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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Sobrany v UAB Transtira [2016] EWCA Civ 28 (28 January 2016)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2016/28.html
Cite as: [2016] EWCA Civ 28
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ON APPEAL FROM THE TUNBRIDGE WELLS COUNTY COURT
DISTRICT JUDGE LETHEM
1 TN 00573
Strand, London, WC2A 2LL |
||
B e f o r e :
LORD JUSTICE LEWISON
and
LORD JUSTICE CHRISTOPHER CLARKE
____________________
| Sobrany |
Appellant |
|
| - and - |
||
| UAB Transtira |
Respondent |
____________________
Steven Turner (instructed by Keoghs LLP) for the Respondent
Hearing date: 17th December 2015
____________________
Crown Copyright ©
- This is another chapter in the long running saga of disputes between insurers about liability to indemnify claimants in respect of the cost of hiring replacement vehicles whilst their cars are being repaired following a road traffic accident.
- The arrangements with which this case is concerned have come into existence because comprehensive insurance policies usually do not cover the cost of hiring a replacement vehicle whilst repairs are carried out. They work like this. A motorist whose car has been damaged by an accident which was entirely the fault of someone else hires a replacement car from a credit hire company. Under the credit hire agreement he agrees to pay hire charges but only at the expiry of a credit period as defined in the agreement. The hire company pursues the driver of the vehicle who was at fault and the innocent motorist accounts to the company for any recovery. Often, as in the present case, the hire agreement is accompanied by an insurance under which the motorist is insured in respect of the hire charges and legal costs. As a result he is not out of pocket; and the hire company pursues the driver who was at fault (in effect his insurers) for damages and costs.
- Credit hire arrangements have produced much litigation. The background is set out in the judgment of HH Judge Mackie QC in W v Veolia Environmental Services [2011] EWHC 2020 (QB) as follows:
- In Dimond v Lovell the credit hire agreement was unenforceable under the Consumer Credit Act 1974. Since then defendants have also relied on other statutory provisions. Under the Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008 SI 2008/1816 consumers who have made a contract for the supply of goods or services during a visit by a trader to their home or place of work have a right to cancel within a cancellation period. A trader who supplies goods or services is bound to give the consumer a written notice of his right to cancel when the contract is made. In Veolia Judge Mackie held [54] that the failure to give the requisite notice rendered the hiring agreement unenforceable.
- If the hiring agreement is unenforceable it could be said that the hirer has suffered no loss. He has obtained the use of a car for which he does not have to pay. To give him damages for services which he has received but for which he has not had to pay would mean that he recovered damages for a loss for which he had already been compensated by the provision of a free car a form of double recovery. This impediment to recovery has been avoided when insurance is in place and the hire charges have been paid by the insurer. Payment by the insurers is treated as payment by the claimant, and the insurers will have the right to pursue by way of subrogation, and in the name of the insured, any claim for damages which its insured has in respect of the indemnified loss. So there can be no question of double recovery: Arab Bank plc v John D Wood (Commercial) Ltd [2000] 1 WLR 857 para [95] and [101]. The claimant is not regarded as having failed to mitigate his loss if he pays for a car which has been provided to him even if it is likely that he would not have to pay if he took the matter to court: Veolia at [39].
- In Veolia the car was a 21 year old Bentley. The credit hire arrangements were made with Accident Exchange Ltd ("Accident Exchange"). The total hire fees were in excess of £ 138,000. The limit of indemnity under the policy was, as here, £ 100,000. The claimant was held entitled to recover £ 100,000.
- At para [40] Judge Mackie said this:
- On 25 September 2009 Mr James Sobrany was driving his recently acquired Bentley Continental along the M 25 when a Mercedes lorry belonging to UAB Transtira and driven by its employee changed from the nearside to the middle lane and drove into the nearside of his vehicle. Mr Sobrany was in no way to blame.
- The Bentley was badly damaged. Mr Sobrany wanted to hire a replacement until his car was repaired. For that purpose he took advantage of the services provided by Accident Exchange. He hired a replacement vehicle from them on credit hire terms by virtue of which he had to pay somewhat more than he would have had to do if he paid the hire as it accrued due, but did not have to pay until the expiry of the credit period as defined in the applicable terms. He also took advantage of the free insurance offered. That insured him in respect of legal expenses and replacement vehicle charges. There was a limit of £ 100,000. The insurer was IGI Insurance Company Limited which with effect from 1 July 2015 changed its name to AmTrust Europe Ltd ("AmTrust"). Accident Exchange acted as claims agent and cover holder for AmTrust.
