ground on appeal to the English Court of Appeal by the third party was that it was inconsistent for the Court to find that the third party was impecunious for the purpose of the daily rate charged for the hire car but that the third party could have funded the cost of repairs at an earlier point in time. Beatson LJ (Patten and McCombe LJJ agreed) rejected this argument, stating:

“It does not, however, follow that because a person is not able to pay a conventional hire rate for similar cars to be used as minicabs for an open-ended period that it was unreasonable for him to fund a total cost of some £3,200 for the repair of the car.”

It remains to be seen whether the Victorian courts take guidance from the decision on Tintas. It is submitted that without other authority on the issue of the period of time for which credit hire vehicles can be used, the decision should be followed in Victoria. Insurers should be mindful of the importance of obtaining evidence of the third party’s financial circumstances and that an impecunious third party for the purposes of the daily rate may not automatically be entitled to use the hire vehicle until such time as the vehicle is repaired or payment for a replacement vehicle is made.

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