CPR PD 16

Updated: Apr 19, 2020

I was reminded by Sefton Kwasnik at BPS Law yesterday, of the changes that came into force on 6th April 2020. These apply to every case that goes to court involving a dispute over the recovery of Hire Charges and, specifically, Credit Hire Charges. Whilst everybody is working remotely and the normal channels of communication are interrupted because of Coroma virus, I thought it might be useful to share this summary. I remember how destructive the ‘Doorstep Challenge was all those years ago when, for reasons I still don’t understand, we all missed the warnings and carried on as normal for months before the challenge was raised by Morgan Cole.

With effect from 6th April, newly introduced Rules now make it mandatory for the Claimant to include in their statement, evidence which covers the following items together with a declaration that now renders them liable to the risk of contempt charges if the evidence is not truthful. Particularly, Practice Direction 16 relates to the hire of a replacement motor vehicle following a road traffic accident and that will apply to hire claims where the hire may have started up to six-months ago but are only now being litigated. In particular, the changes provide that:

6.3 Where the claim includes the cost of hire of a replacement motor vehicle following a road traffic accident, the claimant must state in the particulars of claim—

(1) the need for the replacement vehicle at the relevant time;

(2) the period of hire claimed (providing the start and end of the period);

(3) the rate of hire claimed;

(4) the reasonableness of the period and rate of hire; and

(5) impecuniosity (if the claim relates to credit hire).

6.4 In paragraph 6.3—

(1) “relevant time” means at the start of the hire and throughout the period of hire;

(2) the obligation to state the matters there set out includes an obligation to state relevant facts.

Commentary:

Considering the extent that Accident Exchange went to in order to prosecute those employees of Autofocus that were prepared to perjure themselves to advance the commercial interests of insurers, it is both horribly ironic but critically important to ensure that extra vigilance is taken right at the start of the hire period to address these issues because the consequences of failing to do will bite at a later date if the claim fails to settle under the GTA and litigation is required.

For example, it may be sensible for a CHO to record in any mitigation statement an explanation from the customer about need, period, rate and reasonableness. This is not something a solicitor will be easily able to construct months after the event and, as we all know, clients have a remarkably short memory that is heavily influenced by anything the read in the Daily Mail. Forewarned is forearmed!

Need: Is the damaged car the only car in the family which has clear needs of family care etc, or is the car needed for work as in the case of a taxi-driver. There is a need to also ensure that the hirer can explain why the need for a hire car lasted for the entirety of the hire period

Period: Focus needs to be given to the eventual period of hire claimed. To do that, a CHO needs to ensure that the hirer is well enough to drive the car after the accident (or somebody else in the family who had use of the car does), that the hirer was driving a car immediately before the accident, and, as we have always recognised, he was not away or going away during the intended hire period where he could have off-hired until his return.

Rate: There is an obligation to state the contractual rate of hire and any other charges that the hirer is responsible for clearly and in compliance with the appropriate regulations and that they reflect the terms of the rental agreement.

Reasonableness of the period of hire, should be assured by:

· addressing the mitigation statement as regards need and period,

· the steps taken to monitor the hire period, and

· the creation of a chronology which will document the length of time it took to instruct an engineer, obtain approval, commence repairs, together with any delays that ensue as repairs proceed.

If the car is beyond economic repair then a similar chronology should be kept and it should include the timing of any discussions with any business financing the Claimant’s own vehicle and their agreement, if appropriate, to any settlement agreement.

As regards the reasonableness of the hire rate for the period of hire, conventional principals will apply. As a minimum, look at the like for like car being hired and if a superior vehicle is provided, only charge the rates for the type of car owned by the Claimant. The role of rate experts like Dean Roberts and Steve Perry will become increasingly relevant as there will be a need for the CHO to be aware of local rates, added charges and any differences in the terms and conditions of hire. This will be needed to justify the rate charged and so it becomes a proactive rather than a reactive step. In addition, where the hire extends, the need to review the rate review mid hire is important.

In those cases where the Claimant is impecunious, there is a need to establish the financial ability (or his inability) to meet the hire charges on the spot. There are two issues associated with this.

· The first is that in today’s economic climate, where millions of people have been furloughed and there is grave doubt about the economic outturn, whether anyone should expect to fund the cost of hire charges incurred as a consequence of the negligence of a third party. I know of one solicitor that is seeking counsel’s opinion on this issue, and it strikes me as something that the trade body should have considered in support of their membership. It is whether the test is properly applied by looking back with perfect hindsight (which cannot be right) or whether it is looking forward with caution based on the “unknown unknowns” facing a hirer today.

· The second issue, assuming we are in normal economic times is that it will be necessary to obtain authority from the hirer to obtain full details of personal and family finances at the start of hire and throughout to establish that they are unable to fund the hire or repair charges. James Bilham of Verius has an automated solution to address this issue and I suggest it is something all CHOs give consideration to.