- The terms of the insurance included the following:
- The hire of the replacement vehicle a Bentley Continental GT Coupι - lasted from 26 September 2009 until 5 October 2009. The terms and conditions included the following:
- Mr Sobrany wanted to hire a different Bentley because the original vehicle had been used by a smoker. So he hired another Bentley a Bentley Continental Flying Spur from Accident Exchange from 6 October 2009 to 3 March 2010. This vehicle was also the subject of a third hire agreement (a copy of which was not before the judge) with a rental start date of 5 January 2010. The need for a third hire agreement arose because the rental period under the second hire agreement ended 85 days after its date.
- On 16 March 2010 Accident Exchange produced a statement of charges in the sum of £ 142,751, including VAT, covering the hire of the first vehicle from 26 September 2009 to 5 October 2009 and the second from 6 October 2009 to 3 March 2010. On 21 December 2010 Mr Sobrany claimed under what he described as "my Insurance Policy". The insurers, for whom Accident Exchange acted as agents, paid this amount. By documents of 24 December 2010 and 25 February 2011 Accident Exchange acknowledged payment of £ 100,000 and £ 42,751.56 respectively.
- On 16 May 2011 a claim form was issued in which Mr Sobrany was the claimant and UAB Transtira the defendant. The defendant's insurers had already met the cost of the repairs to the vehicle (£ 45,850), the costs of recovery and storage fees, and an amount in respect of personal injuries. The claim was only for the hire charges of
£ 142,751.56. The Particulars of Claim made it clear that the claim was a subrogated claim under a policy of insurance, under which Mr Sobrany had claimed, and that Accident Exchange's hire charges had been discharged by payments under the policy. - A defence and counter schedule was filed on 10 June 2011 which raised a number of standard issues in cases of this kind such as the need for, and the rate and period of hire.
- In his first witness statement of 28 October 2011 Mr Sobrany said that he had entered into "a policy of insurance"; that he had made claims "under this policy" on or about 24 December 2010 and 25 February 2011; and that he had received letters confirming that the charges had been paid and copies of the receipts for the monies paid on those dates. The statement exhibited the claim made by email of 21 December 2010, the two receipts and two accompanying letters from Accident Exchange, in its capacity as claims agent, confirming that the charges had been paid, and the terms and conditions of the policy.
- On 18 March 2013 the defendant filed an updated counter schedule which "noted" that no cancellation notice (i.e. notice of the right to cancel) had been provided at the time of signing of either the first or the second hire agreement. It averred that, as a result, if the hire charge claim had not been discharged by an insurance company the hire contracts would be irredeemably unenforceable. The claimant was put to proof that he had activated a policy taken out with AmTrust to discharge his liability. The pleading noted that the claimant asserted that there was only one insurance policy albeit he had made two separate claims, and averred that the limit of the policy was £ 100,000.
- The defendant's primary case was said to be that because the policy of insurance was the only policy, and was taken out when Mr Sobrany entered into the first hire agreement, it could only pay out in relation to the first hire agreement "(no separate policy being taken out in respect of the second hire agreement)". (This appears to be a contention, for which there is, in fact, no warrant, that the first policy only covered the period of the first hire agreement). The maximum sum claimed under the first agreement was said to be £ 9,076.88 and that was said to be the maximum that Mr Sobrany could recover. The second hire agreement was said to fall foul of the Regulations and, since there was no insurance policy in force in relation to that agreement, the latter agreement was irredeemably unenforceable against the claimant and any sum claimed under that contract must fail. Hence there could be no claim for damages for any such sum. Alternatively recovery was limited to £ 100,000.
- The trial began on 14 March 2014 before District Judge Lethem. At the beginning of the trial Counsel then acting for Mr Sobrany conceded that he could not recover more than £ 100,000, being the limit under the only policy which it was the claimant's case had ever been issued. The judge then turned to consider whether the defendant should be allowed to challenge whether there was any policy of insurance at all, a point which had been put in issue in the defendant's skeleton argument. He refused to allow it to do so on the ground that that had not been pleaded and would take the claimant by surprise; and that what had been pleaded was that there was only one policy and that, therefore, the indemnity was limited.
