Credit hire costs, taxi drivers, loss of profit and the correct assessment of loss

Hussain v EUI Ltd [2019] EWHC 2647 (QB)

Executive Summary

The High Court has recently handed down an important decision surrounding the assessment of financial losses suffered by taxi drivers in road traffic accidents.

The issue

This case concerned the proper approach to the financial losses suffered by a self-employed professional driver while his car was off the road pending its repair or replacement following an accident. The claimant, a private hire taxi driver had presented a claim for credit hire charges of £6,596.50 for a replacement private hire taxi over an 18 day period.

Trial

At first instance, the claimant was awarded £423 for loss of use, assessed by reference to what the claimant’s loss of profit would have been during the 18 day hire period. It was found that the claimant had not acted reasonably in hiring a replacement vehicle on credit and incurring hire charges almost equal to a full year’s profit. The court also accepted the defendant’s evidence as to basic hire rates, stating that if it was incorrect in relation to the assessment of loss of profit, then the hire would be limited to basic hire rates in the sum of £975. It was also found, based on the claimant’s evidence, that he did not need a replacement vehicle for social, domestic and pleasure (“SD&P”) use, the claimant admitting that there was a second vehicle in the household. The court found that the claimant’s vehicle was a pure profit earning chattel and therefore loss of profit was the correct measure of loss.

The Appeal

The claimant appealed the decision on two grounds, namely that:

• damages should not have been limited to loss of profit and;
• it was wrong to accept the defendant’s evidence as to basic hire rates.

The High Court found there was no evidence from the claimant that the accident damaged vehicle was needed for anything other than commercial purposes (i.e. use as a taxi), stating that “need for social and domestic purposes is not self-proving and, in this case, cannot simply be inferred from Mr Hussain’s actions in acquiring, insuring, taxing and maintaining his BMW since the car was primarily required for business use”.

In accepting the above point, the Court refused the claimant’s submissions that loss of profit was the incorrect assessment of loss, and so the second ground of appeal was not considered

Comment

This is an important decision for insurers in what has been a long running battle with Credit Hire Organisations about how to correctly assess a taxi driver’s loss. The daily rates claimed by taxi drivers are, more often than not, extortionate yet our position has always been that the correct way of assessing such losses is by reference to the claimant’s loss of profit, the claimant having lost the use of a profit earning commercial vehicle.

Where a claimant is pecunious, the court has confirmed the loss of profit approach as per Commissioners for Executing the Office of Lord High Admiral of the United Kingdom v Owners of the Steamship Valeria [1922] 2 A.C. 242, although in that instance the claimant was held to be pecunious by virtue of not complying with the court’s directions regarding disclosure of financial documentation.

Whilst each claim must always be assessed on its merits, this judgment raises important points to consider when dealing with taxi claims, to include:

• where a claimant chooses to hire a replacement vehicle, the expense incurred must be a reasonable attempt to mitigate that loss i.e. where a claimant hires at a cost less than the hypothetical loss of profit, the cost of hire will be awarded;
• where the cost of hire significantly exceeds the avoided loss of profit, the court will ordinarily limit damages to loss of profit;
• where a claimant is genuinely impecunious and, importantly, has evidenced this, then loss of profit is not a reasonable assessment of loss and the cost of hire will likely be awarded and;
• where a claimant can establish that his vehicle is used for SD&P then he/she will ordinarily be entitled to recover the cost of hire.

We remain of the view that when SD&P is a factor, the loss of use element should be assessed by reference to the basic hire rate for a non-taxi vehicle. If the claimant is pecunious, then they are able to mitigate their loss not only by claiming loss of profit, but they can afford to hire a car from a mainstream hire provider to continue their daily life. The claimant can then claim that cost from a defendant insurer until their own vehicle is back on the road or replaced.

This is an important case in the credit hire arena involving claims for credit hire taxis. It is not the silver bullet it may appear to be as each case still needs to be considered on its merits. We believe that this can be the springboard to a judicial decision to challenge the accepted norm that where a pecunious claimant can establish that his vehicle is used for SD&P then they will ordinarily be entitled to recover the cost of hire.