A decision by HHJ Harrison in the Cardiff County Court created a useful tool in the armoury of the defendant credit hire practitioner as it supported the making of targeted pre-action disclosure applications to obtain sight of the claimant’s financial documentation relevant to the issue of impecuniosity.
- The judgment related to seven applications for pre-action disclosure (PAD) of financial documentation of claimants who had hired from Direct Accident Management Ltd (DAMS) and who were pursuing claims for recovery of those charges via Bond Turner.
- The hire charges claimed ranged from £3,145 to £37,819.
- Each request for disclosure had been met by a response stating that the request was premature or alternatively the claimant’s representatives had ignored the request for disclosure.
- The Judge found in favour of the applicants and granted the applications for pre-action disclosure finding that the documents obtained were likely to be standard disclosure as the hire company involved sought to hire to impecunious claimants. The disclosure was relevant to allow a pre-issue offer to be determined which could avoid litigation.
Immediate impact and practical consequences
- The potential to have sight of financial documentation and therefore to determine the claimant’s impecuniosity will ensure insurers can be properly informed pre-litigation and can therefore make strong cost protective Part 36 offers
- It should be remembered that the applications were successful on the facts of the cases before the court.
- The applications pursued all involved a company who were not signatories to the ABI’s general terms of agreement (GTA), who target impecunious claimants and who demonstrated an unwillingness to resolve matters without the need for litigation.
- In addition the disclosure sought was narrow and so not viewed as unnecessary or over burdensome.
- The ideal case for PAD applications therefore involves: (i) liability admitted matters, (ii) hire issues limited to those where impecuniosity is relevant (period and rate), (iii) a request for disclosure has been made and refused/ignored, (iv) the hire company is non-ABI GTA and deals with largely impecunious claimants, (v) the disclosure requested is limited and (vi) the sums sought are significant and therefore proportionate to the costs of the application.
The facts of the case and the reasoning of the court
Before Harrison HHJ; 21 September 2018
Legally the recovery of the full credit hire rate is not normally permitted. Claimants are restricted to recovering a basic hire rate evidenced by the lowest reasonable rate quoted by mainstream supplier (Stevens v Equity Syndicate Management 2015). The justification for this is that the credit hire rate includes charges for additional services which are not recoverable at law. There is, however, one exception - if the claimant is impecunious and could not afford to hire a car without making unreasonable sacrifices (Lagden v O’Connor 2004). Seven applications for pre-action disclosure of financial documentation of claimants were therefore made to allow the defendants to determine whether the claimants were impecunious. All applications involved DAMS who accepted that their own business model targeted impecunious claimants which allowed them to recover a greater rate of hire. DAMS were a non- ABI GTA company and it was contended that their common practice was to involve solicitors in recovery of the hire charges from the outset and that they were viewed within the industry as very litigious.
The applications were made using CPR 31.16(3)(a)-(d) which would allow pre-action disclosure where both parties were likely parties to proceedings, the documents sought fell within the class likely in standard disclosure and where early disclosure may avoid litigation/save costs/narrow issues.
Counsel for the applicant argued that Lagden anticipated free exchange of evidence of impecuniosity. As DAMS and Bond Turner both had the same ownership it was in their interests for matters to proceed to litigation. Pattni v First Leicester Buses 2012 highlights the importance of impecuniosity to both period and rate and anticipates the issue of impecuniosity is resolved before consideration of the basic hire rate.
The respondents contended that a PAD application by a defendant was unusual. Pre-action disclosure obligations are normally contained within pre-action protocols and as there was no obligation on claimants to disclose impecuniosity documents in any such protocols then it was not envisaged. They argued the disclosure was not always relevant as it was only disclosable where the claimant contends to be impecunious and that furthermore disclosure of the basic hire rate should come first as per Lagden. Additionally they contended that the disclosure related to financially sensitive docs and even where provision of the information was given this did not always resolve whether claimant is impecunious. Finally they stated that the relevant costs provisions would result in the claimant’s work not being compensated for adequately.
The Judge found in favour of the applicants and granted the applications for pre-action disclosure on the basis that: 1. Disclosure was likely to arise considering the business model of DAMS. Pattni confirms that impecuniosity is to be considered before the basic hire rate which makes sense as the credit hire rate is always likely to be higher than the basic hire rate. 2. The issue of the claimant’s impecuniosity goes directly to quantification of damages. Information as to the claimant’s financial status is needed to make an appropriate pre-litigation offer. 3. Disclosure was less intrusive than disclosure of medical records. The hire company understand the relevance of claimant’s financial means and should explain to claimants at outset of the significance of their finances. 4. The Judge did not find disclosure to be intrusive or premature especially due to the narrowness of documents requested.
What this means for you?
Used in the right circumstances, the use of targeted PAD applications relying on this authority will allow you to have sight of documentation which until now certain hire companies have refused to disclose pre-issue. This was hampering insurers/practitioners abilities to fully assess the presented claim and to ensure that cost protective pre-issue offers were made. This should have the positive outcome of reducing litigation and indemnity spend.