- Mr Sobrany gave evidence. At the beginning of his cross examination events took an unexpected turn. He said that he remembered receiving the hire agreements of 26 September and 6 October 2009 on those days. Asked what other documentation he signed at the time on those days he said that there was some insurance documentation to go with the hire agreements, which he signed:
- This evidence was contrary (a) to what had been pleaded and (b) to what he had said in his witness statement. Its appearance caused Mr Patrick Kerr, who was then counsel for the defendant, to contend in his final submissions that there were plainly two policies. He submitted that "the policy" envisaged one claim in relation to one hire agreement although that was "not set out explicitly". The first policy covered only the first hire agreement and the claim against the defendant was made only in respect of what was covered by the first policy. Reference was made to clause 4.9.
- It is not entirely clear to me from the transcript whether Mr Kerr was intending thereby to submit that there were likely to be two policies of insurance for two separate and different periods; or, as seems to me more likely, that there was an overlap between the first and the second policy in respect of the period beginning on 6 October 2009, and that clause 4.9 meant that there could be no recovery under the first policy in respect of the second period, and that "the subrogation was only in relation to the first hire agreement and not the second". The judge allowed the point to be taken.
- Before us the claimant, now the appellant, has sought to adduce new evidence, which we have considered de bene esse, with a view to showing two things:
- In respect of (a) the claimant has produced two notices, apparently signed by Mr Sobrany, informing him of his right to cancel. No one has suggested that these are not genuine.
- In respect of (b) the appellant seeks to adduce a witness statement dated 18 November 2014 of Mr Stephen Evans who is the Chief Executive of Accident Exchange. In it he states that there was only one policy, as is the case in relation to every hiring arrangement, however many hire agreements are entered into. He describes the process by which the insurance is provided. This, he says, involves the driver who delivers the car giving the client a sealed envelope containing a schedule of cover, the policy terms and conditions and a letter explaining the cover. He says that the claimant was never handed a second envelope and that Accident Exchange's IT system is configured to generate only one certificate per claim irrespective of the number of hire vehicles provided. A check of the database reveals, he says, that there only ever was one policy issued to Mr Sobrany. He suspects that Mr Sobrany's reference to signing two insurance documents was a reference to signing the "right to cancel" document which accompanies any hire agreement signed at a consumer's home or workplace on each occasion when a new hire vehicle is supplied. The client has nothing to sign in respect of insurance.
- He exhibits to his statement (i) a Schedule of Cover; (ii) the three hire agreements with their terms and conditions; and (iii) two notices of the right to cancel, said to be signed by Mr Sobrany. The Schedule of Cover was not before the judge. It describes Mr Sobrany as the policyholder, and the cover as commencing on 26 September 2009 and expiring "On settlement of the Policyholder's claim or as otherwise set out in the terms and conditions [sic] Policy". The first two agreements and the terms were before the judge. The third was not. Neither of the notices was before the judge. They are both dated 26 September 2009 but the second of them has the words "SWAP VEHICLE" in manuscript at the top. There was, according to Mr Evans, no third notice because the agreement was sent through the post so that the Regulations were not applicable.
- In his ex-tempore judgment the judge decided that, on the evidence, there was more than one policy. He regarded Mr Sobrany, who himself had very little interest in the outcome of the case, as a dependable witness who, although his recollection was not all that it could be in respect of certain aspects of the case, was, overall, an honest and truthful witness doing his best to recollect events some time ago.
- The judge held that the likelihood was that there were two policies in identical or substantially the same terms. He was satisfied that the second policy signed on 6 October "create[d] an indemnity such as to engage clause 4.9" and that, accordingly "recovery in this case is limited to the first period of hire alone". I take that to mean that he accepted the submission made by Mr Kerr that the claim was made on the basis of a single insurance policy and held that if there was, as he found, cover under a second policy, clause 4.9 was engaged so that in respect of the second period from 5 October 2009 there was, by virtue of that clause, no cover under the first policy even if the cover under the first policy extended as a matter of construction to the whole period of hire.
- As a result the judge decided that Mr Sobrany was only entitled to recover £ 8,959.38, being the amount due under the first hiring agreement and was held liable to pay the costs of the action. The appellant submits that the judgment was wrong and seeks to claim £ 101,382.22. That is less than the full figure of £ 142, 571.56 because the appellant concedes that, should the appeal succeed, it would be appropriate to apply a 46 day reduction to the hire period as the judge would have done if he had otherwise decided in Mr Sobrany's favour.
