Gill,
read this thread a couple of times to try to get it clear in my mind.

When the car was hired the hire company will have provided a rental contract to your in-laws and they, presumably will have signed for the hire.

After the fire you said the hire company provided a replacement car. Presumably they provided paperwork accordingly and at that time made no attempt to obtain monies from your in-laws - simply replaced the vehicle.

When their hire period ended thay will have returned the (replacement) car to the depot, been issued with paperwork indicating the end of the contract period and away they go. Again, I'm guessing they were not at that time informed of the requirement to pay £1000 (or the euro equivalent).

Now, on what basis is this hire-company attempting to obtain monet from your in-laws ? Do they (or you) still have the original hire agreement or have you been able to get a copy of that original, signed, hire-agreement ?

Without such information being made available and without that document stating clearly that money will be charged for damage caused by the client they hire-company are on a hiding to nothing. If the contract does state that damage caused to the car whilst in the possession of the hirer will be charged they should have obtained this money either before replacing the vehicle or when the replacement vehicle was returned. The fact that your credit card issuer has even changed the account number of your parents-in-law implies to me that they believe the charges being demanded to be scurilous.

Consider asking your solicitor to counter-sue the hire-company for distress - if he thinks there's any mileage in this approach it may focus the hire-company's mind.

Mike