Taking The Credit - A Recent Decision On Credit Hire Agreements

Disputes involving credit hire agreements continue to come before the courts and this article looks at the recent decision in W v Veolia Environmental Services [2011] EWHC 2020 (QB) in which a number of issues were considered.

The Background

The claimant's car, a 21 year old Bentley worth about £16,000, was damaged when it was struck by the defendants' bin lorry. The claimant entered into a credit hire agreement for a modern Bentley at a rate of £860 per day. He claimed that he had to have an impressive car to reflect the appropriate image for his profession as an actuary. The non credit rate or "spot rate" would have been £485 a day but the claimant maintained that, because of his poor financial position, he could not afford to pay this from his own funds.

The hire company delivered the car to the claimant's home where he signed the hire documents and also an application for insurance for the hire charges. The limit of indemnity under the insurance policy was £100,000. The claimant went on to incur hire charges in the massive amount of £138,000, which the defendants' insurers refused to pay. The hire company then sought payment from the claimant and proceedings were raised against the defendants.

The defendants argued that the charges were irrecoverable as a result of the provisions of the Cancellation of Contracts made in the Consumer's Home or Place of Work etc Regulations 2008 and on that basis neither they nor the claimant was liable to pay the charges. The Regulations provide that the trader (in this case the insurance company) must give the consumer (the claimant) a cancellation notice setting out his right to cancel the agreement. In this case, that had not been done. The defendants argued that the fact that the claimant had not been provided with a cancellation notice made the credit hire agreement unenforceable and on that basis the claimant had not suffered any loss in relation to that agreement.

At that stage the insurance company paid the hire charges in full to the hire company, notwithstanding the fact that the charges exceeded the limit of indemnity and it is worth noting that the court expressed surprise that that the amount of the hire charges claimed had not been challenged in the court proceedings.

Effect of the hire charges having been paid

The court was asked to consider the effect of the hire charges having been paid already and whether this would produce a double recovery - an issue that hadn't arisen in any previous...