- As a result there are three issues for decision: (a) whether, as the appellant submits, the judge should not have permitted the defendant to contend that there were two insurance policies; (b) whether we should admit any of the new evidence; and (c) whether, on the assumption that there were two insurance policies, the judge reached the right conclusion.
- Mr Christopher Butcher QC on behalf of the appellant submits that the judge was wrong to allow the defendant to contend that there were two policies. The defendant had pleaded that there was one. It then sought to suggest that there were none. The judge refused to allow it to do so because that contention was not pleaded and took the claimant by surprise. He should not then, contrary to the approach rightly taken by him in relation to the proposal to claim that there was no policy at all, have allowed the defendant now to claim that there were two. To allow this to be done as a result of an unexpected answer in cross examination was unfair. The claimant had come to court to deal with the pleaded case - as the judge recognised in his first ruling. Mr Sobrany might well have been mistaken in evidence which he was giving over 4 years after the event. No disclosure had ever been given, or sought, in relation to a second policy. AmTrust, the claimant's subrogated insurers and Accident Exchange, their agents, who were best placed to know the true position and had the relevant records, had no opportunity for further research into whether or not there was other relevant documentation or to take the matter up with the claimant. No application was made by the defendant to amend its pleadings and no amendment was ever made.
- Mr Steven Turner for the defendant, who did not appear below, submits that the judge was fully entitled to allow the two policies point to be taken. The evidence given was clear. If the defendant sought to avoid the point being taken Counsel should have objected to the line of questioning. He did not do so. Nor did he seek an adjournment.
- Not without some hesitation I have come to the conclusion that it was within the judge's discretion to allow the two policies point to be run. There were three options: (i) to refuse to allow reliance on Mr Sobrany's evidence in this respect; (ii) to permit reliance; and (iii) to adjourn. The third was never sought. In respect of the choice between (i) and (ii) Mr Sobrany's evidence, which concerned matters wholly within the knowledge of him and Accident Exchange, was clear; and there would have been a degree of unreality in proceeding as if the evidence had not been given. Further there is a difference between allowing a defendant to advance a positive case that is inconsistent with its pleading and allowing it to rely upon the evidence which the claimant had in effect volunteered. I also bear in mind, although I do not regard it as dispositive, that the judge was not asked to rule on whether the point about two policies was open to the defendant, or required an amendment of the pleading, as soon as it surfaced: for the importance of which see Hawksworth v Chief Constable of Staffordshire and Anr [2012] EWCA Civ 293 [40] [41]. Further, in his submissions, whilst relying on (a) the fact that there had been no amendment, or interrogation or appropriate disclosure on the issue; (b) that Mr Sobrany might be wrong; and (c) that the second policy might be a duplicate, Counsel contended, principally that there was no evidence that Mr Sobrany had signed a policy of insurance that undermined the first one. Indeed, at one point he is recorded as saying (in the light of the evidence) that there were two policies.
- Having accepted Mr Sobrany's evidence, it was, in my view open to the judge to find that there were, as he said, two policies in the same or substantially the same terms.
- I would decline to admit the new evidence. As to the notices of the right to cancel, they could have been provided long before the trial and should have been produced on disclosure. Why that did not happen is a mystery, particularly since (i) they refer to a vehicle rental agreement and bear the same number as the hire agreements (which is the same in the case of all three); and (ii) according to Mr Evans their production and signature is a matter of routine. If they had been produced the whole issue of the unenforceability of the hire agreements would never have arisen.
- I have considered whether the requirements of the overriding objective, which in appropriate circumstances might justify the reception of evidence which does not meet the Ladd v Marshall test, should cause us to admit the evidence of the notices on the ground that it is for all practical purposes incontrovertible and determinative. I have however concluded that we should not do so. This is in reality a dispute between two insurance companies. The claimant's insurers had access to the relevant documents which they never produced, although they should have done, for reasons which are unclear. I am not in those circumstances disposed to exercise our discretion to admit the new evidence. If the Ladd v Marshall criteria are to be stretched this is not the case to do it.
