Following our recent article on the case of Zoe Atkinson v Cornish Mutual Assurance [unreported, 2024]it is clear that issues of agency and who is in fact driving the claim are coming before the courts more regularly.
In Cornish Mutual, the Claimant entered into a credit hire agreement with a company who had links to the solicitors who handled the claim. It was found that the hire company were acting as agents of the Claimant because of the documentation signed by the Claimant. The hire company implied that they had undertaken an inspection. A document asking for payment for the inspection was sent to Cornish Mutual but did not disclose the results, rather simply asked for payment as well as asking the insurer to inspect the vehicle, thereby prolonging hire.
The Claimant's agent's failure to disclose the results of the engineer's inspection meant that the hire period was extended, when it could have been curtailed by way of raising a without prejudice payment. It was found that this amounted to a new and intervening event and broke the chain of liability.
The argument about where the blame lies with delays in hire periods has been present since the dawn of credit hire itself. In Colstack v Tesco, the Claimant was in hire from the 5th December 2007, with repairs on a credit basis. These were not authorised by the Claimants' agents until the 17th January 2008. It was noted in the judgment the Claimant's agents were aware that the repairs had not been authorised and failed to act. The court agreed that it was unreasonable and the agents were aware of the lack of repair authority therefore reducing the Claimant's claim accordingly.
A recent matter took this to a new extreme. In Crowley v Haque [unreported, 2024 County Court at Salisbury], a claim was presented for credit hire charges in the sum of £32,580. A relatively innocuous incident took place on 13 April 2023 where the Claimant's vehicle suffered minor damage and was roadworthy. The Claimant continued using the vehicle until 17 May 2023 when they entered into a credit hire facility with a credit hire organisation who shared directors with their solicitors. The credit hire organisation's engineer inspected the vehicle on 14th June 2023 having been on site since 8th June.
Having concerns with the level of damage and the lack of repairs being undertaken, the Defendant inspected the vehicle on 5th July 2023. The results of this inspection confirmed that the vehicle was still on site with no repairs undertaken. The inspecting engineer was advised by the garage that no parts had been ordered and no repairs had been authorised by the Claimant. The Claimant's solicitors advised to the contrary, providing loss of use dates which did not match that provided by the engineer and their own referring garage.
It is clearly unreasonable that a Claimant whose vehicle was entirely roadworthy should enter into a credit hire facility without good reason. At DWF, we constantly see revised engineer's reports being presented despite the vehicle not being stripped for the second inspection therefore prolonging hire periods.
The problem does not only relate to roadworthy vehicles. Where a vehicle is not roadworthy, there can be substantial delays in inspection and thereafter disclosure of engineering evidence so that a without prejudice payment or repair can be authorised. In some cases it takes over 28 days before any engineering evidence is disclosed at all. Consequently, various insurers have taken steps to seek non-party costs orders against credit hire organisations for effectively running the litigation for their own benefit.
The High Court case of Kindertons Ltd v Murtagh & Esure Services Ltd [2024] EWHC (KB)is a reported case regarding non-party costs orders. The relevance to this article is that Justice Turner went further and found that Kindertons had established a high degree of control over the claim. If the Claimant had failed to comply with the documentation he signed he would have opened himself to significant financial risk of being pursued for those costs. Justice Turner also said that any benefit to the Claimant from the hire claim was all but illusionary and cited Amjad v UKI [2023] EWHC (KB)where Justice Ritchie found that there was no real benefit to the Claimant through the credit hire agreement. In the Murtagh case, the hire was for a Jaguar XF, later a Mercedes C250, at the cost of £345 per day.
The main insight from this judgment is that where the Claimant signs documentation giving the credit hire organisation control over the claim, the credit hire organisation is effectively acting as the Claimant's agent. Another credit hire organisation has published their business practice online confirming that there is an obligation to cooperate and a set route of solicitors and agencies to instruct, essentially handing control of the claim to the Credit Hire Organisation. They control the litigation and the entirety of the claim, including organising inspections, dealing with payments, addressing offers of intervention (in some cases advising their customers not to engage with any offer of assistance from insurers) and agreeing commercial rates for repairs that are higher than the industry standard and the market average.
On the horizon
So what? What does this mean for insurers?
The issue of agency is not just limited to that of prolonged hire periods. Whilst that is a key argument, it goes further than this.
A recent DWF matter illustrated this point. The Claimant's solicitors were sent an offer of assistance for their client by the insurers and were asked to forward this offer to the Claimant. The Claimant's witness statement confirmed that he had received a telephone call from the Defendant's insurers but no letter. However, the Claimant's solicitors pre-litigation had confirmed receipt of offer and advised they had passed it on to their client. Clearly this had not happened and given this firm of solicitors share directors with a hire company, it would suggest that they had not acted in their client's best interest by failing to forward a valid offer to their client. Again, the benefit here was for the credit hire organisation, not the Claimant.
Where the credit hire organisation is Financial Conduct Authority (FCA) regulated it will be interesting to see what the FCA would make of the interpretation of Conduct of Business regulations insofar as acting in their client's best interests.
The key take away here is that the long established industry practice of intervention continues to be incredibly important, especially when detailed logs of calls and letters can illustrate a discord between the Claimant and the Claimant solicitor. Credit hire organisations will adjust their behaviours but DWF are well placed to respond to this and will continue to monitor the market to disrupt changing strategies.