Each CHO may wish to seek further guidance from counsel about adhering to CPR 16, to ensure that their administrative processes are amended to ensure that they do not fall foul in attempting a recovery of a customer’s hire charges either because they fail to make proper enquiries and document the outcomes or their client is incapable or unwilling to swear the revised statement of truth because these issues were not addressed early in the process. Please, take your own advice. In addition, please review the steps taken in light of any subsequent decisions which might identify a deficiency in the way the industry interprets the guidelines relative to the way the judiciary do.

With regard to the above warning, and to emphasise the importance of obtaining truthful and accurate information it is critical that you remember that the hirer must sign or authorise his signature on the Claim form and/or any Court Pleadings with an enhanced declaration of truth which I repeat below. Had Autofocus and the others been obliged to sign this declaration, all of them would have been jailed a long time ago. With that in mind, read the declaration below carefully, and consider the consequences of any breach on behalf of your client and anyone else that engages in the preparation of the hirer’s statement or pleadings.

Revised Statement of Truth:

‘[I believe][the (claimant or as may be) believes] that the facts stated in this [name document being verified] are true. I understand that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth

Finally, and for completeness, I have copied below the revised Civil Procedure Rules / Practice Directions although I am sure that everyone will have reviewed, digested and adapted to the changes effective two or three days ago.

Form of the statement of truth:

2.1 The form of the statement of truth verifying a statement of case, a response, an application notice or a notice of objections should be as follows:

‘[I believe][the (claimant or as may be) believes] that the facts stated in this [name document being verified] are true. I understand that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.’

2.2 The form of the statement of truth verifying a witness statement should be as follows (and provided in the language of the witness statement):

‘I believe that the facts stated in this witness statement are true. I understand that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.’

2.2A The form of the statement of truth verifying a costs budget should be as follows:

‘This budget is a fair and accurate statement of incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation.’

2.3 Where the statement of truth is contained in a separate document, the document containing the statement of truth must be headed with the title of the proceedings and the claim number. The document being verified should be identified in the statement of truth as follows:

(1) claim form: ‘the claim form issued on [date]’,

(2) particulars of claim: ‘the particulars of claim issued on [date]’,

(3) statement of case: ‘the [defence or as may be] served on the [name of party] on [date]’,

(4) application notice: ‘the application notice issued on [date] for [set out the remedy sought]’,

(5) witness statement: ‘the witness statement filed on [date] or served on [party] on [date]’.

2.4 The statement of truth must be in the witness’s own language.

2.5 A statement of truth must be dated with the date on which it was signed.

PD 16

Hire of replacement motor vehicle following a road traffic accident

6.3 Where the claim includes the cost of hire of a replacement motor vehicle following a road traffic accident, the claimant must state in the particulars of claim—

(1) the need for the replacement vehicle at the relevant time;

(2) the period of hire claimed (providing the start and end of the period);

(3) the rate of hire claimed;

(4) the reasonableness of the period and rate of hire; and

(5) impecuniosity (if the claim relates to credit hire).

6.4 In paragraph 6.3—

(1) “relevant time” means at the start of the hire and throughout the period of hire;

(2) the obligation to state the matters there set out includes an obligation to state relevant facts.

I know that most of you will have already considered these issues but, with people working remotely, it might not be an inconvenient time to circulate a note afresh just to remind them of the changes to the rules.

Finally, and with apologies for another shameless plug, my book on Credit Hire was launched last month. What I tried to do, after 40 years in the business, was write something that touched on some of the history but then focused on the current market position where I believe that CHOs have evolved into three categories, each of which has different prospects for success.

They are the Primary Suppliers (Enterprise and Redde, who have the scale, expertise, brand, relationships and commercial approach to control most of the current and future volumes). There are then Secondary Suppliers, most of the remainder really but with Kindertons as the largest and Hertz as the smallest based on turnover and most other measures. They are in a difficult world because they have differentiated their proposition based on the high commission they pay which makes their model increasingly harder to sustain. Some of that is because of the need to say ‘yes’ to a hire or demonstrate a desire to extend a hire to make the transaction profitable, all of which makes the claim harder to settle. 

Redde (Helphire) experienced the issues that most Secondary Suppliers now face in 2008 when they decided they needed to become suppliers to insurers and take cost out of their business after massive write-offs for millions of pounds of irrecoverable debt. Redde have got beyond that problem now. We don’t know if Enterprise ever had the same issue because they are a private company and so don’t have to wash their dirty laundry in public. However, the sheer size of both of those organisations and their approach towards a more collaborative relationship with insurers has allowed them to put a lot of clear air between them and their smaller competitors. Some of that has been enabled by moving cost into the repair sector or using their size to drive commercial astute deals throughout the supply chain.

