Court of Appeal ruling on interest in credit hire claims.

Pattni v First Leicester Buses Limited

The Court of Appeal has delivered its judgment in Pattni v First Leicester Buses Limited [2011] EWCA Civ 1384. The judgment also includes the case of Darren Bent v Highways and Utilities Construction. In both cases the claimants were not “impecunious” (see Lagden v O’Connor [2003] UKHL 64.

Can the claimant recover interest on the BHR in a credit hire claim?

This was the issue in the case. Aikens LJ gave the judgment and suggested that the term Basic Hire Rate (BHR) should be substituted for the more familiar term “spot rate”. The claimant had been involved in a RTA. He was entirely innocent. His car, a Porsche 911 Coupé, was damaged and needed repairing. He took out a credit hire agreement on an Audi R8. I’m no petrol head (I owned a Renault Scénic not long ago) although I do know both cars are German and quite expensive. Anyway that doesn’t matter – it was accepted that the Audi was a suitable replacement vehicle.

It was held that the claimant could recover 29 days hire at a basic hire rate of £370.50 per day for a grand total of £10,744.50. The claim had been for 40 days hire at £500 a day. The claimant wanted interest on that sum from the end of the hire period. The judge at first instance, and Swift J on appeal, said they couldn’t have it, notwithstanding the fact that the hire agreement specifically provided that the hirer would pay interest on the charges for the period.

Court of Appeal decision

The claimant advanced three arguments:

1. The claimant reasonably entered into the credit hire agreement as a direct result of the tort. The claimant’s contractual liability to pay interest  at the agreed rate was reasonably foreseeable and so is a loss which is recoverable from the defendant. It is well established by authority that a contractual liability to pay money which is incurred as a direct result of a tort constitutes a recoverable loss from the tortfeasor.
2. When the judge was assessing the damage suffered as a consequence of the defendant’s tort he should have taken into account the fact that if the claimant had hired a car in the usual way, by paying in advance, he would have lost the use of his money. Therefore the judge should have awarded both the BHR and interest on that sum as two heads of the damages recoverable for the loss of use of the claimant’s car.
3. The claimant is entitled to statutory interest pursuant to section 69 of the County Courts Act 1984 to reflect the loss of use of funds that the claimant would have incurred if he had hired a replacement car on a standard basis (ie. by paying in advance).

All three arguments were rejected and the appeal was dismissed. Of the first argument Aikens LJ said at paragraph 61,

In my view it is clear that the interest charge for which Mr Pattni is under a liability to Swift by the terms of the Agreement constitutes the cost of an “additional benefit” given to the credit hirer , viz. the benefit of delayed payment of the credit hire charges until the “Claim” against the other driver has been finalised. On the analysis of both Lord Hoffmann and Lord Hobhouse in Dimond v Lovell, this is not a recoverable loss in the case of a hirer who is not “impecunious”, in the sense described by Lord Hope in Lagden v O’Connor.

As to the second and third arguments the court held the claimant simply hadn’t suffered any loss as the interest liability was deferred to settlement of the claim.

See the related case of Darren Bent v Highways and Utilities Construction.

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