In a credit hire case where the credit hire charges claimed are grossly disproportionate to the profit which could have been generated by the taxi during the period of hire, the High Court has set out the correct principles to be applied where the Claimant is a self-employed taxi driver and.
In Hussain v EUI  EWHC 2647 (QB), the Claimant’s vehicle suffered damage in a road traffic accident. Liability was admitted. The Claimant hired a private hire vehicle on credit for a period of 18 days while his own vehicle was being repaired.
The total credit hire charges were in the sum of £6,596.50.
The Defendant’s insurer argued that the Claimant’s taxi was said to be a purely ‘profit earning chattel’. It was argued that the Claimant’s sole need to hire a replacement vehicle was to continue to earn an income as a taxi driver. Based on the Claimant’s earnings for the year, the total profit which would have been generated by the claimant during the hire period was just £423. This was based on evidence provided by the Claimant to prove his impecuniosity.
First Instance Decision
Following the trial, at first instance it was found that, as the cost of the hire was grossly in excess of his profit, the Claimant had failed to mitigate his loss in hiring a vehicle.
It was found by Her Honour Judge Wall found that:
“The need was for a taxi for business use and, where the loss is of a profit-earning chattel, then the measure of damages is kept at the loss of profits and it is unreasonable mitigation to expend more in attempting to make a profit than the profit itself. So here the damages claimed grossly exceed the loss of profit which would have followed for 18 days and so I cap the level of damages at the loss of profits level.” [para 31]
It should be noted that the that the Claimant had been debarred from relying on impecuniosity due to lack of compliance with a Court Order to provide financial disclosure. Further to the above, Her Honour Judge Wall found that even in the event that the hire charges had been recoverable, the Claimant would have been limited to the basic hire rates as shown in the rates evidence supplied by the Defendant.
The Claimant appealed to the High Court on two grounds:
1) That the Judge was wrong to limit the damages to what the profit would have been; and
2) That the Judge was wrong to accept the Defendant’s evidence of basic hire rates.
In his judgment, Mr Justice Pepperell gave guidance as to the correct principles to be applied to recoverability of hire charges in taxi cases.
The general rule to be applied as a starting point in claims of this nature was the following:
“Where the cost of hire significantly exceeds the avoided loss of profit, the court will ordinarily limit damages to the lost profit.” [para 16.5]
However, Mr Justice Pepperell went on to find that a Claimant may still be held to have acted reasonably in hiring where the hire charges exceed the loss of profit in three potential circumstances:
The Three Exceptions
- Where future trading would be compromised.
The Judge accepted that where there is a real risk of a great loss, the hire may be reasonable:
‘’For example, a chauffeur might not want to let down a regular client for fear of losing her. Equally, a self-employed taxi driver might risk being dropped by the taxi company that provides him with most of his work.’’ [Para. 16.6(a)]
- Where the need for a replacement vehicle is also for social and domestic use
Where a Claimant proves that they need a replacement vehicle for private and family use, they will be entitled to recover the cost of the hire as any private motorist would be even if it is in excess of the loss of profit.
- Where the Claimant is impecunious
It might be reasonable to hire a replacement in circumstances where the driver simply could not afford to be out of work. Impecunious self-employed Claimants cannot be expected to be left without any income.
In this case, none of these exceptions applied. The hire claim was restricted to the recovery of loss of profit.
This case provides confirmation that, ordinarily, recoverable damages are limited to loss of profit where hire charges significantly exceed that profit.
Almost all insurers are pursuing this Defence. In order for the credit hire charges to be recoverable, the Claimant must prove one of the three exceptions. If this cannot be proven, then it is likely the Court will restrict the charges loss of profit for the period of hire.