Of the Secondary Suppliers, pretty much all of them – AX, Hertz, Edam/EasiDrive, Winns – have suffered and had to make significant accounting provisions, the most recent being Edam who reported having written off £5.5m in their accounts published in December. Their position was not unique. The smallest players are in the third category and include niche players like Anexo (DAMS), Crash in Belfast and those supplying just licensed hire vehicles or motorcycles where their business is less challenged with competition. Of the three, I think they will probably have the easiest ride in the next few years. Most of the Secondary Suppliers will be looking to sell or merge their businesses because, I think, the gap between Kindertons at the top of the Secondary Supplier Group and Enterprise and Redde, is almost too big a gap to bridge.

I also look at referrers in the same way as I look at CHOs and identify three tiers – Tier 3 are large insurers who will continue to control the volume, Tier 2 are smaller insurers, CMCs and accident management companies and Tier 1 is everyone else – repairers, brokers, dealers and others. Those Tier 1 referrers have done very well in earning a decent living from the generous commissions paid but they are now too demanding a supplier of referrals considering the volume of work they generate and those CHOs that focus on that element of the market risk losing traction unless they can refocus their model. And, in all of this, there is the connected car and the emerging role of vehicle manufacturers where tens of millions of vehicles will be permanently connected to the manufacturer in the next few years.

My new car can tell me when I am involved in any accident and they will call me to ask if I need help. It has a black box which records all of the vehicle activity prior to an accident, data from which can be downloaded to show a whole host of accident, vehicle and GPS data to identify where and how the accident happened and what I was doing. CHOs appear not to be alert to the threat that will come their way in the next two years. Manufacturers are, however, keen to integrate a means to control more of the customer journey and whether that comes from the AA, RAC and the like providing outsourced services for them OR whether manufacturers choose to partner with insurers, there are few CHOs likely to be able to manage that shift in opportunity when it happens. And, of course, there are already algorithms being developed that allow a manufacturer to identify the location of an impact on the vehicle, the severity of damage, the parts likely to need replacing or repairing based on the impact, the potential injury to the customer and all before they even see the vehicle. No doubt audatex et al. are focused on integrating their systems to maximise that opportunity when it emerges. Bearing in mind Audi are forecasting 346 million connected vehicles by 2023 and Jaguar Land Rover and Mercedes Benz are already retrofitting the technology to vehicles up to 8 years old, this is a big change for an industry that still competes by paying more commission than the next guy.

In addition, the book focuses on why CHOs get it wrong and what they should do to get it right. It follows the evolution of a strategy by looking at the different referral channels and the basis on which the market is split between different CHOs and different referrers. It then follows the life of a claim – everything from approving it through to settling it with everything in between, including an exposition of the skills and expertise needed. How to source, buy and manage a rental fleet, how to build robust IT solutions, approaching fraud with an eye to risk, building better relationships with insurers, the use of telematics and the problems of litigation and the forces against credit hire. That said, it also reflects on why, with annual revenue of £1 billion, it is difficult to see how insurers could engineer a better solution than that which they currently enjoy. I don’t believe litigation is dead, but the control they exert through the GTA, the position they enjoy because of a relatively compliant credit hire sector, the emergence of bilateral protocols that deliver value to an insurer and quicker cash to the CHO as  well as the current support they seem to receive from regulators, judiciary and the Government probably means that it can’t really get much better for insurers.  

Interspersed in all of that are stories about the evolution of the industry over 40 years, consideration of the customer’s role in all of this, details of some of the battles fought and evidence of the bitterness expressed by insurers towards the credit hire industry even though they have also scored some own goals and missed a number of opportunities to create a better world over the past 40 years.  In addition, I touch on the  US Tort Reform movement and how insurers borrowed from that playbook to change the law around whiplash and the perception of the credit hire industry and cast an eye on developments in Australia – ten years behind but, in some ways, quite capable of influencing the atmospherics in the UK especially based on some recent decisions that address issues not yet addressed here. And finally, although there is a bit more in there than just this, I have identified those organisations that are of value to the credit hire industry solicitors, funders, rate experts, fraud specialists as well as solicitors and barristers on both sides of the argument.

If there is a conclusion I think I reached, it is that credit hire is going to become an increasingly challenging environment where Enterprise and Redde will be hard to catch, where the small niche suppliers will be hard  to copy and where the Secondary Suppliers need to thinks about a strategic review of the sustainability of their referral channels especially with the impending threat posed by the connected car. If I had to put a time frame on things, I would say that the next five years will be massively challenging and, for the five or six CHOs that I think are looking to sell, float or merge their businesses  in the next few years, requires a cold hard look at the sustainability of their model.

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