- As to the evidence about whether there were two policies the position is different. The claimant was proofed and his witness statement made clear that he had one policy. There was no reference to a second. The terms and conditions were produced (but not the Schedule). The definition of Period of Insurance does not suggest that any new policy would be needed if there was a fresh hire agreement. The defendant noted that there was one policy and was refused permission to argue that there may have been none. The claimant's insurers and their solicitors could not, if there was only one policy, have expected that he would say that there were two. Those are all factors in favour of admitting the evidence now. But what we have been asked to do is not to order a new trial (which would involve much wasted expenditure) but to admit the evidence and accept it as accurate without Mr Sobrany being questioned again. I do not regard it appropriate to do so, not least because, as will become apparent, the appellant will not suffer any injustice by our declining to take this course.
- I, therefore, proceed on the basis that there were two policies, one incepting on 26 September 2009 and the other on 5 October 2009. On that basis there were two policies in force, but with the same insurer, in respect of the period beginning on 5 October 2009. The Period of Insurance specified under each policy did not, under the terms, end when the new policy was taken out. I cannot, however, accept that, if there were, as the judge found, two policies, it was right to confine the claimant to a claim only in respect of the first period. I say that for a number of reasons.
- First, the Particulars of Claim stated that the claim was a subrogated claim under an insurance policy. But the claim was still a claim by Mr Sobrany for the entirety of the hire charges. Whilst that claim might be defeated by virtue of the operation of the Regulations, UAB Transtira was not entitled to defeat it effectively on the basis that Mr Sobrany had no title to sue. He was the only person who could do so, and the claim was manifestly a claim for the whole of the charges. Further, even if, contrary to my view, Mr Sobrany should be confined to a claim in respect of one of the hire periods I do not see why he should be confined to the shorter of the two.
- Second, on the findings of the judge Mr Sobrany had cover under the first policy for only a small portion of the hire charges, and cover under the second policy (from the same insurer) for the much larger balance. He sought to recover from the insurer in respect of the whole; and he succeeded in doing so because the insurer had paid the whole of the hire charges. Such an insured must be taken, absent some compelling evidence to the contrary, to have claimed and been paid under both policies such that the insurer is subrogated under both and should be treated as claiming as such. It cannot have been right to allow the defendant to rely on the unpleaded contention that there were two policies without allowing the insurer to assert in the claimant's name a claim against the defendant by virtue of its rights of subrogation under both policies.
- Third, as to clause 4.9, Mr Butcher submitted that the exclusion in respect of "any claims that You are indemnified for under any other policy of insurance" must be narrowly construed so as only to cover claims where the insurers under the other policy have in fact paid out, rather than claims in respect of which they have merely agreed to provide indemnity. Noticeably, he submits, the clause does not use the phrase, found in other authorities "entitled to indemnity under any other policy". I am not convinced by this. It seems to me that the words are intended to cover claims for which the second policy provides indemnity according to its terms ("that you are indemnified for under any other policy") whether or not the insurers have honoured those terms.
- But clause 4.9 cannot be construed so as to mean that there is no cover under the first policy in respect of the period beginning on 5 October 2009 because the second policy provides for an indemnity under that period as well. If that were so the same would apply in respect of a claim under the second policy in respect of that period, which would be covered by the indemnity provided for in the first policy. As a result AmTrust would not have to pay in respect of the second period under either policy. Such a result is absurd. Not surprisingly, AmTrust has never suggested it. The exclusion must be construed so as not to apply in respect of any other policy which itself contains a term that it is not to apply if there is cover under the first policy.
- In Weddell and Another v Road Transport and General Insurance Company Limited [1933] 2 KB 563 the plaintiff had a policy which insured a relative or friend whilst driving with his consent, provided that the relative or friend was not entitled to indemnity under any other policy. The plaintiff's brother was driving the car, with his consent, and had an accident. The brother had insurance under which indemnity was extended to cover him while driving a car not belonging to him if no indemnity was afforded the insured by any other insurance. Rowlatt J held that it was unreasonable to suppose that it was intended that clauses such as these should cancel each other out by neglecting in each case the proviso with the result that "on the ground in each case that the loss is covered elsewhere it is covered nowhere". The reasonable construction was "to exclude from the category of co-existing cover any cover which is itself expressed to be cancelled by such co-existence and to hold in such cases that both companies are liable". I regard that approach as applicable here. No question of apportionment arises because the insurer is the same.
- That leaves for consideration the applicability of the Regulations and Veolia. The position which I have now reached is that there were two policies and that AmTrust is liable, and has paid out, under both. That payment amounts to a payment by Mr Sobrany of the hire charges. By virtue of clause 3.7.15 Mr Sobrany would be obliged to hold all damages recovered subject to a charge in AmTrust's favour. There is no question of double recovery.
