The issue of impecuniosity in credit hire claims came before the Court of Appeal again early this year, resulting in a judgment in March 2014. The case concerned credit hire charges awarded by the County Court in excess of £95,000 (or £161 per day) in relation to a period of hire of 591 days.
The claimant’s vehicle, a Mercedes valued at approximately £8,000, was written off in an accident with the defendant insurer’s driver. The claimant immediately hired a vehicle on a credit hire agreement and subsequently claimed against the insurer for hire charges.
In due course, a common credit hire case management direction was made that: “The claimant shall confirm by 4pm on 30 October 2012 whether he intends to allege that he was impecunious at the time of the hire”. The claimant did not make such a statement. The insurer applied for an order that the claimant was “debarred” from relying upon impecuniosity but the judge hearing the application determined that no order was necessary as there had been no application for relief from sanction. However, he did record the debarment in the recitals to the order.
During the quantum trial, the claimant gave evidence that he did not have the means to replace his vehicle when told that it was a write off three months into the hire agreement. Instead, the claimant had replaced his vehicle two weeks after the insurer had paid him the pre-accident value of his old vehicle. The insurer objected to the claimant’s assertion on the basis that he was debarred from relying upon impecuniosity by the earlier order of the court.
The Recorder disagreed. He drew a distinction between impecuniosity justifying a credit hire rate, which the claimant was debarred from doing, and impecuniosity in defence of the duration of hire (use of impecuniosity as a shield v a sword). The claimant recovered hire charges for the whole hire period save for two weeks and at the rate claimed as the defendant insurer had failed to produce basic hire rate evidence.
The issue on appeal was whether the claimant driver had been debarred by an earlier order of the County Court from asserting at trial that his impecuniosity was the reason for him having hired the vehicle for such a long period.
Allowing the appeal, Underhill LJ found that, as a matter of ordinary language, the order prevented the claimant from relying upon an assertion of impecuniosity for the purpose of justifying the period of hire or, indeed, for any other purpose. To find otherwise made little practical sense as the primary purpose of such an order was to establish whether the parties had to expend time and money on the issue of impecuniosity. That meant taking it off the table for all purposes. Impecuniosity was the same concept whether in regards to rate or duration of hire, with the burden of proof on the claimant.
The claimant was debarred from asserting that he could not afford to buy a replacement vehicle and could therefore only recover the hire charges up to the date on which he reasonably should have replaced his vehicle, that being the date on which his old car was scrapped four months into the hire agreement.
Despite an expanse of thorough and well-expressed decisions from the higher courts (see in particularBent v Highways and Utilities Construction Ltd  EWCA 1384), the issue of credit hire continues to frequent the courts. This judgment illustrates the stricter, post-Mitchell approach to case management orders and the effect of that approach on the scope of credit-hire trial arguments.
You can read the judgment here.
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