- On the judge's approach, which I do not accept, there were two polices, but AmTrust paid out only under the first. It also paid more than it was bound to pay under the first policy because it could have relied on clause 4.9. Even if, contrary to my view, that was so, AmTrust was not bound to take the thoroughly unmeritorious point that it was not liable for the second period under the first policy although it was under the second a point which, once the laughter had subsided, would simply have led to a claim under the second policy. If it did not take that point its total payment falls to be regarded as a payment under the first insurance policy. The fact that the insurer did not seek to rely on a policy exclusion did not mean that the sums paid were not to be regarded as the fruits of the insurance or that the tortfeasor could take them: King v Victoria Insurance Co [1896] AC 250, 254-5; and, in the present case, there would be no want of bona fides in paying the full £ 142,000 which was less than the total indemnity under both policies.
- Whilst it is not necessary to decide the point it seems to me that, even on the basis that clause 4.9 was applicable and should have been relied on by AmTrust, the payment by AmTrust amounts to a payment by Mr Sobrany in satisfaction of the hire charges and Mr Sobrany would hold any damages recovered subject to a charge in AmTrust's favour by virtue of the words "in respect of all sums which We have paid out or which We have incurred a liability under this Policy". In Veolia Judge Mackie declined (obiter) to accept that any payment in excess of the £ 100,000 was a good faith payment under the insurance. But it would still be a payment of the hire charges which the insured was bound to repay if it obtained damages: so that there would be no double recovery.
- Further, since there are two policies with a limit of £ 100,000, Mr Sobrany is entitled to recover £ 101,382.22 and is not limited to £ 100,000. Counsel's concession that the claimant could only recover up to the £ 100,000 limit was plainly made on the basis that there was only one policy. It is not applicable in circumstances where the judge has permitted the defendant to assert that there were two and has found that to be the case.
- I would, accordingly, allow the appeal and enter judgment for Mr Sobrany in the sum of £ 101,382.22 together with interest from the dates when the relevant sums were paid by the insurer. I would invite the parties to agree what rate of interest should apply and from what dates and to calculate the amount due.
- The defendant's reliance on there being two policies will thus have meant that it will have become liable for slightly more than the £ 100,000 which was its alternative case. I reach this conclusion with equanimity. The defendant seized the opportunity provided by Mr Sobrany's unexpected evidence to take a point which no doubt seemed a good idea at the time but which was a bad one. Had there been more time for reflection its defects might have become apparent. It then sought, successfully, to exclude evidence which, if accepted, would have shown that there was in truth only ever one policy. The judgment which I propose should be entered is the result of the stance it chose to take. As ye sow, so shall ye reap.
- I agree that the appeal should be allowed for the reasons given by Christopher Clarke LJ; and wish to comment on only two points. The first is the judge's decision to allow the "two policies" point to be taken at all. I have had more difficulty than Christopher Clarke LJ in regarding the judge's decision as fair, especially in the light of his earlier ruling based on the pleadings. I think that had I myself been the trial judge I would not have allowed the point to be taken without an amendment of the pleadings, the formality of which would have alerted counsel for the claimant of the possible need for an adjournment. However, it is necessary to say firmly that whether to allow the point to be taken was a discretionary decision for the trial judge; and my disagreement with him on the facts is not enough for an appeal against his ruling to succeed.
- The second point relates to the consequences of the judge's ruling. In seeking to uphold the judge's judgment Mr Turner submitted that Mr Sobrany ought to be confined to his pleaded case that there was only one policy. That had the consequence that while the Defendant was free to advance its legal arguments on the basis that there were two policies, Mr Sobrany had to accept that there was only one. That was, in my judgment, an impossible position. Either the judge's finding of fact bound both parties or it bound neither of them. A case cannot be decided on the basis of one set of facts applying to one party and a different set of facts applying to the other. Reliance on the pleaded case is no answer because the effect of the judge's ruling was to allow an unpleaded point to form the basis of his decision. All of which goes to show, as Christopher Clarke LJ points out at [33], that pleadings are still important.
- I agree with both judgments. I agree also with my Lord Lewison LJ's gloss on the two policies point.
LORD JUSTICE CHRISTOPHER CLARKE:
"14 As is well known credit hire arrangements have given rise to a lot of litigation. The legal framework is helpfully summarised in the skeleton argument of Mr Butcher QC and Mr Williams for the claimant as follows:
a. In Giles v Thompson [1994] 1 AC 142 (HL) it was held that the claimant who entered into this type of arrangement incurred a loss (namely his liability to the credit hire company) for which he could claim compensation from the at fault defendant notwithstanding that the schemes envisaged that the claimant would not have to pay the credit hire company anything.
b. In Giles v Thompson it was further held that this type of scheme was not champertous or invasive of any requirement of public policy.
c. In Dimond v Lovell [2002] 1AC 384 (HL) it was held that, while the amount of the hire charges was prima facie the loss the claimant had suffered, in the case of credit hire charges would include amounts for benefits additional to the simple hiring of a car.
d. The majority of the House found that the claimant would only be entitled to recover that part of his loss which represented the cost of hiring a substitute car, and this would, ordinarily, be what was established to be 'the equivalent spot rate' for the relevant kind of vehicle.
e. In the same case, it was further added that, if the hire charges were incurred under an 'irredeemably unenforceable' consumer credit agreement, the claimant could not recover them from the defendant as this would offend the rule against double recovery.
f. In Lagden v O'Connor [2004] 1 AC 1067 (HL) the majority of the House of Lords found that, in the case of claimants who were unable to afford to pay hire charges 'up front', they should be able to recover the entire amount of the hire charges in any event.
g. In Bee v Jenson [2007] 4 All ER 791 (CA), it was held that even if a hire agreement did not impose a liability on the claimant to pay the hire charges, he could still be awarded general damages for the loss of use of his car, and that these could be calculated with reference to the reasonable cost of hire in any event."
"There are layers of artificiality in the arguments of each side. The defendant's reliance upon the Regulations arises not from a new and unexpected concern for the rights of consumers but from a search for weapons in a continuing battle with those behind the claimant. The decision by insurers to pay immediately after the issue of Regulations was raised in the litigation was similarly tactical and part of what Mr Butcher describes as "meeting fire with fire". These considerations and the motives behind them do not in themselves invalidate the points taken or transactions entered into. But there is a limit. I have concluded that the arrangements between W and AEL involved genuine contracts of insurance (and in evidence he so regarded them). But insurers paid more than £138,000 under a policy whose limit was £100,000. It is true, as Mr Butcher submits, that parties to a contract can vary their arrangements. However insurers were under no contractual liability to pay out more than £100,000. Insurers are understandably cautious about paying any claims given their duties to shareholders and their responsibilities to other payers of premiums. Cheerful, prompt and knowing overpayment of claims by insurers is unheard of it, at least in this Court. It would be extraordinary for insurers to pay out almost 40% more than the limit under the policy except in unusual ex gratia circumstances which certainly do not apply here. While recognising that the transactions in this case amount to a valid contract of insurance I will not treat anything above £100,000 as being a good faith payment of a claim made under the policy. Apart from that I accept the Claimant's case on this point. (In practice this does not affect the overall result because the entire £100,000 can be allocated to the first hire agreement given the position on the second one- see Para 55 below)."
The last sentence refers to the fact that there were two hire agreements and only the second one was affected by the Regulations.
The facts
The insurance
"1. Definitions
Accident Exchange's Charges the amounts incurred by the Insured in connection with Accident Exchange Limited's credit services (including vehicle hire charges owed to Accident Exchange Limited and any repair costs paid for on behalf of the Insured by Accident Exchange Limited) following an Insured Incident.
Insured Incident a road traffic accident and which is objectively considered by Us as likely to be shown to have been caused by the fault of the Defendant without any fault on the part of You.
Limit of Indemnity is the maximum sum that the Underwriters will pay in aggregate in respect of all Legal Costs and Expenses and Accident Exchange's Charges, being the sum of £ 100,000.
Period of Insurance the period which commences on the date of issue of this Policy as shown on the accompanying schedule of cover and ends on the earliest of the following occurrences:
(a) when the legal proceedings in respect of the Claim are concluded in a court of first instance;
(b) when the Claim is concluded by negotiation by the Solicitor;
(c) when You or the Solicitor give Us notice that the Claim is concluded; or
(d) when We give You notice that the cover is withdrawn in accordance with the terms of the Policy.
2. Cover
Following a Policy Claim, the Underwriters will, subject to the terms and conditions of this Policy, indemnify the Insured against (a) Legal Costs and Expenses and (b) at the end of the relevant credit period and following demand for payment of the same having been made, Accident Exchange's Charges, in each case, subject to:
2.1 the Policy Claim having been met within the Period of Insurance;
2.2
2.3
2.4 The Claim having reasonable prospects of success;
2.5 the maximum sum the Underwriters pay not exceeding the Limit of Indemnity: and
2.6 the terms and conditions of this Policy.
3. Policy Conditions
The following conditions apply to this Policy:
3.7.15 notwithstanding any other term of this Policy and as may be requested by Us, diligently pursue a Claim together with the Claim for the costs of doing so in compliance with Our instructions and hold all damages and Legal Costs and Expenses recovered subject to a charge in Our favour in respect of all sums which We have paid out or which We have incurred a liability under this Policy and further immediately reimburse Us all such sums and pay over to Us any recovered costs; and
4. Policy Exclusions
The following exclusions apply to this Policy:
4.9 any claims that You are indemnified for under any other policy of insurance;"
The hire agreements
"
1.5 AX Charges together, the Hire Charges and any Repair Charges
1.6 Claim Your claim for compensation for the Hire Charges and any Repair Charges against the Third Party.
1.9 Hire Charges the charge set out in the tariff on the face of this Agreement which You incur in hiring the Vehicle for the Rental Period (which may include charges for extra benefits, including but not limited to delivery, collection, rental to additional drivers, rental to high-risk drivers, insurance, or theft, damage or excess waivers).
1.12 Rental Period the shorter of the period for which you have a reasonable need for a Vehicle by reason of the Accident and a period of 85 days from the date of this Agreement.
2.1 Where You cannot use Your motor vehicle as a result of an Accident which in Our opinion was the fault of a Third party, We may hire You the Vehicle for the Rental Period, and allow You credit on the AX Charges in accordance with this Agreement.
3.1 You will pay Hire Charges to Us for the rental of the Vehicle together with interest during any period (including the Credit Period) in which Hire Charges are outstanding.
3.2 You shall pay the Hire Charges together with Interest to Us in full and by a single payment immediately upon the expiry of the Credit Period. It is your duty to ascertain in advance the amount which is due.
5.1 You grant Us the exclusive right to pursue the Claim on Your behalf.
5.2 We may instruct an Appointed Representative in Your name to pursue the Claim, and You authorise such person to provide Us with all the information about the Claim (including copies of all relevant documents) which We reasonably require.
5.4 You are responsible for the costs of the Claim (although these may be recoverable in whole or in part from the Third Party).
5.5 You must inform Us if You receive any settlement proposals from the Third Party in respect of the Claim, and must not respond to such a proposal unless We agree.
5.6 In the event that We or the Appointed Representative receive a cheque in settlement of all or any part of the Claim, You authorise it to be paid to Us, and for it to be paid into Our bank account even if it is made payable to You. Where the sum paid exceeds the amount of the Claim and any Legal Costs, We will pay You the balance as soon as reasonably practicable.
5.7 In the event that You receive any payment in respect of the Claim, You will pay the sum to Us immediately. Save that in no circumstances may you discharge AX Charges in more than three payments."
Payment
The pleadings
The trial
"A. ... mainly because I was concerned I would be left with a huge bill at the end of it.
Q. I understand that. So, there is an insurance agreement with your signature on it kicking around somewhere?
A. Correct, yes.
Q. Do you remember only signing one or two or ----
A. No, I believe we signed the first one when they brought the first car.
Q. Mm-mh?
A. That would have been actually in the kitchen, I remember sitting there going through the paperwork with them. The second one would have been when they exchanged the car as well.
Q. Yes, and you signed another insurance policy then?
A. I believe so, yes.
Q. So there should actually be two insurance policies under your name kicking around somewhere?
A. Correct.
Q. OK. You did not have to pay any money for those insurance policies, they were just extra documents?
A. No, which is one of the reasons why I asked a lot of information when I was doing it because I was obviously concerned that there would not be any sort of repercussion for whatever cost that was liable, if there was I needed to know about it at the time.
Q. Fair enough, so that is the reason why you can be quite sure that there were two because you went through them first?
A. Yes."
The application to admit new evidence
a) That Mr Sobrany had in fact signed a notice of his right to cancel in respect of both hire contracts;
b) That he had only ever had a single insurance policy.
The judgment
The issues on the appeal
Issue (i): the two policies point.
Issue (ii) New evidence
Issue (iii): was the judge right?
Lord Justice Lewison
Lord Justice Laws